Kinder Morgan Inc. (NYSE: KMI) sold bonds in euros for the first time, the latest U.S. company to take advantage of record-low euro-area borrowing costs, Bloomberg said March 9.
The world’s largest builder of oil and gas pipelines by market value sold 750 million euros (US$814 million) of seven-year notes and 500 million euros of 12-year bonds, according to data compiled by Bloomberg. The proceeds will help to repay existing debt, the data show.
Kinder Morgan joins Coca-Cola Co. (NYSE: KO) and Berkshire Hathaway Inc. (NYSE: BRK-B) in a surge of U.S. companies that have raised 34 billion euros from bonds this year, the most for the period since 2007, data compiled by Bloomberg show. Borrowing costs have fallen to records in anticipation of the European Central Bank’s 1.1 trillion-euro bond-buying plan, which began March 9, while Federal Reserve policymakers are withdrawing economic support.
“Cost is the main driver,” said James Athey, a London-based investment manager at Aberdeen Asset Management Plc, which manages about US$504 billion of assets. “The benefit in Europe should persist with the likelihood of a Fed exit.”
Billionaire Richard Kinder’s company issued the notes following a record week of bond sales from U.S. energy companies as oil prices stabilize from last year’s 48% drop, reigniting investor interest in the sector. Exxon Mobil Corp. (NYSE: XOM), the world’s largest oil company by market value, and Laredo Petroleum Inc. (NYSE: LPI), the Tulsa, Okla.-based oil exploration and production company, were among borrowers that raised $14.5 billion last week.
Houston-based Kinder Morgan’s seven-year notes were priced with a 1.5% coupon and will pay a premium of 1.08 percentage points more than benchmark rates, according to Bloomberg. The 12-year bonds priced with a coupon of 2.25% and will pay a premium of 1.43 percentage points.
The company is “pleased to access the European market for the first time and expects to return to this market in the future,” Kinder Morgan spokesman Richard Wheatley said by email.
The average yield on investment-grade corporate bonds in euros dropped to an all-time low of 0.88 percent on Feb. 26 and is now 0.91%, according to Bank of America Merrill Lynch index data. That compares with an average of 3.14% for U.S. dollar-denominated notes, the data show.
The average yield difference investors get to hold euro-denominated investment-grade debt is 56 basis points, or 0.56 percentage point, more than the mid-swap rate, the index shows. Kinder Morgan is given the lowest investment-grade rating by Moody’s Investors Service and Standard & Poor’s.
El Paso Corp., which Kinder Morgan acquired in 2012, sold 500 million euros of 7.125 percent seven-year notes in 2002, according to data compiled by Bloomberg.
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