Building materials giant CRH received more than €2 billion of orders from investors for a bond it marketed on Tuesday, prompting the group to increase the amount of securities on offer.
The company, headed by chief executive Albert Manifold, initially intended to raise €500 million of debt in bond markets, but it decided to increase the amount to €600 million given the demand for the issuance, sources said.
The bonds were priced to effectively carry a coupon, or interest rate, of less than 1.38 per cent, the lowest ever for a euro bond issued by CRH and below the 1.55 per cent rate expected when CRH's banking advisers opened their books for orders earlier on Tuesday. Banks including BNP Paribas, Commerzbank, ING, JP Morgan, Société Générale and UBS ran the deal.
Investor appetite for the company's first euro-denominated bonds in almost a year "shows the power of CRH's integrated model and is rewarding the group's financial discipline following two large deals last year", said Joseph McGinley, a bond analyst with securities firm Davy in Dublin.
Standard & Poor's, the ratings agency, raised the outlook on its BBB+ credit rating for CRH to stable from negative last month as the group keeps a tight rein on costs and successfully integrates its biggest ever deal, the €6.4 billion purchase of assets off-loaded by European rivals Lafarge and Holcim in 2015.
The group spent a further $1.3 billion (€1.2bn) in the second half of last year buying Los Angeles-based glazing company CR Lawerence.
It is understood that the proceeds from the bond sale will be used mainly to refinance loans associated with the Lafarge-Holcim deal. The weighted average maturity of the group’s debt will be almost eight years once the bond deal is completed, according to sources.
Opportunities
The group’s debt rose by €400 million during the first half of the year to €7.1 billion, equating to 2.5 times ebitda for the 12 months to June, according to its interim report.
Mr Manifold told investors in August, as the group reported better-than-expected first-half earnings, that he had passed up on some large purchase opportunities this year. However, he suggested that the company could comfortably spend between €1.5 billion and €2 billion next year on deals without damaging its debt ratios.
CRH, which sold €1 billion of non-core assets last year, raised a further €140 million during the first half of this year from such sales.
The Central Bank approved a number updates to CRH's base bond prospectuses last week ahead of the bond sale, according to filings with the regulator.
CRH is forecasting record earnings before interest, tax, depreciation and amortisation this year in excess of €3 billion as trading conditions in America remain positive, while Europe shows early signs of recovery.
