LONDON, Nov 7 (Reuters) - Italian high-end lighting and furniture company International Design Group (IDG) is poised to launch the first test of investor appetite for high-yield debt from the country since Italy's budget was thrown out by the European Union.
Against a challenging backdrop for Italian companies seeking growth capital IDG is looking to raise 720 million euros ($826 million) with one fixed-rate and one floating-rate issue, both with seven-year maturities, according to an offer document seen by Reuters.
Established in September, IDG generates 85 percent of its revenue outside Italy and its financial investors, Carlyle and Investindustrial, view it as a global business, a source familiar with the company said.
The high-yield offering is aimed at raising financing for IDG's proposed acquisition of lighting business Flos, furniture company B&B Italia and Danish lighting brand Louis Poulsen, according to the offer document.
A stand-off between the Italian government and European Union over Italy's 2019 budget has pushed up the country's borrowing costs and made for volatile trading conditions in recent months.
The yield investors demand for holding Italian government debt over safer German paper is close to 300 basis points.
One investor at a U.S. hedge fund said he expects pricing to be in the region of 5.75-6.25 percent but that a slowing Italian economy bodes ill for a bond issue from a retail company.
"We'll pass on the deal," he said, declining to be named. "They were trying to tell us that they are counter-cyclical but if you are buying a 10k sofa I still think you are affected by a recession."
However, a second investor said that IDG's deal is less tied to the fate of the Italian economy because it is part Danish.
The deal is not the first Italian high-yield corporate offer since a political crisis in late May sparked the biggest one-day jump in short-dated Italian bond yields for 26 years.
Drugmaker Recordati defied market volatility in early October to raise 1.3 billion euros with a fixed and floating-rate bond maturing in 2025, though this was just before the EU rejected Italy's draft budget.
Italian bonds account for about 18 percent of the iBoxx high-yield index tracked by bond investors, far more than any other country, Societe Generale research shows.
Italian corporate issuers have $228.2 billion of bonds outstanding, according to Refinitiv Eikon data, only $165 billion of which is designated as investment grade.
IDG has appointed Goldman Sachs, JP Morgan and UniCredit as lead banks to arrange a series of investor meetings this week to raise new debt for the company. DNB Markets, HSBC and Natixis are also on the mandate, the document said. ($1 = 0.8715 euros)
Additional reporting by Pamela Barbaglia Editing by David Goodman