Schneider Electric Helps Euro Company Debt Sales for Buyout

Schneider Electric SE's proposed acquisition of Aveva Group Plc is getting a boost from the company's issuance of euro debt. Europe's sluggish corporate bond market is seeing some activity as a result.

Schneider Electric is set to raise €1.1 billion ($1.08 billion) through the sale of two notes, maturing in five and 10 years. The notes will have spreads of 33 basis points and 57 basis points above mid-swaps, according to a person familiar with the matter. Investor orders have reached €8.5 billion. The proceeds from the sale will be used to finance Schneider's purchase of the British tech company and to refinance a £4.1 billion ($4.7 billion) bridge loan facility.

This deal is a much-needed boost for corporate bond issuance, which has been lagging this year. According to Bloomberg data, sales of euro-denominated debt from non-financial firms have slumped to the lowest level since 2014. Firms have been cautious about fundraising due to a number of challenges, including the war in Ukraine, the energy crisis and central banks' efforts to contain inflation.

The recent political turmoil in the UK may have deterred Schneider Electric from turning to the pound debt market for its funds. Both the acquisition and bridge financing are sterling-denominated, and the issuer has never issued pound bonds. It last visited public debt markets in 2020 and raised euro notes instead.

A spokesperson for Schneider Electric was not immediately available for comment when contacted by Bloomberg News.

As companies emerge from their earnings blackout periods and the markets stabilize, there is a greater likelihood of a final push to get bond deals done this year.

According to a Bloomberg league table, global sales of high-grade corporate bonds have reached $1.79 trillion and are headed for the lowest annual tally since 2011.

Schneider is paying approximately £31 per share, or £3.87 billion, for the remaining equity of Aveva Group. Schneider has been interested in the Cambridge, England-based tech firm since 2015, and took a majority stake in 2017.

The company has obtained a £1.5b loan to help repay the bridge financing. The bridge financing was led by Citigroup Inc. and Societe Generale SA. Bank of America, Deutsche Bank AG, Natixis SA and Societe Generale are arranging the bond offering set to price later on Wednesday.