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DaimlerChrysler sells €2 bln of 3-year bonds

DaimlerChrysler AG, the world's fifth-largest automaker, received orders worth more than €5 billion ($6.6 billion) in a sale of €2 billion of bonds yesterday, according to a banker involved in the transaction.

The Stuttgart, Germany-based carmaker's sale of three-year notes is the biggest corporate debt issue in Europe since a jump in supreme mortgage failures prompted investors to demand the highest risk premiums to hold company debt in a least a month. „The market is entering into a more normal phase after the recent volatility,” said Mahmoud El-Shaer, who helps manage about $35 billion of fixed-income assets for State Street Investment Management in London.

„The bond was attractively priced.” The 4.375% bonds due March 2010 were sold at a yield premium, or spread, of 35 basis points over the midswaps rate, a benchmark for borrowing. That compares with a spread of 30 basis points for the company's €1 billion of 3.625% bonds due in November 2010, according to Fortis Bank prices. Demand for the bonds may also have been underpinned by speculation that DaimlerChrysler will succeed in its search to find a buyer for its unprofitable Chrysler division, according to El-Shaer, who placed an order for some of the debt.

Blackstone Group representatives are visiting Chrysler's US headquarters yesterday as they explore a possible investment in the DaimlerChrysler unit, a person familiar with the matter said. Cerberus Capital Management LP representatives also met officials at Chrysler two days ago, according to the person who didn't want to be named because the visit isn't public. A company spokeswoman declined to specify the use for the proceeds of the sale.

DaimlerChrylser has the equivalent of €8.3 billion of bonds maturing this year, according to data compiled by Bloomberg. The carmaker hired Commerzbank AG, Royal Bank of Scotland Group Plc and UniCredit SpA to manage the sale of the debt. The bonds also pay a yield premium of 55.3 basis points more than German government bonds of a similar maturity. A basis point is 0.01 percentage point. The company's bonds gained on February 14 after DaimlerChrysler said it may sell, or seek partners, for its Chrysler division.

Chrysler will cut 13,000 jobs after posting a 2006 operating loss of €1.12 billion, the company said on the same day. It's abandoning a nine-year attempt to build a global carmaker that brought together luxury Mercedes-Benz limousines with Dodge pickup trucks. DaimlerChrysler pays more to borrow than its rivals including Bayerische Motoren Werke AG, the world's largest maker of luxury cars, Bloomberg data show.

BMW's €750 million of 4.625% bonds due February 2013 pay investors a yield premium of 35 basis points more than similar-maturity government debt. That's about half the spread investors demand to hold DaimlerChrysler's 4.375% bonds maturing in March 2013. Moody's Investors Service rates DaimlerChrysler's debt Baa1, its eighth-highest investment grade ranking. Fitch Ratings grades the carmaker's bonds an equivalent BBB+. Standard & Poor's ranks the company's debt one level lower at BBB. (Bloomberg)