The Nordic high-yield bond market is attracting new issuers with highly favourable financing.
Yinson Production announced on Friday it has issued its first bond in the international markets.
The Singapore-based owner of floating production, storage and offloading vessels chose the Nordic high-yield market as the venue for its debut $500m senior secured bond issue.
The five-year bond has a fixed coupon of 9.625% per year.
“With this inaugural bond issue in the Nordic bond market, we have successfully expanded our financing toolkit and further broadened Yinson Production’s funding base in an ever-changing financial markets landscape,” finance chief Markus Wenker said in a statement.
Wenker said: “The bond issue received significant interest from the investor community and was substantially oversubscribed, reflecting the compelling investment proposition underpinned by our long-term contracts and highly visible cash flows as well as the attractive FPSO market environment.”
The net proceeds will be used to refinance Yinson Production’s existing corporate loan and for general corporate purposes.
The company will apply for the bond to be listed on the Oslo Stock Exchange.
DNB Markets and Pareto Securities acted as joint bookrunners and ABG Sundal Collier acted as joint lead manager.
“The broad sentiment in the Nordics is still particularly strong with good liquidity and continued strong fund inflow and not least high coupon payments that must be reinvested,” Ole Kjennerud, credit strategist at DNB Markets, told TradeWinds.
“It has been a period with too little supply and too much demand, which have resulted in narrowing spreads. Many issuers have achieved close to record low spreads,” he added.
The tight interest rate spreads make the Nordic bond market a competitive financing source.
“When the spreads are that tight, the product will be competitive compared with other financing. Time-to-market is short. When the pricing is that favourable it will attract new issuers,” Kjennerud said.
The oil service sector has had “extreme activity” this year, according to Kjennerud.
“Without a doubt the most active sector. Investors are starting to get a bit saturated with oil service,” he said.
The activity within shipping has not been that high.
Danish product tanker owner Torm’s $200m bond in January is among the more notable shipping issues this year.
Earlier in April, John Fredriksen-backed SFL Corp did a $150m bond refinancing.
“Within shipping, there is a good underlying demand. Many funds have a bit too little compared with what they would like to have,” Kjennerud said.
He sees continued good demand in the overall market but added that some investors feel that the spreads have fallen too much.
Even so, the big funds have a large reinvesting need because of the current high coupons, which are twice as big as normal, according to Kjennerud.
“They must invest their money but there is a wish that the spreads should not narrow that much. But, as always, supply and demand is decisive.
It has been a good and well-functioning market for a long time. As long as the risk-free rates are that high, one will see that investors will come to this market,” he added.
