Lafarge sells EUR750m of debt as rates fall

Lafarge sells EUR750m of debt as rates fall
Published: 08 December 2009

Lafarge SA sold EUR750m (US$1.1bn) of 10-year notes, bringing its borrowing in the bond market this year to EUR3.3bn as the world’s biggest cement maker took advantage of falling yields.

The company offered the 5.5 per cent securities at a yield of 220 basis points more than the benchmark mid-swap rate, according to data compiled by Bloomberg. That’s about half the 430 basis-point spread the Paris-based company paid to sell seven-year notes in June, Bloomberg data show.

Lafarge is issuing a record amount of debt this year as the construction industry emerges from a global slump and the cement maker faces EUR1.97bn of bond maturities through 2011, Bloomberg data show. The drop in construction output in 15 western European countries will probably slow to a 1.5 percent decrease next year, after an 8 percent contraction in 2009, research group Euroconstruct estimated in June.

“Lafarge has allayed many of its refinancing concerns during the course of this year,” said Simon Ballard, head of European credit strategy at RBC Capital Markets in London. “It continues to show there’s still a strong level of appetite for risk assets.”

Western Europe and North America accounted for 48 percent of Lafarge’s sales in 2008. Lafarge had EUR16.6bn of long- and short-term borrowings as of Sept. 30, Bloomberg data show. A basis point is 0.01 percentage point.

The cement maker hired BNP Paribas SA, Calyon, Citigroup Inc. HSBC Holdings Plc, Morgan Stanley and Societe Generale SA to manage today’s offering. The securities are rated Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.

“Proceeds of the new transaction will be used to refinance existing debt with shorter maturities,” said a spokeswoman for Lafarge, who declined to be identified citing company policy. “This is an opportunistic transaction by Lafarge because the current credit market conditions are favorable. It will further lengthen our average debt maturity.”