Sheltering from the storm
European companies used to regard the US private placement market as a refuge for the desperate. But pricing is increasingly attractive, issues can be sizeable and even unknown names can attract investors.
When triple-B-rated French retailer Casino decided earlier this year that it wanted to diversify its funding, it went for an issue in the US private placement market. It duly did a nine-year deal with a small seven-year tranche raising a total of $260 million at the beginning of October. The transaction was sold to 11 investors.
Casino didn't have much choice. It had raised e700 million of 10-year debt in the public euro market by June this year but in view of the way its public bonds denominated in euros were trading at the end of September, it knew it wasn't going to be able to do another big issue in euros, where it has 95% of its debt.
Its e1.1 billion March 2008 bonds were trading at 250 basis points over Libor. The spread at launch on the third of its fungible March 2008 issues had been as tight as 117.50bp over Bunds. The situation wasn't any better in any other market. "Obviously it was a time when the euro, sterling and yen markets were really closed for credits like us," says Casino's head of funding, Régis Taillandier.
Several months before this, US private placement bankers had identified Casino as a good candidate for the market.