CRH plans to borrow $650m in bond sale

IRISH BUILDING materials giant CRH intends to borrow at least $650 million (€500 million) from US institutions in a bond sale that was announced following the close of business in New York last night.

CRH will use the money to refinance existing debt and extend the period in which it has to repay bonds it has issued previously.

The bonds will be a mix of instruments that mature – that is fall due for repayment – in five and 10 years. The overall issue is likely to be weighted towards the longer-term debt. Once that deal is done, it is expected to clear debts that fall due over the next three years.

The company had not finalised details yesterday, but sources said the debt was likely to attract an overall interest rate of less than 6 per cent. Interest repayments on that scale would be seen as a good outcome in the current environment.

The new bond issue is not likely to have an impact on CRH’s overall debt or interest payments. The company regularly refinances parts of its debt, much of which is in the form of bonds issued to US and European institutions.

In an interim management statement issued recently, the group said it had cut net debt to €4 billion from €4.8 billion between the end of September and the end of June. CRH uses a mixture of debt and its own resources to finance activities such as the acquisition of other businesses and capital spending.

The group has been planning the bond issue for some time, and originally set a target of $500 million. The level of interest in the offer prompted it to increase the amount that it intends raising.

Just over two years ago, CRH raised $650 million from US institutions, and sources said yesterday the response to soundings taken before the current rounds indicated it could raise more than that amount. There was said to be strong interest from banks and high net-worth funds in the offer.

CRH is based in Dublin and has businesses across Europe and the US, as well as a presence in such emerging economies as China and India. Around half its revenues come from the US, where it is the biggest player in the market.

Recently, it said earnings before interest, tax and the cost of writing off depreciation and amortisation were set to reach €1.2 billion this year, compared with €1.4 billion in 2009. It expects profits before tax to be €520 – €550 million.