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Financial Times: Shell paper scarce in US

By Ivar Simensen in London and Richard Beales in New York

Published: June 21 2006 03:00 | Last updated: June 21 2006 03:00

Royal Dutch Shell sold $1bn of five-year bonds yesterday, the Anglo-Dutch oil company’s first SEC-registered issue in the US market.

The bonds priced to yield 52 basis points over Treasuries, in line with guidance.

The scarcity of Shell paper helped the price below the prevailing Libor yield, among the tightest spreads in memory for a US corporate benchmark issue, according to a person close to the deal.

Lehman Brothers, Merrill Lynch and Morgan Stanley lead-managed the sale.

US utility Dominion Resources sold $300m of hybrid securities yielding 240bp over Treasuries. Goldman Sachs and Merrill Lynch were joint bookrunners for the deal, rated low investment grade by Moody’s and just below investment grade by Standard & Poor’s.

In Europe, Swedish Match, the tobacco products maker, was hit by investor nerves as it was forced to sweeten terms and cut the size of its issue.

The company priced €300m of 2013 bonds to yield 60bp above mid-swap rates. It had targeted a €350m deal with a slightly lower yield spread.

“Even if the credit fundamentals looked quite good, we decided not to participate,” said one London-based investor.

He said the sell-off in subordinated financial debt had made industrial bonds look comparatively unattractive.

ABN Amro and SEB were the lead managers.

In the UK, BP added £50m to its December 2008 note to take the total amount to £500m. The bonds were priced to yield 30bp above Gilts with a 5.125 per cent coupon. HSBC managed the sale.

National Grid, the utility company, sold €600m of floating rate notes priced to yield 29bp more than three-month Euribor.

About 60 investors across Europe placed orders worth €900m for the bonds, according to one of the bookrunners.The sale was managed by Commerzbank, ING, RBS and SG CIB.

Copyright The Financial Times Limited 2006


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