Siemens AG is selling the biggest issue of corporate bonds in Europe since the start of the year after the German company’s credit rating was upgraded. The group wants to raise 5 billion EUR in a four-tranche bond deal with maturities between 4.75 years and 20 years, a source familiar with the matter said. It attracted a total of 17.5 billion EUR in bids.
Investors were drawn to the offering after Siemens’ long-term credit rating was upgraded this week to AA- from A+ by S&P Global Ratings, with the rating agency citing structural improvement and greater sustainability of profitability and cash flow.
It’s an opportunity for funds to snap up the 20-year bond, as borrowers in the region don’t often sell debt with similar maturities. In fact, it’s the longest euro-denominated corporate bond for the past three months, with only 11 major deals in 20-year bonds last year.
The offer follows a slow start to the year for corporate bond issuance in the region, with many firms refraining from such offerings amid shutdown periods before financial statements.
Although year-to-date corporate bond sales represent only 14% of total debt issuance across all sectors, they are expected to increase.
Siemens’ report presented earlier this month showed that the company, along with the rest of the industrial sector, was still struggling with weaker demand in China. It is evaluating the spin-off of its heavy-duty electric motor business Innomotics, with direct lenders and banks working on proposals to provide a debt package worth at least 1.2 billion EUR.
Although the current bond sale looks set to be the largest in Europe of the five parts of International Business Machines Corp. as of January 2023, it still pales in comparison to some issues in the US market.
On Wednesday, Bristol-Myers Squibb Co. sold 13 billion EUR of bonds in nine tranches, raising more than 85 billion EUR in bids to help finance its acquisition of Karuna Therapeutics Inc and RayzeBio Inc.
Also this year, IBM sold a seven-tranche bond for 5.5 billion USD, while Eli Lilly & Co offered one in five parts for 6.5 billion USD.
