MILAN, July 23 (Reuters) - Italy's Fiat raised 1.25 billion euros on Thursday by issuing a three-year bond that saw huge demand as investors rushed for the high yield the car maker had offered at a time of increasing appetite for corporate debt.
Lead managers told Reuters demand exceeded 10 billion euros and said the group was expected to tap the bond market again this year. The bond, which carries a 9.0 percent coupon, was priced at 99.367 reoffer, giving it a yield of 9.25 percent.
Fiat later confirmed in a statement the terms of the bond.
Earlier this month, power group Edison raised 700 million euros in a five-year bond issue that attracted demand of more than 7 billion euros.
The Edison bond yield was about half that offered by Fiat, which has a junk rating. Standard & Poor's on Thursday said the bond was a step towards a more solid liquidity position.
In June, Italian oil and gas group Eni had closed a retail bond offer around 11 days early on the back of heavy demand.
Fiat announced the bond issue on Thursday after Wednesday's second-quarter results when it confirmed 2009 forecasts.
'There will be bonds that will need to be reimbursed in the future and this is just the beginning,' one of the lead managers told Reuters. 'To start with three years was a good way to approach the market. We should expect other Fiat bonds by the end of this year and the next.'
Fiat has a 2.8 billion euro bond expiring next year as well as a 3.8 billion euro bond expiring in 2011 and a 1.5 billion euro bond expiring in 2013.
Lead managers were Barclays Capital, Intesa Sanpaolo unit Banca IMI, Calyon, and UniCredit.
The bond expires on July 20, 2012 and settlement is July 28.
HIGH-YIELD BOND
The yield offered by the new 2012 Fiat bond is 'very good, also in comparison to other Fiat bonds traded on the secondary market,' a sector dealer said.
The high-yield bond was 30 percent subscribed by UK investors, 20 percent by German investors, 13 percent by Italians, while Swiss and French investors got 10 percent each, one of the lead managers said.
'A 64 percent is made up of asset managers, 15 percent of insurers and pension funds and another 15 percent of private banks,' the lead manager added.
On Wednesday, Fiat swung back to a trading profit after two quarters of losses, beating expectations. Its net industrial debt fell to 5.7 billion euros, from 6.6 billion euros at end of March, disappointing some analysts.
On Thursday, Standard & Poor's kept its long-term corporate credit rating on Fiat at 'BB+' and its CreditWatch negative pending an analysis of Fiat's cash flow generation, operating performance and its Chrysler alliance.
'We aim to solve the CreditWatch listing in the next couple of weeks. Any downgrade is likely to be limited to one notch,' S&P analyst Barbara Castellano said in the statement.
'We believe (the bond) could help strengthen its liquidity profile; the profile showed improvement at the end of June, but continues to be tight in our view,' she said.
Fiat sought a line of credit from banks this year and got 1 billion euros, about a third of what had been discussed.
Fiat shares closed down 0.38 percent at 7.775 euros.
(Reporting by Gabriella Bruschi, writing by Nigel Tutt; Editing Bernard Orr)
($1=.7046 Euro) Keywords: FIAT/BOND (nigel.tutt@thomsonreuters.com; +39 02 66129723; Reuters Messaging: nigel.tutt.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Lead managers told Reuters demand exceeded 10 billion euros and said the group was expected to tap the bond market again this year. The bond, which carries a 9.0 percent coupon, was priced at 99.367 reoffer, giving it a yield of 9.25 percent.
Fiat later confirmed in a statement the terms of the bond.
Earlier this month, power group Edison raised 700 million euros in a five-year bond issue that attracted demand of more than 7 billion euros.
The Edison bond yield was about half that offered by Fiat, which has a junk rating. Standard & Poor's on Thursday said the bond was a step towards a more solid liquidity position.
In June, Italian oil and gas group Eni had closed a retail bond offer around 11 days early on the back of heavy demand.
Fiat announced the bond issue on Thursday after Wednesday's second-quarter results when it confirmed 2009 forecasts.
'There will be bonds that will need to be reimbursed in the future and this is just the beginning,' one of the lead managers told Reuters. 'To start with three years was a good way to approach the market. We should expect other Fiat bonds by the end of this year and the next.'
Fiat has a 2.8 billion euro bond expiring next year as well as a 3.8 billion euro bond expiring in 2011 and a 1.5 billion euro bond expiring in 2013.
Lead managers were Barclays Capital, Intesa Sanpaolo unit Banca IMI, Calyon, and UniCredit.
The bond expires on July 20, 2012 and settlement is July 28.
HIGH-YIELD BOND
The yield offered by the new 2012 Fiat bond is 'very good, also in comparison to other Fiat bonds traded on the secondary market,' a sector dealer said.
The high-yield bond was 30 percent subscribed by UK investors, 20 percent by German investors, 13 percent by Italians, while Swiss and French investors got 10 percent each, one of the lead managers said.
'A 64 percent is made up of asset managers, 15 percent of insurers and pension funds and another 15 percent of private banks,' the lead manager added.
On Wednesday, Fiat swung back to a trading profit after two quarters of losses, beating expectations. Its net industrial debt fell to 5.7 billion euros, from 6.6 billion euros at end of March, disappointing some analysts.
On Thursday, Standard & Poor's kept its long-term corporate credit rating on Fiat at 'BB+' and its CreditWatch negative pending an analysis of Fiat's cash flow generation, operating performance and its Chrysler alliance.
'We aim to solve the CreditWatch listing in the next couple of weeks. Any downgrade is likely to be limited to one notch,' S&P analyst Barbara Castellano said in the statement.
'We believe (the bond) could help strengthen its liquidity profile; the profile showed improvement at the end of June, but continues to be tight in our view,' she said.
Fiat sought a line of credit from banks this year and got 1 billion euros, about a third of what had been discussed.
Fiat shares closed down 0.38 percent at 7.775 euros.
(Reporting by Gabriella Bruschi, writing by Nigel Tutt; Editing Bernard Orr)
($1=.7046 Euro) Keywords: FIAT/BOND (nigel.tutt@thomsonreuters.com; +39 02 66129723; Reuters Messaging: nigel.tutt.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.