Heidelberg Bond Issue Highlights Rising Cost Of Debt

BMI View: While HeidelbergCement's recent EUR300mn bond issue can be deemed a relative success given the recent wave of risk aversion pervading global markets, the high yield on the bond is indicative of the increasing risk premium demanded by investors on all but the safest of assets. With much of the construction industry in Europe and North America still in the doldrums, the rising cost of credit is making life even more difficult for an industry that is, by nature, highly capital intensive. Moreover, given that investor confidence in the sector is closely linked to economic sentiment, the ability of companies to finance their debt and initiate new projects will be tested over the coming months.

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