Books soar past 5bn for debut EasyJet bond

(Adds investor comments and background detail)

By Laura Benitez

LONDON, Feb 2 (IFR) - UK budget airline EasyJet (Other OTC: EJTTF - news) has attracted more than 5bn of demand for a 500m seven-year debut bond in a test of appetite for corporate supply after a near three-week issuance hiatus.

Leads Bank of America Merrill Lynch, Barclays (LSE: BARC.L - news) and Societe Generale set initial price thoughts at 165bp to 170bp over mid-swaps on Tuesday morning, a level deemed generous by investors.

Guidance followed at swaps plus 150bp area (plus or minus 3bp, will price in the range).

"The IPTs look cheap and I expect the premium to be halved, but it would still be coming with a good pick-up. There are many reasons why this should generate decent demand," one investor said early in the marketing process.

EasyJet was offering an attractive concession to compensate for the volatile conditions, which have stunted supply from the sector this year. Corporates raised only 5.6bn-equivalent last month, the lowest January supply total in 16 years.

"Ryanair is bid at around 135bp over swaps, so it's about 30bp tighter than EasyJet IPTs. I don't think I'll need to pay up to get a speedy boarding ticket for this one," another investor said.

Leads used BBB+/BBB+ rated Ryanair as the main comparable. Its June 2021s were bid on Tradeweb at 127bp over mid-swaps and its March 2023s at plus 136bp. Those bonds started the year around swaps plus 102bp and 120bp respectively.

The second investor said feedback from accounts on Monday for the final pricing level was in the region of 155bp to 165bp over swaps.

The airline was assigned first-time ratings of Baa1 and BBB+ by Moody's and S&P last month. Proceeds from the sale will be put towards purchasing new aircraft instead of using more expensive bank lending.

Last week, EasyJet reported a 3.7% fall in revenue per seat on a constant currency basis in the three months to December 31.

It (Other OTC: ITGL - news) said more than half the decline was attributed to a drop-off in demand for flights to Paris, one of the world's most-visited cities, after the attacks in November that killed 130 people.

However, falling fuel costs are expected help the airline as crude prices hover near 12-year lows. (Reporting by Laura Benitez, editing by Helene Durand, Julian Baker)