(Bloomberg) -- Germany’s RWE AG has turned to the debt market for funding, as Europe faces its worst energy crunch in decades.
The company saw over 2 billion euros ($2 billion) of investor demand for at least 500 million euros of three-year bonds on Wednesday, according to a person familiar with the matter, who asked not to be identified as they aren’t authorized to speak publicly. It’s RWE’s first venture into Europe’s debt market since May and adds to the region’s busiest day for new deals in two months.
The bond offering is the first from a German power provider since Europe’s energy crisis deepened this summer. The region is bracing for possible power shortages later this year, with some companies considering rationing supplies to ensure essential demand can be met. In Germany, power prices surged above 500 euros for the first time on Tuesday, ratcheting up pressure on households and businesses as Russia tightened its grip on the region’s gas supply.
While RWE’s bond proceeds are earmarked for general corporate purposes, the company said last week that it plans to boost investment in renewable energy capacity to make Europe more energy independent. Alongside Uniper SE, it also struck a deal with the German government to import liquefied natural gas through two new terminals in an effort to alleviate the energy crunch.
The deal is adding to the busiest day for sales in Europe’s debt markets since June 23, according to data compiled by Bloomberg. Nine borrowers, including Lloyds Banking Group Plc and Nordea Bank Abp are offering at least 4.85 billion euros of new bonds on Wednesday, marking a nascent revival after the slowest summer in at least eight years.
JPMorgan Chase & Co., Commerzbank AG, Banca IMI SpA, Mitsubishi UFJ Financial Group, Inc., NatWest Group Plc and Societe Generale SA are working on the deal, the person familiar said. RWE didn’t immediately reply to a request for comment from Bloomberg News.
Elsewhere in credit markets:
Extreme hot weather has exposed flaws in England’s water system, which could make it harder for the country’s privatized utilities to borrow money on the public debt markets.
- UK water companies normally issue new bonds in the second half of the year. This year, however, investors are ready to demand higher yields, especially for providers lagging behind on their leakage targets
- Low refinancing needs, still-solid fundamentals and the increased quality of high-yield indexes suggest default rates will hold below those seen in previous recessions if the economy heads into a contraction, according to Pictet Asset Management
- EuroChem is asking holders of its $700 million bonds due 2024 to agree to replace the trustee and change some of the notes’ terms, according to a filing on Tuesday afternoon
Chinese high-yield dollar bonds posted their biggest gains since March, with some large developers soaring on news that authorities are planning to help them raise financing.
- China Huarong Asset Management Co.’s bonds plunged after the bad-debt manager said it expected a net loss of 18.99 billion yuan ($2.78 billion) in the first half of the year as credit impairments surged
- Asia ex-Japan high-yield corporate bonds may generate an average total return of 6.8% over the next 10 years, outperforming other credit market segments globally, according to Pictet Wealth Management
- Some dollar bonds of Country Garden Holdings Co. and CIFI Holdings Group Co. fell several cents on the dollar in minutes on Wednesday as European activity picked up amid what some credit traders called profit-taking
Citrix Systems Inc. bankers are doing whatever it takes to get one of the biggest buyout financings of the past decade off their books, pitching investors a revised $15 billion deal to help limit potential losses.
- Drug manufacturer Endo International Plc has filed for bankruptcy after being overwhelmed by litigation, including claims that it profited by helping fuel the US opioid epidemic
- A group of Avaya Holdings Corp. debt holders hired advisers to help navigate talks with the company after a rapid earnings decline, according to people familiar with the matter
- Ford Motor Co. is taking advantage of a credit-market rally to sell $1.75 billion of green bonds expected to mature in 10 years
(Updates with deal demand and credit markets sections.)
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