Buyers Hunt For Risky Assets

By Caroline Hyde

Oct. 30 (Bloomberg) -- Sales of company bonds without

credit ratings jumped 15 percent in October, fueled by investor

demand for riskier assets as high-grade yield spreads shrank to

the lowest in more than a year.

AP Moeller-Maersk A/S, the Danish shipping company, and

French advertising agency Havas SA led 4.2 billion euros ($6.2

billion) of unrated debt sales in the busiest month this year,

Bloomberg data show. Bonds not graded by firms such as Standard

& Poor’s or Moody’s Investors Service may yield more than rated

debt because buyers have less data on borrower creditworthiness.

Companies with high-yield or no ratings are issuing debt

amid growing investor confidence that borrowers will meet debt

commitments as the global recession recedes. The U.S. economy

grew in the third quarter for the first time in more than a

year, while 82 percent of the companies in the Standard & Poor’s

500 Index reported positive earnings surprises this year.

"Unrated issuers are being fantastically opportunistic,

taking advantage of investor risk appetite which is being forced

higher as yields go lower and lower," said Roger Appleyard,

head of credit research at RBC Capital Markets in London. "In

the hunt for yield, buyers are lowering their credit

standards."

Investment-grade company debt yields relative to government

debt narrowed 12 basis points this month to 173 basis points,

the smallest gap since July 2008, according to Merrill Lynch &

Co. bond indexes. High-yield note spreads shrank 35 basis points

to 877. A basis point is 0.01 percentage point.

High-yield debt is graded below Baa3 by Moody’s and BBB- at S&P and Fitch Ratings.

Record Issuance

Companies issued a record 942 billion euros of bonds this

year, 51 percent more than in the same period in 2008, Bloomberg

data show, as the worst financial crisis since the 1930s forced

banks to cut lending. High-yield sales reached 17 billion euros,

triple the amount last year.

Copenhagen-based AP Moeller-Maersk sold 750 million euros

of bonds last week in its first-ever issue. Denmark’s biggest

company raised the debt to refinance bank loans and make

acquisitions, offering investors a yield spread of about 237

basis points over government debt.

Havas sold 350 million euros of five-year bonds this week

to diversify its funding sources, the Paris-based company said.

The notes were priced at a yield spread of 314.5 basis points,

Bloomberg data show.

Air France KLM, Europe’s biggest airline, and Essen,

Germany-based Evonik Industries AG, which is the holding company

of Evonik Degussa, also issued unrated bonds earlier in October.

"Demand is there for holding-company issues, unrated bonds

and high-yield," said RBC’s Appleyard. "Supply remains

relatively low of high-yield debt, so appetite has been high for

recent riskier bond issues such as Havas."

William Hill, Sixt

Sixt AG, a German car-rental company, priced 300 million

euros of notes at a yield of 368 basis points over government

debt, according to Bloomberg data. The Pullach, Germany-based

company isn’t rated.

William Hill Plc, the U.K.’s second-largest bookmaker, is

meeting bond investors next week on a potential high-yield issue

in pounds. The company has been seeking to diversify its sources

of funding since raising about 350 million pounds ($579 million)

in a share sale and refinancing its bank borrowings in April.

The London-based betting shop operator is rated BB+ by S&P, one

level below investment-grade status, and an equivalent Ba1 at

Moody’s.

For Related News and Information:

For top bond news: TOP BON <GO>

European debt sales: TNI NEWBON EUROPE <GO>

Stories on Eurobond Market: NI EBN <GO>

Corporate Bond New Issue Monitor: NIM4 <GO>

--Editors: Andrew Reierson, Michael Shanahan

To contact the reporter on this story:

Caroline Hyde in London +44-20-7330-7220 or

chyde3@bloomberg.net.

To contact the editor responsible for this story:

Paul Armstrong at +44-20-7330-7185 or

Parmstrong10@bloomberg.net

We are actively involved in this credit, please call or email Peter Aman for current market prices and/or more information about this situation.

We are also active in many other high yield and distressed corporate bonds.

Peter Aman

PAman@aps-financial.com

800-248-0630