Bayer AG, Europe's largest pharmaceutical and chemical maker, plans to extend a 3.5 billion euros (4.7 billion) credit line in the first quarter a year earlier, benefiting from bank loans to high-grade companies appetite.
“We want to take advantage of the favorable market situation,” Guenter Forneck, a spokesman for Leverkusen, Germany-based Bayer, said today by phone. “We have no plan to use the credit line.”
Banks halved the interest margin on loans to European borrowers with the same credit ratings as Bayer’s to an average 73 basis points last year, according to data compiled by Bloomberg. Standard & Poor’s and Fitch Ratings rank Bayer’s debt A-. Moody’s Investors Service rates it A3. Lenders almost doubled commitments to investment-grade companies in Europe last year to $390 billion, Bloomberg data show.
Bayer hasn’t decided on the size of the new facility which will replace its existing undrawn credit line maturing in 2012, Forneck said. The company agreed in 2005 to pay interest at 20 basis points more than the euro interbank offered rate on money drawn under the revolving credit, according to Bloomberg data.
Companies keep credit lines to guarantee debt such as commercial paper for day-to-day operations. They typically don’t draw on the loans.
Bayer reported a 12 percent increase in third-quarter profit Oct. 28 on a recovery in demand for plastics from carmakers and manufacturers.
A basis point is 0.01 percentage point. 3 month Euribor, an average daily rate set by banks and borrowers as a benchmark, is 1.025%.

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