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European Debt Market Update: Gallaher, Freddie Mac, and Network Rail Raise Funds

Strategic Insights

— 2 min read

As the European debt market continues to navigate uncertain rate conditions, several major companies are finding ways to raise funds to meet their financial obligations. Gallaher, the British tobacco company, is pricing a Eur 750m seven-year bond to yield 75 to 80 basis points over mid-swaps, while Freddie Mac, the US mortgage refinancing institution, has sold a Eur 3bn euro-reference note at the wide end of market guidance. Additionally, Network Rail, the operator of Britain's railways, has tapped its dollar-denominated March 2008 issue for a further $500m, taking the issue to $1.75bn.

Key Takeaways:

  • Gallaher is pricing a Eur 750m seven-year bond with a coupon that has a 125bp step-up if the company is downgraded to sub-investment grade by a major credit rating agency.
  • Freddie Mac sold a Eur 3bn euro-reference note at the wide end of market guidance, priced to yield 7bp above mid-swaps, with an order book of Eur 4.2bn.
  • The Freddie Mac transaction brought in a further 30 investors that were new to the credit and raised its funding in Europe to Eur 7bn in the year to date.
  • Network Rail raised the equivalent of Pounds 6.5bn in five tranches during one week in March and tapped its dollar-denominated March 2008 issue for a further $500m, taking the issue to $1.75bn.
  • Network Rail enjoys a letter of support from the UK government, ensuring a Triple A rating from S&P and Fitch Ratings and a Aa1 rating from Moody's.
  • Barclays Capital, Goldman Sachs, and WestLB are managing the Gallaher sale, while Deutsche Bank, Goldman Sachs, and Merrill Lynch were the lead managers for Freddie Mac's transaction.

Statistics:

  • The Gallaher bond will yield 75 to 80 basis points over mid-swaps.
  • Freddie Mac's euro-reference note was priced at 7bp above mid-swaps, with an order book of Eur 4.2bn.
  • The Freddie Mac transaction raised Eur 3bn, with 30 new investors brought into the credit.
  • Network Rail's March 2008 issue is priced to yield 76bp over the comparable US Treasury.
  • Network Rail raised the equivalent of Pounds 6.5bn in five tranches during one week in March.
  • Network Rail's funding in dollar-denominated debt is now at $1.75bn.

Sources:

  • "Gallaher bonds on display", Euromoney, no date.
  • "Freddie Mac sells €3bn euro-reference note", Reuters, no date.
  • "Network Rail raises £6.5bn in one week", Financial Times, no date.

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