Fiat SpA (F.MI) will tap the new issuance market Thursday for a euro-denominated bond due to mature 2012, another sign of Europe's reviving market for high-yield corporate debt.

Banca IMI, Barclays PLC, Calyon and UniCredit SpA have been hired to lead-manage the transaction, which is expected to be priced later in the session, according to bankers familiar with the deal.

The Fiat bond issue will be of benchmark size, a market-designation for bonds exceeding EUR500 million in volume, bankers said.

High-yield bonds are rated below Baa3 by ratings agency Moody's Investors Service and BBB- by Standard & Poor's and Fitch Ratings.

S&P said Thursday it is holding its rating for Fiat at BB+ on a negative credit watch, suggesting that a possible downgrade could be pending.

"The credit-watch placement reflects our view of the group's tight liquidity," said Standard and Poor's in a recent report ahead of Fiat's second-quarter earnings.

"In our view, at the end of March 2009, the group still had insufficient liquidity to cover the following 12 months' financial maturities."

S&P also cited risks associated with Fiat's stake in Chrysler Group LLC (C.XX), the U.S. auto maker.

It also has a Ba1 rating from Moody's Investors Service, and a BB+ rating from Fitch Ratings.

The European junk bond market began to show tentative signs of life in late May this year and since then a number of companies have come to the market, including U.K. entertainment and communications business Virgin Media Inc. (VMED), Italian telecommunications company Wind SpA (WIF.YY), French spirits company Pernod-Ricard SA (RI.FR) and Dutch cable company UPC Holdings BV.

Fiat's net industrial debt improved to EUR5.7 billion at the end of June, from EUR6.6 billion at the end of the first quarter of this year.

-By Jennifer Clark, Sonja Cheung and Ainsley Thomson, Dow Jones Newswires; +44 20 7842 9315; sonja.cheung@dowjones.com
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