GDF Suez Issues Zero Coupon Bond

By Josie Cox 

French utility GDF Suez has become the first company in more than 14 years to issue bonds in euros bearing no regular payments for investors, according to Dealogic data.

The Paris-based group sold four tranches of debt, with maturities ranging between two and 20 years, for a total value of EUR2.5 billion ($2.77 billion), according to bankers involved in the deal. Usually, bonds carry an annual payment for investors, known as a coupon. In this case, for the EUR500 million two-year tranche, the coupon will be 0%--another sign of the hard bargain borrowers can demand while investors' appetite for bonds is so strong.

This is the first time any company has done that in euros since the financing arm of Italian car maker Fiat priced a EUR10 million bond in July 2001. No company has ever printed a bond in euros greater than EUR160 million in size that offers a zero coupon, according to Dealogic.

The 20-year debt that GDF Suez sold Wednesday offers a coupon of just 1.5%--also a fresh record low for a corporate bond in euros of that maturity.

The transaction comes on the eve of a key meeting at which the European Central Bank is expected to shed more light on how it will execute the bumper bond-buying program it announced in January.

The program, known as quantitative easing, which could see the ECB buy as much as EUR1 trillion worth of on top-rated bonds in the eurozone, has already aggressively driven down funding costs for companies and triggered a rush of issuance, including from companies beyond the region.

GDF Suez, which is a fairly regular player in the bond market, has a solid investment grade rating of A1 from Moody's Investors Service and A from Standards and Poor's. Bank of America Merrill Lynch, BNP Paribas, HSBC, Barclays and Crédit Agricole managed the transaction.

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