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LONDON, Feb 8 (IFR) - Ryanair capitalised on favourable rates to raise €750m in the bond market on Wednesday after CEO Michael O'Leary announced profit losses and a challenged outlook ahead of Brexit.
Ryanair returned to the bond market for the first time in nearly two years, just days after announcing a 8% drop in its Q3 profits, which it attributed to the sharp decline in sterling following Britain's vote to leave the EU.
"We expect sterling to remain volatile for some time and we may see a slowdown in economic growth in both the UK and Europe as we move closer to Brexit," Ryanair's CEO Michael O'Leary said on an investor call on Monday.
The airline started marketing a euro benchmark 6.5-year deal at initial price thoughts of 105-110bp over mid-swaps, before guidance was later set at plus 95bp area.
Final levels were announced at plus 92bp for an expected 1.25% coupon, on orders of around €3bn.
At this level, market participants saw a 6bp new issue premium for the paper.
"Ryanair have a very smart bunch of people, and they liked the look of the market and wanted the best price," a lead on the deal said.
O'Leary said last month that Ryanair may tap bond markets again if rates remain low.
The airline was last in the market in March 2015, printing a 1.125% €850m eight-year bond at mid-swaps plus 67bp.
The airline is expected to use some of today's proceeds to fund its €550m share buyback programme which is expected to finish by the end of February, according to its investor presentation released on Monday.
" will allow them to announce a new buyback programme with the full year results and this bond effectively pre-funds it," one investor said. "I think O'Leary wants to make sure the ECB is still hoovering up bonds to make sure he gets the best possible price."
The European Central Bank corporate sector purchase programme started on June 8 last year, allowing borrowers to fund at all-time low borrowing costs. It plans to reduce bond purchases of the wider quantitative programme by €20bn from April this year to €60bn a month until at least the end of the year.
"A lot of CEOs must be thinking I'll get some of that free money from Mario while there is still some in the till," the investor added. "He may change his mind soon if inflation in the euro area continues to pick up, despite what he said earlier this week."
Wednesday's trade, rated BBB+ by S&P and BBB+ by Fitch, will price later today via BNP Paribas (B&D), Citigroup and Credit Agricole. (Reporting By Laura Benitez)