Air Liquide SA attracted strong demand for a sale of euro-denominated bonds, with investors willing to buy the debt at lower yields than French government bonds caught up in the country’s fiscal and political turmoil. The industrial-gas maker drew more than €13.1 billion ($14.7 billion) of investor orders for a €2 billion offering consisting of a two-year floating-rate note as well as five and 10-year fixed-rate tranches. Pricing for the two fixed-rate issues is set to come in below the curve of French government bonds, or OATs.
That suggests that investors see the debt of Air Liquide — which has a strong international revenue base — as more attractive than the country’s sovereign debt. Bonds issued by French companies with a global footprint “can trade through OAT, and so they should if there is OAT distress because that’s not going to be the biggest driver of their corporate earnings at all,” said Edward Farley, head of European investment grade corporate bonds at PGIM Ltd. French government bonds have experienced a punitive selloff in recent months after plans to narrow the deficit this year veered off course, while the country’s fiscal watchdog said that economic assumptions in the 2027 draft budget are “optimistic.” Compounding the pressure, recent polling for next year’s presidential election indicates it may come down to a second-round runoff between far-right front-runner Marine Le Pen and far-left rival Jean-Luc Mélenchon. Pricing for Air Liquide’s bonds tightened through the morning, with the floating-rate notes cut to 35 basis points above three-month Euribor, the five-year bond at 65 basis points over mid-swaps, and the 10-year tranche at 95 basis points over.
That equates to a borrowing cost of roughly 4.098% for the five-year debt compared with five-year OATs yielding 4.133%. The offering comes after Air Liquide unveiled an ambitious capital allocation plan including plans to buy back €4 billion worth of shares through 2028 and widen margins, addressing key investor concerns as it faces pressure from Elliott Investment Management. The bonds are expected to be rated A2 by Moody’s, two notches below France’s Aa3 sovereign rating, and A by S&P, one notch below the sovereign’s A+.
France is also rated A+ by Fitch. Barclays Plc, BBVA SA, Bank of America Corp., CIC, Citigroup Inc., HSBC Holdings Plc and IMI Intesa Sanpaolo Sp A are bookrunners for the deal.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing