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BG Group's bonds rally on Shell takeover offer

Reuters - UK Focus

By Robert Smith

LONDON, April 8 (IFR) - BG Group (LSE: BG.L - news) 's bonds traded up strongly on Wednesday on the back of Royal Dutch Shell (Xetra: R6C1.DE - news) 's US$70bn offer to buy the UK firm.

The strongest rally has been in the oil and gas company's multi-currency 6.5% 2072 hybrid bonds issued in 2012. The £600m bond jumped from a cash price bid of 107 to 109.75, the 500m tranche from 110.88 to 113.15 and the US$500m piece from 107 to 110.49, according to Tradeweb.

BG's senior bonds have also tightened across the board, particularly its longer-dated sterling bonds. The £750m 5% 2036 and £750m 5.125% 2025 deals both snapped 30bp tighter on news of the deal.

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The market appears to be anticipating ratings convergence between the two entities, specifically an improvement in BG's A2/A-/A- senior ratings and a slight weakening in Shell (LSE: RDSB.L - news) 's Aa1/AA/AA score.

Shell's bonds in contrast have widened around 4 to 6bp across its senior curve. The oil major has said it will pay a mix of cash and shares that would value each BG share at around 1,350 pence, a premium of around 52% to the 90-day trading average. (Reporting by Robert Smith; editing by Alex Chambers, Julian Baker)