Fifth Bond Sale Pulled as Cracks Grow in Europe's Primary Market

(Bloomberg) -- Europe’s primary bond market suffered another blow as Dutch lender Van Lanschot Kempen NV became the fifth issuer to pull a euro-note sale in little more than a week.

The bank postponed the bond sale “due to market circumstances,” spokesman Robin Boon said by phone on Monday. The lender planned to sell as much as 100 million euros ($115 million) of Additional Tier 1 notes, the riskiest form of bank debt, according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified.

Volksbank Wien AG also delayed an AT1 sale last week -- one of two deals postponed the same day -- as concerns about Italy’s budget, Brexit and a recent spike in U.S. Treasuries yields erode investor appetite for higher-yielding debt. Demand for investment-grade euro notes has been less affected, with Dutch gas distributor Nederlandse Gasunie NV getting orders for almost six times its 300 million-euro deal size on Monday.

“Investors are reluctant to invest in high-risk bonds at current rates,” said Sebastien Barthelemi, head of credit research at Kepler Cheuvreux, which recommends being underweight AT1s. “The trend is for widening spreads.”

The premium investors demand to hold high-yield euro corporate bonds instead of government notes has widened more than 50 basis points this year to 329 basis points, based on a Bloomberg Barclays index.

Read more: Europe’s Issuers to Step Carefully After Bond Rout, Pulled Deals

Van Lanschot offered a coupon of about 6.5 percent at guidance in AT1 sale. Volksbank Wien set a final coupon of 7.375 percent for similarly-rated AT1s before pulling its sale on Thursday.

German maintenance provider Bilfinger SE and payment-technology provider Ingenico Group SA also both abandoned euro bond sales last week. French lender My Money Bank delayed a 500-million euro covered-bond sale on Sept. 27.

©2018 Bloomberg L.P.

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