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IFR Magazine - April 11, 2020 PDF
IFR Magazine - April 11, 2020 PDF
com
Seeking certainty Luckin’s sudden fall from grace has triggered much soul-
searching at the banks that underwrote its US IPO in May
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BY HELENE DURAND “This is a complete novelty give them an update on who’s NOT SO RARE ANY MORE
that they would do a syndication buying, they just don’t have the The surge in funding means that
The escalating cost of dealing for something that already same transparency because they German debt, which had in recent
with the coronavirus fallout was exists,” a DCM banker said. don’t do syndications.” years become increasingly scarce
underlined last week when “They’ve used syndications Writing on Wednesday, as a result of the ECB’s Asset
GERMANY announced it was before for their linker, which Citigroup analysts said: “The Purchase Programme, is losing
revising upwards its funding was uncharted territory, or US German Finanzagentur yesterday some of that scarcity value, which
needs for the rest of 2020 less dollars but never for points on (again) announced an intra-year bankers say has encouraged the
than three weeks after the the curve that already exist. increase of €109.5bn for its 2020 sovereign to consider syndication.
previous revision and said it was That’s very much their bread funding (excluding syndications), “The increase in funding plans
PLANNINGûITSûlRSTûSYNDICATEDû and butter business in auctions.” after a €119.5bn increase on is having a direct impact on the
BONDûDEALûINûlVEûYEARS But faced with rapidly March 23. Total supply target availability of Bunds and their
Spain, Portugal, Austria, Ireland expanding needs, the sovereign across bonds and bills now SCARCITYûVALUEvûTHEûlRSTû$#-û
and Belgium have all raised billions has said it is planning the sale amounts to €439bn versus the banker said.
in recent weeks via syndications to of a new 15-year via syndication initial target of €210bn (excluding “It means that some of the
tackle the additional funding needs in May. syndications and linkers).” premium in the Bund is going
stemming from the crisis. But “This says it all, if they’re Analysts at Commerzbank away a little bit and they are
unlike Germany, these issuers having to deviate from their made the obvious link with the aware of that.”
regularly use syndications to usual methods,” another DCM corona crisis. “The latest funding The increased funding
market bonds. The Finanzagentur, banker said. announcement from the requirement also has
'ERMANYSûlNANCEûAGENCYûONûTHEû “The problem they have is that German Finance Agency is RAMIlCATIONSûFORû'ERMANYSû
other hand, normally sells standard they don’t really know who buys confronting markets with the ability and willingness to retain
Bunds via an auction process their bonds as they only do auctions brutal reality of the corona the unsold Bunds from its
handled by primary dealers. and while the primary dealers will costs,” they wrote. auctions.
BY WILLIAM HOFFMAN Ally was last in the bond HIGH-GRADE DEBUT average bank spreads at 271bp
market in May when it carried This was Ally’s debut over.
Coming into the year ALLY high-yield ratings and sold investment-grade issuance since Spreads tightened by 37.5bp
FINANCIAL was looking forward to 53MûOFûlVE
YEARûNOTESûATû the company formerly known as through price progression but
a triumphant debut in the US 192bp over Treasuries for a General Motors Acceptance Corp still landed well above average
investment-grade bond market, 3.875% coupon. was forced to split off from the high-yield bank sector spreads
but with credit markets roiled While spreads have blown out auto maker as part of a bailout that trade around 508bp over
by the global pandemic the across all corners of the package during the previous Treasuries, according to ICE
company ended up pricing wide investment-grade market in lNANCIALûCRISIS BofA data.
of levels it used to accept as a recent weeks, investors worry As an infrequent issuer, the Yet some investors considered
junk issuer. that the rising trajectory of Ally, deal required a fair bit of price the compensation paltry
!LLYû&INANCIALSû53MûlVE
which focuses heavily on auto discovery, which is why considering where Ally
year note issue on Monday was lNANCEûCOULDûNOWûTAKEûAûTURNû bookrunners Citigroup, Deutsche currently trades in the
ITSûlRSTûSINCEûBEINGûUPGRADEDûINTOû for the worse. Bank, JP Morgan and RBC started secondary market, with its
the lowest rungs of investment “It’s unfortunate timing. spreads at high-yield levels in the 5.75% 2025s changing hands at
grade by both S&P and Fitch over What should have been a area of 600bp over Treasuries. around 584bp over Treasuries
the last six months. Moody’s still celebratory debut has turned That was an eye-popping level the prior week, according to
rates Ally at Ba1. into the issuer coming to the in the investment-grade space, MarketAxess data.
The deal was priced at 562.5bp market with their beggar cup,” where ICE BofA data places A syndicate banker close to
over Treasuries for a 5.8% said David Knutson, head of average Triple B credit spreads at the deal placed concessions at
coupon. credit research at Schroders. 401bp over Treasuries and about 5bp but noted that
Indonesia’s global lifeline 06 Luckin fallout snares more 08 BP nets US$10bn loan 09
“This is a strategy you can use “According to current and long-term sectors,” said Lee execution and subsequent
if you have a lot of scarcity estimates, the introduction of a 15- Cumbes, head of public sector performance has been enough to
value,” the banker added. year bond and the large-volume DCM for EMEA at Barclays keep investor sentiment strong.”
“If the auction doesn’t go increase of a bond in the 30-year “So far, it’s been received
well, they can retain some and segment represent such a special impressively by a market that’s RISING YIELDS
push back into the market at a situation,” the spokeswoman said. largely working from home, a Still, the surge in volumes is not
later stage. With higher As well as the two syndications, market that was under severe without consequences, some of
issuance, it can’t be in their the Finanzagentur will put a new stress a few weeks ago. The which have already started to
interest to keep a high portion seven-year point on the curve via numbers required for this working play out with yields rising across
of Bunds. They’re becoming auction on May 12. SOLUTIONûTOûTHEûCRISISûAREûSIGNIlCANTû the curve.
more realistic that their ability The spokeswoman said that but so is the reception. Quality of Germany’s 30-year
to raise large size is easier in the reason for choosing the benchmark, for example, was
syndicated form in one shot.” maturities was that Germany saw quoted at 0.077% on Friday, up
MAKING A COMEBACK
As well as the new 15-year, the good demand in the seven-year THE YIELD ON GERMANY'S from –0.25% in the middle of
Finanzagentur is also planning a maturity segment and that it was BENCHMARK 15-YEAR BOND last month. The 10-year
syndicated tap of the 0% August closing a gap in the maturity % benchmark has followed a
0.0
2050 in June. Further syndications PROlLEûOFûTHEûFEDERALûGOVERNMENTû similar pattern, moving from
“are possible in the second half of with the new 15-year Bund. –0.1 –0.84% to –0.32% .
the year”, a spokeswoman for the “We think there will be
–0.2
Finanzagentur said. STRONG SENTIMENT pressure on the long-end of the
“Placements via syndicates Despite the rapidly escalating –0.3
yield curve and while it’s true that
have so far only been carried out funding needs across the board, the ECB is buying and will buy
in special situations: the US market participants are sanguine –0.4 more, this Bund funding will
DOLLARûBONDûTHEûlRSTûISSUEûOFûANû about public issuers’ prospects in substantially increase,” said Mauro
–0.5
INmATION
LINKEDûBONDûTHEûlRSTû the primary market. 6ITTORANGELIû#)/ûFORûlXEDûINCOMEû
ISSUEûOFûAû
YEARûINmATION
“The public sector is going to –0.6 at Allianz Global Investors.
linked bond, the Bund-Lander expand very quickly in places. “While central banks can
bond,” the spokeswoman said. Amongst the eurozone –0.7 contain the movement upward
Germany’s last syndicated governments, the early signs in in yields and make the long
–0.8
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transaction was in 2015, when it a developing picture were that term increase in yields smooth,
PRICEDûAûõBNûINmATION
LINKEDû we expected another €400bn to they cannot change the
bond issue. come in 2020 across short-term Source: Refinitiv direction of the move.”
secondary levels are quite “It wasn’t in our view a huge changes, Ally could be one of the Some, however, believe Ally
erratic for the company. initial concession and one I lRSTûCREDITSûTOûTURNû"RUZZOûSAID may be better positioned to
In fact, by some calculations, thought might price wide of “On days where the market capitalise on growth opportunities
THEûNEWûlVE
YEARûNOTESûWEREû the initial talk level, but that didn’t mood sours, a lot of these deals coming out of the crisis than its
priced 20bp inside Ally’s existing HAPPENvû"RUZZOûSAIDûh)ûlNDûITûHARDû AREûTRADINGûSIGNIlCANTLYûWIDEûOFû captive auto lending peers Ford
curve, according to Dan Bruzzo, to justify the launch level.” their launch levels,” he said. Credit and GM Financial,
MANAGINGûDIRECTORûOFûBANKûlNANCEû “The Ally deal feels like one of CreditSights noted in a report.
at Amherst Pierpont Securities. ATTRACTIVE those deals where it could be Ally tends to focus on
CreditSights on the other hand trading wide of 600bp over in a lNANCINGûLOWER
COSTûUSEDûCARSû
ALLY FINANCIAL US$750m argued that the premium for heartbeat.” which could be more in demand
3.875% 2024s the credit was attractive to as consumers look for savings
BID YIELD
%
investors considering high-yield SIGNIFICANT NUMBER through a recession, Knutson
12 peer CIT Bank trades in the Ally’s portfolio remains noted.
565bp area. concentrated in the legacy auto But there are risks in Ally’s
10 Clearly, many investors lNANCEûBUSINESSûWHICHûISû OTHERûDIVERSIlEDûLINESûOFû
agreed as order books grew to a coming to a grinding halt. business as well, such as its
SUFlCIENTû53BNûFORûû In March, US new vehicle recent purchase of sub-prime
8
times coverage. sales declined by an estimated consumer lending company
On the break, the bonds 40% and April sales are expected CardWorks in a US$2.65bn deal.
6
continued to tighten quickly, to decline 80% year-on-year, “As far as bad timing goes it’s
reaching around 545bp over according to a JD Power report. not catastrophic for them, but
4 Treasuries, according to Additionally, just last week certainly it’s a negative to lock
MarketAxess. !LLYûDISCLOSEDûTHATûAûhSIGNIlCANTû in another portion of sub-prime
2 Ally caught a positive day in number” of auto borrowers had lending at a time when the US
Jun Sep Dec Mar
2019 2020
the market as equities closed up enrolled in a 120-day payment consumers are handicapped for
Source: Refinitiv over 7%, but if that sentiment relief programme. a period of time,” Bruzzo said.
BY CHRISTOPHER WHITTALL to post more collateral to the re- Longevity swaps emerged over automatically adjust to take
insurers that provide these a decade ago as one way for these additional deaths into
Mounting deaths from the swaps if mortalities increase COMPANIESûTOûOFmOADûTHEûRISKûOFû ACCOUNTûANDûTOûREmECTûANYû
coronavirus could soon trigger faster than models pensioners living longer than implied acceleration in
margin calls for corporate underpinning the transactions expected and saddling them mortality rates. That would
pension schemes from a little- had predicted. with expensive unexpected trigger collateral calls for the
known source: the more than “Naturally if we have a lot of payments. pension scheme to cover the
£80bn of swaps contracts many deaths coming through, there anticipated rise in net payments
hold to hedge against their will be an increase in [the] “We’re saying to it would face in the future.
pensioners living longer than amount of collateral that schemes with “We expect unfortunately
expected. schemes will need to place to [Covid-19] will lead to a higher
existing longevity
UK companies have found so- reinsurers,” said Baljit Khatra, a mortality compared to the
called longevity swaps to be a senior risk transfer consultant at
swaps: make sure original pricing assumptions
useful tool over the past decade Hymans Robertson. you have enough supporting the transactions,”
to pass on some of the risk of “We’re saying to schemes liquidity to answer said Cedric Fetiveau, co-founder
their pension scheme members with existing longevity swaps: any collateral calls” OFû$EDOMAINIAûAûlNANCIALû
beating assumptions on life make sure you have enough technology company focused on
expectancy. Now, as markets liquidity to answer any collateral BRINGINGûGREATERûEFlCIENCYûTOûTHEû
reel from the impact of the calls.” longevity risk transfer market.
extraordinary spread of Covid- “This experience will be
19, there is perhaps no corner of MARGIN CALLS Today, there are about captured by the model
lNANCEûAFFECTEDûMOREûDIRECTLYûBYû The UK is at the forefront of £81.5bn of existing pension fund supporting the valuation of the
the thousands of deaths coming longevity swap activity thanks longevity swaps outstanding, trades and will generate some
as a result of the virus. to the large number of according to Hymans Robertson, collateral movement between
Actuaries say there is still a COMPANIESûWITHûDElNEDûBENElTû with AstraZeneca, British parties,” he added.
good deal of uncertainty over pension plans. These schemes, Airways, BT, ITV and Rolls-Royce
the longer-term impact of Covid- where employers provide among the companies to have TIME TO REVIEW?
19 on mortality expectations. In RETIREDûSTAFFûWITHûAûSPECIlEDû used these products. Despite the shifting outlook,
the nearer term, though, level of payout, are mostly In a typical structure a consultants believe pension
consultants say the virus is closed to new members now. pension scheme makes regular schemes and re-insurers are
encouraging pension trustees to But there are still around 10.5m lXEDûPAYMENTSûTOûAûSWAPû unlikely to demand a so-called
shelve new longevity swap deals. members of such schemes provider based on mortality mortality basis review just yet
As for the billions of longevity spread across about 14,000 assumptions about its members for these swaps. That action
swaps already in existence, the employers handling roughly – essentially how much it is involves asking for a
uptick in UK deaths means £1.5trn in assets, according to a expected to pay out to reassessment of the models
pension schemes will likely have 2018 UK government report. pensioners over the course of underlying the swaps if there is
the swap. thought to be a permanent
The swap provider (usually a change in assumptions around
WEEKLY DEATHS REGISTERED
IN ENGLAND AND WALES re-insurer) pays the scheme a life expectancy of scheme
15,000 regular variable amount in members.
return, based on members who +HATRAûSAIDûHISûlRMûWASû
are alive at that time. That advising pension schemes to
12,000
means if pensioners live longer start thinking about reviews,
than expected, the re-insurer though it’s probably too early for
9,000 has to make up the shortfall. SPECIlCûACTION
These regular payments are “There’s no point doing a
6,000 usually settled on a net basis mortality review without
every month or quarter, while knowing the facts. At the
collateral – typically cash or moment, there are a lot of
3,000
investment-grade bonds – is also unknowns and a very mixed bag
exchanged to provide security of views,” he said.
0 against the risk of default on any
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2011
2012
2013
2014
2015
2016
2017
2018
2019
2009
Q1 2020
have to pay a 100bp fee, which from the past is, when you can
means the primary programme get funding take it and worry
Source: Hymans Robertson will be a worst-case scenario- about the cost later.”
BY SUDIP ROY h7EûAREûTRYINGûTOûlGUREûOUTû A few other sovereigns from The next day Abu Dhabi went
who sits in each camp across the the CEEMEA region have issued with the same tenors, the only
Two of the Gulf’s powerhouses asset class. But it’s slightly more over the past couple of weeks, difference being that the 30-year
proved their capital markets DIFlCULTûASûWEûNEEDûTOûFEEDûINû including Israel, which sold a tranche wasn’t a Formosa.
credentials last week as QATAR [the potential actions of ] China, century bond as part of a US$5bn Leads began this deal also
and ABU DHABI raised US$17bn the IMF, the World Bank and so triple-trancher on March 31. with a 75bp premium before
between them to support their on into this analysis,” said one But Qatar decided to go with a revising by 45bp after also
balance sheets in the wake of emerging markets investor. more conventional format of getting US$44bn of orders.
the novel coronavirus pandemic $ElNITELYûINûONEûCAMPûAREû lVEûûANDû
YEARûBONDSûWITHû At US$7bn, however, Abu Dhabi
and slump in oil prices. blue-chip issuers, such as Qatar the longest tranche structured as (Aa2/AA/AA) raised less than Qatar.
But countries lower down the and Abu Dhabi. Despite a more a Formosa (facilitating its sale to It issued US$2bn of April 2025s at
ratings spectrum are in a much than 50% fall in the oil price over Taiwanese investors). Pricing 220bp over Treasuries, US$2bn of
tougher position and are staring the past month, as well as the began generously with a 75bp April 2030s at plus 240bp and
at a very different predicament. global spread of Covid-19, new issue premium. But a book US$3bn of April 2050s at 4.10%.
Several African nations have investors were more than happy of US$44bn enabled leads to For investors, both deals were
even called for debt relief. to get involved in two of the knock 35bp of each tranche. enticing given the repricing of
The contrast illustrates a safest credits in the emerging Qatar (Aa3/AA–/AA–) sold a risk assets and the concessions
potential split within the markets – especially given the US$2bn April 2025 issue at on offer.
emerging markets asset class concessions on offer. 300bp over Treasuries, a US$3bn “Qatar looked particularly
between those with primary April 2030 at plus 305bp and a attractive to us, and we
markets access and those that FIRST OUT US$5bn April 2050 at 4.4%, participated in the new issue.
are scrambling for funds as the 1ATARûWASûlRSTûOUTûONû4UESDAYû REmECTINGûTHEûBIDûFORûDURATIONû We see some very compelling
global economy heads into a with a US$10bn triple-tranche that has been evident in other opportunities in the higher
deep recession. deal. high-grade markets. quality segment of the EM
BY JIHYE HWANG The US$1bn 4.45% 50-year While pricing tightened Bankers saw the new issue
piece was priced at 99.009 to around 25bp–40bp from initial premium at 40bp–55bp over
The REPUBLIC OF INDONESIA turned yield 4.50%, while the US$1.65bn guidance, the absolute yields Indonesia’s existing bonds with
to the global bond markets to 3.85% 10.5-year tranche was were higher than in January similar tenors and a hypothetical
fund its response to the priced at 99.573 to yield 3.9% when Indonesia last printed 50-year point on the curve.
coronavirus crisis, raising and the US$1.65bn 4.2% 30.5- global bonds. The sovereign then “There is a new issue
US$4.3bn from its largest US year portion at 99.150 to yield sold a 10-year note tranche at premium of 62.5bp for slightly
dollar bond issue. 4.25%. 2.88% and a 30-year piece at 3.55%. higher rated Single A sovereigns,
The US$4.3bn triple-tranche so the premium Indonesia paid
SEC-registered deal comprised INDONESIA US$1bn 3.7% 2049s this time is something that the
tenors of 10.5, 30.5 and 50 years BID YIELD government will feel
– the longest maturity for any US % comfortable with,” said the
5
dollar bond issue from Asia since banker on the deal.
1997. Another banker involved in
Indonesia’s new senior the transaction added that
unsecured notes, with expected Indonesia’s new bonds were
ratings of Baa2/BBB/BBB, priced competitively compared
received orders of over US$11bn 4 with Tuesday’s US$10bn jumbo
ATûlNALûGUIDANCEûWITHûSTRONGû from Qatar, rated Aa3/AA–/AA–.
support from real-money funds. Qatar’s 10-year and 30-year
“We were looking at a tranches were priced at 305bp
minimum US$3bn issue size but and 308bp over Treasuries, while
THEûlNALûSIZEûCAMEûINûATû Indonesia’s 10.5-year and 30.5-
3
US$4.3bn on the back of the Nov Jan Mar year bonds came at around
oversubcription,” said a banker 2019 2020 297bp and 322bp over the
on the deal. Source: Refinitiv benchmark.
universe at the moment,” said The topic of debt relief and concessional loans made to low- China, commercial banks,
Joanna Woods, emerging standstills has also been raised income countries. commodity traders and
markets portfolio manager at despite several packages of Separately, with African bondholders – means efforts to
First State Investments. lNANCIALûHELPûFROMûMULTILATERALSû Eurobond spreads on average ease the region’s debt burden
With INDONESIA and GAZPROM also to the poorest regions. around the 1,000bp mark, will be complicated.
issuing last week, the best credits Both the World Bank and IMF, lNANCEûMINISTERSûFROMûTHEû Moreover, any waiving of debt
are forging ahead with fundraising which are leading the rescue region want support for owed to private creditors could
to combat the economic damage packages, have made calls for bilateral, multilateral and be construed as a distressed debt
caused by the coronavirus. bilateral loan repayments made commercial debt relief. exchange, warned Fitch and
to IDA countries to be However, the presence of so Moody’s, triggering a move to
ASKING FOR HELP suspended. These are many different creditors – restrictive default.
However, many other emerging For their part, bondholders
markets credits are struggling. aren’t that keen on the idea,
YIKES
Last month, the head of the IMF BLENDED SPREAD OF AFRICA EMBI GD INDEX though didn’t reject it entirely.
said nearly 80 countries had bp “Clearly, as a bondholder, I am
approached the multilateral for 1,200 not keen on accepting a
help. haircut,” said Uday Patnaik,
With US$730bn of foreign head of EM debt at LGIM.
currency debt needed to be 1,000 “I think the situation varies
RElNANCEDûBYû%-ûPUBLICûANDû country-to-country. From a
private-sector borrowers by the longer-term perspective, if a
end of the year, according to the 800 country can afford to pay, it
Institute of International should.”
Finance, the stakes are high. 4HEûlRSTûBONDHOLDERûSAIDûh)Fû
ARGENTINA and LEBANON are 600 it’s across the board and well co-
already in talks with creditors, ordinated, then maybe people
while ZAMBIA, which has a would be reluctantly willing to
400
coupon payment due on April stomach it but I fear it won’t be
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14 on its US$1bn of 8.5% 2024 02/04/2020 and some will be able to better
BONDSûISûLOOKINGûFORûlNANCIALû go down this route than others.”
advisers to help ensure the Additional reporting by Robert
sustainability of its debt. Source: Refinitiv Hogg
HALF A CENTURY The 2030s traded slightly impact of the fallout from the In a press release, Indonesia’s
)NDONESIASûlNANCEûMINISTRYû higher on April 9 at coronavirus pandemic,” said the central bank partly attributed
said the 50-year note tranche 99.679/100.104, while the 2050s second banker on the deal. the drop to its rupiah
was the result of strong demand were trading a touch lower at stabilisation efforts amid the
from global investors at the long 98.850/99.508, according to “Indonesia has done GLOBALûlNANCIALûMELTDOWNûANDû
end of the curve. The Tradeweb. The 2070s, which are EMERGINGûMARKETûOUTmOWSû
a market-leading
government also wanted to most sensitive to rate triggered by the pandemic. The
balance its maturities and set a movements, were trading much
funding that indicates rupiah is down 15% against the
benchmark for other lower at 95.500/96.375 for a what there is to come US dollar this year.
Indonesian issuers. yield of 4.794%/4.694%. for Asian SSA issuers Indonesia will increase its
No Asian issuer has sold US to stem the impact of 2020 bond issuance target by
dollar bonds beyond the VIRUS RELIEF the fallout from the Rp160.2trn (US$9.68bn) to cover
40-year mark since the Proceeds will be used for the expected widening of the
Philippines and Reliance general purposes, including
coronavirus pandemic” ûlSCALûDElCITûTOûûOFû
Industries sold century bonds in funding the country’s GDP, Reuters reported on
1997, following a similar deal coronavirus relief and recovery Monday, quoting a government
from China in 1996. efforts by supporting document presented to
Interest in long tenors, healthcare, providing a social Outside Asia, a wave of Covid- parliament.
however, is growing as interest safety net and supporting small 19 social bonds were printed by On top of that, it listed a plan
rates decline. Indonesian state- and mid-sized businesses. institutions such as Nordic for sales of Rp449.9trn of
owned energy company Though not labelled as a Investment Bank and Council of “pandemic bonds” to cover
Pertamina sold 40-year bonds in social bond, this is thought to be Europe Development Bank, additional spending on the
February, as did Thailand’s PTT THEûlRSTûSOVEREIGNû53ûDOLLARû while Portugal sold euro Covid-19 response.
Exploration and Production in bond issue to explicitly state currency bonds as part of its Indonesia reported 2,956
November last year. that the proceeds will be used to response to the pandemic. infections from the coronavirus
Citigroup, Deutsche Bank (B&D), FUNDûTHEûlGHTûAGAINSTûTHEû The new bonds will also help as of April 8 and 240 deaths,
Goldman Sachs, HSBC and pandemic. BUTTRESSûOFlCIALûFOREIGNû the highest number in Asia
Standard Chartered Bank were “Indonesia has done a exchange reserves, which after China, but limited
joint bookrunners. Danareksa market-leading funding that dropped to US$121bn as of the testing so far means the
Sekuritas and Trimegah Sekuritas indicates what there is to come end of March from US$130.4bn ACTUALûlGURESûAREûTHOUGHTûTOû
Indonesia were co-managers. for Asian SSA issuers to stem the a month earlier. be much higher.
BY ANTHONY HUGHES, FIONA LAU and a US$1bn follow-on/ “The risk of lawsuits over US (OWEVERû1IANSûBENElCIALûANDû
convertible bond issue in IPOs is kind of expected but the voting interests would fall
The woes of Nasdaq-listed LUCKIN January. loss from the margin loan could SIGNIlCANTLY
COFFEE deepened last week with The shares pledged were really hurt the bottom line of That is because Lu will retain
revelations of a default on a worth about US$2bn before the banks,” said a banker away a bigger percentage of
US$518m margin loan secured Luckin said an internal probe from the Luckin deals. supervoting Class B shares
against shares in the fraud- had found that its chief after the sale, even though
racked Chinese coffee chain. OPERATINGûOFlCERûANDûOTHERû “The risk of lawsuits his economic interest will
As if the disclosure of employees had fabricated sales over US IPOs is kind fall. Luckin’s Class B shares
fabricated sales on April 2 was totalling Rmb2.2bn (US$310m) of expected but the lose their 10:1 voting power
not bad enough, Luckin INûTHEûlNALûNINEûMONTHSûOFû upon conversion to ordinary A
loss from the margin
chairman Lu Zhengyao and CEO As of last Wednesday, those shares, a precursor to the
Qian Zhiya last Monday were shares had lost 83% of their value
loan could really hurt disposal.
FORCEDûTOûSURRENDERûAûSIGNIlCANTû since the April 2 announcement the bottom line of the The prospectus for the
economic stake in Luckin after and were worth only US$335m. banks” January follow-on showed that
margin lenders seized the As well as their share of a Lu had pledged 30% of his Class B
equivalent of 76.35m Luckin near-US$200m hit on the margin shares as security for a loan,
ADSs, or about 30% of the loan, the bookrunners on while Qian had pledged 47% of
outstanding. Luckin’s deals are facing her Class B stock.
The margin lenders are Credit potential lawsuits as investors A statement from Goldman A company controlled by
Suisse, Morgan Stanley, CICC, question whether they Sachs, which is acting as the 3UNYINGû7ONGûIDENTIlEDû
Haitong International, Goldman PERFORMEDûSUFlCIENTûDUEû disposal agent for the seized elsewhere as Lu’s sister, had
Sachs and Barclays, according to diligence ahead of the IPO and shares, said that if all the pledged 100% of its Class B stock.
people with knowledge of the FOLLOW
ONû3EVERALûLAWûlRMSûAREû shares pledged under the Additional shares were to be
matter. preparing class action suits on margin loan were sold, Lu’s pledged automatically in the
4HEûlRSTûFOURûBANKSûARRANGEDû behalf of disgruntled voting interest in Luckin event of a margin call, according
Luckin’s US$645m IPO last May shareholders. Coffee would not decrease. TOûTHEûlLING
BY STEVE SLATER as a whole,” said Ying Cao, lockdowns and social distancing Symphony was founded in
director of digital strategy and rules put in place across the ûBYûAûGROUPûOFûûlNANCIALû
Remote working and a new digital head of digital product for WORLDûINCLUDINGûINûlNANCIALû lRMSûLEDûBYû'OLDMANû3ACHSûINû
ecosystem have been rolled out at Barclays’ Markets division. hubs like New York and London. an effort to change the way
breakneck speed across the Cao said Barclays had adapted traders communicated. Its
lNANCIALûINDUSTRYûINûRECENTûWEEKSû well. “In essence, you learn as SYMPHONY IN CONCERT take-up had been slower than
– often kickstarting new you are doing,” she said. Banks are running remote EXPECTEDûBUTûCOULDûBENElTûFROMû
technology into use in weeks, Bankers said platforms across desktop systems, backed up by the remote working shift and
rather than years. THEûINDUSTRYûWEREûBENElTINGû having some traders and critical demand for secure encryption to
“We’ve had to do in two weeks from a shift by banks three or STAFFûINûOFlCESû&IRMSûAREûUNLIKELYû address compliance issues. It
what many industries have taken four years ago to pursue a more to have introduced new systems raised US$165m in new capital
10 years, to enable work from agile and adaptable approach to – but have ramped up existing in June, and its investors (and
home effectively,” Atte Lahtiranta, technology, similar to big tech platforms on to mobile devices users) include Goldman, BNP
Goldman Sachs’ chief technology lRMSû4HATûHASûCREATEDûANû and rolled them out more widely Paribas, MUFG, HSBC and JP
OFlCERûSAIDûONûAûVIDEOûFORûSTAFFû environment more able to across staff. The use of Morgan.
and clients last week. change quickly in days or weeks communications platforms such JP Morgan has more than
"ANKERSûATûRIVALûlRMSûAGREEDû – aided by the removal of layers as Symphony, Zoom or Cisco’s 180,000 staff working from
Indeed, some say the change has of bureaucracy. *ABBERûHASûINCREASEDûSIGNIlCANTLY home and said last week it had
been so profound that a new That has meant traders, Barclays has extensively used nearly 150,000 virtual sessions
infrastructure will remain in capital markets desks and the Symphony and been allowed to RUNNINGûATûTHEûSAMEûTIMEûnûlVEû
place when social and work WIDERûlNANCEûINDUSTRYûAPPEARûTOû add new licences quicker than times its average before the
conditions return to normal. have adapted well to working usual, adding about 1,000 in crisis.
“It’s been uncharted territory from home. That has been a recent weeks, to about 14,000. In “It’s amazing how quickly we
for all of us. There’s been such a cornerstone of contingency the past month, the bank’s have mobilised and
quick and rapid change to the plans that were suddenly activity on the platform has implemented work-from-home
operating model for the industry implemented following more than doubled. and other resiliency measures –
LOST MANDATE
For the banks involved, the
“It’s about perception,” said
one source close to the company. BP nets US$10bn loan
fallout from the scandal does “The company wants to distance
not end with losses on the
share-backed loan.
itself from anything that could
potentially affect the IPO.”
to bolster liquidity
Shares in Chinese car rental Credit Suisse declined to Loans Underwriting alive and well in IG market
company CAR INC, also controlled comment.
by Lu, have also slumped 50% Just two weeks ago, WeDoctor BY ALASDAIR REILLY, to major clients facing
since April 2. Moody’s cut CAR’s picked CMB International, Credit CHRISTOPHER MANGHAM uncertainty over the impact of
rating to Caa1 on Thursday, Suisse and JP Morgan as sponsors the pandemic on their
warning of a possible change of for a planned Hong Kong IPO of Britain’s BP has agreed a businesses.
control and default after CAR about US$1bn, IFR reported on US$10bn two-year credit facility “The loan market is always
said its major shareholder had March 27. Citigroup has since to provide additional liquidity there, through thick and thin.
been forced to sell part of its replaced Credit Suisse. headroom in the wake of the 5NDERWRITINGûISûDElNITELYûTHEREû
stake. The scandal has also Covid-19 pandemic and for solid, investment-grade
CAR’s liabilities include two emboldened short-sellers disruption in the oil market, names,” a second banker said.
US$100m loans, both arranged including Muddy Waters, which illustrating how lenders are “Some banks have ramped up
by Bank of China (Hong Kong), revealed a short position on stepping up to underwrite their underwriting activity
as well as US$500m of US dollar Luckin on January 31 saying it syndicated loans for investment- quickly and aggressively in
bonds. had received a “credible” grade borrowers. response to this crisis.”
At least one of Luckin’s anonymous report outlining The revolving credit facility The facilities are being put in
underwriters has lost business allegations of fraud. was solely underwritten by BNP place by companies that already
as a direct result of the scandal. Muddy Waters and Wolfpack Paribas and was syndicated to 20 have large undrawn facilities
Tencent-backed online Research last week accused banks. The transaction, which and robust liquidity as a
healthcare site WEDOCTOR quickly Nasdaq-listed video-streaming was oversubscribed, shows that precautionary measure to deal
dropped Credit Suisse as one of PLATFORMûI1IYIûOFûINmATINGûITSû the loan market remains open with the Covid-19 crisis.
the sponsors for its Hong Kong 2019 revenues, prompting a for high-quality corporates. “The main point of these
IPO of about US$1bn. swift denial from the company. “Those borrowers with good facilities is to directly cover and
The Swiss bank had led both TAL Education, a Muddy Waters banking relationships can access provide headroom on the
Luckin’s IPO and follow-on/CB target in 2018, said last week an the market,” a banker said. current risks we know about.
issue and has the closest EMPLOYEEûMAYûHAVEûINmATEDû The move came after BP The existing longer-term
relationship with the company. sales data. secured a US$10bn facility in backstop remains in place for
March in addition to its existing the unexpected,” the second
US$7.625bn of undrawn standby banker said.
in weeks instead of months or NOTûINûANûOFlCEûENVIRONMENTûnû facilities. In the last week, ROLLS-ROYCE
years. There are great lessons to but that is behavioural, not due h"0ûISûALREADYûLIQUIDûTHISûGIVESû has agreed an additional £1.5bn
be learned from this to systems, they said. the borrower some additional RCF with its relationship banks
experience,” JP Morgan boss headroom,” the banker said. to boost its liquidity and also
Jamie Dimon said in his annual FINTECH HAS BIGTECH’S TOOLS The company said previously fully drew its existing £2.5bn
letter to shareholders last week. Goldman’s Lahtiranta is well that it manages its cash position RCF, while French aerospace
Barry Donlon, UBS’s head of PLACEDûTOûASSESSûHOWûlNANCEûISû to have adequate cover to and defence group THALES signed
debt capital markets for EMEA, adapting: he only joined the respond to potential short-term a €2bn short-term RCF with its
said the new digital ecosystem 7ALLû3TREETûlRMûlVEûMONTHSûAGOû market illiquidity and short- banks to bolster its liquidity on
was faring well. from Verizon, where he was term price volatility. top of its existing undrawn
“It’s been impressive how CHIEFûTECHNOLOGYûOFlCERûSINCEû BP is one of an increasingly €1.5bn RCF.
well the infrastructure has held 2017, and is based in Silicon long list of highly rated European While a lot of banks are very
up. Different banks have Valley. borrowers that have put in place busy at the moment on bilateral
different approaches, but I’m He said he had not been short-term liquidity facilities and club loans, which is keeping
not aware of anything that AWAREûHOWûFASTûTHEûlNANCEû over the past few weeks. credit committees busy, the type
needed to be done to close the industry would be able to adapt, “With elevated pricing in the of borrowers being seen on the
gap between where we were but it had done so rapidly, bond market, the logic follows large underwritten deals can be
lVEûORûSIXûWEEKSûAGOûINûTHEû helped by its adoption of public that there is elevated pricing in prioritised and risk is being
OFlCEûANDûHOWûWEVEûWORKEDûINû cloud-type technology in recent other markets, including the cleared very quickly.
the last two or three weeks,” years, which had given it a loan market,” the banker said. “Banks are more geared up
Donlon said. versatile technology base. ROYAL DUTCH SHELL agreed a than they were even two weeks
7ORKmOWûANDûKITSûHAVEûBEENû “There’s nothing for the US$12bn RCF in March to boost ago. A lot of banks have changed
seriously tested during volatile lNANCEûINDUSTRYûTOûLOOKûATû its liquidity as commodity systems on approving deals,
and active markets, including BigTech and say ‘Oh my, I wish markets were hit by uncertainty, with some credit committees
record levels of corporate debt we had that’. We have all of the increasing the oil giant’s available now meeting every day as
issuance. Bankers have said the same things,” Lahtiranta said. liquidity to more than US$40bn. opposed to once or twice a week,
bookbuild process can be “It’s been a massive in a bid to deal with requests
slower, because more phone undertaking, and at the same LIQUID GOLD FROMûBORROWERSvûTHEûlRSTû
calls need to be made, and time we’ve been hit by very Banks are focusing heavily on banker said.
people may be more cautious unpredictable market the swift delivery of these kinds Additional reporting by Claire
about taking risk when they are volatility.” of short-term liquidity facilities Ruckin
BY STEPHEN LACEY 25%–30% conversion premium. and US$7.9bn pulled from all 7HILEûNOTûTHEûlRSTû#"ûSINCEû
The offering size was increased equity and high-yield funds over the start of the coronavirus
The convertible bond market is to US$750m late in the the same period, according to pandemic, Slack’s deal is the
functioning and, not bookbuild and pricing was Lipper. lRSTûTRULYûOPPORTUNISTICû
surprisingly, it was work-from- lNALISEDûATûûUPûûnû lNANCING
HOMEûBENElCIARYûSLACK towards the aggressive end of “The terms are “The terms are certainly less
TECHNOLOGIES that highlighted the talk. certainly less aggressive than we saw two
product’s resilience as a source While there was no pre- aggressive than months ago, but are still pretty
of growth capital. marketing of the Slack CB in we saw two months attractive from a historical
Slack, which went public via a particular, investment banks perspective,” said a second
direct listing last June and whose have sounded out CB buyers in
ago, but are still banker involved in the
cash balance stood at US$768.6m recent weeks on a no-names pretty attractive underwriting. “They are
on January 31, landed US$750m basis about potential terms. from a historical certainly better than what we
on Monday from the one-day “Unlike 2008, when there perspective” have seen on some of the
MARKETEDûSALEûOFûANûUPSIZEDûlVE
were heavy [fund] redemptions, consumer or healthcare CBs.”
year CB. the CB market is open for In late February/early March,
Against a constructive market business,” said one banker close RingCentral and Square both
backdrop, shares of Slack were to the transaction. “This proves The CB market is much secured US$1bn from the sale of
EFFECTIVELYûmATûONû-ONDAYûnûUPû that money can get raised for a smaller than those for equities lVE
YEARû#"SûATûCOUPONSûOFû
0.2% at US$24.31 – as the company with the right or high-yield, though – CB funds 0.125% and 0%, respectively, and
offering was pitched to opportunity, and that there is tracked by Lipper manage 50% conversion premiums,
investors. still interest in growth capital.” US$9.8bn of assets, compared among the most aggressive
Morgan Stanley and Goldman Long-only CB funds have seen with US$5.9trn for all equities, terms ever achieved.
Sachs launched that morning a US$671.2m withdrawn over the for instance, but the appetite for Cruise ship operator Carnival
US$600m convertible bond PASTûlVEûWEEKSûTHROUGHû!PRILûû the deal showed investor and Nevro, a medtech company,
offering a 0.5%–1% coupon and compared with the US$62.5bn resilience. sold CBs late last month at
BY ANTHONY HUGHES the importance of having an downsized to US$500m from EQUITY-LINKED TOO
anchor investor to reduce the US$1.25bn at launch. This activity has also extended to
US companies are leaning risk of offerings being poorly The offering came at a 37.5% equity-linked offerings.
heavily on anchor investors and received. lLE
TO
OFFERûDISCOUNTûANDûTRADEDû Online furniture retailer
private offerings to raise equity “The public market is still poorly in the immediate Wayfair raised US$535m last week
capital while visibility on the pretty twitchy and not ready to aftermath, though the stock has from the sale of a convertible bond
length of the coronavirus crisis put in the volume of capital rebounded in recent sessions. with a 2.5% coupon to two private
remains poor. needed to bail out these In contrast, real estate equity investors and an existing
Most common stock sales by companies,” one ECM banker developer Howard Hughes late shareholder.
US companies in the past two said. last month priced a US$600m h0)0%SûHAVEûALWAYSûlLLEDûTHEû
weeks have come in the form of “But if you can draw a line in offering comprising a US$500m gap when markets are volatile
private investments in public the sand in terms of how much private placement to hedge fund and companies need to raise
equity (aka PIPEs) or public capital you need and have an investor and long-time supporter capital and they want to do a
offerings with private anchor investor, others will Bill Ackman plus a US$100m transaction that receives less
placements to anchor investors, buy the story and that can public stock sale. publicity, that is targeted, or
including existing shareholders work.” In the past two weeks, they need to do a deal that is
that have already conducted Carvana (US$600m), EVO more structured,” said Anna
extensive due diligence. CARNIVAL LESSON 0AYMENTSû53M û2EDlNû Pinedo, capital markets partner
Bankers say public market Cruise operator Carnival’s stock (US$110m), Ares Management ATûLAWûlRMû-AYERû"ROWN
investors remain reluctant to be sale earlier this month was (US$384m) and Velocity Financial The trend of companies using
wall crossed for long periods marketed for two days – a (US$45m) have all opted for PIPEs PIPEs to raise capital is likely to
given volatile market conditions relative eternity in current or direct offerings to existing continue over the next few
and the murky outlook for market conditions – and lacked shareholders and/or strategic weeks and months, Pinedo said,
corporate earnings, highlighting an anchor order before being investors. particularly while it remains
BY CHRISTOPHER SPINK members of the currency bloc “There are no easy answers,” “The change would involve
via the European Stability said Ugo Panizza, professor of giving senior coronabonds a
ITALY should issue a new type of Mechanism – although that may international economics at the statutory seniority – in effect, a
bond that is senior to its be impractical given the size of Graduate Institute, Geneva. “If lRSTûCLAIMûONûTHEûPUBLICû
outstanding instruments if it Italy’s debt, with €250bn [Italian GDP] is down by 10%, exchequer – over other
needs emergency funds to maturing this year. then the debt still goes crazy. sovereign obligations governed
weather the coronavirus crisis, Others, including a group of There may either be a massive by the country’s own law,”
according to Lee Buchheit, the lNANCEûMINISTERSûFROMûSOUTHERNû exercise of European solidarity – Buchheit said.
sovereign debt restructuring eurozone states, including some sort of mutualisation – or The move would echo the tool
lawyer who has advised Greece, France, Spain and Italy, have it may be time to call the Buchheit advised Greece to
Argentina and many others. called for the bloc to issue euro lawyers.” employ when restructuring its
Italy is one of the world’s most or coronabonds collectively to €206bn of debt in 2012. Most
heavily indebted countries, with lLLûlSCALûGAPSû'ERMANYûANDûTHEû EMERGENCY BONDS was written under Greek law,
a debt-to-GDP ratio of around Netherlands have resisted such Buchheit said that Italy and allowing parliament to vote
135% before the crisis. And proposals. potentially other eurozone through a clause imposing a
with the country’s economy Another option is for mutual countries should issue change of terms on the debt
virtually shut down and bodies such as the European emergency bonds that are retroactively.
questions about whether the Investment Bank to be the deemed senior to outstanding One problem may be that the
country’s debts are issuing entity for jointly instruments to ensure take-up. European Central Bank, via the
unsustainable, there has been guaranteed bonds. “Let’s call them ‘senior Bank of Italy, is already a major
considerable discussion over A Eurogroup conference call coronabonds’,” he said. owner of Italian government
how Italy should be helped. that discussed the issue on Because Italy and most other bonds. It might resist being
Some have suggested that it Tuesday broke up without major members of the eurozone subordinated, as it did in 2012
should follow the example of agreement. Ministers joined issue bonds governed by their when it refused to include its
Greece, which was bailed out another call on Thursday to own law, it would be legally Greek holdings in any
eight years ago in part by other continue deliberations. possible to do this. restructuring.
BY DAVID BROOKE, AARON WEINMAN over Libor and an OID of 96. restaurant operator Del Frisco’s Despite relief among market
Prior to closing, the margin was has closed in-house dining and his participants that a new transaction
Texas businessman Tilman cut to 1,200bp over Libor with a National Basketball Association has emerged, some were quick to
Fertitta has offered huge û,IBORûmOORûWHILEûTHEû/)$ûWASû franchise, The Houston Rockets, is downplay the idea that Landry’s
investor-friendly incentives in a unchanged. benched after the NBA suspended incremental deal was a sign that
bid to raise a leveraged loan to The new debt broke for the season. the US syndicated lev loan market
shore up liquidity at a time trading at a bid of 99–102 on Moody’s downgraded Golden was once again open for business.
when the coronavirus has forced Wednesday. Nugget to B3 from B2 and cut its “[Landry’s deal] will not be a
the hospitality magnate to cease The incremental loan, which lRST
LIENûTERMûLOANûTOû"ûFROMû"Aû harbinger of the loan market re-
operations at his casinos and was open to both new and due to the expectation that opening. With secondary levels
restaurants. existing Golden Nugget lenders, earnings will deteriorate from the still, on average, in the mid-80s,
The gamble paid off, as the is structured with two years of closed restaurants and casinos. accounts will likely continue to
incremental loan was increased call protection – an investor- “Never did I think this would focus their attention on buying
to US$300m from US$250m. The friendly feature typically found be the issuer to kick off the loan names that they know at
debt is being attached to an in the high-yield bond market market, but here we are,” said historically attractive levels,”
existing term loan that will and less so in leveraged loans – one investor. said a loan syndication manager.
mature in 2023 for Fertitta’s before kicking in at 107 for six The outstanding term loan for
restaurant and gaming company months and par thereafter. ONE-OFF Golden Nugget was quoted at an
GOLDEN NUGGET, growing the Fertitta offered lenders some The transaction, under the average bid of 74–76 cents on
outstanding facility to more hefty concessions in exchange borrower LANDRY’S FINANCE the dollar in secondary trading
than US$2.5bn. for their participation in a loan ACQUISITION COûISûTHEûlRSTû on April 6, up from 60–62 cents
Jefferies, a long-standing lender for a business that is suffering leveraged loan to hit the broadly on March 23, according to three
to Fertitta’s businesses, pitched FROMûDECREASEDûCASHmOWû syndicated market since March sources.
the transaction to investors at an The businessman’s Golden 11, when SERVICE LOGIC raised And the LPC 100, a cohort of
eye-watering spread of 1,400bp Nugget casino is shut, steakhouse US$140m. the 100 most liquid US leveraged
"UCHHEITûSAIDûOFlCIALûSECTORû
holders of Italian obligations
on senior debt in any case, he
said, since the ESM, like the Covid-19 raises
SHOULDûlRSTûBEûASKEDûTOû International Monetary Fund,
voluntarily agree to
subordination and pledge not to
claims “preferred creditor”
status and must be repaid before
ESG’s profile
receive payment if the senior other creditors. People & Markets Pandemic underlines “S” in ESG
coronabonds were in default, “The difference is that
and pass on any money received European taxpayers ultimately BY TESSA WALSH and markets to the top of the list
to senior coronabond holders. stand behind an ESM loan. Only of concerns as businesses adapt
“This subordination would the debtor country’s credit is on The impact of the Covid-19 to change and focus on ESG.
not involve a forgiveness of the line for a senior pandemic on sustainable Investors and agencies are
CLAIMSûBYûTHEûOFlCIALûSECTORû coronabond,” Buchheit said. lNANCEûISûPUSHINGûSOCIALûANDû also looking at preparedness as a
institutions, only an This would get around the governance issues to the fore measure of companies’ ability to
acknowledgment that senior objections of some eurozone and intensifying the overall adapt to change and manage
coronabonds are entitled to members as taxpayers’ money focus on ESG, according to RISKûANDûAREûlNDINGûTHATû
priority payment,” said would not be funding another research, as the issuance of companies that have already
Buchheit. country, as long as all agreed social bonds targeted at virus considered ESG risks are
He said this idea will only that debt held by the ECB was response continues to rise. showing leadership in the
work if it was made clear that subordinated only temporarily. Three main points are pandemic.
the senior notes were issued Others have argued that the EMERGINGûTHATûREmECTûMARKETSû
simply to cover a funding gap ECB’s €750bn pandemic new priorities as the “S” of ESG “Covid-19 is disclosing
for a limited period. emergency purchase becomes more dominant,
social inequalities
“Senior coronabond issuance programme is so extensive that according to research by UBS.
for any particular country must it would allow it to step in and “Investors now appreciate
that we’ve known
be kept to a tightly prescribed, keep funding any eurozone how substantial a social risk can about for a long time;
manageable aggregate size,” country in distress. be to value creation and the the crisis is bringing it
Buchheit said. “Legal “ECB purchases of response of companies to Covid- to the fore”
subordination is effective only if government bonds in 2020 will 19 is very similar to what we’re
it is implemented on a targeted, be huge, and probably will be seeing on climate change,” said
transparent basis.” able to absorb all the new debt John Streur, president and CEO
issuance for 2020. This can keep of Calvert Research and
PREFERRED CREDITOR Italy’s cost of funding Management.
Receiving emergency funding contained,” Citigroup said in a Governments, multilateral
from the ESM is akin to taking note. AGENCIESûANDûlNANCIALû S&P’s ESG Evaluations score
institutions are raising also measures companies’
loans, was averaging 87.8 cents At the revised margin of SUSTAINABLEûlNANCINGûPRIMARILYû preparedness and risk
on April 6, up from a low of 77.9 1,200bp over Libor, the yield to for social purposes such as management. A Covid-19
cents on March 23, according to maturity has tightened to healthcare and employment, to review left the scores
2ElNITIVûDATA approximately 14.3% from MITIGATEûTHEûlNANCIALûFALLOUTûOFû unchanged, as rated
about 18% for a margin of the pandemic. companies have responded
JUICY YIELD BPûACCORDINGûTOû2ElNITIVû “Covid-19 is disclosing social quickly to the crisis.
With lenders already on the hook LPC data. inequalities that we’ve known Investors and analysts are
for roughly US$2.5bn in debt The US$250m transaction is ABOUTûFORûAûLONGûTIMEûTHEûCRISISû monitoring companies’
under this Golden Nugget loan, the third incremental deal is bringing it to the fore,” said responses to the crisis and
bankers said the addition would attached to this loan in the past Julie Hudson, global head of ESG what their performance
mainly be sold to existing holders seven months. research at UBS. relative to peers could
of the loan. And despite the facility In February, Golden Nugget “Climate change is framed as mean in terms of governance,
trading in stressed territory, the wrapped up a US$200m deal an environmental issue around and for markets and access to
call protection and small size of to fund a shareholder dividend. carbon, but it’s a social issue capital.
the add-on is palatable enough to The casino operator offered with inequality consequences. I Capital allocation to
an investor base familiar with the the debt at just 250bp over hope this will make the dividends, pay and
credit history of Fertitta’s Libor with no discount and environmental debate more remuneration, tax and a
companies and his solid track at the same time, it repriced rounded and not separate from company’s purpose will
record as a business owner. the existing US$2.39bn it social issues. The crisis has all be under scrutiny,
“If anybody can operate had outstanding on the thrown a clear light on what according to a report by
around the headwinds facing loan to 250bp from 275bp ESG is here for and reinforces Morgan Stanley.
the restaurant industry, my over Libor. ESG and sustainable investing as “We’ll all look back on this
money would be on Tilman,” Last October, Golden Nugget an approach. Several people period and understand how
said a second investor. “He again appointed Jefferies to have been saying that ESG is a SPECIlCûCOMPANIESûDEALTûWITHû
knows every little detail about complete a US$300m loan to ‘nice to have’ and will disappear the situation. This will impact
his business to make sure his support its acquisition of Del in a crisis, but I don’t think it our purchase decisions and
EMPIREûSTAYSûAmOATû(EûHASû Frisco’s Double Eagle could be more relevant,” Hudson impact people’s decisions on
operated in many economic Steakhouses and Del Frisco’s said. where they want to work for
cycles, so I think there is 'RILLESûFROMûINVESTMENTûlRMû,û The crisis is also pushing the many, many years to come,”
comfort there.” Catterton. concept of resilience in society Streur said.
Established in 1997, it draws on IFR’s global editorial team – the largest of any
capital markets publication with bureaux throughout the region – to provide the most
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People
16
&
JP Morgan
boss Jamie
Markets
19 US boutique
Centerview is 21 The Republic
of Congo
Dimon warns earnings ramping up in Paris is one of the few
will drop meaningfully and hires Lazard’s countries where
this year due to the former France boss China has agreed to
coronavirus pandemic Matthieu Pigasse to restructure debt, but
lead the charge more sovereigns may
look for relief
2016
2017
2018
2019
2020
THE CARLYLE GROUP and TMT sectors. Last SCHRODERS has country head, to co-
has hired the former month, Carlyle raised appointed Lily Choh head of Asia-Pacific.
Japan CEO of GE ¥258bn (US$2.37bn) to the newly created Choh will continue to
Healthcare as senior for its fourth Japanese position of Singapore lead the distribution
adviser in its Japan buyout fund, more deputy CEO. The teams in Singapore,
advisory team. Carlyle than double the size UK-based asset Malaysia and Thailand
said Jun Kawakami of its predecessor manager said Choh and retain her role as
will primarily advise fund. Kawakami will have day-to-day head of institutional
on investment was most recently management of the for Asia-Pacific. She
opportunities in the president and CEO South-East Asia continues to report
healthcare sector and, of telecoms company business following the to Soh.
to a lesser extent, in Arteria Networks. recent appointment of
the general industries Susan Soh, Singapore
NOMURA has hired head of investment CLIFFORD of Clifford Capital Malaysia’s AFFIN as chief financial
Sarab Bhutani from banking in Asia CAPITAL HOLDINGS Holdings. Audra BANK has appointed officer, succeeding
Standard Chartered ex-Japan. Bhutani has started operations Low, previously head Wan Razly Abdullah as Ramanathan Rajoo.
as head of South- worked at StanChart with Clive Kerner of origination and chief executive. Wan Lee has worked at
East Asia investment for more than a appointed as CEO. structuring, replaced Razly, 48, succeeds Affin Bank and its
banking. Bhutani decade and was Kerner was previously Kerner as CEO of Kamarul Ariffin Mohd various affiliates since
replaces Kelvin Ho, most recently head chief executive of Clifford Capital. Jamil. Wan Razly has 1991.
who was recently of general industries Clifford Capital, the 24 years’ banking
appointed Nomura’s and regional head of Singapore-based experience after
head of Singapore. financial sponsors. He infrastructure finance previously working
Bhutani is based in previously worked at company that was set at CIMB Group and
Singapore and reports Lehman Brothers. up in 2012 and is now PwC. Affin Bank also
to Kenji Teshima, one of the subsidiaries named Lee Yoke Kiow
DEFAULT POSITION Argentina is set to update CASH WITHDRAWAL Banks have until
the market on whether or not it will make Tuesday to participate in a US$125m loan for
US$500m of coupon payments due to holders %VERIû0AYMENTSûAû,ASû6EGASûCOMPANYûTHATû
of bonds issued under foreign law that are makes and runs ATMs. The loan is being
due April 22. The bonds have rallied in recent arranged by Jefferies, and is being offered at
days after the government delayed payments BPûOVERû,IBORûWITHûAûûmOORû4HEûBANKû
on some local law bonds, fuelling hope that it is on a roll, having just closed a US$300m
was doing so to prioritise its foreign law debt. facility last week for Golden Nugget, which
operates casinos and steak restaurants
CALLING A HALT The International Monetary across the US.
Fund and World Bank hold their spring COPPER BOTTOM Zambia is due to pay a
meetings virtually, amid growing calls for a coupon on Tuesday on US$1bn of
moratorium on more than US$100bn of debt outstanding bonds. It is unclear whether the
owed by African countries. Former Credit country will pay, after it put out a request
Suisse chief Tidjane Thiam is leading calls for for advisers to help it manage its debts, LAST WEEK IN NUMBERS
the debt relief, as countries struggle to keep which have ballooned in recent years. US$4.3bn – Sum raised in a three-part
up repayments due the global slowdown and Demand for copper, its main source of hard bond sale from Indonesia, the biggest
new pressures on their budgets. currency, has plummeted, and a 30% drop in ever from the country
the kwacha against the dollar has left it Five – Years since Germany’s last
struggling to pay foreign currency debts. syndicated bond deal, the latest of which
FILLING THE TANKû!STONû-ARTINû,AGONDAû has just been announced
wraps up subscription for its £365m rights 5.80% – Coupon on Ally Financial’s latest
issue on Friday. The cash call is the DOUBLE OR QUITO Bondholders have until lVE
YEARûBONDûALMOSTûBPûHIGHERû
centerpiece of a £536m rescue that the Friday to respond to a consent solicitation than deal last May
luxury carmaker, which was already from Ecuador, which wants to defer interest US$10bn – Two-year loan facility for BP,
struggling before the crisis hit, hopes will payments on more than US$19bn of dollar which it hopes will help it navigate
help it turn around its fortunes. Banks will bonds. The country is asking bondholders to through crisis
be hoping the rights issue fares better than defer interest due between March 27 and 130 – Jobs cut at NatWest Markets, as
the one they did recently for sensor maker July 15 until August and reduce interest due its parent RBS presses on with
AMS, which left them stuck with millions of after March 27 by US$0.50 on each US$1,000 restructuring
unsold shares. of principal.
PAY CUTS
surpass 2008 crisis Top executives at UK banks HSBC, STANDARD
CHARTERED and NATWEST said they would take
Economists are warning that the shock from LARGEûCURRENTûACCOUNTûDElCITSûORûHIGHû salary cuts after pressure on bankers to show
the coronavirus pandemic will outstrip even external borrowing levels.” solidarity with customers struggling to make
THEûFALLOUTûFROMûTHEûûGLOBALûlNANCIALû ends meet during the coronavirus crisis. LLOYDS
crisis in Asia, adding to the strain on a INDONESIAN EXCEPTION said all its executives – including CEO Antonio
number of borrowers in the region that Although Chinese issuers account for by far Horta-Osorio – had asked not to be considered
fund in US dollars. the largest share of US dollar debt in the for bonuses for 2020, but none took pay cuts or
Several economists in recent weeks have region, most analysts do not expect them to donated some of their salary to charity, unlike
downgraded their expectations for a face major funding pressures because of the directors at the other three banks.
U-shaped, rather than a V-shaped recovery, size of the country’s local currency bond HSBC said its CEO Noel Quinn and CFO
with the downturn peaking in China during market, which overtook Japan last year to Ewen Stevenson would donate 25% of their
THEûlRSTûQUARTERûANDûINûTHEûSECONDûQUARTERûINû become the world’s second-largest bond salary for the next six months to charity and
the rest of Asia. market after the US. forgo their cash bonuses, totalling £1.4m and
The Asian Development Bank has lowered Chinese developers, the most active high- £800,000, respectively. Chairman Mark Tucker
its growth forecast for 2020 in developing yield issuers in Asia’s US dollar bond market, will also donate his entire director’s fee for 2020,
Asia, a group of 45 economies that includes have been stepping up their fundraisings amounting to £1.5m.
China and India, to 2.2% from a previous onshore in recent weeks given the lower Standard Chartered said its CEO Bill Winters
forecast of 5.2%, its lowest since the Asian funding costs now available there and the and CFO Andy Halford would waive their cash
lNANCIALûCRISIS introduction of a new registration-based bonuses for this year and make “significant”
The World Bank also said recently that SYSTEMûPROVIDINGûISSUERSûWITHûMOREûmEXIBILITY personal donations to the lender’s Covid-19
under its base case scenario growth in According to research compiled by Natixis, Assistance fund. Winters has donated £825,000,
developing Asia would fall to 2.1% this year total foreign currency-denominated debt in a source familiar with the matter told Reuters.
with the possibility of a contraction of 0.5% if China as a percentage of GDP stands at 14.9%,
the effects of the virus spilled over into 2021. among the lowest in developing Asia, and ACCOUNTING SHIFT
China, India and Indonesia were among THISûHASûBEENûFALLINGûOVERûTHEûPASTûlVEûYEARS A global committee of banking regulators has
the countries that avoided a recession In other major economies in the region, offered lenders breathing space from topping up
DURINGûTHEûGLOBALûlNANCIALûCRISISûANDûMANYû FOREIGNûCURRENCYûDEBTûISûBELOWûûOFû'$0ûnû capital buffers to cover losses on loans to borrowers
countries, particularly in South-East Asia, in India, Malaysia, the Philippines, South struggling to stay afloat in the coronavirus pandemic.
last experienced a downturn during the Korea and Thailand it is 15.3%, 23.7%, 46.1%, The BASEL COMMITTEE of banking regulators said it
!SIANûlNANCIALûCRISIS 30.4% and 31.3%, respectively. had agreed to amend its transitional arrangements
The 1997 crisis, which was triggered by a )NDONESIAûATûûISûTHEûONLYûCOUNTRYû for deciding how much capital must be set aside to
sharp depreciation in a number of emerging whose foreign currency debt ratio is more than cover expected losses on loans.
markets currencies in the region, led to a half of its GDP, and along with Malaysia is the It said this was in light of governments offering
large drop in asset prices and a number of only country that has increased its issuance of loan repayment holidays during a crisis. Normally,
borrowers, particularly those that had 53ûDOLLARûDEBTûINûTHEûPASTûlVEûYEARS banks are required to step up provisioning when
borrowed heavily in US dollars, defaulting The Indonesian rupiah is also the worst repayments are missed, but the committee said
on debt repayments. performing emerging Asian currency this this did not have to be the case with a temporary
Market observers said most countries year, having lost 16% of its value against the payment holiday introduced by governments.
have reduced their exposure to foreign US dollar, which is likely to increase the
currency debt and increased their FX strain on Indonesia borrowers. CHINA MINI-IPOs
reserves since then, so the economic impact Roughly two dozen Indonesian issuers One unforeseen outcome from the coronavirus
of the coronavirus is likely to be less severe. have US dollar bonds maturing in the next outbreak in China is that the country’s regulators
Still, there are growing concerns that the two years totalling an aggregate US$6bn, are speeding up capital markets reforms even
recent strengthening of the US dollar as well according to research from S&P. as economic activity is hampered by restrictions
as the spike in dollar borrowing costs, as Moody’s recently downgraded the long- to contain the virus’s spread. Authorities are
investors globally liquidate their risk term ratings of property developer ALAM stepping up plans for a new “mini-IPO” market to
positions, could add to pressure on a SUTERA REALTY and GAJAH TUNGGAL, South-East help the next generation of innovative technology
number of Asian borrowers. Asia’s largest tyre manufacturer, both to companies access capital quickly, including
“As of right now, the situation isn’t as bleak Caa1, because of their foreign debt exposure. artificial intelligence and fifth-generation
as it was back in 1997,” said one analyst. Under central bank rules introduced in telecommunications firms.
“Most countries in Asia no longer operate 2014, companies are only required to hedge a The reforms to the moribund New Third Board
lXEDûEXCHANGEûRATESûANDûEXTERNALûBORROWINGû minimum 25% of their liabilities in foreign to turn it into a feeder for the bigger exchanges
levels are a lot more manageable today. currency three to six months before they have been designed to help reduce the reliance
“Having said that, the Fed still doesn’t come due, although the central bank has of start-ups on foreign capital, as was the case in
have swap lines in place with most central repeatedly urged borrowers to hedge their FX the past with internet giants Alibaba and Tencent.
banks in the region and any pressure on exposure beyond the regulatory minimum, in The changes could be rolled out by July to help
dollar liquidity is likely to have a knock-on ANûEFFORTûTOûSTAVEûOFFûFOREIGNûCAPITALûOUTmOWS small and medium-sized enterprises that have
effect, particularly for those countries with Thomas Blott been hit hard by the coronavirus crisis.
6/4/20-9/4/20
23/3/20-27/3/20
30/3/20-3/4/20
9/3/20-13/3/20
Another sign of how the market is progressing ECB matters – as has been proven ever since
CAMEûTHROUGHûTWOûMULTI
TRANCHEûDEALSûTHEûlRSTû the supply taps were reopened.
from TOYOTA AUSTRALIA (A1/AA–) and the next “The ECB is absolutely driving the
from CAPGEMINI (BBB), which included two-year MARKETvûSAIDûTHEûlRSTûBANKER
Source: IFR NOTESûTHEûlRSTûSINCEûTHEûBEGINNINGûOFû&EBRUARY Sudip Roy
3/1/11
3/1/12
3/1/13
3/1/14
3/1/15
3/1/16
3/1/17
3/1/18
3/1/19
3/1/20
IPO of its US business, Jackson. Investors said the change and unfamiliar
Leads Bank of America, Barclays, Citigroup, regime was a complication when looking at
Credit Agricole and MUFG opened books for the new issue.
the 10-year SEC-registered benchmark with Adding to the uncertainty, the question of
initial price thoughts of Treasuries plus the
312.5bp area.
regulation is not yet settled. Prudential will
ultimately become subject to a wider
US$87trn
THE RISE IN GLOBAL DEBT LEVELS
supervision regime being developed by the BETWEEN THE START OF THE 2008
(+)!û)TûISûEXPECTEDûTOûBEûlNALISEDûINûTHEû FINANCIAL CRISIS AND NOW, ACCORDING
“There are a lot of moving parts second half of 2020. TO THE IIF. BY THE END OF 2019, GLOBAL
around Prudential, in terms of At the end of 2019, the Prudential group’s DEBT STOOD AT US$255trn OR 322%
their structure and regulatory LCSM surplus over its minimum capital OF GDP
regime, the impact of Covid on requirement was estimated at US$9.5bn on a
the asset side of their book” shareholder basis, equivalent to a solvency
ratio of 309%.
such a strong response.” not advanced the Jackson IPO, but said it 60
50
A recent US$1bn 10-year senior issue for remained one of the stronger insurance
40
AIA Group was deemed the closest COMPANIESûWITHûSIGNIlCANTûFEESûFROMû
30
comparable. That 3.375% paper, which was insurance and asset management products
20
priced at 275bp over Treasuries on March to support the business to some degree in 10
2/2/20
2/4/20
2/1/20
2/3/20
“With a few more accounts back online with especially with the 2025 maturity less popular
the start of the new quarter, the pool of SSA with investors than shorter tenors.
SSAR investors has continued to grow. That’s why “I don’t expect them to go head-to-head,”
you’re seeing larger and larger order books.” said one, who noted that price discovery will
".'SûORDERûBOOKûREmECTEDûTHEûAGENCYSû be aided by the US market being open on
US DOLLARS spread over recent supranational issuers and Monday despite Easter Monday bank
what the lead argued was uncontroversial holidays in Europe.
BNG, CANADIANS BEAT BIG NAMES pricing of swaps plus 32bp, which translated “Everyone else will stand out of the way –
TO THE PUNCH to 44.9bp over the three-year Treasury. that’s why this week is busy – and that’ll
“That was a very strong following wind leave it quieter for them. The market is
With expected bonds from heavyweights and captured investors’ minds,” said the going to take those names down easily,” he
EIB and KfW waiting in the wings, a trio of lead manager. added, emphasising that US dollar SSA
smaller borrowers jumped into the Neither BNG nor CDPQ followed the volume is up less this year than euros (5%–
international US dollar primary market last recent 5bp spread tightenings seen lately on 10% versus 20%-plus), while 2020 will also
Tuesday. a number of shorter-dated SSA deals in the see very high SSA redemptions in the US
Canada’s CDP FINANCIAL (guaranteed by currency. currency.
Caisse de depot et placement du Quebec) “It’s not a sea change, but issuers are
and ONTARIO TEACHERS’ FINANCE TRUST followed making sensible decisions and investors ALL INTERNATIONAL GREEN BONDS
compatriot CPPIB Capital. The crown appreciate that,” the lead said. BOOKRUNNERS: 1/1/2020 TO DATE
corporation upped its two-year to US$1.25bn )NûCONTRASTûTHEûLOWER
PROlLEû/4&4ûSAWûITSû Managing No of Total Share
from an initial US$1bn on books of nearly order book peak at US$1.25bn and bank or group issues US$(m) (%)
US$3.5bn the previous Thursday. eventually fall back to US$1.15bn. It was 1 BNP Paribas 15 3,123.61 7.2
The provincial names opted for different priced in line with guidance at mid-swaps 2 JP Morgan 16 3,074.71 7.1
maturities, however – both from CPPIB and plus 80bp. 3 HSBC 19 2,837.87 6.5
each other. Having paused its earlier pursuit Even so, bankers were not highly critical 4 Credit Agricole 15 2,818.60 6.5
of a euro trade, OTFT picked Bank of America, of the issue’s reception. “It’s still a good deal 5 Barclays 14 2,796.60 6.4
Citigroup, HSBC and Scotiabank FORûAûlVE
YEARû but slower than the others,” commented 6 SG 10 2,511.72 5.8
while CDP mandated Goldman Sachs, JP one banker away from the transaction. 7 Goldman Sachs 7 2,233.53 5.1
Morgan, RBC and TD for a three-year. 8 Citigroup 11 2,139.33 4.9
The latter competed for investors’ HEAVYWEIGHTS AHEAD 9 Deutsche Bank 7 2,070.44 4.8
attention with a new 2023 Reg S/144A bond While both EIB and KfW have been rumoured 10 Santander 10 1,919.43 4.4
from fellow Triple A BNG BANK via Bank of TOûBEûPLANNINGûlVE
YEARû53ûDOLLARûOFFERINGSû Total 69 43,504.69
America, Barclays, Goldman Sachs and RBC. this week, bankers doubt that the Triple As Excludes social bonds and mixed use of proceeds.
will compete directly in the currency – Source: Refinitiv SDC code: JG1
SWEET THREES
ALL INTERNATIONAL BONDS (ALL CURRENCIES) ALL BONDS IN EUROS
Investors responded more warmly to the
BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE
shorter-dated pair. Each issuer managed to
Managing No of Total Share Managing No of Total Share
tighten their US$2bn deal 3bp, with BNG bank or group issues €(m) (%)
bank or group issues US$(m) (%)
achieving a US$2bn size after attracting
orders of more than US$4.1bn. CDPQ, 1 JP Morgan 450 129,317.68 9.1 1 JP Morgan 131 43,909.98 8.1
2 BofA Securities 325 96,187.73 6.8 2 BNP Paribas 143 39,581.76 7.3
meanwhile, drew interest of more than
3 Barclays 317 94,172.14 6.6 3 Barclays 133 37,513.21 6.9
US$3bn.
4 Citigroup 321 93,528.14 6.6 4 HSBC 129 35,435.44 6.5
h4WOûWEEKSûAGOûTWOûYEARSûWASûONûlREû
5 Goldman Sachs 234 80,006.28 5.6 5 Credit Agricole 114 34,522.35 6.4
but now we’re moving to threes,” said a lead
6 HSBC 295 70,961.26 5.0 6 Deutsche Bank 107 27,996.06 5.1
manager. While central banks were the key
7 BNP Paribas 219 61,351.81 4.3 7 UniCredit 99 27,287.33 5.0
initial buyers – attracted back to SSAs by the
8 Deutsche Bank 240 60,967.94 4.3 8 SG 89 27,079.18 5.0
greater spreads to Treasuries available after
9 Morgan Stanley 168 60,907.76 4.3 9 BofA Securities 90 26,350.15 4.8
the crisis period’s widening – bank
10 Credit Agricole 187 50,407.04 3.5 10 Goldman Sachs 60 21,134.10 3.9
treasuries have grown more active too.
Total 1,632 1,420,592.40 Total 544 543,622.82
Some real-money institutions have also
Including Euro, foreign, global issues. Excluding equity-related debt, Including Euro-preferreds. Excluding equity-related debt,
begun buying in the sector as well, the lead US Global ABS/MBS. US Global ABS/MBS.
3.#&û3!ûISûRESPONSIBLEûFORûTHEûlNANCINGû top of that in the case of AFD and it starts AFD said the issue would contribute to its
of the fully integrated SNCF Group and is to look interesting,” said a second lead commitment to provide support to the
100% owned by the French state. manager. GLOBALûlGHTûAGAINSTû#OVID
ûANDûSAIDûITûWASû
BNP Paribas, Credit Agricole, HSBC, JP Morgan The deal drew on alternative sources of implementing a number of measures to
and Societe Generale were joint lead demand to recent short-dated offerings. help developing countries, emergency credit
managers. “AFD is not HQLA, so you’re looking at a LINESûTOûLOCALûlNANCIALûINSTITUTIONSûINûORDERû
different investor base. Ten years also to support SMEs lending activity and better
AFD 10-YEAR FINDS THE MIDDLE GROUND means that you’re looking at a different set support states efforts related to healthcare,
of investors and you can feel that in the social and economic measures.
AGENCE FRANCAISE DE DEVELOPPEMENT accelerated book,” the second lead said. “We will probably do something else
the French public sector’s return to primary “It’s really hard to predict what books before the end of the semester,” Cherif said.
markets with a modestly oversubscribed 10- are going to look like at the moment, Having raised €3bn this year, it has not
year benchmark. unlike in February when you broadly knew yet reached the halfway stage of its
The Double A name issued its €1.5bn May in advance who was going to buy.” announced €7.5bn programme. AFD
2030 bond in line with guidance at 42bp normally aims to have funded 50%–60% of
over interpolated 2029 and 2031 OATs. The MORE TO COME its annual requirement before the summer
deal, lead managed by BNP Paribas, Credit The deal’s outcome was “a very great result, break, said Thibaut Makarovsky, its head of
Agricole, Goldman Sachs, JP Morgan and Natixis, given the shape of the market”, according to funding and market operations.
drew orders of some €1.7bn (including JLM Bokar Cherif, head of treasury and capital
interest). markets at AFD. CURRENCY COMMITMENT
Pricing was tighter than some recent 7ITHûVERYûLIMITEDûmOWSûINûITSûSECONDARYû Having issued a US dollar benchmark every
public sector new issues from the country. paper, the agency sought to price between year for the past decade, the agency
One day earlier, SNCF SA issued a debut two peer references – the recent offerings DElNITELYûEXPECTSûTOûRETURNûTOûTHEû53û
green bond of €1.25bn in the same maturity from Bpifrance and Unedic, Cherif said. As a currency this year, he said.
at 57bp over the interpolation, though this somewhat more established name issuing “We have a strong commitment towards
LEVELûREmECTEDûTHEûSTATE
OWNEDûCREDITû larger transactions across the curve, it was the market and investors.”
lacking the ‘etablissement public a caractere able to command a tighter price than Bpi. Cherif emphasised that arbitrage back to
industriel et commercial’ (“public It opted for a 10-year as a “more euros is not the key driver of AFD’s US dollar
establishment of an administrative nature” conservative tenor” that also served its asset/ borrowing.
– EPIC) status of other French public liability management needs.
MUNICIPAL, CITY, STATE, PROVINCE ISSUES IN EUROS
entities. $ISTRIBUTIONûDIFFEREDûFROMû!&$SûlVE
YEARû
BOOKRUNNERS: 1/1/2020 TO DATE
In late March, Bpifrance issued a €2bn in February. While the split between
Managing No of Total Share
lVE
YEARûATûBPûOVERûnûLIKEû!&$ûINûLINEû domestic and international placement was
bank or group issues €(m) (%)
with guidance. little changed, the overall number of buyers
However, explicitly guaranteed names halved and some accounts’ participation 1 UniCredit 19 7,707.34 18.2
have been achieving narrower spreads. Last was “quite smaller”, Cherif noted. 2 Barclays 14 3,899.82 9.2
Monday, Caisse Centrale du Credit A number of potential buyers could not 3 JP Morgan 12 3,624.90 8.5
)MMOBILIERûDEû&RANCEûISSUEDûAûSHORTûlVE
PARTICIPATEûASûTHEYûFAILEDûTOûlNDûBIDSûFORû 4 DGZ-DekaBank 17 3,073.65 7.2
year at 34bp over. Days earlier Unedic had bonds they sought to switch out of. Some 5 BayernLB 10 2,831.72 6.7
tapped its May 2028 bond for €750m at 28bp also held back in expectation of French 6 HSBC 13 2,276.68 5.4
over. spreads widening. 7 Nord/LB 14 2,227.24 5.2
In February, before the coronavirus crisis The agency is reviewing its funding 8 Deutsche Bank 12 2,162.38 5.1
all but halted primary market activity for requirements with the French state 9 NatWest Markets 8 1,897.12 4.5
SOMEûTIMEû!&$ûGOTûAûlVE
YEARûCLIMATEûBONDû currently. While it is unable to say whether 10 TD Securities 7 1,404.78 3.3
away at 23bp over. these will rise in response to the coronavirus Total 56 42,443.19
While AFD’s 2029 and 2031 bonds were CRISISûITûISûLIKELYûTOûISSUEûAGAINûINûTHEûlRSTû Excluding ABS/MBS.
shown at around 31bp over recently, trading half of 2020. Source: Refinitiv SDC code: N7
in them was very limited, noted a lead
ALL AGENCY BONDS IN EUROS ALL SUPRANATIONAL BONDS IN EUROS
manager. He saw Bpi, now at around 37bp BOOKRUNNERS: 1/1/2020 TO DATE
BOOKRUNNERS: 1/1/2020 TO DATE
over, as the most relevant reference.
Managing No of Total Share Managing No of Total Share
“Pricing was not tight, but it doesn’t look bank or group issues €(m) (%)
bank or group issues €(m) (%)
as wide in that context.”
More generally, he described the deal as 1 HSBC 20 7,401.02 14.1 1 Goldman Sachs 7 4,685.00 13.4
2 JP Morgan 13 6,095.25 11.6 2 JP Morgan 9 4,375.56 12.5
“a good balance – taking the middle ground
3 Barclays 12 4,356.25 8.3 3 UniCredit 4 3,252.91 9.3
between price and size” and characterised it
4 BofA Securities 9 3,957.70 7.5 4 Deutsche Bank 6 3,003.72 8.6
as “a solid trade”.
5 Credit Agricole 16 3,495.39 6.7 5 BofA Securities 4 2,785.23 8.0
While a high proportion of orders were
6 Deutsche Bank 6 3,371.36 6.4 6 HSBC 5 2,770.78 7.9
ALLOCATEDûBONDSûTHISûREmECTEDûTHEûQUALITYûOFû
7 Commerzbank 9 2,686.73 5.1 7 Credit Agricole 5 2,712.02 7.8
investors participating, he added.
8 BNP Paribas 10 2,523.56 4.8 8 BNP Paribas 6 2,538.00 7.3
Higher French government yields are
9 NatWest Markets 5 2,487.02 4.7 9 SG 5 2,281.46 6.5
supporting SSA offerings from the country,
10 Natixis 10 2,284.65 4.4 10 DZ Bank 4 1,831.22 5.2
bankers noted.
Total 54 52,463.71 Total 22 34,933.44
“It helps for these guys that OATs have
underperformed. You’ve gone from Excluding equity-related debt. Including publicly owned institutions. Excluding ABS/MBS.
negative to plus 15bp, so you add 42bp on Source: Refinitiv SDC code: N6 Source: Refinitiv SDC code: N5
The deal takes Ireland within the €10bn–€14bn Moreover, its relative value included positive A lead manager countered that “when you
funding range it had originally targeted for spreads of 30bp–76bp versus Euribor, Eonia, OATs have smaller markets, smaller issuers, smaller
this year. Although the sovereign emphasises and Bunds, according to one lead manager’s analysis deals that are not traded often, with every
that it enjoys large cash balances and has no of potential asset swaps and bond switches. deal you’re going through a much bigger price
redemptions due in 2021, the NTMA’s new Leads were BNP Paribas, Bank of America, discovery process, which is what Cyprus has
investor presentation acknowledges that the Cantor Fitzgerald, Danske Bank, Goldman Sachs done today successfully”.
earlier total “will be exceeded”. and JP Morgan. While the deals “probably didn’t get 100% of
“While the economic challenges arising investors’ attention in a very, very busy market
from Covid-19 are significant, Ireland is well SELECTIVE INVESTORS today”, a second lead manager described them
positioned to meet any additional borrowing In contrast, Cyprus drew some €1.8bn for its as “a pretty honourable, good result for an
requirements,” O’Kelly said. €1.25bn April 2027 offering. The order book issuer with a slightly lower rating in a market
Bankers applauded the new issue. “It’s shrank by around €400m after the sovereign that is still quite risk averse”.
a phenomenal trade,” said one syndicate tightened the deal 5bp from an initial 170bp area He emphasised the sovereign becoming only
manager away. over mid-swaps. the second after Austria in the current wave to
“They’re a poster child for how sovereigns The Mediterranean credit – Ba2/BBB–BBB–/ pull off a 30-year new issue.
can recover from a crisis. They’ve gone through BBBL (positive) by DBRS, compared to Ireland’s “At the end of the day, the way the
a dramatic recovery in the last couple of A2/AA–/A+ - also issued a new €500m 30-year. transaction was brought was pretty assertive.
years and investors love Ireland. Also, the After tightening the April 2050 bond 5bp too, They had a cash buffer already and they’ve built
composition of their economy makes them it saw orders decline to some €775m from an it further.”
relatively okay, given that it’s services-based earlier €1.1bn-plus. Distribution was “solid and diversified”, with
compared to others.” Although Cyprus achieved a rather larger a higher international take-up than on previous
At 32bp over mid-swaps, the deal offered order book of over €13.5bn for its €1.75bn 10 and Cypriot deals, the second lead believed. Bank
value against recent secondary levels for Irish 20-year package in January’s stronger market, treasuries took a smaller share of the 30-year
debt, the syndicate manager away said. “They bankers away from the new deal were not than the shorter tranche.
had been trading extremely tight, so this was surprised by its more meagre cover. Noting that the new issue is eligible for
a great opportunity for investors to buy them “They’re not the most popular name at the European Central Bank asset purchase
wider.” best of times, so in what is still a tricky market it’s schemes, he expected that “the bonds will
Ireland’s last syndication, a €4bn May 2035 not surprising, really,” said one. “While investors perform positively”.
was priced at 6bp over mid-swaps. are engaged, they’re also being selective.” Julian Lewis
“When it comes to the euro market, QE Some Laender, such as the populous One characterised the coming sales as
is a big part of this. So seeing non QE- North Rhine-Westphalia, face very “another Laender bonanza”.
eligible names printing at different levels SIGNIlCANTûINCREASESûTOûTHEIRûBORROWINGû
and getting different receptions is to be bankers noted. SAXON SUPPLEMENT
expected. There’s also been a queue of “They have a much higher need, more -EANWHILEû3AXONYûDOUBLEDûITSûRECENTûlVE
Canadian issuers as well.” or less at the KfW level, and will need to be year in a no-grow transaction through
He added that it was positive that the active again,” said one. BayernLB and DekaBank. It issued the new
market had been open to non ECB-eligible .27ûHASûANNOUNCEDûAûhlSCALûRESPONSEû debt at mid-swaps plus 10bp.
names. package” of €25bn for the crisis. This is in Sole lead DekaBank disclosed no spread
“There could have been a scenario addition to its existing €15bn borrowing ONûTHEûlRSTûTRANCHEûAûWEEKûEARLIERûALSOûFORû
where QE names dominated completely programme for the year. €250m.
and it could have taken a lot longer for the Federal agency KfW has an existing Saxony issued a €250m three-year
next layer of issuers of credit quality,” he programme of €75bn prior to any increase through UniCredit around the same time
said. for the crisis. at mid-swaps less 10bp.
“To see these trades coming in quick Banks away from the transaction viewed
succession and then see non-QE names NEW NAME it as expensive. “Price-wise we thought this
goes to show that we have a healthy Supply in prospect for the shortened week one was a bit tricky,” said one.
functioning market.” is headed by two to three new bonds. One “It looks like the right price. But when
of these is for a federal state that has not you see where spreads are going with
SAXONY TAPS AHEAD OF NEW been active in the recent wave of activity more and more states coming to the
LAENDER DELUGE from the sector. The borrower is seeking market next week it was a bit pricey.”
€500m, according to bankers in Germany. The state offers some rarity value, the
The FREE STATE OF SAXONY added €250m to a Another name that has been active banker away from the deal acknowledged.
recent bond ahead of a new wave of lately is also considering a new issue, while "UTûITSûSTRATEGYûOFûhTRYINGûTOûlLLûITSûNEEDSû
German sub-sovereign funding. AûSOUTHERNûSTATEûISûLIKELYûTOûISSUEûAûmOATING
with expensive taps”, which it shares with
!SûMANYûASûlVEûNEWûISSUESûANDû rate note as well – an untypical product in a number of other Laender, was out of step
taps are in prospect this week as the the sector. Some bankers believe this is with the latest “institutional repricing”.
country’s regional states – a sector that Baden-Wuerttemberg, though this could A lead manager declined to comment on
has been notably prominent in the NOTûBEûCONlRMEDûIMMEDIATELY rumours that the tap was not fully
reopening of public sector primary In addition, at least one northern state subscribed. While he acknowledged that it
markets in recent weeks – look to is seeking a tap of €250m–€300m. A was “maybe a basis point too tight”, he
fund local responses to the second tap may also emerge, bankers viewed it as a “good deal” that brought
coronavirus crisis. reported. “more liquidity to that bond”.
The 1.50% April 15 2026s were priced at The supply surge was brought on by the As earnings are released and the market
100.228990 for a yield of 1.46%, at the tight Federal Reserve’s corporate bond purchase receives more data on the size of the
end of revised 78bp–80bp mid-swaps PROGRAMMEûWHICHûPROVIDEDûTHEûCONlDENCEû downturn, the market tone could shift.
guidance, which was revised down from an issuers needed to bring US$263bn to the “The outlooks for second-quarter 2020 and
initial 78bp–83bp range. market in the three weeks since its the rest of the year are likely to be among the
ANZ, BNZ, CBA and Westpac were joint lead announcement on March 23. weakest that many have experienced in
managers for the offer, which had an Deals last week were remarkably well decades,” JP Morgan wrote in a recent report.
indicative maximum issue size of NZ$300m received, averaging 7.6 times oversubscribed
and was open to institutional and New books and new-issue concessions of just BROADCOM SHORES UP LIQUIDITY AMID
Zealand retail investors. 1.9bp, BMO Capital Markets noted in a report. COVID-19 PRESSURES
LGFA previously issued NZ$500m of 1.5% Follow-on performance was exceptional
short 10-year retail notes last August, priced as well. New issues traded 8.8bp tighter on Semiconductor company BROADCOM priced a
at mid-swaps plus 48bp. average from pricing, according to Bank of two-part bond last Monday, even as the Covid-
It made its debut in the domestic bond America research. 19 pandemic placed additional pressures on
market in March 2019 with a non-sovereign The largest deal of the week was a its already cuspy low Triple B ratings.
RECORDû.:BNûSALEûOFûûlVE
YEARû!PRILû US$4.5bn three-part BMW US CAPITAL bond that The acquisitive semiconductor company
15 2024) notes. was priced at 350bp over Treasuries across has long been under the microscope for
The agency, which provides cheap debt THREEûlVEûANDû
YEARûMATURITIESû potential fallen angel risk, especially after
lNANCINGûTOûPARTICIPATINGûLOCALûCOUNCILSû Those bonds tightened considerably in the announcement of a US$10.7bn
previously focused on small, regular tender the secondary market, with the 4.15% 2030s acquisition of Symantec’s enterprise
issues, which are allocated on a sliding scale trading at 303bp over Treasuries late on business last year.
based on the councils’ size and credit Wednesday, according to MarketAxess data. While Moody’s and S&P have since
ratings. Additionally, semiconductor company resolved to keep the company at Baa3/BBB–
The New Zealand government owns 20% BROADCOM tested demand for cuspy Triple B with a stable outlook, Fitch maintains a
of LGFA, while 30 regional and territorial paper last week, while ALLY FINANCIAL priced negative outlook on its BBB– rating.
councils, including Auckland Council, its debut investment-grade bond since it was An expected slowdown in phone sales and
Christchurch City and Wellington City, hold spun off from GENERAL MOTORS during the other tech products that use chips and
the remaining 80%. lNANCIALûCRISIS antennas made by Broadcom could place
LGFA has identical S&P and Fitch ratings With bond markets closing for Good Friday, further pressure on the company’s high
to New Zealand sovereign bonds, but has no the pace slowed. But despite earnings blackout leverage.
rating from Moody’s (which rates the periods approaching, issuers are expected to
ALL US INVESTMENT GRADE CORPORATE DEBT
sovereign Aaa) and no government come out of Easter weekend in force.
BOOKRUNNERS: 1/1/2020 TO DATE
guarantee. “Despite holidays spilling over into next
On April 7, the Reserve Bank of New week in Europe, we expect primary market Managing No of Total Share
bank or group issues US$(m) (%)
Zealand added NZ$3bn of LGFA debt to its supply to come roaring back given the very
Large Scale Asset Purchase programme, supportive market tone,” BMO Capital 1 JP Morgan 198 77,876.53 13.9
approximately 30% of the (then) total LGFA Markets wrote in a report. 2 BofA Securities 185 75,859.43 13.6
debt on issue. %ARNINGSûSEASONûKICKSûOFFûINûTHEûlNANCIALSû 3 Citigroup 149 55,225.53 9.9
This took the total size of the LSAP to sector with JP Morgan and Wells Fargo 4 Goldman Sachs 108 48,250.18 8.6
NZ$33bn over 12 months, with NZ$30bn reporting on Tuesday. 5 Morgan Stanley 105 40,551.43 7.3
already earmarked for central government US banks have already brought a huge 6 Wells Fargo 107 35,819.54 6.4
bond purchases in the secondary market. slug of issuance to the market but could 7 Barclays 75 25,282.36 4.5
come back for more after earnings, 8 RBC 66 17,592.29 3.1
especially considering that nearly 100 9 Deutsche Bank 47 15,825.79 2.8
was already under pressure before the Plans were revived on Monday and IPTs comfortable with the numbers and the
coronavirus pandemic spread. were announced at the mid-swaps plus criteria around it.”
In addition, Toyota’s deal – like VW’s – is 235bp area, following two days of investor A second bookrunner added that the deal
not eligible for the ECB’s bond-buying calls. was structured in a way that makes it
programme. So, relatively big concessions A bookrunner said fair value was hard to eligible for ECB purchases and that this
are necessary and, as Daimler showed, that evaluate for a debut offering but gauged it at factor also supported demand for the trade.
is true even for deals the central bank can around 170bp, having looked at 2027 notes “We’ve seen that deals that are ECB
BUYûIFûTHEûSECTORûISûMOREûEXPOSEDûTOûlNANCIALû from similarly rated entities Akelius and eligible get some traction, in both primary
risks. Thermo Fisher, which were quoted at plus and secondary markets,” he said, pointing to
But the book – bigger than that attained 145bp and 189bp, respectively. forays on Tuesday from utilities.
by either VW or Daimler, which is partly a Books soared north of €4.5bn and enabled He highlighted the rampant demand for
REmECTIONûOFûAûBETTERûMARKETûTONEûBUTûALSOû THEûISSUERûTOûRElNEûGUIDANCEûTOûTHEûPLUSû ECB-eligible new issues from Veolia and
the fact that Toyota is higher rated than the 200bp area. EnBW, in contrast to the take up of SSE’s new
two German companies – enabled leads to With further orders pouring in, books bonds, which, he said, were not eligible.
tighten in on all three tranches. PEAKEDûABOVEûõBNûBEFOREûlNISHINGûATûOVERû “SSE ... clearly struggled more,” said the
However, the April 2022s and October õBNû4HATûALLOWEDû,ONZAûTOûlXûTHEûlNALû second bookrunner. “They paid more NIP
2027s were revised much more sharply than spread at plus 180bp, 55bp tighter than and had smaller books.”
the October 2024s. initial talk. Both bankers expect the Lonza trade will
4HEûTWO
YEARûPRICEDûATûBPûOFFûAûlNALû A bookrunner said that accounts from encourage further inaugural issuers to head
€2bn book, signalling a 40p revision; the 4.5- Continental Europe led the demand, and he into the market, with the second
year was issued at 220bp off €1.7bn of orders attributed the success of the trade to the bookrunner citing LUNDBECK as one of the
with a 25bp cut; and the 7.5-year came at quality of the issuer’s name and the efforts issuers that could take advantage of the
235bp off €4.5bn of demand with a 50bp made with the investor calls. current window of opportunity.
tightening. “We knew investors would need to spend The pharmaceuticals company set the ball
a bit more time with it, so we didn’t rush it,” rolling for a roadshow in late February for a
CANNIBALISATION he said. “It’s a very solid credit and investor EURO
DENOMINATEDûlVE
YEARûMAIDENûBONDû
A second lead acknowledged the two-year feedback was very strong from the but put it on ice as the pandemic began to
cannibalised demand for the 4.5-year note to beginning, which showed they were affect market conditions.
a degree.
“I think there was an element of investors ALL INVESTMENT-GRADE BONDS IN EUROS ALL CORPORATE BONDS IN STERLING
not having had the ability to buy [much BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE
short-dated paper], which has created a Managing No of Total Share Managing No of Total Share
slight skew,” said the lead. bank or group issues €(m) (%) bank or group issues £(m) (%)
4HEûlNALûSPREADSûSUGGESTEDûTHATûWHILEûTHEû 1 JP Morgan 105 39,860.00 8.4 1 Barclays 12 1,455.16 16.9
new issue premium on the 2022s was 2 BNP Paribas 110 34,387.97 7.3 2 HSBC 9 934.06 10.8
roughly 25bp, on the 2024s it was more like 3 Barclays 100 32,571.76 6.9 3 JP Morgan 6 910.00 10.5
60bp – that part of the Toyota’s secondary 4 HSBC 105 32,098.87 6.8 4 BNP Paribas 8 818.18 9.5
CURVEûWASûmATûBEFOREû/NûTHEûSûTHEû 5 Credit Agricole 99 30,659.35 6.5 5 NatWest Markets 6 654.12 7.6
concession was about 35bp. 6 SG 80 26,159.31 5.5 6 Lloyds Bank 5 569.93 6.6
VW and Daimler both had premiums 7 Deutsche Bank 86 25,227.66 5.3 7 RBC 5 464.22 5.4
north of 50bp. 8 UniCredit 77 24,192.50 5.1 8 Citigroup 3 439.30 5.1
The deal suffered no ill effects from 9 BofA Securities 73 22,371.04 4.7 9 Deutsche Bank 2 297.89 3.5
overnight headlines that Toyota Australia is 10 Goldman Sachs 41 17,640.66 3.7 10 BofA Securities 3 241.02 2.8
recalling more than 45,000 cars because of Total 437 473,043.09 Total 19 8,633.80
fuel pump issues. Excluding ABS/MBS, equity-related debt.
Barclays, BNP Paribas, Citigroup, Credit Source: Refinitiv SDC code: N9 Source: Refinitiv SDC code: N8a
Agricole and Societe Generale were the leads.
ALL INTERNATIONAL STERLING BONDS ALL SWISS FRANC BONDS INCLUDING
LONZA EURO DEBUT DRAWS EXCLUDING SECURITISATIONS SECURITISATIONS
EYE-POPPING DEMAND BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share Managing No of Total Share
LONZA brought its long-awaited maiden euro bank or group issues £(m) (%) bank or group issues SFr(m) (%)
bond to fruition on Wednesday, a €500m 1 Barclays 34 6,253.61 14.6 1 Credit Suisse 48 6,662.7 36.7
no-grow seven-year, recording eye-popping 2 HSBC 29 4,818.79 11.3 2 UBS 32 3,697.7 20.4
demand in the process. 3 NatWest Markets 24 4,307.11 10.1 3 Verband 10 3,117.3 17.2
4HISûWASûTHEûlRSTûINAUGURALûEUROûTRADEû 4 RBC 19 4,064.52 9.5 4 ZKB 18 1,596.2 8.8
executed in the corporate sector since the 5 Lloyds Bank 13 2,477.95 5.8 5 Raiffeisen 15 1,393.0 7.7
onset of the Covid-19 crisis. 6 JP Morgan 10 2,452.10 5.7 6 Deutsche Bank 6 802.6 4.4
The seven-year had been in the works 7 Deutsche Bank 12 2,334.09 5.5 7 Commerzbank 3 305.2 1.7
since November when Lonza (BBB+, S&P)), 8 TD Securities 10 2,281.40 5.3 8 BNP Paribas 3 279.6 1.5
which has businesses in pharmaceuticals 9 Citigroup 11 2,162.89 5.1 9 Basler KB 1 140.4 .8
and biotech, convened investor meetings. 10 BNP Paribas 10 1,763.50 4.1 10 VTB Capital 1 83.3 .5
However, the offering was postponed after Total 71 42,754.49 Total 78 18,161.4
Lonza’s chief executive announced his Including preferreds. Excluding equity-related debt. Including preferreds. Excluding equity-related debt.
departure. Source: Refinitiv SDC code: K05a Source: Refinitiv
due to the outbreak of the coronavirus,” banker away from the deal, for a new followed up with a £300m no-grow
wrote analysts. “The combination will lead õMûNO
GROWûLONGûlVE
YEARûAFTERûBOOKSû February 2031 placement from its gas-
to a deterioration in market value opened at the plus 300bp area. focused subsidiary National Grid Gas plc
leverage.” The Switzerland-headquartered that came at Gilts plus 87bp.
BNP Paribas, Bank of America, Citigroup, multinational, which manufactures “Even though the spreads have moved
Deutsche Bank, MUFG and Santander ran the building materials, moved pricing by 35bp higher, the coupon is 2%, which is exactly
trade. and set the spread at 265bp. Pre-reconciled the same as the 19-year printed in
books reached more than €2.1bn. September. Even after the crash, the shock
DEFENSIVE FUNDING STRATEGY STILL CreditSights has run a stress test on the and the widening, UK corporates can still
THE NORM FOR CORPORATES BUILDINGûMATERIALSûSECTORSûlNANCIALSû4HEû print at levels comparable with 2019.”
RESEARCHûlRMûSAIDûTHATûBYûANDûLARGEûTHEû Utilities were the prevalent issuers in
Borrowers continued to take a six investment-grade credits they analysed the euro IG space last week, with Naturgy,
conservative approach to pricing last had very powerful liquidity cushions. SSE and EDP raising €2.85bn between
week, especially if they are from a more LafargeHolcim, alongside CRH, retained them.
vulnerable sector. the largest surpluses in the analysis. HSBC, NatWest Markets and RBC were
That was the case with REPSOL after it HeidelbergCement (Baa3/BBB–/BBB–) bookrunners on NGET’s deal.
became the latest oil and gas corporate to was the weakest performer in the
enter the market. CreditSights stress test. HeidelbergCement
The Spanish company priced a €1.5bn printed an October 2024 the week before SWISS FRANCS
dual-trancher off demand of €4bn, at 285bp over swaps, giving a 50bp
following €11bn of supply from the sector premium DOMESTIC CORPORATES FILL
the week before from Total, Shell, BP and SWISS WEEK
OMV.
Repsol took a two-pronged approach to STERLING Swiss plumbing supplies maker GEBERIT
its new issue, opening books on a shook off any fears over an industry
December 2025 note at the swaps plus NATIONAL GRID WIPES OUT slowdown to print an oversubscribed and
245bp area and an April 2030 tranche at CONCESSION upsized 2.5-year deal on Monday.
plus 295bp area. A banker away put the The company had warned the markets
NIP at IPTs at around 85bp. NATIONAL GRID ELECTRICITY TRANSMISSION in an investor call and trading statement
Pricing was tightened by 25bp on the launched a £400m 20-year at 135bp over that morning about the impact of the new
LONGûlVE
YEARûFORûAûLAUNCHûATûBPûANDûBYû Gilts on Wednesday, wiping out any new coronavirus on the construction industry
30bp on the 10-year to 265bp. The sizes issue premium on offer in the process. as building site and showroom shutdowns
were evenly split at €750m. The bond was originally marketed at the hit demand in March.
While getting cash on board to make plus 170bp area but strong demand Given the situation, it said it would be
their balance sheets more solid is the allowed the issuer to ratchet in pricing by raising SFr150m (US$155m) to help with
priority, some corporates are also 35bp as pre-reconciled books topped costs, including paying about SFr400m in
fundraising to cover dividend payments. £2.35bn. dividends.
That is one of the rationales behind these “The sterling market has been slowly IPTs were announced in the immediate
oil-related deals, said a banker. coming back to life, really helped by the wake of the call at mid-swaps plus 100bp–
This is in stark contrast to the banking Bank of England commencing its 110bp, before books opened 10bp tighter
sector. Many eurozone banks, and their UK corporate bond-buying scheme,” said a for a SFr300m no-grow size.
counterparts, have scrapped or suspended lead. 4HEûTRANSACTIONSûPOPULARITYûCONlRMEDû
dividends following pressure from their “We’ve seen some very supportive Geberit’s strong name recognition and
respective regulators. moves in pricing dynamics, and National scarcity value among the Swiss investor
2EPSOLûCONlRMEDûINûLATEû-ARCHûTHATû Grid was very quick to take advantage of base. It was last in the market more than a
shareholders can expect to receive a that. Putting a 20-year into the market was year ago, with a SFr125m 0.61% 9.5-year
dividend of €1 a share for the full year, also exactly what investors were looking due October 2028.
although the company has scrapped a plan for.” That deal was priced at mid-swaps plus
to reduce the number of shares by 5%. NGET (A3/A–/A) has a £440m 2038 note 50bp in March 2019, neatly showcasing
The company said that it would slash that was placed in September alongside a how the market has changed in the wake
investments by 26% this year. It is cutting £300m 2026 bond. The 2038s, which were of the pandemic, with Geberit paying 40bp
planned capex in 2020 by more than €1bn increased in January, were bid at 128bp, more for a much shorter trade.
and opex by more than €350m. according to MarketAxess prices. Despite that, the bonds came at the
For its part, compatriot utility NATURGY, A second lead said that taking into tightest relative level for a pure corporate
which is also committed to paying a account price movements in secondary, it issuer since the crisis began, paying a new
dividend, printed a €1bn January 2026 RESULTEDûINûTHEûNEWûTRADEûCOMINGûmATûTOû issue premium of just 17bp.
bond. the issuer’s curve. Asset managers and treasury accounts
Marketing began at the plus 195bp area “Spreads have clearly moved out took a little over three-quarters of the
but a book that reached €3.3bn at guidance compared with the beginning of the year,” paper, drawn by the positive yield for a
enabled leads to tighten by 40bp. That left he said. “The utility space has felt well Single A rated credit in a short tenor.
AûlNALûCONCESSIONûOFûABOUTûBPû.ATURGYû supported, though, as has duration, and Geberit is rated A+ (stable) by S&P.
was also able to upsize the bond from an you have the Bank of England providing a Swiss supermarket chain COOP-GRUPPE
initial target of €750m. SMALLûTECHNICALûBENElTûTOûTHEûMARKETv followed the next morning with another
LAFARGEHOLCIM offered an initial NGET issued a €500m January 2025 upsized deal, a SFr320m three-year priced
concession of about 75bp, according to a green bond at the start of the year. It then in the middle of guidance at 130bp over
“CFF obviously didn’t want anything “We see French issuers doing big deals, OUTBREAKûHAVEûHELPEDûlRMûUPûCREDITûMARKETû
more than €1bn, so they’ve proven you can but if you were to take the ECB element out, conditions, encouraging riskier names to
move pricing tighter [in covereds],” said a most of these issuers would have got their take a run at the high-yield primary market
syndicate banker. order books where BNS had theirs today,” last week.
In the previous week, fellow French the second lead said. Issuers from troubled sectors such as
issuers Credit Agricole and Credit Mutuel 4HEûlRSTûLEADûADDEDûTHATûTHEûGAPûWASûMOREû casino gaming and retail were able to lock in
SOLDûõBNûLONGûFOUR
YEARûANDûõBNûlVE
present in the primary market than in much needed cash, as well as companies
year covereds, respectively. Both were secondary. SEENûTOûBEûINûlNANCIALûDISTRESSûnûMARKINGûAû
priced at 40bp and quoted 1bp–2bp tighter “For now, the French are quite busy shift from the way that corporate treasurers
last Monday. printing new ECB-eligible deals at tighter have largely used the high-yield market for
Bankers cited CoFF’s ability to move the levels in primary but I think over time you STRAIGHTFORWARDûCOUPON
CUTTINGûRElNANCINGû
needle on pricing another positive sign for will see more investors looking for extra purposes over the past couple of years.
the restoration of the covered bond pick-up and you will see that differential Bonds from Wynn Resorts, NCR
primary market amid the coronavirus narrow,” he added. Corporation, Ferrellgas and Nordstrom all
crisis. The tap takes the new total issue size of got strong receptions from investors as they
BNS’s March 2023s to €2bn. looked to add cash to their balance sheets.
BNS TAKES REOPENING ROUTE BNP Paribas, Credit Suisse, NatWest Markets, “Companies are bulking up on cash
Scotiabank and Societe Generale were leads. balances and hoping they can fund the burn
BANK OF NOVA SCOTIA executed a €1.25bn for as long as they need to and get to the
reopening of its 0.375% March 2023 other side intact,” said Peter Schwab, high-
mortgage-backed covered bond, as it kept NON-CORE CURRENCIES yield portfolio manager of the Pax High
its options open on price and size on Yield Fund, which is advised by Impax Asset
Thursday. BMO COMPLETES CANADIAN HAT TRICK Management.
BNS’s choice to reopen an existing note For the most part, issuers were seen to
rather than place a new benchmark BANK OF MONTREAL became the third Canadian pay up compared with their existing bonds,
REmECTEDûTHEûHEIGHTENEDûACTIVITYûOFûLATEûOFû lNANCIALûINûEIGHTûDAYSûTOûISSUEûTHREE
YEARû but that is seen as a secondary concern.
Canadian issuers in the covered bond Australian dollar covered bonds with last “If you can tap the market, it is expensive
sector. Wednesday’s A$2bn (US$1.245bn) to do so right now but it is not that
“We thought going down the reopening mOATING
RATEû+ANGAROOûVIAûJOINTûLEADû expensive compared with historical levels,”
ROUTEûWOULDûGIVEûUSûMOREûmEXIBILITYûINû managers BMO, CBA, NAB, UBS and Westpac. said Schwab.
terms of pricing and size,” said a lead. The notes were priced inside 125bp area
“That proved to be true. We were able to guidance at three-month BBSW plus 120bp, CASINOS
tighten the spread and print a decent size.” 5bp tighter than the 125bp margin paid by WYNN RESORTS, for example, paid up to help
Guidance was announced at mid-swaps CANADIAN IMPERIAL BANK OF COMMERCE, Sydney weather the total shutdown of US casinos
plus the 60bp area for a benchmark size branch, for its A$600m domestic three-year and minimal activity at its Macau outpost.
reopening. covered note issue on April 2. !SûWELLûASûBEINGûTHEûlRSTûBONDûFROMûTHEû
The outstanding bond was quoted at TORONTO-DOMINION BANK also paid a 125bp gaming sector since the Covid-19 pandemic
plus 38bp on Tradeweb, prior to the tap spread for its A$1.25bn covered Kangaroo FORCEDûCASINOûCLOSURESûITûWASûTHEûlRSTû
announcement. However, the lead said issued a day before CIBC. unsecured bond seen in high-yield since the
recent issues from Bank of Montreal and Canadian major banks have been the primary market reopened the previous week.
Toronto-Dominion gave more accurate most active participants in the Australian With price talk of the 8% area on the
REmECTIONSûOFûPRICES covered bond market in recent years. 53MûlVE
YEARûNON
CALLûTWOûUNSECUREDû
March saw BMO place a €1.25bn three- "EYONDûTHEûlVEû#ANADIANûLENDERSûnû#)"#û NOTEûRATEDû"""n ûTHEûlRMûDANGLEDûAûBIGû
year covered at swaps plus 45bp, while TD Bank of Nova Scotia, Bank of Monteal, Royal concession to investors, compared with the
sold a €1bn four-year at plus 50bp. The Bank of Canada and Toronto-Dominion – 2029 notes issued by the same Wynn Resorts
notes were quoted at 46bp and 53bp, the only other covered Kangaroo issuers Finance entity which were trading at a yield
respectively. SINCEûTHEûlNANCIALûCRISISûHAVEûBEENû3WEDISHû of 6.70% in the secondary market on
Orders for the BNS tap topped €1.7bn, mortgage lender Stadshypotek, Bank of New Tuesday, according to MarketAxess.
which enabled the issuer to tighten pricing Zealand, Norway’s DNB Boligkreditt and
BYûBPû4HEûlNALûSPREADûWASûSETûATûBP Singapore’s DBS Bank. ALL COVERED BONDS (ALL CURRENCIES)
A second lead manager said the pricing BOOKRUNNERS: 1/1/2020 TO DATE
level showed it was still cost effective for Managing No of Total Share
BNS to print in euros. bank or group issues US$(m) (%)
“The Canadian banks have been really 1 Barclays 32 6,797.88 8.4
active in euros, US and Aussie dollars. If HIGH-YIELD 2 HSBC 24 5,411.01 6.7
you were to compare this against what 3 Natixis 18 4,048.73 5.0
they could achieve in these currencies, it 4 Commerzbank 16 3,895.31 4.8
was inside that,” he said. UNITED STATES 5 Credit Agricole 17 3,791.85 4.7
Both bankers acknowledged that the 6 Santander 15 3,663.91 4.5
spread here was wider than that seen for RISKIER FIRMS FIND SUPPORT IN JUNK 7 Credit Suisse 13 3,544.52 4.4
THEûRECENTûmURRYûOFû&RENCHûCOVEREDûBONDSûnû BOND MARKET 8 BNP Paribas 15 3,382.58 4.2
which have sported spreads ranging from 9 UniCredit 18 3,134.50 3.9
35bp to 40bp – and attributed the gap Federal Reserve market interventions, a 10 ING 14 3,092.68 3.8
principally to the latter’s eligibility for ECB MASSIVEûlSCALûSTIMULUSûPACKAGEûANDûSOMEû Total 92 80,994.53
purchases. more encouraging headlines on the virus Source: Refinitiv SDC code: J15a
HEALTHCARE – was able to price, despite The euro high-yield corporate market CSPP-eligible, and they’re from big
LifePoint’s coming with slightly lower has now been shut for six straight weeks, companies that have a lot of liquidity and
ratings. its longest stretch since the 2011-12 easy access to markets.”
Tenet priced an upsized US$700m B1/BB– eurozone crisis, according to JP Morgan, Bankers are hopeful that the euro high-
RATEDûlVE
YEARûSECUREDûNOTEûATûûTHEû but market participants say it’s just a yield market has turned a corner, with
previous Thursday. Those notes were “matter of time” before there’s a deal. SOMEûINmOWSûRETURNINGûTOûTHEûASSETûCLASS
trading at 102.50 to yield 6.70% as of They are hopeful that the lack of !NDûLASTûWEEKû3WISSûAGRIBUSINESSûlRMû
Wednesday, according to MarketAxess. liquidity in the secondary market will SYNGENTAû"A"""n""" ûSOLDû%UROPESûlRSTû
LifePoint was last in the market in provide the tail-wind for new issue crossover new issue since novel
February, when it sold a US$600m seven- interest. coronavirus volatility hit markets, printing
year non-call two bond at 4.375% that last “We’re seeing investors on the sidelines a €500m six-year at mid-swaps plus 365bp.
traded at 91.49 to yield 5.90%, according to that have been waiting for an opportunity
Trace data. to deploy capital, especially now assets are CARNIVAL IN DOLLARS
deeply discounted,” said a source familiar The US high-yield market reopened on
LIQUIDITY BOOST with Carnival’s deal. March 30 after a month-long hiatus with
The spread of Covid-19 is causing hospitals “But the reality is that liquidity in 9UMû"RANDSûlRSTûOUTûONûSCREENS
to delay many elective procedures, which secondary is pretty thin, and everyone is But when Carnival then announced
will impact revenues across the sector. trying to bid for the same 25 names. If you ITSû53BNûlNANCEûPACKAGEûTHEûFOLLOWINGû
LifePoint was also in the market with an have lots of money to deploy, the only day, it seemed the drought in euros
53MûASSET
BASEDûlRST
INûLAST
OUTûTERMû option available is the primary market.” would also be broken. Although the
loan on Monday. /NEûHIGH
YIELDûINVESTORûWITHûAûmEXIBLEû issuer is still rated investment-grade in
It warned the spread of Covid-19 will have mandate told IFR he had been buying every other sense this was a high-yield
ANûADVERSEûIMPACTûONûlNANCIALûRESULTSûTHATû investment-grade bonds in primary for a lNANCING
THEûlRMûISûhNOTûCURRENTLYûABLEûTOûQUANTIFYv lack of opportunities in high-yield The package included a minimum
Against this backdrop, JP Morgan analysts secondary. €300m component as part of a US$3bn-
wrote in a note on Monday that they expect “Liquidity has gone out of the door,” said EQUIVALENTûTHREE
YEARûNON
CALLûlRSTûPRIORITYû
to continue to see hospital operators the investor. senior secured note as Carnival sought
SUSPENDINGûlNANCIALûGUIDANCEûANDûTAKINGû “Investment-grade is coming at lNANCINGûTOûKEEPûITSELFûAmOATûFORûTHEûNEXTû
steps to shore up liquidity, estimating relatively attractive spreads, the bonds are year.
double-digit percentage reductions of
normal volume. ALL US$ DENOMINATED HIGH-YIELD BONDS ALL ASIAN HIGH-YIELD ISSUERS
LifePoint is seen by ratings agencies as BOOKRUNNERS – 1/1/2020 TO DATE 1/1/2020 TO DATE
having a strong liquidity position and is also Managing No of Total Share Managing No of Total Share
EXPECTEDûTOûBENElTûFROMûSUPPORTûFROMûTHEû bank or group issues US$(m) (%) bank or group issues US$(m) (%)
recently passed CARES Act. 1 BofA Securities 56 7,908.47 8.8 1 Credit Suisse 18 2,362.97 11.2
LifePoint said it had around US$895m of 2 JP Morgan 61 7,875.07 8.8 2 UBS 12 1,672.49 7.9
liquidity as of March 31, consisting of 3 Barclays 47 6,695.29 7.5 3 BofA Securities 5 1,531.66 7.2
US$325m cash and cash equivalents and 4 Citigroup 50 6,369.87 7.1 4 Tianfeng Securities 4 1,320.00 6.2
US$570m of capacity on its asset-based 5 Goldman Sachs 43 4,984.98 5.6 5 Goldman Sachs 10 1,235.42 5.8
lending facility. 6 Credit Suisse 39 4,952.15 5.5 6 Citic 17 974.90 4.6
The company is also seeking accelerated 7 Morgan Stanley 29 4,857.61 5.4 7 Haitong Secs 25 947.56 4.5
Medicare payments and direct grant aid 8 Deutsche Bank 42 4,450.85 5.0 8 Barclays 13 790.45 3.7
under the CARES Act. 9 Wells Fargo 35 4,221.39 4.7 9 Standard Chartered 7 677.20 3.2
It has also been taking steps this year, 10 RBC 31 4,021.96 4.5 10 Deutsche Bank 13 666.69 3.2
INCLUDINGûRElNANCINGSûANDûTENDERûOFFERSûTOû Total 136 89,453.68 Total 47 21,135.57
clean its balance sheet of expensive legacy debt. Including US domestics, Euro, foreign, globals. Excluding equity-related debt. Excluding equity-related debt.
Moody’s said it expected the company’s Source: Refinitiv SDC code: B5 Source: Refinitiv SDC code: B06d
good liquidity and anticipated relief from
the recently signed CARES Act will enable it ALL NON-DOLLAR DENOMINATED HIGH-YIELD BONDS ALL EUROPEAN HIGH-YIELD ISSUERS
TOûWEATHERûSIGNIlCANTûSHORT
TERMûEARNINGSû 1/1/2020 TO DATE 1/1/2020 TO DATE
headwinds related to the Covid-19. Managing No of Total Share Managing No of Total Share
bank or group issues €(m) (%) bank or group issues US$(m) (%)
ALL EUROPEAN ISSUERS GLOBAL STRUCTURED FINANCE IN EUROS ALL INTL ISSUERS (EXCLUDING SELF-FUNDED)
BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share Managing No of Total Share Managing No of Total Share
bank or group issues US$(m) (%) bank or group issues €(m) (%) bank or group issues US$(m) (%)
1 BofA Securities 8 2,360.10 14.5 1 Credit Agricole 2 1,352.56 17.3 1 Goldman Sachs 26 6,365.95 10.0
2 Lloyds Bank 9 2,073.91 12.7 2 Goldman Sachs 3 1,202.69 15.4 2 Citigroup 25 5,211.39 8.2
3 Citigroup 7 1,603.64 9.8 3 BofA Securities 2 942.53 12.1 3 JP Morgan 27 5,138.14 8.1
4 Credit Agricole 2 1,514.09 9.3 4 JP Morgan 2 574.63 7.4 4 Wells Fargo 20 4,887.03 7.7
5 BNP Paribas 4 1,122.23 6.9 5 Morgan Stanley 2 547.58 7.0 5 Credit Suisse 24 4,758.41 7.5
6 JP Morgan 4 1,091.33 6.7 6 Commerzbank 1 521.35 6.7 6 BofA Securities 23 4,637.85 7.3
7 Goldman Sachs 3 972.04 6.0 7 ING 1 521.35 6.7 7 Barclays 26 4,573.60 7.2
8 Morgan Stanley 3 850.78 5.2 8 Coop Rabobank 1 500.00 6.4 8 Morgan Stanley 15 3,397.01 5.4
9 Barclays 5 790.89 4.8 9 BNP Paribas 1 327.17 4.2 9 Deutsche Bank 21 3,174.66 5.0
10 ING 1 576.20 3.5 10 UniCredit 1 321.93 4.1 10 Nomura 18 2,933.04 4.6
Total 30 16,313.40 Total 14 7,803.71 Total 128 63,343.91
Includes securitisations, credit-linked notes (Euro, foreign, global and Includes securitisations, credit-linked notes (Euro, foreign, global and Includes securitisations, PFI bonds and credit-linked notes. Excludes US
domestics) and excludes CDOs. domestics) and excludes CDOs. global ABS/MBS, CDOs and self funded issues.
Source: Refinitiv SDC code: B16n Source: Refinitiv SDC code: B16g Source: Refinitiv SDC code: J10d
“Net sellers mean in those names you OFlCEûMAYûENDûUPûWITHûTHEûTRANCHEûGIVENû In the UK, Fitch downgraded bonds from
will be overcompensated for the the CIO’s previous willingness to absorb three shopping centre CMBS. The deals are
underlying risk. You can use the senior securitised risk from the UK. INTU METROCENTRE FINANCE, TRAFFORD CENTRE
irrationality and ratings-driven nature of The £1.7bn UK RMBS is backed by FINANCE and MEADOWHALL FINANCE, which
markets to your advantage – as long as the mortgages originated by Northern Rock securitise loans backed by regional shopping
company survives.” BEFOREûTHEûûlNANCIALûCRISISû4HEYûMAKEû centres in Newcastle, Manchester and
up one of three portfolios acquired in a 3HEFlELDûRESPECTIVELY
ENERGY AND AUTO £4.9bn deal last year from UK “bad bank” UK Intu had already been downgraded to BBB
The energy and auto sectors are most at Asset Resolution. Citi was sponsor and from A at the end of last year, as its
risk of mass downgrades to junk, thanks to 0IMCOûPROVIDEDûTHEûMAJORITYûOFûlNANCING collateral value fell and LTV rose. Fitch has
the respective threats of the oil glut and The 1.98-year Class A from Chester B1, now downgraded the bond to BB.
production shutdown. sized at £1.29bn and rated Triple A by Fitch also put on Rating Watch Negative
US car company Ford recently became Moody’s and S&P, was priced at par with a the £750m Triple A senior secured notes
the largest fallen angel ever after being coupon of Sonia plus 95bp. issued by quasi-CMBS WESTFIELD STRATFORD CITY
downgraded to junk at the end of March. It Classes B, C D, and E, rated Aa3/AA, A1/A, FINANCE NO.2.
has US$77.7bn-equivalent in bonds, Baa3/BBB and Ba3/BB, came at cash prices of 4HEûDEALûISûBACKEDûBYûAûLOANûONûmAGSHIPû
ACCORDINGûTOû2ElNITIVû%IKON 93.7, 90.5, 89 and 87.9, with respective ,ONDONûSHOPPINGûCENTREû7ESTlELDû3TRATFORDû
Moody’s said after the downgrade: “The margins of 130bp, 160bp, 200bp and 250bp. City. Although Fitch expects the business to
rapid and widening spread of the The unrated Class Z had a cash price of suffer because of the coronavirus, the
coronavirus outbreak, deteriorating global 75.5, and the Caa3/CCC+ Class Z was at 98.5. substantial equity position of sponsor
economic outlook, falling oil prices, and Unibail-Rodamco is enough to keep the
asset price declines are creating a severe EUROPEAN RETAIL, HOTEL CMBS notes at Triple A.
and extensive credit shock across many HIT BY RATINGS AGENCIES But it put the notes on watch because of
sectors, regions and markets.” the possibility that containment measures
“The combined credit effects of these S&P and Fitch downgraded or put on in the UK last longer than its base case
developments are unprecedented.” negative review tranches from several assumption, which relies on a solid recovery
Most European carmakers are likely to European CMBS this week, as a range of sub- in the UK starting in the third quarter this
end up as fallen angels thanks to asset classes within CMBS come under year.
production shutdowns, according to pressure with the coronavirus keeping S&P put three tranches from two UK hotel
analysts at Bank of America. consumers locked down. CMBS on CreditWatch Negative on Tuesday.
Triple B rated autos such as CNH, One notable exception is warehouse “The hotel and lodging sector is facing an
0EUGEOTû6ALEOûANDû3CHAEFmERûAREûALLûONû logistics CMBS, an asset class which found unprecedented freefall in passenger
the brink of junk, and have cumulatively popularity with investors in late 2017 and in numbers due to the rapid escalation of the
issued more than €12bn in Eurobonds, 2018, although last year market participants Covid-19 pandemic,” S&P said.
noted analysts. RCI Banque (Baa1/BBB, started to question whether the sector was “In addition, our economists are now
both neg) has around €15.6bn outstanding. overdone. pointing to a global recession in 2020, which
“In the context of a European HY market That was before lockdowns put a COULDûTRANSLATEûTOûSIGNIlCANTûlNANCIALûSTRAINû
with a face value of around €333bn, these premium on businesses which provide for some operators within the sector.”
AREûSIGNIlCANTûAMOUNTSvûWROTEû"!-,û home delivery services. One of the deals, MAGENTA 2020, was closed
analysts. “The bulk of European auto “Now [logistics CMBS] is the best thing just one month ago. It securitises a loan
issuers will be high-yield from 2020 for the since sliced bread again – the warehouses from Goldman Sachs to Thai conglomerate
foreseeable future.” literally contain sliced bread,” said one DTGO, backed by a portfolio of 17 hotels.
investor. Classes D and E are on CreditWatch
But other parts of the CMBS market – Negative.
retail and hotels in particular, as well as And S&P put the Class E from Morgan
leisure and student housing – are under Stanley’s 2019 CMBS Helios (ELoC 37) on
STRUCTURED FINANCE pressure. CreditWatch Negative, for the same reasons
Fitch has downgraded notes from three as Magenta.
Italian CMBS and put the deals on Rating The ratings agency has also downgraded
EMEA MBS Watch Negative, because of the impact of UK shopping centre CMBS ELIZABETH FINANCE
containment measures on retail businesses. 2018; not because of the coronavirus, but
ISSUE PRICES SHOWN FOR It downgraded all tranches of PIETRA NERA because one of the loans in the deal received
CHESTER B1 RMBS UNO, which is sponsored by Blackstone and a lowered market valuation in January.
backed by loans on three retail properties.
A prospectus for UK RMBS CHESTER B1, It downgraded all tranches of Kildare
which was pre-placed on March 30, shows Partners’ EMERALD ITALY 2019, backed by EMEA ABS
the issue prices for Classes A to X. Northern Italian retail centres.
The prospectus says the notes were And it downgraded the mezzanine ECB ADDS €700m TO ABSPP,
initially taken down by the lead managers, tranches from Deco 2019 – Vivaldi, which is FIRES UP PEPP
BNP Paribas and Citigroup on all tranches, backed by two fashion outlets in Northern
and JP Morgan on the Class A. It says they Italy. The ECB bought €700m for its ABS
intended to sell the notes to investors after Two weeks ago DBRS Morningstar put Purchase Programme in the week ended
the closing date. tranches from those three Italian CMBS on April 3, down from €1bn the previous
JP Morgan’s presence on the seniors Negative trend, and did the same for a week. Netting out €100m of redemptions
suggests that the bank’s chief investment fourth Italian trade, TAURUS 2018-1 IT. leaves the programme standing at €31.7bn.
But the ECB may have bought more ABS Data show that the ECB bought more AMAG Leasing was last in the auto ABS
under its new Pandemic Emergency under APP in March than in any previous market in 2018 when it sold two
Purchase Programme (PEPP) too. Figures month, with €2.8bn (as of March 27) transactions from its Swiss Car shelf. The
released on Wednesday showed the recorded, versus the next highest €2.26bn second, Swiss Car 2018-2, sold SFr250m
programme bought €30.2bn of securities in January 2016, Triple As due November 2021 at mid-swaps
INûITSûlRSTûWEEKûOFûOPERATIONS “We will need a few more data points before plus 58.25bp.
All assets eligible under the ECB’s we can determine whether this is a historical As with many Swiss securitisations, the
existing Asset Purchase Programme – ABS, aberration or a new trend,” BofA said. deal was sold only to Swiss accounts.
covered bonds, public sector debt and
corporates – are eligible under PEPP, AMAG LEASING MANDATES SWISS FCA READIES SUPPORT FOR
which has a maximum size of €750bn. AUTO LEASE ABS AUTO FINANCE BORROWERS
But the ECB has not broken down the
PEPP asset purchases by type, meaning in Regular Swiss issuer AMAG LEASING has The UK’s FINANCIAL CONDUCT AUTHORITY will
theory its purchases under PEPP could MANDATEDûWHATûCOULDûBEû%UROPESûlRSTû announce measures this week to support
include additional ABS too. A spokesperson public securitisation since volatility caused MOTORûlNANCEûBORROWERSûAFTERûITû
for the ECB told IFR a decision about by the coronavirus pandemic shut primary introduced payment freezes for mortgages
whether to reveal the types of assets markets. and unsecured consumer debt.
bought for the PEPP still needs to be taken. Europe’s last public trade was French “We know there is still more work to be
As well as the €700m ABS purchases RMBS Harmony French Home Loans done, and we will be announcing further
under APP, the programme in the week 2020-1 on March 11. measures to support consumers in other
ended April 3 bought an extra €1.8bn of Spreads have since widened too far for parts of the credit market in the future,
covered bonds, €13.2bn of public sector most issuers to consider bringing a new INCLUDINGûINûTHEûMOTORûlNANCEûSECTORûNEXTû
assets and €2.7bn of corporate debt. issue to market. And central bank week,” interim FCA chief executive
The ECB has already announced it has willingness to accept senior securitisation Christopher Woolard said on Thursday.
an extra €120bn to spend on APP-eligible paper as repo collateral offers a more In March the FCA told mortgage lenders
assets. economic route for bank issuers, while they should allow borrowers payment
“We cannot stress enough the deals from some non-bank issuers might holidays of up to three months if they
importance of the PEPP of €750bn and struggle to get traction with investors struggle to meet repayments because of
extra QE of €120bn for 2020 to be spent nervous about extension risk. the coronavirus pandemic.
in purchases of assets eligible under the AMAG said on Tuesday it had mandated On Thursday the FCA extended the
APP ... without timing or quantitative GreensLedge Capital Markets and Zuercher provision of payment holidays to
limits,” BofA Securities research said last Kantonalbank as joint arrangers for a borrowers with consumer loans, credit
week. potential SFr-denominated auto-lease ABS. CARDSûANDûOVERDRAFTSû"UTûAUTOûlNANCEû
Market participants say the expectation The deal, SWISS CAR ABS 2020-1, will offer loans were excluded from those measures.
of a bid from the ECB in the secondary only Class As, rated Triple A by Fitch. )NûTHEûABSENCEûOFûANYûOFlCIALûGUIDANCEû
market has helped spreads of eligible There is a revolving period to February AUTOûlNANCEûPROVIDERSûHAVEûALREADYûSTARTEDû
ASSETSûlRMûUPû!NDûHAVINGûTHEû%#"û 2022. introducing their own additional
behind a new issue could be crucial Zuercher Kantonalbank will be sole forbearance measures.
when the euro primary markets eventually bookrunner, and will be a joint lead Volkswagen Financial Services is
reopen. manager alongside UBS. offering UK customers “breathing space” -
a 60-day period when customers in
GLOBAL SECURITISATIONS IN STERLING SECURITISATIONS – ALL EUROPEAN RMBS lNANCIALûDIFlCULTIESûBECAUSEûOFûTHEû
BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE coronavirus will not be contacted or
Managing No of Total Share Managing No of Total Share chased for payment.
bank or group issues £(m) (%) bank or group issues €(m) (%) It could also agree payment extensions
1 Lloyds Bank 9 1,594.20 27.0 1 Credit Agricole 2 1,352.56 15.0 for borrowers and allow them to keep
2 Citigroup 6 1,120.61 19.0 2 Lloyds Bank 6 1,301.83 14.5 their vehicles for as long as possible.
3 BofA Securities 6 970.48 16.4 3 Citigroup 6 1,203.26 13.4 According to Moody’s, VWFS UK’s offer
4 BNP Paribas 3 531.92 9.0 4 BofA Securities 5 1,027.14 11.4 of extensions to personal contract
5 JP Morgan 2 348.32 5.9 5 JP Morgan 3 914.82 10.2 purchase (PCP) of up to six months will
6 Barclays 2 325.00 5.5 6 BNP Paribas 3 717.01 8.0 help reduce residual value losses on the
7 NAB 2 305.23 5.2 7 Barclays 4 639.43 7.1 lRMSûOUTSTANDINGû5+ûAUTOû!"3
8 Goldman Sachs 1 242.30 4.1 8 Coop Rabobank 1 500.00 5.6 PCP contracts, which now dominate
9 Morgan Stanley 1 183.19 3.1 9 Morgan Stanley 2 480.40 5.3 NEWûCARûlNANCINGûINûTHEû5+ûAREûSTRUCTUREDû
10 Wells Fargo 1 183.19 3.1 10 NAB 2 359.30 4.0 WITHûAûlNALûBALLOONûPAYMENTûAFTERûAûSERIESû
Total 15 5,904.43 Total 16 9,007.75 of smaller monthly payments.
Including Euro, foreign, global and domestics, excluding CDOs. Including Euro, foreign, global and domestics, excluding CDOs Borrowers can choose to return the
Source: Refinitiv SDC code: B16i Source: Refinitiv SDC code: B10a VEHICLEûINSTEADûOFûMAKINGûTHEûlNALûBALLOONû
payment, exposing the lender to the risk US secondary loan trading volume was come up with at least US$75bn to pay
that the residual value of the returned US$742.29bn in 2019, compared to just bondholders.
vehicle is less than it would have received US$78.5bn in Europe during the same That total could climb above US$100bn,
FROMûTHATûlNALûPAYMENT period, LPC data showed. according to the Mortgage Bankers
Also protecting ABS investors, Moody’s Association, an industry trade group.
said VWFS UK will repurchase any loans SHORT TURNAROUND Hence, the mortgage industry has been
subject to coronavirus extensions at a price However, the short-dated CLOs does not scrambling to convince the US Treasury
equal to the principal amount outstanding, appeal to every investor. Department and the Federal Reserve to
together with any arrears. “The static deals aren’t necessarily what launch a lending programme for mortgage
we look for to tackle current challenges,” servicers so they have a backstop if they
Andrew Lennox, ABS portfolio manager have to advance payments to bondholders
EMEA CLO International at Federated Hermes said. for months.
“We prefer managers who actively manage “While some servicers will not need
MARKET DISRUPTION CREATES “PRINT their portfolios and know how to manage assistance, many others will require
AND SPRINT” CLOs loans during the tough times.” temporary support to deliver forbearance
“The whole point of CLOs is to give at the scale and for the duration required,”
A number of CLO managers are printing MANAGERSûmEXIBILITYûWITHûLONG
TERMû a group of organisations representing
short-dated CLOs to take account of funding to back the right horses and do lNANCIALûINDUSTRYûANDûAFFORDABLEûHOUSINGû
current market disruption caused by ongoing due diligence,” Stephan Michel, advocates wrote in a letter to regulators on
Covid-19 and buy bargain trades in the senior portfolio manager International at April 5.
secondary loan market following a massive Federated Hermes added. The number of mortgages in
sell-off in loan pricing. In addition, a pick-up in the secondary forbearance is rising and is likely to
Oaktree and Permira are marketing CLO market which offers an attractive accelerate in the coming weeks as millions
CLOs in Europe totalling around €375m discount and yield on existing CLO of workers have been laid off or
and €300m, respectively with a focus on vehicles themselves could dampen the furloughed.
ramping up a pool of leveraged loans in a demand for new CLOs. The percentage of home loans in
short period of time via the secondary loan “Most secondary offers in different CLO forbearance increased to 2.66% on April 1
market, banking sources said. tranches now are at least 95% of face from 0.25% on March 2, MBA said last
The so-called “print and sprint” deals value,” said the debt fund manager. “It’s Tuesday.
differ to typical CLOs which spend months better to buy in secondary.” “It is expected that requests will
ramping up warehouse portfolios from both As such, the CLO market has been continue to skyrocket at an unsustainable
the primary and secondary loan markets. largely shut since mid-March when pace in the coming weeks, putting
With no primary issuance due to the lockdown measures started being imposed INSURMOUNTABLEûCASHmOWûCONSTRAINTSûONû
coronavirus, managers have been forced to across Europe and the US. many servicers,” MBA chief economist
adapt CLO structures and buying habits. Year-to-date European CLO volume was Mike Fratantoni said in a statement.
In addition, these deals have shorter down 28% to €5.8bn on the same period
one-year non-call periods rather than two- last year, while the US market dropped PRIVATE VS AGENCY MBS
years, while the re-investment period is ûTOû53BNûACCORDINGûTOû2ElNITIVû 4HISûPOTENTIALûlNANCIALûSQUEEZEûONû
AROUNDûONEûTOûTWOûYEARSûINSTEADûOFûTHEûlVE
LPC. servicers is expected to affect the two types
year periods typically seen on CLOs. of mortgage-backed securities differently.
“These are opportunistic transactions Privately issued MBS are expected to feel
because prices in the secondary loan US MBS the brunt of the fallout, less so agency
market are depressed at the moment,” a MBS, guaranteed by the federal
debt fund manager said. US MORTGAGE INVESTORS WARY AS government like GINNIE MAE or backed by US
The average prices of European SERVICERS FRET ABOUT CASH mortgage agencies FANNIE MAE and FREDDIE
leveraged loans in the secondary market MAC.
fell to under 80% of face value in March – Investors in US mortgage bonds are Servicers for private MBS often have the
levels not seen since 2009 – before clawing becoming wary about the stress put on right to be repaid on payments they make
back some ground to 87.48 on April 7, mortgage servicers by potentially millions to bondholders. In most cases, they either
ACCORDINGûTOû2ElNITIVû,0#ûDATA of homeowners, who, facing economic HAVEûTOûADVANCEûAûlXEDûNUMBERûOFû
In the US last week, Blackstone/GSO sold hardship from the impact of the Covid-19 payments or until they view advances as
a US$476.7m “print and sprint” CLO, while pandemic, are expected to seek mortgage unrecoverable.
Palmer Square is looking to raise around loan relief in the coming months. “If servicers start to recover advances,
US$200m for a similar-type CLO, sources Mortgage servicers, who collect and THATûCOULDûCUTûINTOûCASHmOWSûGOINGûTOû
said. process loan interest and principal bonds. That would hurt bond value,” said
Executing this short-term strategy will payments, are obligated to pay Steve Abrahams, head of securitisation and
be easier for US managers than European bondholders every month even when they investment strategy at Amherst Pierpont.
managers, because the US is a much larger, record collection shortfalls. On the other hand, investors who own
more liquid market, several bankers and “There is an elevated risk now, but it’s agency MBS should not lose too much
fund managers noted. too early to tell,” said John Bastoni, a sleep over their monthly income,
“The US market is a different ball game. trader at Breckinridge Capital Advisors. Abrahams said.
The secondary market is more active and If about a quarter of all US “Servicers could come under pressure,
liquid,” said Alexander Ohl, head of borrowers reduce or stop making their but Fannie Mae, Freddie Mac and Ginnie
structured credit at Union Investment in mortgage payments for six months, Mae MBS insulate investors from that,”
Germany. mortgage servicers are on the hook to Abrahams said.
NEW YORK MORTGAGE REIT and other industries have essentially shut TWO HARBORS TO PAY INTERIM
SELLS MORE BONDS due to government measures to curb the DIVIDENDS
transmission of Covid-19.
NEW YORK MORTGAGE TRUST, a mortgage real “The deterioration in the US economy TWO HARBORS INVESTMENT CORP, a mortgage
estate investment trust, said last Tuesday has caused us to become increasingly real-estate investment trust, said last
that it had been selling bonds since late concerned about consumer credit,” they Monday it would pay interim stock
March in a bid to raise cash and is seeking wrote in a research note released last dividends after suspending regular
LONGER
TERMûlNANCINGûFORûSOMEûSECURITIESû Monday. dividends to conserve cash amid
in its investment portfolio. Bank of America forecast between 16 turbulence in the mortgage market
The mortgage REIT sector was roiled in and 20 million US workers could lose their stemming from the Covid-19
March as market volatility due to a Covid- jobs, sending the unemployment rate to pandemic.
19 pandemic touched off a wave of margin 15.6% in the second quarter. US mortgage REITs have been roiled by
calls from their lenders. Many of these On April 3, the Labour Department said wild price swings and margin calls, forcing
mortgage funds unloaded assets to raise the jobless rate rose to 4.4% in March from a number of them to sell assets and/or to
cash in order to meet margin calls on their 3.5% the month before. slash their dividends.
repurchase agreements. “We expect deterioration in credit Two Harbors said it will pay an interim
Since March 30, the company “is current performance could reach or exceed the COMMONûSTOCKûDIVIDENDûOFûlVEûCENTSûPERû
with its repurchase agreement payment 2008–09 recession experience,” BofA share on April 29. It will also pay dividends
obligations, including margin added. on its preferred shares.
requirements, and is no longer in a ABS issuance has been nearly non- For the fourth quarter of 2019, it
position to need forebearance agreements existent for more than three weeks as paid 40 cents in dividend on its common
FROMûITSûREPURCHASEûAGREEMENTûlNANCINGû market participants await for details on stock.
counterparties”, the REIT’s chairman and the Federal Reserve’s Term Asset-Backed “The declaration of this interim
CHIEFûEXECUTIVEûOFlCERû3TEVENû-UMMAûSAIDû 3ECURITIESû,OANû&ACILITYûTHATûCANûlNANCEû DIVIDENDûREmECTSûOURûCOMMITMENTûTOû
in a statement released on Tuesday. US$100bn in ABS supply. STOCKHOLDERSûANDûOURûABILITYûTOûBEûmEXIBLEû
Since March 27, New York Mortgage said Bank of America analysts expected this and make real-time decisions, informed by
it had sold US$291m in mortgage-backed Fed lending programme to launch in the current and expected market conditions,”
securities. This was on top of the US$1.7bn second quarter. Two Harbors’ President and Chief
in proceeds from MBS sales it reported on They now see consumer ABS issuance %XECUTIVEû/FlCERû4HOMASû3IERINGûSAIDûINûAû
March 30. totalling US$140bn, down from their statement.
Meanwhile, it said it secured U$250m in earlier forecast of US$170bn, which would The REIT had US$1.2bn in unrestricted
repurchase agreements by using its mean US$100bn is to still come to market. cash on March 31 following the sale of
residential home loans as collateral, bring Much of the consumer ABS supply nearly all its non-agency mortgage-backed
ITSûTOTALûREPOûlNANCINGûTOû53BN would come from the auto sector. The securities.
It said it was looking at term funding for Bank of America analysts said this ABS On March 24, it said it suspended
about US$859m in securities in investment category would total US$105.5bn from DIVIDENDSûFORûTHEûlRSTûQUARTER
portfolio. their earlier forecast of US$120bn. “As the global health pandemic
Its US$3bn investment portfolio For commercial ABS, the analysts said continues to play out, we will be in a
includes US$554m of non-agency they now expected supply for this segment better position to evaluate the future
residential mortgage-backed securities, at US$40bn from their initial projection of earnings power of our portfolio
US$276m of commercial mortgage-backed US$68bn with US$29bn remaining to be and determine an appropriate level
securities, US$272m of residential issued. for a sustainable dividend,” Siering
mortgages and about US$200m in cash. “The stresses in the travel (aircraft and said.
“To the extent we are successful in rental), shipping (container, railcar, Prices on Two Harbors’ common shares
OBTAININGûTERMûlNANCINGûFORûTHISûPORTFOLIOû trucking) and in-store dining (franchise) have nearly doubled this week. They were
WEûBELIEVEûSUCHûlNANCINGûCOULDûENHANCEû sectors will likely create challenges for at US$4.76 in midday afternoon trading
our liquidity position and provide new deals, in our view,” they wrote. last Wednesday.
opportunities to invest in this new
operating landscape,” Mumma said. GLOBAL CDOs ALL EUROMARKET CDOs
BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share Managing No of Total Share
US ABS bank or group issues US$(m) (%) bank or group issues US$(m) (%)
1 JP Morgan 2 2,700.68 14.2 1 BofA Securities 2 876.75 15.8
US ABS SUPPLY SEEN DOWN TO 2 BNP Paribas 4 1,448.73 7.6 2 BNP Paribas 2 863.46 15.5
US$180bn IN 2020: BOFA 3 Citigroup 3 1,329.44 7.0 3 Citigroup 2 811.18 14.6
4 Barclays 3 1,315.31 6.9 4 Jefferies 1 507.90 9.1
Bank of America analysts slashed their 5 Jefferies 3 1,039.90 5.4 5 Credit Suisse 1 461.02 8.3
forecast for issuance of US asset-backed 6 BofA Securities 2 876.75 4.6 6 Natixis 1 452.14 8.1
securities in 2020 to US$180bn from their 7 Natixis 2 713.44 3.7 7 Goldman Sachs 1 417.01 7.5
earlier forecast of US$238bn, prompted by 8 Credit Suisse 1 461.02 2.4 8 Morgan Stanley 1 399.06 7.2
an expected deterioration in consumer 9 RBC 1 438.50 2.3 9 Barclays 1 359.94 6.5
credits due to the economy contracting. 10 Goldman Sachs 1 417.01 2.2 Total 13 5,554.18
&IRST
TIMEû53ûlLINGSûFORûUNEMPLOYMENTû Total 43 19,084.94 Excludes global and domestic.
BENElTSûHAVEûSOAREDûTOûOVERûûMILLIONû Including Euro, foreign, global, US domestics.
since mid-March, as hotels, restaurants Source: Refinitiv SDC code: B12 Source: Refinitiv SDC code: J11
SSAR
US DOLLARS
Apr 7 2020 BNG US$2bn Apr 17 2023 0.75 99.811 MS+32 / T+44.9 0.814
Apr 7 2020 ONTTFT US$1bn Apr 15 2025 1.375 99.731 MS+80 / T+92.05 1.431
Apr 7 2020 CDP Financial US$2bn Apr 17 2023 1 99.849 T+67 1.051
Apr 8 2020 OMERS US$1bn Apr 14 2023 1.125 99.959 T+80 1.139
EUROS
Apr 6 2020 CCCI €500m Mar 25 2025 0.05 99.941 OAT+34 0.062
Apr 6 2020 Lower Saxony €250m incr Aug 2 2024 0 100.574 MS+11 -0.133
(€1.5bn)
Apr 7 2020 Alberta €1.1bn Apr 16 2025 0.5 99.838 MS+70 / B+106.9 0.533
Apr 7 2020 Cyprus €1.25bn Apr 16 2027 1.5 99.579 MS+165 / B+204 1.564
Apr 7 2020 Cyprus €500m Apr 16 2050 2.25 98.097 MS+215 / B+225.6 2.339
Apr 7 2020 Ireland NTMA €6bn May 15 2027 0.2 99.706 MS+32 / B+74.2 0.242
Apr 7 2020 SNCF green €1.25bn Apr 17 2030 0.625 99.23 OATs+57 0.705
Apr 8 2020 AFD €1.5bn May 25 2030 0.5 98.828 OATs+42 0.62
Apr 8 2020 Saxony €250m incr Apr 17 2025 0.01 100.424 MS+10 / B+47.3 -0.075
(€500m)
STERLING
Apr 9 2020 NIB £350m incr Dec 15 2022 1.125 101.494 G+48 0.555
(£600m)
SWISS FRANCS
Apr 7 2020 Eurofima SFr150m Apr 28 2027 0.125 100.489 MS+40 / Eidg+52 0.055
NON CORE
Apr 6 2020 Akademiska Hus SKr600m Apr 11 2023 0.5 99.851 - -
Apr 6 2020 Linkopings Stadshus SKr500m Apr 14 2002 3mS+75 101.129 3mS+19 -
Apr 6 2020 IFC social A$200m Apr 15 2035 1.5 99.906 ASW+54 / 1.507
ACGB+37.95
Apr 7 2020 South Australia A$467m incr Sep 22 2022 1.5 101.942 EFP+45 / 0.695
(A$2.467bn) ACGB+48.25
Apr 7 2020 South Australia A$628m incr Aug 15 2024 2.25 105.686 EFP+66.5 / 0.91
(A$2.628bn) ACGB+59.75
Apr 7 2020 South Australia A$290m incr Jul 20 2026 3 110.865 EFP+95 / 1.195
(A$2.54bn) ACGB+69
Apr 7 2020 South Australia A$40m incr May 24 2028 3 111.697 EFP+65 / 1.465
(A$2.04bn) ACGB+76.25
Apr 7 2020 South Australia A$15m incr May 24 2030 2.75 109.763 EFP+86.3 / 1.695
(A$1.765bn) ACGB+86.3
Apr 7 2020 South Australia A$60m incr May 24 2032 1.75 98.543 EFP+107 / 1.885
(A$1.06bn) ACGB+96.05
Apr 7 2020 Queensland A$300m Apr 16 2040 2.25 99.84 EFP+137.5 / 2.26
ACGB+65
Apr 7 2020 New Zealand NZ$3.5bn incr May 15 2031 1.5 100.997 NZGB 2039+32 1.403
(NZ$6.4bn)
Apr 8 2020 ACT A$1.1bn Apr 17 2023 1 100.414 EFP+60 / 0.86
ACGB+60
MS+35 area, MS+32 - >US$4.1bn Aaa/AAA/AAA Barc / BofA / GS / RBC EMEA 51%, US/Can 27%, APAC 14%,
LATAM 9%. CB/OI 63%, Bks 21%, AM/
Ins/PF 13%, Other 3%.
MS+80 area, MS+80 - >US$1.15bn Aa1/AA+/-/AAA BofA / Citi / HSBC / Scotia Amers 51%, EMEA 45%, Asia 4%. Bks
35%, CB/OI 28%, AM 28%, Ins/PF 9%.
T+70 area, T+67 - US$2.9bn Aaa/AAA/AAA/AAA GS / JPM / RBC / TD EMEA 45%, Amers 44%, APAC 11%. CB/
OI 70, Bks 21%, AM 7%, Ins/PF/Other
2%.
T+80 area, T+80 (#) - US$1.17bn Aa1/AA+/AAA/AAA BMO / HSBC / RBC / TD -
OAT +38 area 4 >€1.2bn, 35acs Aa2/-/AA BNPP / CA-CIB / HSBC / Natx / SG Fr 27%, UK/Ire 23%, Nordics 17%, Asia
17%, Ger/Aus 6%, S.Eur 5%, Benelux
5%. AM 40%, Bks/PB 38%, CB/OI 17%,
Ins/PF 4%, HF 1%.
- - - -/-/AAA Uni -
MS+40/43, MS+40 - 40acs Aa2/AA+ UBS / ZKB Switz 100%. Tsy 87.5%, AM 7%, Ins
area 4.5%, PF 0.5%, PB 0.5%.
- - - -/AA Danske -
- - - -/AA+ HCM -
- - - Aaa/AAA/AAA Daiwa -
- - Aa1/AA+/AA Citi -
Apr 8 2020 ACT A$225m incr May 22 2029 2.25 103.887 EFP+84 / 1.785
(A$900m) ACGB+89.5
Apr 8 2020 SEK green SKr500m Apr 14 2025 0.625 99.863 - 0.653
Apr 9 2020 KfW A$100m incr Feb 9 2022 5.5 108.48 ASW+48 / 0.76
(A$2.65bn) ACGB+53.5
Apr 9 2020 LGFA NZ$1.1bn Apr 15 2026 1.5 100.229 MS+78 1.46
Apr 9 2020 KfW A$100m incr Feb 9 2022 5.5 108.48 ASW+48bp, 0.76
(A$2.65bn) ACGB+53.5bp
CORPORATES
US DOLLARS
Apr 3 2020 Dell International Corp/EMC US$1bn Jul 15 2025 5.85 99.863 T+550 5.883
Apr 3 2020 Dell International Corp/EMC US$500m Jul 15 2027 6.1 99.762 T+562.5 6.143
Apr 3 2020 Dell International Corp/EMC US$750m Jul 15 2030 6.2 99.817 T+562.5 6.226
Apr 3 2020 FedEx US$1bn May 15 2025 3.8 99.724 T+350 3.859
Apr 3 2020 FedEx US$750m May 15 2030 4.25 99.758 T+370 4.279
Apr 3 2020 FedEx US$1.25bn May 15 2040 5.25 99.05 T+410 5.313
Apr 3 2020 Metropolitan Life Global US$1bn Apr 13 2030 2.95 99.794 T+240 2.974
Funding
Apr 6 2020 Ally Financial US$750m May 1 2025 5.8 98.828 T+562.5 6.071
Apr 6 2020 Analog Devices US$400m Apr 1 2025 2.95 99.496 T+262.5 3.06
Apr 6 2020 BMW US Capital US$1.5bn Apr 6 2023 3.8 99.897 T+350 3.837
Apr 6 2020 BMW US Capital US$1.5bn Apr 9 2025 3.9 99.829 T+350 3.938
Apr 6 2020 BMW US Capital US$1bn Apr 9 2030 4.15 99.854 T+350 4.168
Apr 6 2020 Broadcom US$2.25bn Apr 15 2025 4.7 99.99 T+425 4.702
Apr 6 2020 Burlington Northern Santa US$575m Feb 15 2051 3.05 99.171 T+180 3.092
Fe
Apr 6 2020 Caterpillar US$800m Apr 9 2030 2.6 99.459 T+200 2.662
Apr 6 2020 Caterpillar US$1.2bn Apr 9 2050 3.25 99.601 T+200 3.271
Apr 6 2020 Hewlett Packard Enterprise US$1.25bn Oct 2 2023 3.45 99.956 T+412.5 4.464
Apr 6 2020 Hewlett Packard Enterprise US$1bn Oct 1 2024 4.65 99.817 T+425 4.696
Apr 6 2020 Pacificorp US$400m Sep 15 2030 2.7 99.82 T+205 2.72
Apr 6 2020 Pacificorp US$600m Mar 15 2051 3.3 99.176 T+205 3.343
Apr 6 2020 Tucson Electric Power US$350m Jun 16 2050 4 99.138 T+275 4.05
Apr 7 2020 Avangrid US$750m Apr 15 2025 3.2 99.871 T+275 3.228
Apr 7 2020 BAE Systems US$1.3bn Apr 17 2030 3.4 99.296 T+275 3.484
Apr 7 2020 Brookfield Finance US$600m Apr 15 2030 4.35 99.903 T+362.5 4.362
Apr 7 2020 Estee Lauder US$700m Apr 15 2030 2.6 99.816 T+185 2.621
Apr 7 2020 Keurig Dr.Pepper US$750m May 1 2030 3.2 99.743 T+250 3.23
Apr 7 2020 Keurig Dr.Pepper US$750m May 1 2050 3.8 99.448 T+250 3.831
Apr 7 2020 Mondelez International US$500m Apr 13 2023 2.125 99.769 T+185 2.205
Apr 7 2020 Mondelez International US$500m Apr 13 2030 2.75 99.032 T+212.5 2.862
Apr 7 2020 Narrangasett Electric US$600m Apr 9 2030 3.395 100 T+265 3.395
Apr 7 2020 NiSource US$1bn May 1 2030 3.6 99.631 T+290 3.644
Apr 7 2020 Phillips 66 US$500m Apr 6 2023 3.7 99.885 T+337.5 3.741
- - - Aa1/AA+/- SEB -
- - - Aaa/AAA/-/Scope Nomura -
AAA
MS+78/83, - - -/AA+/AA+ ANZ/BNZ/CBA/WBC -
MS+78/80
- - - Aaa/AAA/-/AAA Nomura -
Scope
Apr 7 2020 Phillips 66 US$500m Apr 9 2025 3.885 99.946 T+337.5 3.862
Apr 8 2020 American Water Capital US$500m May 1 2030 2.8 99.591 T+210 2.847
Apr 8 2020 American Water Capital US$500m May 1 2050 3.45 99.794 T+210 3.461
Apr 8 2020 Booking Holdings US$1bn Apr 13 2025 4.1 99.982 T+362.5 4.104
Apr 8 2020 Booking Holdings US$750m Apr 13 2027 4.5 99.78 T+387.5 4.537
Apr 8 2020 Booking Holdings US$1.5bn Apr 13 2030 4.625 99.834 T+387.5 4.646
Apr 8 2020 EOG Resources US$750m Apr 15 2030 4.375 99.96 T+362.5 4.38
Apr 8 2020 EOG Resources US$750m Apr 15 2050 4.95 99.412 T+362.5 4.988
Apr 8 2020 IPALCO Enterprises US$475m May 1 2030 4.25 99.909 T+350 4.261
Apr 8 2020 Nordstrom US$600m May 15 2025 8.75 100 8.75 8.75
EUROS
Apr 6 2020 Holcim Finance €500m Apr 9 2025 2.375 99.739 MS+265 / B+306.3 -
Apr 6 2020 Naturgy Finance €1bn Jan 15 2026 1.25 99.413 MS+155 / B+196.8 1.357
Apr 6 2020 Repsol International Finance €750m Apr 15 2030 2.625 99.896 MS+265 / B+305.7 2.637
Apr 6 2020 Repsol International Finance €750m Dec 15 2025 2 99.967 MS+220 / B+262.1 2.007
Apr 6 2020 Sanofi €250m incr Apr 1 2025 1 102.427 MS+73 / B+113.5 0.505
(€1bn)
Apr 6 2020 Sanofi €250m incr Apr 1 2030 1.5 106.539 MS+83 / B+123.7 0.815
(€1bn)
Apr 7 2020 Akzo Nobel €750m Apr 14 2030 1.625 99.397 MS+165 / B+202.6 1.691
Apr 7 2020 Bouygues €1bn Jul 24 2028 1.125 99.277 MS+125 / B+165.4 -
Apr 7 2020 Deutsche Bahn €750m Apr 16 2040 1.375 99.342 MS+115 / B+152 1.413
Apr 7 2020 EDP green €750m Apr 15 2027 1.625 99.385 MS+180 / B+219.4 1.719
Apr 7 2020 EnBW €500m Apr 17 2025 0.625 99.52 MS+90 / B+126.7 0.723
Apr 7 2020 SSE €600m Apr 16 2025 1.25 99.62 MS+150 / B+189.5 -
Apr 7 2020 SSE €500m Apr 16 2030 1.75 99.149 MS+180 / B+216.4 -
Apr 7 2020 Syngenta €500m Apr 16 2026 3.375 99.201 MS+365 / B+404.5 3.525
Apr 7 2020 Toyota Finance Australia €750m Apr 21 2022 1.584 100 MS+185 / B+220.9 1.584
Apr 7 2020 Toyota Finance Australia €500m Oct 21 2024 2.004 100 MS+220 / B+257.2 2.004
Apr 7 2020 Toyota Finance Australia €500m Oct 21 2027 2.28 100 MS+235 / B+274.9 2.28
Apr 7 2020 Veolia Environnement €700m Apr 15 2028 1.25 100 MS+130 / B+170.8 1.25
Apr 8 2020 Capgemini €500m Apr 15 2022 1.25 99.794 MS+160 / / B+195 1.355
Apr 8 2020 Capgemini €800m Apr 15 2026 1.625 99.412 MS+185 / B+223.9 1.729
Apr 8 2020 Capgemini €1bn Apr 15 2029 2 99.163 MS+210 / B+247 2.103
Apr 8 2020 Capgemini €1.2bn Apr 15 2032 2.375 99.003 MS+235 / B+276.5 2.472
Apr 8 2020 Lonza Finance International €500m Apr 21 2027 1.125 99.424 MS+180 / B+219.6 1.713
Apr 8 2020 JAB Holdings €500m Apr 17 2027 2.5 99.267 MS+270 / B+308.1 2.616
Apr 8 2020 JAB Holdings €500m Apr 17 2035 3.375 99.007 MS+325 / B+364.4 3.461
JAPANESE YEN
Apr 9 2020 Berkshire Hathaway Inc ¥56.3bn Apr 14 2023 0.674 100 MS+70 0.674
Apr 9 2020 Berkshire Hathaway Inc ¥41.6bn Apr 16 2025 0.879 100 MS+90 0.879
Apr 9 2020 Berkshire Hathaway Inc ¥29bn Apr 16 2027 1.002 100 MS+100 1.002
Apr 9 2020 Berkshire Hathaway Inc ¥18.3bn Apr 16 2030 1.1 100 MS+105 1.1
Apr 9 2020 Berkshire Hathaway Inc ¥25.8bn Apr 16 2040 1.585 100 MS+140 1.585
Apr 9 2020 Berkshire Hathaway Inc ¥18.5bn Apr 15 2050 1.779 100 MS+155bp 1.779
Apr 7 2020 Coop-Gruppe SFr320m May 5 2023 0.75 100.067 MS+130 / Eidg+133 0.728
NON CORE
Apr 6 2020 Telia NKr400m incr Apr 8 2030 2.9 99.999 - 2.9
(NKr1bn)
Apr 9 2020 Volvofinans Bank SKr500m Oct 20 2022 3mS+175 100 3mS+175 -
FINANCIALS
US DOLLARS
Apr 6 2020 Credit Suisse US$1.5bn Apr 8 2022 2.8 99.996 T+255 2.802
Apr 6 2020 Credit Suisse US$1.5bn Apr 9 2025 2.95 99.829 T+255 2.987
Apr 6 2020 Mitsubishi UFJ Lease & US$450m Apr 13 2025 3.637 100 T+320 3.637
Finance
Apr 6 2020 Mitsubishi UFJ Lease & US$350m Apr 13 2030 3.967 100 T+330 3.967
Finance
Apr 8 2020 New York Life Insurance US$1.25bn May 15 2050 3.75 99.938 T+240 3.784
Company
Apr 8 2020 Prudential Financial Inc US$1bn Apr 14 2030 3.125 99.058 T+250 3.236
EUROS
Apr 6 2020 Svenska Handelsbanken €1.25bn Apr 15 2025 1 99.386 MS+135 / B+173.1 1.127
COVERED BONDS
EUROS
Apr 6 2020 CFF €1bn Apr 16 2024 0.05 99.824 MS+35 / B+73.6 0.094
Apr 9 2020 Bank of Nova Scotia €1.25bn incr Mar 10 2023 0.375 100.227 MS+55 / B+90.4 0.296
(€2bn)
NON CORE
Apr 8 2020 Bank of Montreal A$2bn Apr 17 2023 3mBBSW+120 100 3mBBSW+120 -
HIGH YIELD
US DOLLARS
Apr 8 2020 Ferrellgas US$575m Apr 15 2025 (Apr 2022) 10 100 - 10
MS+100/+110, 17 >SFr300m, >60acs -/A+/- CS / CMZ Switz 100%. AM 42.5%, Tsy 33%, Ins
MS+90/+100 WPIR 10.5%, PB 9%, PF 5%.
MS+125/135, 35 SFr320m, 71acs CS Low A/fedafin BKB (2/4 leads) Switz 100%. AM 45%, PB
MS+130 (#) Baa+/UBS BBB+/ / CS / Raiff / UBS 20%, PF 16%, Ins 11%, Tsy 8%.
ZKB BBB+
- - - Baa1/BBB+ SEB -
- - - A3 Danske / DNB -
MS+36 area (+/-1 14 €2.2bn Aaa/AAA/-/AAA Citi / CMZ / LBBW / Natx / Rabo / -
WPIR) Scope Swed / UBS
MS+60 area - >€1.7bn Aaa/-/AAA/AAA BNPP / CS / NatWest / SG / Scotia -
)SSUERSûWITHûLOOMINGûMATURITIESûCANûMAKEû
substantial savings by buying back their
BONDSûATûAûDISCOUNT
A case in point is Jiuding, which already
Asian perps face non-call risk
bought back nearly two-thirds of its PERPETUALS Secondary trading suggests at least three issuers may not redeem bonds
53MûûGUARANTEEDûBONDSûDUEû*ULYûû
2020 since it began to make repurchases in Investors received a pleasant surprise when Car dealer CHINA GRAND AUTOMOTIVE SERVICES
*ANUARY FULLERTON HEALTHCARE exercised the call option has US$400m 5.625% perps callable on
The company disclosed on January 23 that on US$175m perpetual bonds on Monday, October 30 that are quoted at a cash price of
ITûHADûREPURCHASEDû53MûOFûTHEûBONDSû but some other Asian issuers are expected to 73. If not called, the distribution rate will reset
INûPRINCIPALûAMOUNTû4HENûONû-ARCHûûITû struggle when their first call dates come due to the initial spread of 390.9bp over three-year
SAIDûITûHADûBOUGHTûAûFURTHERû53MûANDû later this year. Treasuries, plus a 500bp step-up.
on March 25 it disclosed the purchase of an The Asia Pacific-focused healthcare network Chinese investment bank AMTD GROUP has a
ADDITIONALû53Mû*USTûLASTûWEEKûITûSAIDûITû operator’s bonds were bid at a cash price in the US$123m 7.625% perp that is callable on June 15
BOUGHTûAûFURTHERû53MûDURINGûTHEû low 90s, implying a yield to call in the high teens, and would step up to three-year Treasuries plus
PERIODûFROMû-ARCHûûTOû!PRILûû before it announced the redemption. 616.1bp, as well as a 500bp step-up, if not called.
&OLLOWINGûTHEûLATESTûREPURCHASEûTHEûSIZEû The senior notes came with a reset to AMTD repurchased US$77m of the original
of the bonds has been reduced to Treasuries plus 548.8bp and a 500bp step-up if US$200m principal on December 19, and the
53Mû4HEûBONDSûWEREûQUOTEDûATû the bonds were not called on April 6, raising the bonds are now trading at a cash price of around
nûONû!PRILûûACCORDINGûTOû coupon to around 11%. 88. All three rank as senior debt.
2ElNITIVûDATA Given that clear incentive to call the perps, With the three-year Treasury yielding around
On the other hand, issuers could imperil the secondary price suggested that investors 0.35%, that would mean those issuers will see
their ratings if they buy back a lot of bonds were worried not only about call risk but coupons increase to between 9.25% and 11.50%
FARûBELOWûPAR also the company’s ability to keep up with its if they decide not to call.
-OODYSûANDû30ûINû-ARCHûDOWNGRADEDû payments. A series of skipped call options might help
GEO ENERGY RESOURCES after concluding that Fullerton had been hoping to complete a change the mindset of some Asian investors who
THEû)NDONESIANûCOALûPRODUCERSûREPURCHASESû Singapore IPO by the time of the call date, but tend to expect issuers to redeem their bonds at
of US$111m of bonds in principal amount at said it repaid the bonds with a combination of the first opportunity.
a steep discount constituted a distressed internal and external funding. “Perps have sold like hotcakes through private
EXCHANGEû Trading prices suggest that investors do not banks with the understanding that they will be
expect some other Asian issuers to redeem their called, otherwise there will be reputational risk
bonds when they turn callable in the coming [for the issuers],” said a bond investor.
MALAYSIA months. The investor noted that a growing number of
“The negative sentiment will reverberate if issuers in recent years opted not to call perps or
PETRONAS PLANS DOLLAR they don’t call,” said a DCM banker. “A lot of capital notes when it did not make economic sense.
BOND OFFERING these perps have not been priced as though they In 2018, Chinese property developer Agile
are really perpetual.” Group Holdings did not call a US$700m
State-owned oil company PETRONAS has hired HONG KONG AIRLINES, part of the highly subordinated perp at the first call date, even
banks for a proposed US dollar multi- indebted HNA GROUP, has US$683m of 7.125% though it meant the coupon stepped up to
tranche offering and held investor calls for perps callable on July 26. The bonds, bid at a 10.215% from 8.25%.
!SIAû%UROPEûANDûTHEû53ûLASTûWEEK cash price in the low 50s according to Refinitiv “In this environment there will be more
Bank of America and Citigroup are global data, reset to three-year Treasuries plus 558.8bp failures to call,” said the investor.
coordinators, and bookrunners with HSBC, plus a 500bp step-up if not called. Daniel Stanton
Maybank and MUFG
The proposed notes, to be issued off
0ETRONASSû53BNûGLOBALû-4.û OFûlNALûGUIDANCEûOFûPLUSûBPnBPûANDû offered new-issue concessions of 20bp–25bp
programme, will have medium to long-term WELLûINSIDEûINITIALûGUIDANCEûOFûTHEûPLUSûBPû OVERûTHEIRûCURVES
MATURITIESû3UBSIDIARYû0ETRONASû#APITALûISû AREA h4HEûTWOûDEALSûFROMû+OREAûOUTûTHISûWEEKû
THEûISSUERûANDûTHEûPARENTûISûTHEûGUARANTOR The deal was upsized from US$300m after have traded well in secondary, which is
Petronas is rated A2/A–/A– and the notes ATTRACTINGûORDERSûOFûOVERû53BNûFROMûû ABSOLUTELYûCRITICALûINûAûDIFlCULTûMARKETvûSAIDû
have expected ratings of A2/A– ACCOUNTSûMAINLYûFROMûBANKSûINû!SIAû/RDERSû THEûBANKER
-OODYS30 WEREûALREADYûMOREûTHANû53BNûWHENû “The deals are setting the new price and
!SIAûBOOKSûWEREûCLOSED show that investors are being compensated
4HEûNEWûISSUEûFROMûTHEû+OREANûPOLICYû for the risks they take, which is a win-win
SOUTH KOREA bank, rated Aa2/AA/AA–, was said to have FORûBOTHûISSUERSûANDûINVESTORSû4HEYûAREûALSOû
tightened around 20bp in the aftermarket INûLINEûWITHûHOWû+OREANûISSUERSûHAVEû
SOVEREIGN REVIVES OFFSHORE DEALS LIFTINGûCONlDENCEûTHATûTHEûMARKETûCANû operated over time as sophisticated
ABSORBûFURTHERûSUPPLY INTERNATIONALûNAMESv
KOREA DEVELOPMENT BANK has reopened the !ûDAYûAFTERû+$"SûRETURNûSHINHAN BANK, The last public US dollar offering from
INTERNATIONALûBONDûMARKETûFORû3OUTHû+OREANû which had hired banks for an international 3OUTHû+OREAûWASûALMOSTûTWOûMONTHSûAGOû
issuers after a break of almost two months OFFERINGûPRICEDûAûlVE
YEARû53Mû WHENû+$"ûPRICEDûAû53BNûDUAL
TRANCHERû
WITHûAû53MûTHREE
YEARûmOATING
RATEû mOATING
RATEûBONDûINû4AIWANSû&ORMOSAû ONû&EBRUARYûû4HATû3%#
REGISTEREDûDEALû
NOTE MARKETû4HEûNOTESûTIGHTENEDûAROUNDûBPûONû INCLUDEDûAû53MûTHREE
YEARûmOATING
RATEû
The Reg S bond priced at par to yield THEIRûlRSTûDAYûOFûTRADINGûACCORDINGûTOûAû note that priced at par to yield three-month
three-month Libor plus 145bp, the tight end BANKERûONûTHEûDEALû+$"ûANDû3HINHANû ,IBORûPLUSûBPû
Apr 6 2020 Republic of Indonesia US$1bn Apr 15 2070 4.45 99.009 T+321.8bp 4.5
Apr 6 2020 Republic of Indonesia US$1.65bn Oct 15 2030 3.85 99.573 T+323.2bp 3.9
Apr 6 2020 Republic of Indonesia US$1.65bn Oct 15 2050 4.2 99.15 T+296.8bps 4.25
Apr 7 2020 KDB US$500m Apr 16 2023 3mL+145 100 3mL+145 -
Apr 8 2020 Shinhan Bank formosa US$500m Apr 24 2025 3mL+170 100 3mL+170 -
Apr 6 2020 Latvia €1bn Apr 14 2023 0.125 99.749 MS+49 / B+86.3 0.209
Apr 7 2020 Slovenia €100m incr Aug 7 2045 3.125 133.337 MS+130 / B+156.9 1.527
(€1.35bn)
Apr 7 2020 Slovenia €1bn Jul 15 2030 0.875 99.745 MS+85 / B+123.9 0.901
Apr 7 2020 Slovenia €1.15bn incr Mar 31 2023 0.2 99.853 MS+50 / B+86.9 0.25
(€2bn)
Apr 7 2020 Qatar US$2bn Apr 16 2025 3.4 99.69 T+300 3.468
Apr 7 2020 Qatar US$3bn Apr 16 2030 3.75 99.81 T+305 3.773
Apr 8 2020 Gazprom €1bn incr Apr 15 2025 2.95 100 MS+311 / B+346 2.95
(€0m)
Apr 8 2020 Abu Dhabi US$2bn Apr 16 2025 2.5 99.205 T+220 2.671
Apr 8 2020 Abu Dhabi US$2bn Apr 16 2030 3.125 99.6 T+240 3.172
Apr 8 2020 Abu Dhabi US$3bn Apr 16 2050 3.875 96.136 - 4.1
“Our primary intention for the issue this ,ATEûLASTûMONTHû+EXIMûRAISEDû53Mû Citibank Taiwan, Credit Agricole Taipei branch
TIMEûWASûTOûREOPENûTHEû+OREANûMARKETûASû FROMûAûPRIVATEûPLACEMENTûOFûûNOTESû and HSBC Taiwan were bookrunners of the
we were not necessarily facing needs to DUEûûWHILEû+./#ûSOLDûAû3&RMû 3HINHANû"ANKûDEAL
PRINTû53ûDOLLARSvûSAIDûAû+$"ûOFlCIALû 53M ûûlVE
YEARûBONDûTOû3WISSû
“The spread is higher compared to our INVESTORSûONû!PRILûû SHINHAN PRICES BIG FORMOSA BOND
offering a few months ago, but it’s still Last week’s new issues are raising
encouraging in that there were no major expectations that other investment-grade SHINHAN BANK has raised US$500m from its
US banks that have priced a deal with a 3OUTHû+OREANûISSUERSûWILLûRETURNûTOûTHEû lRSTû&ORMOSAûBONDûTHEûLARGESTûFORûAû3OUTHû
SPREADûUNDERûBPûRECENTLYvû international bond market. +OREANûISSUERûINûTHEû4AIWANESEûMARKETû
Bank credit spreads blew out in the US +EXIMûALSOûRATEDû!A!!!!nûHASû 4HEûDEALûALSOûTHEûlRSTû!2EGû3û
market in March, reaching up to 407bp mandated UBS, Citigroup, Societe Generale, BNP &ORMOSAûFROMû3OUTHû+OREAûANDûTHEûlRSTû
OVERû4REASURIESûACCORDINGûTOû)#%û"OF!û Paribas and HSBCûFORûAû'LOBALûBONDûOFFERINGû FROMûAû+OREANûNAMEûINûMOREûTHANûFOURû
DATAû The format of the deal as well as its currency MONTHSûDREWûlNALûORDERSûOFûOVERû53BNû
Volatility has subsided in the past 10 and tenor will depend on market conditions, FROMûûACCOUNTSû
days, allowing Citigroup to print a ACCORDINGûTOûAû+EXIMûOFlCIAL 4HEûlVE
YEARûmOATINGûRATEûBONDSûWEREû
53BNûlXED
TO
mOATINGûSIX
YEARûNON
CALLû KOREA EAST-WEST POWER, rated Aa2/AA priced at three-month Libor plus 170bp, the
lVEûATûBPûOVERû4REASURIESûONû!PRILûû!û -OODYS30 ûHASûALSOûMANDATED Bank of TIGHTûENDûOFûlNALûGUIDANCEûOFûBPnBPû
WEEKûEARLIERû7ELLSû&ARGOûPAIDûBPûFORûAû America, BNP Paribas, Citigroup, Credit Agricole and well inside initial guidance of the 210bp
53BNû
YEARûNON
CALLûû and HSBCûFORûAû53ûDOLLARûBONDû4HEû3OUTHû AREA
/FFSHOREûNEWûISSUESûFROMû3OUTHû+OREAû +OREANûPOWERûPRODUCERûHASûAû53Mûû The new bonds traded tighter in the
AREûGENERALLYûRAREûINûLATEû&EBRUARYûTOûEARLYû bond due this June and aims to price the aftermarket and were 155bp–151bp over
March, as many borrowers need to update DEALûTHISûMONTH THREE
MONTHû,IBORû
THEIRûlNANCIALûSTATEMENTSûTOûMEETûTHEû
h4HEûMARKETûISûOPENûSOû+OREANûISSUERSûWILLû 4AIWANESEûINVESTORSûTOOKûûOFûTHEû
DAYûRULEûBEFOREûACCESSINGûTHEû!ûMARKETû follow suit after those in the US in printing BONDSûTHEûRESTûOFû!SIAûû%-%!ûûANDû
This year, however, the spread of the bonds as an insurance policy against market !MERICAûû"ANKSûGOTûûFUNDûMANAGERSû
coronavirus and the ensuing global market conditions potentially deteriorating even INSURERSûANDûPENSIONûFUNDSûûANDûPRIVATEû
turmoil put deals on hold even in late further in the next month or two,” said a BANKSûANDûCORPORATESûû
-ARCH BANKERûONûSOMEûDEALSûINûTHEûPIPELINE Shinhan had originally planned to raise
As a result, the international bond Other issuers in the G3 bond pipeline funds in the global market, before opting for
PIPELINEûFROMû3OUTHû+OREAûHASûBUILTû during the second quarter include KOREA THEû4AIWANESEûFORMATû
despite some state agencies and RESOURCES The senior unsecured bonds have
enterprises like EXPORT-IMPORT BANK OF KOREA +$"SûNEWûSENIORûUNSECUREDûNOTESûHAVEû expected ratings of Aa3/A+/A, in line with
and KOREA NATIONAL OIL CORPORATION turning EXPECTEDûRATINGSûOFû!A!!û-OODYS30 THEûISSUER
to private placements or different Standard Chartered was the sole lead manager The bonds will be listed in Singapore and
CURRENCIESûTOûRAISEûFUNDS ANDûBOOKRUNNER 4AIPEI
Citibank Taiwan, Credit Agricole Taipei and The Sovcombank offer expires on April )NSTITUTIONSûLOCALûISSUANCEûEXPORTûCREDITû
HSBC Bank TaiwanûWEREûBOOKRUNNERS ûRenaissance CapitalûISûDEALERûMANAGER AGENCYûSUPPORTûHEûSAID
3HINHANûISûTHEûlRSTû3OUTHû+OREANûISSUERûTOû ABSA/Barclays, HSBC and Standard Bank
SELLû&ORMOSAûBONDSûSINCEû+OREAû2AILROADû ORGANISEDûTHEûCALL
raised US$150m in a Reg S offering in SOUTH AFRICA
.OVEMBERû
ESKOM MAKES CONTACT REGIONAL
WITH INVESTORS
CEE PAIR DOUBLE DOWN ON BONDS
South Africa’s state-owned power utility
EUROPE/AFRICA ESKOM held a call last week as the troubled LATVIA and SLOVENIA added another slice of
company kept up the lines of funding to borrowing plans that have
COMMUNICATIONûWITHûINVESTORS increased in the face of the Covid-19
RUSSIA One analyst who listened in to the call pandemic, as the sovereigns visited the bond
said the company made no comment on markets for the second time in a matter of
SOVCOM LAUNCHES BUYBACK OFFER HOWûITûINTENDEDûTOûCOVERûAû53BNû WEEKS
MATURITYûDUEûINû*ANUARYû Latvia on Monday raised €1bn with an
SOVCOMBANK has launched an offer to buy h4HATSûALLû)ûREALLYûCAREûABOUTvûTHEûANALYSTû !PRILûûOFFERINGûATûSWAPSûPLUSûBP
BACKûUPûTOû53MûOFûITSû53Mûû SAID The spread landed at the tight end of
PERPETUALûBONDSûANDû53MûSû 4HEûBONDûISûQUOTEDûATûûONû-ARKET!XESSû guidance, after Latvia initially marketed the
4HEûTENDERûOFFERûISûBEINGûRUNûBYûMODIlEDû PRICES note at plus 50b area, plus or minus 1bp,
Dutch auction, with a minimum purchase 4HEûCOMPANYûWHICHûGENERATESûûOFû ANDûEXPECTEDûTOûPRICEûINûRANGE
price of US$750 per US$1,000 in principal of South Africa’s electricity, has been hit in “With guidance of ‘will price in range’,
THEûPERPûANDû53ûFORûTHEûS recent years by a deterioration of its they are giving the investor base some
“The minimum buyback prices set out in generators due to a lack of maintenance and certainty over where it will come,” said a
the offer are close to the indicative market by coal shortages, leading to electricity BANKERûAWAYûATûTHEûTIMEûOFûTHEûlRSTûUPDATEû
prices as of [Tuesday’s] close, so the bank shortages that has left it unable to generate WHENûBOOKSûHADûPASSEDûõM
seems to be looking to provide some SUFlCIENTûCASHûTOûMEETûITSûOPERATINGûCOSTSû h0RETTYûSLOWûBOOKBUILDûFORûSUCHûAû.)0û4HEû
liquidity to those who are being forced to ANDûSERVICEûITSûDEBT problem with the Baltic states is the deals
liquidate positions in the market,” wrote Eskom (Caa1/CCC+/CCC+) needs to raise are all small and ‘illiquid’, so many accounts
3BERBANKûANALYSTS 2BNû53BN ûINûTHEûûlSCALûYEARûTHEû don’t care, especially now when ‘liquidity’ is
Credit Bank of Moscow conducted a similar analyst said, with R56bn of that coming KINGv
exercise in March, accepting for purchase just FROMûAû.ATIONALû4REASURYûEQUITYûINJECTION )NVESTORSûTHOUGHûULTIMATELYûPUSHEDû
over US$52m of its dollar bonds and a touch The remainder will mostly be funded by a MOREûTHANûõBNûOFûORDERSûTHROUGHûTHEû
UNDERûõMûOFûITSûEUROûNOTES COMBINATIONûOFû$EVELOPMENTû&INANCEû DOORû4HEûALLOCATIONSûWENTûTOû'ERMANYûANDû
bank, the impairment of banks’ loans raise the ratings should Argentina complete The local government is calling for grace
portfolio and government debt a successful and comprehensive PERIODSûOFûhSUFlCIENTûMAGNITUDEvûTOûALLOWûITû
RESTRUCTURING RESTRUCTURINGûWITHûCREDITORSû return to a sustainable growth path, as well
The plan estimated US$40bn in embedded “We believe the likelihood of another as a reduction in the cost of debt, maturity
losses at the central bank, the result of foreign currency default is virtually certain, EXTENSIONSûANDûPOSSIBLYûPRINCIPALûHAIRCUTSû
hYEARSûOFûLOSS
MAKINGûlNANCIALûTRANSACTIONSvû given the timing and advanced nature of the The province meanwhile said it would
TOûACCUMULATEû&8ûRESERVESûTOûDEFENDûTHEûPEGû comprehensive foreign law restructuring CONTINUEûTOûRElNANCEû53MûINûDOMESTICû
and cover a balance of payments funding PROCESSvû30ûSAIDû DEBTûIFûMARKETûRATESûREMAINEDûhACCESSIBLEv
GAP “Hence, we will not raise the foreign )TûISûPROJECTINGûTHATûITSûECONOMYûWILLû
A phased restructuring of commercial currency sovereign credit ratings from ‘SD/ SHRINKûBETWEENûnûTHISûYEARûWITHûAû
bank balance sheets would include a full 3$ûUNTILûTHATûPROCESSûHASûCONCLUDEDv PRIMARYûBALANCEûOFûnûOFû'$0ûBUTûWARNSû
bail-in of existing shareholders estimated at Even so, the Covid-19 pandemic has that such estimates do not take into account
53BNûINûCAPITALûWRITE
OFFSûWITHûTHEû further complicated talks over restructuring THEûIMPACTûOFûTHEû#OVID
ûPANDEMIC
REMAININGû53BNûCOVEREDûBYûTHEû SOMEû53BNûINûELIGIBLEûFOREIGNûANDûLOCALû Bank of America and Citigroup have been
“transitory exceptional contribution from law debt as the government attends to the mandated to advise Buenos Aires on the
LARGEûDEPOSITORSv HEALTHûCRISISû UPCOMINGûDEBTûRESTRUCTURINGû
“The exact parameters of the contribution And several creditors have expressed Earlier this year, Buenos Aires asked for
WILLûBEûDElNEDûWITHûTHEûASSISTANCEûOFû frustration with the government’s an extension on amortisation payments for
external advisers and in the context of a restructuring plans, which they think have its 2021s, but was forced to back down when
broad and good-faith dialogue with the BEENûONE
SIDED HOLDERSûREFUSEDûTOûAGREEûTOûTHEûTERMS
COMMERCIALûBANKSv )NûITSûOFlCIALûNEWSLETTERûTHEûGOVERNMENTû "ETWEENûûANDûûTHEûPROVINCEû
A special fund would compensate said that it will defer payments on US dollar- Argentina’s most populous, raised over
depositors’ losses, with the proceeds coming denominated securities under Argentine 53BNûEQUIVALENTûTHROUGHûlVEûBONDûDEALSû
from a programme that will track and law until December 31, or until the Ministry DENOMINATEDûINûDOLLARSûANDûEUROSû
RECOVERûILL
GOTTENûASSETS OFû%CONOMYûDECIDEDûOTHERWISEû
With its restructuring being delayed,
markets had been wondering whether MEXICO
!RGENTINAûWOULDûMAKEûAû53BNûPAYMENTû
due on May 7 on dollar-denominated local GRUPO POSADAS BONDS UNDER
AMERICAS LAWûû"ONARûûNOTESûWHICHûAREûALSOû PRESSURE AFTER HOTEL CLOSURES
HELDûBYûFOREIGNûINVESTORSû
4HATûBONDûWASûBIDûATûûONû-ONDAYû Analysts expect the bonds of one of Mexico’s
ARGENTINA following the announcement of the delayed largest hotel operators GRUPO POSADAS to
PAYMENTSûDOWNûFROMûûSEENûONû!PRILû come under further pressure, after Covid-19
SOVEREIGN DELAYS US DOLLAR ûACCORDINGûTOû2ElNITIVûDATA forced the company to close 151 of its
PAYMENTS ON LOCAL LAW BONDS The question now is whether the HOTELSû
government will continue to distinguish Posadas will close the hotel properties
ARGENTINA‘s decision last week to delay some between upcoming payments on local law UNTILûATûLEASTû-AYûûACCORDINGûTOûREPORTS
US$10bn in dollar payments on local law ANDûFOREIGNûLAWûBONDS (OWEVERû2AFAELû%LIASûANûANALYSTûATû).4,û
bonds left market participants split on what The country faces about US$500m in TONEû&INANCIALûEXPECTSûCLOSURESûCOULDûGOû
might come next for securities issued under foreign law bond payments on April 22 on beyond the projected date, extending the
FOREIGNûJURISDICTIONû its 2021s, 2026s and 2046s, according to COMPANYSûLOSSES
4HEûSOVEREIGNSû.EWû9ORKûLAWûû -ORDENû “We are waiting for a response from
SûJUMPEDûABOUTûûPOINTSûONûTHEû h4HATûWILLûBEûTHEûNEXTûSIGNûPOSTvûSHEûSAIDû management to assess the company’s
NEWSûTOûTRADEûATûûWHILEûTHEûLONGER
h"UTû)ûDONTûTHINKûTHEYûWILLûDEFAULTû;ONû current situation and to discuss any
DATEDûûSûWEREûUPûALMOSTûTWOû foreign law bonds] until they run out of potential contingency plans if the closures
POINTSûATûûACCORDINGûTOû-ARKET!XESSû OPTIONSv
But whether the rally could be ALL INTL EMERGING MARKETS BONDS
attributed to the delayed local law PROVINCE OF BA TARGETS OVER BOOKRUNNERS: 1/1/2020 TO DATE
payments - which potentially frees up US$7bn IN BONDS FOR RESTRUCTURING Latin America
money for payments elsewhere - or to the Managing No of Total Share
market’s more upbeat mood last week as !BOUTû53BNûINûFOREIGNûLAWûBONDSû bank or group issues US$(m) (%)
Covid-19 infections appeared to peak in issued by the PROVINCE OF BUENOS AIRES will be
1 JP Morgan 19 5,500.69 12.2
SOMEûCOUNTRIESûISûANYONESûGUESS eligible for its upcoming debt restructuring,
2 Deutsche Bank 6 3,900.29 8.7
h)TûISûAûRISK
ONûDAYûSOûYOUûWOULDûEXPECTû according to a presentation posted last week 3 BNP Paribas 8 3,852.17 8.6
EM to be up,” said Siobhan Morden, head ONûTHEûPROVINCIALûGOVERNMENTSûWEBSITE 4 Goldman Sachs 15 3,590.81 8.0
OFû,ATINû!MERICAûlXED
INCOMEûSTRATEGYûATû Much like the federal government, the 5 BofA Securities 16 3,082.47 6.9
!MHERSTû0IERPONT province said that its public debt was 6 Credit Suisse 7 2,473.39 5.5
“Or you could say [the delayed unsustainable given the amount of sizeable 7 BBVA 6 2,335.53 5.2
payments] takes pressure off external debt short-term maturities and high interest 8 Scotiabank 9 2,262.22 5.0
ASûTHEREûISûMOREûMONEYûTOûPAYû.EWû9ORKû COSTSûITûFACES 9 Santander 9 2,054.72 4.6
LAWûBONDSv h#URRENTûRElNANCINGûPROJECTIONSûWOULDû 10 Citigroup 7 2,038.55 4.5
30ûRESPONDEDûBYûCUTTINGûTHEûSOVEREIGNSû lead to an explosive debt path,” the Total 53 44,954.80
long-term foreign currency rating to province’s ministry of economy said in the Excluding equity-related debt.
selective default from CCC-, but said it could PRESENTATION Source: Refinitiv SDC code: L3
ASIA-PACIFIC Gambling entertainment group TABCORP Import and export logistics company QUBE
HOLDINGSûHASûSIGNEDûAû!MûSHORT
TERMû HOLDINGS is pursuing initiatives to enhance
loan to mitigate the impact of the its liquidity, including increasing its bank
AUSTRALIA coronavirus pandemic on its businesses and facilities and monetising its property assets.
lNANCIALS The company will have cash and available
VIVA ENERGY REIT CLUBS LOAN 4HEûLOANûMATURESûINû*ULYû UNDRAWNûDEBTûFACILITIESûOFûOVERû!MûAFTERû
!SûATû!PRILûûû4ABCORPûHADûUNDRAWNû the payment of the interim dividend on
VIVA ENERGY REITûHASûCLOSEDûAû!Mû FACILITIESûOFû!MûANDûUNRESTRICTEDûCASHûOFû !PRILû
53M ûFOUR
YEARûREVOLVINGûCREDITûFACILITYû !M Qube has no debt maturing in the short
ASûAûFOUR
BANKûCLUB /THERûTHANûAû!Mû53ûPRIVATEû term and has material headroom to its
The new facility will be used to repay PLACEMENTûWHICHûMATURESûINû$ECEMBERû covenants.
amounts currently drawn under two existing û4ABCORPûHASûNOûOTHERûDEBTûMATURITIESû It is in the process of determining if it can
REVOLVERSûDUEû*UNEûûANDû-AYû UNTILû!PRILû realise some of the substantial value at
The existing facilities with a combined )Nû-ARCHûûTHEûCOMPANYûPRICEDûAû -OOREBANKû,OGISTICSû0ARKûANDûTOûREDUCEûITSû
LIMITûOFû!MûWILLûBEûCANCELLED 53BNû5300ûCOMPRISINGûFOURû53ûDOLLAR
future funding requirements given the
Following completion of these initiatives, DENOMINATEDûTRANCHESûTOTALLINGû53BNû sizeable capital expenditure it would be
6IVAû%NERGYû2%)4ûWILLûHAVEûUNDRAWNûDEBTû ANDûTWOû!USTRALIANûDOLLAR
DENOMINATEDû likely to need.
ANDûUNRESTRICTEDûCASHûONûHANDûOFû!M portions totalling A$195m. A group of prospective parties has
Its weighted average debt maturity as at 0ROCEEDSûFROMûTHEû5300ûREPAIDûAû!BNû expressed interest in participating in the
-ARCHûûûWILLûINCREASEûTOûûYEARSû BRIDGEûlNANCINGûINûCONNECTIONûWITHû next stage of monetisation or partnering
FROMûûYEARSûWITHûTHEûEARLIESTûDEBTûNOWû Tabcorp’s acquisition of Tatts Group and PROCESSûFORû-OOREBANKû,OGISTICSû0ARKûANDû
DUEûINû*ANUARYû other existing bank debt. certain other property assets, but this is
6IVAû%NERGYû2%)4SûWEIGHTEDûAVERAGEû )Nû$ECEMBERûû4ABCORPûCLOSEDûAû likely to take longer than previously
INTERESTûMARGINûWILLûALSOûDECREASEûTOûû !BNûCLUBûLOANûWHICHûCOMPRISESûAû expected in light of the current
FROMû !MûSIX
MONTHûTERMûLOANûTRANCHEûAû environment.
/Nû-ARCHûûTHEûCOMPANYûSAIDûITûHASû !BNûONE
YEARûTERMûLOANûPIECEûANDûTHREEû )Nûû#LEANû%NERGYû&INANCEû#ORPû
received waivers from lenders on loans !MûREVOLVINGûCREDITûPORTIONSûWITHû PROVIDEDûAû!MûSEVEN
YEARûBILATERALû
TOTALLINGû!MûFOLLOWINGûAûREVIEWûEVENTû THREEûFOURûANDûlVE
YEARûMATURITIESû term loan to Qube to back construction of
triggered from the exit of its controlling THEû-OOREBANKû,OGISTICSû0ARK
shareholder. NATIONAL STORAGE TAPS The development was to switch 1.55m
4HEû!MûINûLOANSûACCOUNTûFORûûOFû FREIGHTûCONTAINERSûATû0ORTû"OTANYûFROMûROADû
the company’s total debt. NATIONAL STORAGE REIT has obtained A$225m TOûRAILûSLASHINGûMOREûTHANûûTONNESûOFû
6IVAû%NERGYû2%)4ûCONTINUESûTOûDISCUSSûTHEû through new loans and also extended carbon dioxide equivalent a year of
review event with lenders on the remaining another smaller facility maturing this year. TRANSPORT
RELATEDûEMISSIONS
!MûOFûFACILITIES The company raised A$125m from its )NûûAûCONSORTIUMûINCLUDINGû1UBEû
The terms of the facilities remain existing lenders through a club loan and ,OGISTICSû(OLDINGSûRAISEDûAû!BNûLOANûTOû
unchanged and no fees were paid to lenders ALSOûAûNEWû!MûFACILITYûFROMûJP Morgan, back its acquisition of Asciano Ltd’s ports
for the waivers. FOLLOWINGûWHICHûTHEû53ûLENDERûWILLûACCEDEû business.
The facilities carried provisions for a into the existing club banking
review event if Viva Energy Group’s arrangements. FLIGHT CENTRE SEEKS COVENANT WAIVERS
SHAREHOLDINGûINûTHEûFORMERûFELLûBELOWû !DDITIONALLYû.32ûEXTENDEDûAû.:Mû
In February, Viva Energy Australia, which 53M ûLOANûDUEûINû Travel and tourism company FLIGHT CENTRE TRAVEL
is part of Viva Energy Group, agreed to sell These new debt arrangements increase GROUPûHASûRECEIVEDûCOMMITMENTSûFORû
DAYû
ITSûûSTAKEûINû6IVAû%NERGYû2%)4 the company’s total debt facilities to BILATERALûLOANSûTOTALLINGû!MûFROMûEXISTINGû
!BNûANDûUNDRAWNûDEBTûCAPACITYûTOû banks and is seeking covenant waivers as well
ASIA-PACIFIC LOANS BOOKRUNNERS – FULLY !M ASû!MûINûEQUITYûFUNDINGûTOûCOPEûWITHûTHEû
SYNDICATED VOLUME (INCLUDING JAPAN) .32ûREMAINSûWELLûWITHINûALLûOFûITSûDEBTû impact of the coronavirus pandemic.
BOOKRUNNERS: 1/1/2020 TO DATE covenant limits and is within its target The company is also seeking waivers to
Managing No of Total Share GEARINGûRANGEûOFûn COVENANTSûRELATINGûTOûOPERATINGûLEVERAGEûlXEDû
bank or group issues US$(m) (%) “These new arrangements have charge coverage and shareholder funds that
1 Mizuho 179 26,891.44 21.2 SUBSTANTIALLYûINCREASEDû.32SûLIQUIDITYû AREûSCHEDULEDûFORûTESTINGûINû*UNEûûANDû
2 MUFG 320 23,566.35 18.6 position, ensuring it is well placed to $ECEMBERûûANDûAûWAIVERûOFûAûMATERIALû
3 Sumitomo Mitsui 211 17,702.79 14.0 EXECUTEûITSûBUSINESSûPLANûINûTHEûFUTUREvûSAIDû ADVERSEûEFFECTûCLAUSEûASûITûRELATESûTOû#OVID
4 Bank of China 60 8,255.79 6.5 MANAGINGûDIRECTORû!NDREWû#ATSOULIS &LIGHTû#ENTREûISûALSOûLOOKINGûTOûRAISEûABOUTû
5 China Merchants Bk 10 4,856.72 3.8 .32ûISûTHEûLARGESTûOWNER
OPERATORûOFûSELF
!MûINûEQUITYûTOûENSUREûITûHASûTHEû
6 Ag Bank of China 6 2,334.69 1.8 storage centres in Australia and New BALANCEûSHEETûmEXIBILITYûANDûLIQUIDITYûTOû
7 Credit Agricole 7 2,162.14 1.7 :EALANDûWITHûMOREûTHANûûCENTRESû trade through a prolonged period of
8 HSBC 18 2,034.55 1.6 PROVIDINGûTAILOREDûSTORAGEûTOûOVERûû disruption to the travel industry.
9 Indl & Comm Bk China 7 2,026.78 1.6 residential and commercial customers The waivers apply to existing and new
10 Bank of Shanghai 2 2,024.95 1.6 across the two countries. FACILITIESûTOTALLINGû!MûSUBJECTûTOûAû
Total 930 126,890.28 )NûûTHEûCOMPANYûRElNANCEDûITSûDEBTû !MûMINIMUMûLIQUIDITYûCOVENANTûBEINGû
Proportional credit facilities, increasing the overall facility to SATISlEDû4HEûNEWûBILATERALûLOANSûAREûALSOû
Source: Refinitiv SDC code: S3a !MûFROMû!Mû subject to certain conditions.
After taking into account the cost saving !NOTHERû53MûFACILITYûTOûSUPPORTûITSû53û even though the pricing is tighter than on
ANDûCAPITALûRAISINGûINITIATIVESû&LIGHTû#ENTREû mortgage services business is in the works. its previous visit last year.
HADûTOTALûAVAILABLEûLIQUIDITYûOFû!BNûASû !SûOFû-ARCHûûTHEûCOMPANYSûDRAWNûDEBTû ANZ, Bank of Shanghai, China Citic Bank
ATû&EBRUARYûûûPRIORûTOûANYûUNWINDINGû PROlLEûHADûANûAVERAGEûDURATIONûOFûûYEARSû)Tû International, Chong Hing Bank, Commerzbank,
OFûWORKINGûCAPITALûONEûOFF
COSTSûTOû HADû!BNû53BN ûOFûGROSSûDEBTû CMB Wing Lung Bank, Credit Suisse, Hang Seng
implement cost saving initiatives or INCLUDINGûBANKûLOANSûANDû53ûPRIVATEûPLACEMENTû Bank, HSBC, Nanyang Commercial Bank, Natixis
additional net operating cash losses. NOTESûWITHûANûAVERAGEûINTERESTûRATEûOFûû and Standard Chartered Bank were the
#OMPUTERSHAREûEXPECTSûNETûDEBTûTOû%BITDAû mandated lead arrangers and bookrunners.
G8 EDUCATION SEEKS COVENANT RELIEF TOûFALLûTOûABOUTûûTIMESûBYûYEAR
ENDûFROMû Other lenders are Banco do Brasil, Bank of
ûTIMESûASûATû-ARCHû Communications, Bank of East Asia, China Bohai
#HILDCAREûSERVICEûPROVIDERûG8 EDUCATION is )Nû-AYûû#OMPUTERSHAREûCLOSEDûAû Bank, Deutsche Bank, Kasikornbank, Raiffeisen
SEEKINGûEQUITYûFUNDINGûOFûABOUTû!Mû 53MûMULTICURRENCYûLOANûWHICHûWASû Bank International, Shanghai Rural Commercial
and covenant waivers on its debt to PRICEDûATûAûCOMPETITIVEûMARGINûOFûBPû Bank and SPD Silicon Valley Bank.
strengthen its balance sheet and increase over the corresponding base rate for the 4HEûLOANûWASûINCREASEDûFROMû53M
mEXIBILITYûAMIDûTHEûCORONAVIRUSûPANDEMIC THREE
YEARûTENORûANDûBPûFORûTHEûlVE
YEARû EQUIVALENTûANDûNOWûCOMPRISESûAû53Mû
'ûHASûWONûCOVENANTûRELIEFûFROMûITSû tenor. 4RANCHEû!ûAûõMû4RANCHEû"ûAû53Mû
lenders for the next two testing periods 4RANCHEû#ûANDûAûõMû4RANCHEû$
ENDINGû*UNEûANDû$ECEMBERûûSUBJECTûTOû &UNDSûAREûFORûRElNANCINGûAû53M
CERTAINûCONDITIONSûBEINGûSATISlEDûINCLUDINGû CHINA EQUIVALENTûTHREE
YEARûLOANûTHEû(ONGû
COMPLETIONûOFûTHEûEQUITY
RAISING +ONG
LISTEDûCOMPANYûRAISEDûINû-AYû
It has also temporarily suspended FOSUN SUCCEEDS DESPITE TIGHT PRICING 4HEûLATESTûDEALûOFFEREDûTOP
LEVELûALL
INûPRICINGû
dividends, with the exception of the OFûBPûANDûBPûFORûTHEû53ûDOLLARûANDûEUROû
DEFERREDûlNALûDIVIDENDûFORûCALENDARûYEARû #ONGLOMERATEûFOSUN INTERNATIONAL has PORTIONSûBASEDûONûINTERESTûMARGINSûOFûBPû
ûWHICHûWILLûBEûPAIDûINû/CTOBERû4HEû INCREASEDûAûTHREE
YEARûDUAL
CURRENCYûLOANûTOû OVERû,IBORûANDûBPûOVERû%URIBORûRESPECTIVELY
company does not expect to declare or pay a 53M
EQUIVALENTûAFTERûANûOVERWHELMINGû The pricing was tighter than that for a
DIVIDENDûINûRESPECTûOFûûBUTûANûINTERIMû response from nine lenders in syndication, 53M
EQUIVALENTûTHREE
YEARûLOANû&OSUNû
DIVIDENDûFORûûMAYûBEûPAIDûSUBJECTûTOû
lNANCIALûPERFORMANCE
The company may seek additional
funding, sell assets or defer capital
Airport Authority returns
EXPENDITUREûIFûITSûOPERATINGûCASHmOWSûANDû
DEBTûFACILITIESûAREûINSUFlCIENTûTOûMEETûITSû
requirements for ongoing operations and
amid turbulence
CAPITALûEXPENDITUREûBECAUSEûTHEû#OVID
HONG KONG Borrower back for HK$20bn loan after four years
related lockdown conditions prevail longer
than expected. THE AIRPORT AUTHORITY OF HONG KONG is seeking a The package includes purchasing from four
If it is unable to obtain additional funding HK$20bn (US$2.58bn) five-year loan to fund an home-based airlines in Hong Kong around
on acceptable terms in these circumstances, expansion, returning to the market after four years 500,000 air tickets in advance. These will be
ITSûlNANCIALûCONDITIONûANDûABILITYûTOû as the fallout from the coronavirus pandemic has given away to global visitors and the territory’s
continue operating may be adversely hurt operations and air traffic significantly. residents in a future market recovery campaign
affected. Proceeds from the unsecured loan will fund to be launched when the Covid-19 pandemic is
!SûATû$ECEMBERûûTHEûCOMPANYûHADû the construction of a third runway at Chep over.
!MûOFûAVAILABLEûDEBTûOFûWHICHû!Mû Lap Kok airport and also be used for general AAHK is also offering to pay upfront for the
was drawn. corporate purposes. purchase of ground services equipment from
&OLLOWINGûTHEûEQUITY
RAISINGû'SûNETû ANZ, Bank of China, HSBC, Standard Chartered aviation support services operators, with the aim
DEBTûWILLûBEûREDUCEDûTOû!MûONûANû Bank and Sumitomo Mitsui Banking Corp are the of helping improve the cashflow of the operators.
adjusted basis and adjusted leverage ratio mandated lead arrangers and bookrunners of Its previous visit to the loan market was in
WILLûDROPûTOûûTIMESûFROMûûTIMES the transaction, which offers an interest margin December 2015 for a HK$5bn self-arranged five-
)NûûTHEûCOMPANYûRAISEDû!Mû of 72bp over Hibor. year club deal that paid top-level all-in pricing of
through senior and junior syndicated loans. Banks have been invited to join as MLABs for 80bp based on a margin of 70bp over Hibor.
!38
LISTEDû'û%DUCATIONûOWNSûOPERATESû top-level all-in pricing of 82bp via a 50bp fee, Twenty-one banks provided the revolving
franchises, and manages childcare centres while MLAs earn all-in pricing of 81bp via a 45bp credit facility, with Mizuho Bank as the
INû!USTRALIAûANDû3INGAPORE fee. Lead arrangers receive an all-in of 80bp via coordinator. As at September 2019, there was no
a 40bp fee. outstanding amount under the facility, according
COMPUTERSHARE DIALS IN A Q&A conference call has been scheduled for to AAHK’s 2019 interim report.
April 24. Commitments are due by May 8. The borrower, which operates the Hong Kong
COMPUTERSHARE is in the process of The deal comes at a time when global air International Airport, is a statutory body fully
RElNANCINGûITSû53MûSYNDICATEDûLOANû traffic has collapsed to historically low levels due owned by Hong Kong’s government. The third
MATURINGûINû!PRILûûANDûALSOûRAISINGû to travel restrictions arising from the Covid-19 runway is expected to be operational in 2022
ANOTHERûLOANûFORûITSû53ûBUSINESS pandemic. and will be able to serve 30 million additional
4HEûCOMPANYûHADûDRAWNûDOWNû53Mû On Wednesday, AAHK announced a new relief passengers annually as per HKIA’s Master Plan
OFûTHEûSYNDICATEDûLOANûASûATû-ARCHûû package worth up to HK$2bn to help airlines and 2030.
#OMPUTERSHAREûALSOûHASûFULLYûDRAWNû aviation services operators ease their liquidity AAHK is rated AA/Aa2/AA+.
ANOTHERû53MûFACILITYûWHICHûITûPUTûINû pressure. Apple Li
place recently.
EVERBRIGHT FINANCIAL RAISES US$303m BCEG UPS MAIDEN LOAN 3TATE
OWNEDûONGC VIDESHûHASûCLOSEDûAûlVE
YEARûRElNANCINGûOFûUPûTOû53BNûWITHûTWOû
3TATE
OWNEDûEVERBRIGHT FINANCIAL LEASING has #HINAûSTATE
OWNEDû"EIJINGû#ONSTRUCTIONû banks joining the deal as a result of reverse
OBTAINEDûAû53MûTHREE
YEARûONSHOREû Engineering Group has increased its debut enquiries.
TERMûLOANûFROMûûLENDERS THREE
YEARûLOANûTOû53MûFROMû53Mû Bank of China and Intesa Sanpaolo
Bank of East Asia, BMCE Bank Group, Chang after attracting eight banks in limited COMMITTEDû53MûANDû53Mû
Hwa Commercial Bank, CMB Wing Lung Bank, syndication. respectively, as mandated lead arrangers
E Sun Commercial Bank, East West Bank, Hua Natixis was the sole mandated lead and bookrunners.
Nan Commercial Bank, Kasikornthai Bank, arranger and bookrunner of the transaction, Nine banks were mandated as original
Kookmin Bank, Korea Development Bank, Land WHICHûOFFERSûALL
INûPRICINGûABOVEûBPûVIAû MLABs and underwriters in February. They
Bank of Taiwan, Mega International an interest margin of 195bp over Libor. are Bank of Baroda, DBS Bank, Korea
Commercial Bank and Woori Bank joined as Mandated lead arrangers are Hua Xia Bank, Development Bank, First Abu Dhabi Bank, MUFG,
participants. China Construction Bank, Maybank, Shanghai State Bank of India, SMBC and United Overseas
SMBC was the mandated lead arranger Pudong Development Bank, Shanghai Pudong Bank.
and bookrunner of the transaction, which Development Bank London branch and China The deal was not syndicated because of
OFFEREDûTOP
LEVELûALL
INûPRICINGûOFûBPû CITIC Bank International. Lead arrangers are unstable market conditions following the
BASEDûONûANûINTERESTûMARGINûOFûBPûOVERû China Minsheng Banking Corp, Luso Internatinal coronavirus pandemic.
,IBORûAûPARTICIPATIONûFEEûOFûBPûANDûANû Banking and Siam Commercial Bank. The interest margin on the loan is below
AVERAGEûLIFEûOFûûYEARS The borrower is BCEGI (HONG KONG), a BPûWITHûTHEûALL
INûINûTHEûLOWûS
Funds are for working capital purposes. SUBSIDIARYûOFû"#%'ûWHICHûISûTHEûGUARANTOR The overseas unit of Oil and Natural Gas
India’s embattled financial institutions are the fiscal year ending March 2021 to 2% from international lenders joined the deals despite
facing further challenges in attracting overseas 5.1% previously. This year could see the slowest the rarity value and strong parentage of the
funding as the coronavirus pandemic threatens growth in the country in 30 years, the ratings borrowers.
to cut growth in the world’s fifth-largest agency said. Last week, PNB Housing Finance, a unit of
economy to 30-year lows. Moody’s on April 2 changed its outlook for the state-owned Punjab National Bank, announced
Loan syndications for Indian borrowers in Indian banking system to negative from stable, it had raised another US$100m through co-
recent weeks point to growing concerns among warning that the lockdown will eventually lead financing loans from two foreign lenders. That
offshore lenders of a further deterioration in to pressure on profitability and capital. followed a month after it closed a US$75m
asset quality as a result of the sharp decline in India’s banking sector suffered another blow three-year bullet term loan with only one
economic activity and rising unemployment. in mid-March when the RBI seized control of bank joining after nearly six months of general
India enforced a 21-day lockdown on March 25 to beleaguered Yes Bank, the country’s fifth-largest syndication.
combat the Covid-19 pandemic. private sector bank, which recorded a surge in gross LIC Housing Finance, a subsidiary of state-
In the past month, financial institutions bad loans to 18.87% of total loans for the quarter owned insurance giant Life Insurance Corp of
including PNB HOUSING FINANCE and debut ending December 31 from 2.1% a year earlier. India, is returning to the offshore loan markets
borrower HDB FINANCIAL SERVICES have closed Non-banking financial companies have after nearly 17 years. It is expected to close a
loans with limited syndication. been wrestling with tight liquidity following US$200m three-year loan without general
The reception from offshore lenders defaults and credit scares that began with syndication, having attracted only one bank in
underscores the weak sentiment towards the missed payments from Infrastructure Leasing senior syndication so far.
Indian financial sector, which is already reeling & Financial Services in September 2018. In mid-March, HDB Financial Services, the
from a series of defaults. Dewan Housing Finance, another major NBFC, NBFC unit of India’s largest private sector
“Confidence in the financial sector is low defaulted on its debt last June. lender HDFC Bank, increased a three-year loan
and one of the issues people have had is non- “Debt capital will continue to remain a to US$530m from US$300m despite only two
performing assets,” said a loan syndications challenge for most NBFCs,” said one Mumbai- banks joining in general syndication. State Bank
banker at a global bank. based banking analyst. “There are lenders of India, one of the three leads, took a final hold
“We are only hoping that there are no fresh and investors who at this point in time are of US$250m, increasing its initial underwritten
spurts of NPAs. Otherwise it could be an even only comfortable with certain names and not commitment by US$150m.
longer journey to recovery.” the others, so access to funding still remains In 2019, Indian NBFCs raised a combined
constrained to a few.” US$3.07bn from offshore syndicated loans,
BANKING SECTOR WOES Since 2018, NBFCs have increasingly relied according to Refinitiv LPC data. Overall, Indian
NPAs at Indian banks are not a new concern, on Indian banks for funding and most banks are loan volumes fell 24.5% year-on-year to
with a system-wide bad loan ratio of 9% as of now near their exposure limits, he said. US$18.20bn.
March 2019, according to the Reserve Bank of Deal flow from India also declined 23% year-
India. POOR APPETITE on-year in the first three months of 2020 to
Since the lockdown began on March 25, Several NBFCs had lined up offshore US$4.95bn.
Fitch has cut India’s GDP growth forecast for borrowings late last year, but few Mirzaan Jamwal
4ELENETûHASûACCESSûTOûõMûOFûADDITIONALû Thales had €2.9bn in cash and cash "ANCOû3ANTANDERû".0û0ARIBASû#ITIGROUPû
liquidity under separate loans, bringing the equivalents. #REDITû!GRICOLEû#)"û#REDITû3UISSEû$EUTSCHEû
company’s total liquidity buffer to €555m )Nû*ANUARYû4HALESûRElNANCEDûAûõMû "ANKû3OCIETEû'ENERALEû"ANCOûDEû3ABADELLû
ONûTOPûOFûõMûOFûCASHûANDûCASHû bond that was due to mature in April. The !LLIEDû)RISHû"ANKSû#OMMERZBANKû
EQUIVALENTSûHELDûATûTHEûENDûOFû COMPANYSûNEXTûBONDûMATURITYûISûõMûINû 2ABOBANKû#REDITû)NDUSTRIELûETû#OMMERCIALû
4HEûNEWû2#&ûRElNANCESû4ELENETSûõMû -ARCHû ,Aû"ANQUEû0OSTALEû-EDIOBANCAû"ANCAûDIû
2#&û!0ûWHICHûWASûDUEûTOûMATUREûINû 4HEûEXISTINGû2#&ûWASûARRANGEDûINû #REDITOû&INANZIARIOûANDû2AIFFEISENû"ANKû
$ECEMBERûûANDûITSûõMû2#&û!'ûTHATû $ECEMBERûûVIAûAûGROUPûOFûûBANKSûWITHû International were lenders.
WASûDUEûTOûMATUREûINû*UNEû ".0û0ARIBASû#REDITû!GRICOLEû#)"ûANDû(3"#û 4HEûlNANCINGûINCLUDESûAûMAXIMUMû
4HEûlNANCINGûPAYSûAûMARGINûOFûBPû ASûGLOBALûCOORDINATORSûONûTHEûlNANCING LEVERAGEûCOVENANTûOFûûTIMESû!TûTHEûENDûOFû
OVERû%URIBORûWITHûAûûmOORûLOWERûTHANûTHEû The company expects the greatest impact ûLEVERAGEûWASûûTIMES
BPûPAIDûONûTHEû2#&û!'ûANDûTHEûSAMEûASû of the pandemic to be on its civil aviation As a key supplier to the food industry,
THEûSHORTER
DATEDû2#&û!0 business, which generated sales of around Verallia’s production sites have remained
!ûCOMMITMENTûFEEûOFûûOFûTHEû õBNûINû operational during the crisis, adapting
applicable margin on undrawn funds Thales has launched an action plan to deal production volumes.
remains the same. with the crisis including a reduction of In Northern Europe, Italy and Iberia, the
Bank of America, "ELlUS, BNP Paribas, CIC, TEMPORARYûWORKûUSINGûGOVERNMENT
company’s plants have continued to
Credit Suisse, Deutsche Bank, Goldman Sachs, supported furlough programmes in operate at a sustained level. However, in
ING, JP Morgan, KBC Bank, MUFG, NatWest, countries that provide them, and a hiring France and Latin America, operations are
Rabobank, Royal Bank of Canada, Bank of Nova freeze in support functions. more affected by the availability of
Scotia and Societe Generale are lenders. 4HEûCOMPANYûISûALSOûDEFERRINGûNON
CRITICALû workforce and a decline in demand from
investments including in research and certain customers.
ONTEX FULLY DRAWS development, IT and real estate as well as
reducing discretionary spend and
Hygiene product maker ONTEX has fully controlling working capital to mitigate the GERMANY
DRAWNûITSûõMûREVOLVINGûCREDITûFACILITYûASû impact of the crisis on demand and supply
it seeks to protect itself from the chains. SCHAEFFLER GETS GREEN SSD
UNCERTAINTIESûCAUSEDûBYûTHEû#OVID
û 4HEûCOMPANYûHASûSCRAPPEDûAûlNALû
pandemic. DIVIDENDûTOûSAVEûõM Automotive and industrial supplier
!TûTHEûENDûOFû-ARCHûJUSTûõMûOFûTHEû2#&û SCHAEFFLERûHASûPLACEDûAûDEBUTûõMû
was drawn but the company decided to PEUGEOT ADDS €3bn LOAN 3CHULDSCHEINDARLEHENûINCLUDINGûGREENû
DRAWûTHEûREMAININGûõMûTOûPROVIDEû TRANCHESûTOûlNANCEûAûPORTFOLIOûOFûSUSTAINABLEû
lNANCIALûmEXIBILITY #ARMAKERûPEUGEOTûHASûAGREEDûAûõBNû projects.
4HEû2#&ûMATURESûINû.OVEMBERûû SYNDICATEDûLOANûTOûINCREASEûITSûlNANCIALû 4HEûlNANCINGûCOMPRISESûTHREEûlVEûANDû
along with the company’s fully drawn SECURITYûDURINGûTHEû#OVID
ûPANDEMIC EIGHT
YEARûTRANCHESûWITHûlXEDûANDûVARIABLEû
õMûTERMûLOAN 4HEûlNANCINGûISûFORûANûINITIALûûMONTHSû interest rates.
/NTEXûALSOûHASûõMûDRAWNûUNDERûAû WITHûTWOûTHREE
MONTHûEXTENSIONûOPTIONSû !ROUNDûõMûOFûTHEûlNANCINGûWILLûBEû
õMûBILATERALûLOANûWHICHûMATURESûINû ANDûISûINûADDITIONûTOû0EUGEOTSûõBNûCREDITû USEDûTOûlNANCEûAûPORTFOLIOûOFûSUSTAINABLEû
.OVEMBERû line. PROJECTSûINûLINEûWITHûTHEû3CHAEFmERSûGREENû
/NTEXSûûPRODUCTIONûFACILITIESûREMAINû “This operation reinforces our ability to lNANCEûFRAMEWORKûWHICHûISûINDEPENDENTLYû
open and operating with limited face up this exceptional situation and EVALUATEDûBYû3USTAINALYTICS
disruptions, but uncertainty remains over PREPAREûTHEûFUTUREvûSAIDû0HILIPPEûDEû2OVIRAû 4HEûPROJECTSûFOCUSûONûPRODUCTSûFORûZERO
the duration of the pandemic and its impact #&/ûOFû'ROUPEû03! emission mobility such as electric motors
on the company’s operations, supply chain 0EUGEOTSûCREDITûLINEûWASûAMENDEDûANDû and electric axles as well as products for
partners and customers. EXTENDEDûINû-AYûûVIAû3ANTANDERû".0û GENERATINGûCLIMATE
FRIENDLYûENERGYûUSINGû
The company has also suspended 0ARIBASû#ITIGROUPû#REDITû!GRICOLEû#)"û wind power.
dividends until visibility over the impact of $EUTSCHEû"ANKû)#"#û.ATIXISûANDû3OCIETEû
the crisis improves. Generale as bookrunners and mandated EMEA LOANS BOOKRUNNERS – FULLY
lead arrangers. SYNDICATED VOLUME
After exercising an extension option, BOOKRUNNERS: 1/1/2020 TO DATE
FRANCE õMûOFûTHEûlNANCINGûISûDUEûINû-AYûû Managing No of Total Share
WHILEûTHEûREMAININGûõBNûISûDUEûINû-AYû bank or group issues US$(m) (%)
THALES BOLSTERS LIQUIDITY 1 Deutsche Bank 30 8,001.53 5.7
2 BNP Paribas 42 7,990.50 5.7
Aerospace and defence group THALES has VERALLIA DRAWS €200m 3 UniCredit 34 7,378.01 5.2
signed a €2bn syndicated credit facility to 4 BofA Securities 23 6,503.61 4.6
BOLSTERûITSûLIQUIDITYûINûCASEûTHEû#OVID
û Glass bottle and jar maker VERALLIA has 5 Commerzbank 28 6,302.84 4.5
pandemic persists or gets worse. DRAWNûõMûOFûITSûõMûREVOLVINGûCREDITû 6 Santander 32 6,252.02 4.4
The facility, which is for an initial 12 facility, increasing its liquidity in response 7 Credit Agricole 33 6,206.51 4.4
MONTHSûPLUSûAûSIX
MONTHûEXTENSIONûOPTIONû TOûTHEû#OVID
ûCRISIS 8 Sumitomo Mitsui 21 5,894.70 4.2
is on top of the company’s undrawn €1.5bn 6ERALLIAûHADûLIQUIDITYûOFûõMûASûOFû!PRILû 9 HSBC 30 5,594.85 4.0
revolving credit facility that matures in The company arranged a €2bn 10 Citigroup 21 5,387.80 3.8
$ECEMBERû RElNANCINGûASûPARTûOFûITSû)0/ûINûû4HEû Total 192 140,796.63
4HEûlNANCINGûSTRENGTHENSû4HALESûALREADYû lNANCINGûINCLUDEDûTHEûlVE
YEARû2#&ûANDûAû Proportional credit
ROBUSTûlNANCIALûPOSITIONû!TûTHEûENDûOFûû õBNûlVE
YEARûTERMûLOAN Source: Refinitiv SDC code: R17
COMMITMENTSûANDûBPûOVERû%URIBORûFROMû
LEADûARRANGERûWITHû".0û0ARIBASû#ITIGROUPû
4HEûlNANCINGûHELPSûSTRENGTHENû4EEKAYû
,.'SûLIQUIDITYûPOSITIONûOFûAROUNDû53Mû
ANDûINCREASEDûlNANCIALûmEXIBILITY
Citigroup is bookrunner and mandated
Direct lenders support
LEADûARRANGERûONûTHEûlNANCINGûWITHûCredit
Agricole CIB, Danske Bank, DNB Bank, JP Morgan,
existing investments
Morgan Stanley, Nordea and Swedbank as
mandated lead arrangers. US MIDDLE MARKET Firms also open for new opportunities
Bank of America, BNP Paribas, ING, Societe
Generale and SMBC also participated. Firms that lend to small and mid-sized There were US$26.26bn of middle market
4EEKAYûPROVIDESû,.'ûANDû,0'ûSERVICESû companies are looking to shore up existing loans issued in the first quarter, down from
PRIMARILYûUNDERûLONG
TERMûFEE
BASEDû investments amid market volatility caused by US$33.06bn in the last three months of 2019,
CHARTERûCONTRACTSûTHROUGHûINTERESTSûINûû the coronavirus pandemic, but are still open for according to Refinitiv LPC data.
,.'ûCARRIERSûûMID
SIZEû,0'ûCARRIERSûANDû new deals as valuations fall. “Right now it is defence first,” said Richard
SEVENûMULTI
GASûCARRIERS Managers of business development Byrne, president of Benefit Street Partners,
companies have been reaching out to an investment manager that oversees about
INGREDION AGREES BRIDGE borrowers to gauge their financial health and US$27bn in assets. “But if you have excess
ascertain their plans to weather any economic cash, we think it is a very good time to deploy
Ingredients group INGREDION is backing its hit that may result from market volatility. capital, even though we may not be at the
aMûACQUISITIONûOFû,ONDON
LISTEDû “It’s an extremely challenging time, and our bottom yet.”
SWEETENERûMAKERû0URE#IRCLEûWITHûAû
DAYû overall disposition is to be incredibly cautious in
bridge loan from Citigroup. deploying capital,” said Craig Packer, co-founder DRY POWDER
4HEûACQUISITIONûCOMESûASû0URE#IRCLEûWASû of Owl Rock Capital Partners, which oversees Private equity firms are sitting on about
FACINGûAûSIGNIlCANTûCHALLENGEûINûREPAYINGûAû BDCs that lend to US middle market businesses. US$2trn of dry powder, according to Morgan
PORTIONûOFûITSû53MûLOANûMATURINGûINû “The vast majority of our resources will be Stanley, and may want to capitalise on the dip
November after breaching covenants on used to support existing portfolio companies in valuations.
multiple occasions, as well as the impact of and work with sponsors to make sure they Several funds have “available capital, and
THEû#OVID
ûPANDEMIC have enough wherewithal to get through,” he there are opportunities as a result of the
The company secured waivers in February said. “But we and other (direct lenders) are current disruption in the credit space”, said
on its previous defaults combined with an positioned and can extend (new capital) in John Mahon, a partner at law firm Schulte
ADDITIONALû53MûREVOLVINGûCREDITûFACILITYû moderation.” Roth & Zabel. “We see funds looking to provide
ANDûANû53MûUNSECUREDûSUBORDINATEDû The virus has interrupted supply chains, liquidity to companies if they can do so on
loan provided by shareholders. closed retail operations, and reduced consumer attractive terms.”
4HEûFUNDINGûPROVIDEDûMUCH
NEEDEDû demand, pushing the world economy towards Some deals that were in the works as the
SHORT
TERMûLIQUIDITYûBUTûTHEûCOMPANYûSTILLû recession. Companies have laid off workers or impact of the virus spread are still waiting in
faced probable covenant breaches. put them on leave for the near term. the pipeline, while others made it through.
0URE#IRCLEûHADûBEENûEXPLORINGûALTERNATIVEû Businesses are also examining their balance Owl Rock recently teamed up with Benefit
lNANCINGûOPTIONSûTOûRElNANCEûTHEûDEBT sheets, looking for ways to cut costs and Street Partners for a US$117m unitranche
4HEûLOANûWASûAGREEDûINûûANDûCOMPRISEDû determine their access to capital, in some financing to support growth at GoHealth, a
Aû53MûFOUR
YEARûTERMûLOANûANDûAû instances drawing on their revolving lines of portfolio company of Centerbridge Partners
53MûTHREE
YEARûREVOLVINGûCREDITûFACILITY credit for more liquidity. that provides an online marketplace for health
-ALAYSIA
BASEDû0URE#IRCLEûPRODUCESûPLANT
Art Penn, founder of PennantPark insurance.
based sweeteners to the global food and Investment Advisers, which lends to middle Owl Rock extended a US$55m incremental
beverage industries. market companies with Ebitda between first-lien term loan to support Rise Baking
US$10m-$50m, said his firm has already Co, a portfolio company of Olympus Partners
received requests for revolver drawdowns. that produces goods for supermarkets’ in-
“We stand ready to fund those house bakeries. The financing will back Rise’s
commitments,” he said. “We have liquidity acquisition of Dawn Foods North American
LATIN AMERICA and are able to do so. Every company takes a frozen manufacturing business. It also provided
different tack – some draw all of the revolver a first-lien credit facility to support Hellman
and some draw none. It’s a case-by-case & Friedman’s buyout of software security
BRAZIL decision based on the company’s need for company Checkmarx.
liquidity.” While lenders continue to focus on existing
BRASKEM DRAWS THE LOT No businesses PennatPark lends to have investments, they await new opportunities.
asked for additional funding, Penn said, but it is “There is a tremendous amount of
0ETROCHEMICALSûCOMPANYûBRASKEM has drawn possible they will in the future. uncertainty, and we know that; activity is
DOWNûITSûENTIREû53BNûREVOLVINGûCREDITûFACILITYû “As each day of new information sinks in slowing, and we expect market activity in
to shore up liquidity against the coronavirus and the length and breadth of the shutdown the second quarter to be down significantly,”
pandemic, which has led businesses to cease (continues), I think (lenders) will focus more Packer said. “But BDCs are designed to lend to
OPERATIONSûANDûWORKERSûTOûSELF
ISOLATEûINûORDERû inward to help existing companies rather than US-based companies. We think the economy
to slow the spread of the virus. sign new deals until we get a sense of the will get through this and come back strongly
The company had been evaluating bottom and when and how this ends,” he said. … and there are reasonable places to extend
whether to draw on its revolver since last “Our top priority is for our existing investors, credit responsibly.”
month after several other Latin American and how we protect them.” Kristen Haunss
companies had drawn on their credit lines.
Outdoor advertising firm LAMAR MEDIA‘s decision familiar with Lamar’s loan. “But (the drawdown), LPC 100 comprising the 100 most liquid US
to draw down US$535m from its revolving shows how widespread the virus is through the loans, was at 87.8 cents on the same day.
credit facility due to macroeconomic uncertainty market. The company’s prospects get worse the The Lamar loan bottomed at a bid of 83-85
illustrates the shift among corporate borrowers longer no one is going out.” cents on March 19 alongside much of the
brought on by the coronavirus pandemic. Known for its billboards on highways and institutional term loan market, but has slowly
The withdrawal came just two months after mass transit services, Lamar benefits from the ticked up after being offered at par on January 30.
Lamar locked in a spread on a new term loan B, high-margin nature of the advertising business. “The low point so far was the middle of March,
which was agreed when US companies looking Its ability to convert printed billboards into but higher quality loans like Lamar are going to
to slash borrowing costs rushed to the leveraged digital advertisements is also an avenue of attract a bid,” said the second investor.
loan market to find yield-hungry investors growth for the company, according to a January Despite the upside, however, investors are
willing to accept lower prices if only to have an 23 report from Moody’s. cautious that the longer the pandemic freezes
opportunity to put money to work. Despite company ratings of Ba2/BB, Lamar’s the broader economy, the company faces a
That momentum quickly vanished, as the revolver and senior secured term loan are tough road to preserve its cash balance.
coronavirus battered financial markets and graded Baa3 by Moody’s - investment-grade In addition to drawing on its revolver, Lamar
brought new syndicated transactions to a - which helped the company obtain the rarely has slashed capital expenditure for 2020 to
dramatic halt. seen 150bp margin. US$58m from US$130m, suspended acquisition
Lamar’s US$600m seven-year loan was “That 150bp is a low return, but at the same activity and implemented a hiring freeze.
offered at 150bp over Libor, one of the tightest time we still want that relationship with Lamar. With customers confined to their homes,
spreads seen on a broadly syndicated US And it’s a durable business even during a market sources are wary of businesses curtailing
leveraged loan since energy company KINDER recession,” a second investor said. advertising.
MORGAN and WEIGHT WATCHERS priced debt at the “In a prolonged downturn, things like movie
same rate 13 years earlier. TOP PERFORMER posters and films going straight to streaming
JP Morgan and Wells Fargo led the loan. The strength of Lamar is also reflected in the services hurts. The new James Bond film should
“Lamar’s a great business because of valuable performance of the loan in the secondary have a subway ad, but that’s not going to be
real estate and locked-in, contracted revenues, market. The term loan was quoted at an average there,” the first investor said.
so lenders like their cashflow,” said one investor bid of 93-95 cents on the dollar on April 6. The Aaron Weinman
Australia’s largest radio group is !MûTHEûPROûFORMAûNETûDEBTûTOû%BITDAû As the company did not receive a bid that
amending its syndicated loan due January RATIOûWILLûDECREASEûTOûûTIMESûFROMûû could pay all obligations under the term
ûTOûINCREASEûTHEûLEVERAGEûCOVENANTûTOû times. loan agreement, it constituted an immediate
ûTIMESûFROMûûTIMESûFROMû*UNEûûû event of default.
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3OUTHERNû#ROSSû-EDIAûINTENDSûTOûDRAWû UNITED STATES Akorn, which develops and markets
DOWNû!MûFROMû!MûOFûEXISTINGûDEBTû generic and prescription pharmaceuticals,
to further enhance liquidity in its bid to AKORN PLANS RESTRUCTURING ISSUEDûDEBTûINûûTOûlNANCEûITSû
navigate uncertain macroeconomic ACQUISITIONSûOFû(I
4ECHû0HARMACALûANDû
conditions arising from the coronavirus 0HARMACEUTICALûCOMPANYûAKORN plans to 6ERSA0HARM
pandemic. sign a restructuring support agreement with 5NDERûTHEû!PRILûûCREDITûAGREEMENTûAû
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As per the terms of the syndicated loan, 4HEûCOMPANYûALSOûSAIDûITûWILLûlLEûFORû acquisition.
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dividends while the amended leverage than May 1. LOANûFUNGIBLEûWITHûTHEû!PRILûûLOANûWASû
covenant applies or while the leverage ratio Akorn entered a standstill agreement issued to back Akorn’s purchase of
EXCEEDSûûTIMES with lenders last May to discuss an 6ERSA0HARM
4HEûCOMPANYûEXPECTSûTHATûNOû&9û AMENDMENTûOFûITSû!PRILûûCREDITû !KORNûHASû53MûOUTSTANDINGûINû
dividends will be paid. agreement. On February 12, the agreement TERMûLOANûDEBTûOFû3EPTEMBERûûINCLUDINGû
-EANWHILEûPROCEEDSûFROMûTHEû!Mû was amended to extend the standstill period ANûAGGREGATEû0)+ûFEEûOFû53MûANDûNON
equity funding will reduce net debt by FORû!KORNûTOûSELLûTHEûBUSINESSûBYû-ARCHû CASHûINTERESTûOFû5M
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THREE UK COMPANIES RAISED OVER
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SELL EQUITY. ITS ZERO PREMIUM CBS
PAY A 7% COUPON AND WILL BE SETTLED ASIA-PACIFIC EQUITIES ASIA-PACIFIC EQUITIES (EX-JAPAN)
IN STOCK, MAKING THIS EFFECTIVELY BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE
COMMON STOCK BUT WITH THE Managing No of Total Share Managing No of Total Share
ADDITIONAL DOWNSIDE PROTECTION OF bank or group issues US$(m) (%) bank or group issues US$(m) (%)
A BOND 1 Morgan Stanley 19 4,265.77 9.7 1 Morgan Stanley 15 4,054.14 9.9
2 China Secs 9 3,255.06 7.4 2 China Secs 9 3,255.06 7.9
3 CICC 18 3,007.30 6.9 3 CICC 18 3,007.30 7.3
4 Goldman Sachs 16 2,276.40 5.2 4 Goldman Sachs 15 2,216.77 5.4
Ï25.5% 5 UBS
6 Citic
16
8
2,192.06
2,135.89
5.0
4.9
5 UBS
6 Citic
16
8
2,192.06
2,135.89
5.3
5.2
KEROS THERAPEUTICS SOARED 25.5% 7 Citigroup 12 1,662.54 3.8 7 Citigroup 12 1,662.54 4.0
ON DEBUT FOLLOWING ITS UPSIZED 8 JP Morgan 11 1,576.95 3.6 8 JP Morgan 11 1,576.95 3.8
US$96m IPO THAT PRICED AT THE TOP OF 9 BofA Securities 9 1,461.95 3.3 9 BofA Securities 8 1,433.70 3.5
THE RANGE. KEROS IS THE NINTH BIOTECH 10 Macquarie Group 9 1,276.46 2.9 10 Macquarie Group 9 1,276.46 3.1
TO COMPLETE AN IPO IN THE US THIS Total 503 43,813.78 Total 448 41,121.07
YEAR, WITH THE FLOATS IN THIS SECTOR Including all domestic and international deals and rights issues Including all domestic and international deals and rights issues
DELIVERING A RETURN TO DATE OF 19% Source: Refinitiv SDC code: C4a1 Source: Refinitiv SDC code: C4a2
UK retailer WH SMITH raised £166m on Monday WH Smith released a Covid-19 trading flexible, which helps solve for numbers that we
night in a capital raising flagged earlier in the update on March 12, before more extensive think make sense.”
day that aims to protect the business against lockdowns were enforced in the UK and Several other UK-listed companies have
what it called “the most challenging of trading elsewhere, flagging a material reduction in air already tapped the market in recent weeks,
environments”. passengers outside Asia and predicting a 15% including food concessions business SSP Group.
WH Smith earlier on Monday said it had drop in revenues. Like WH Smith, SSP derives most of its
secured lending facilities totalling £120m, Conditions have worsened since then and business from concessions in travel locations
conditional on raising new equity. Its shares rose the exact impact on the company’s finances is including airports, railways stations and
8.3% during the day, finishing at £10.94 each. unclear given the general uncertainty over the motorway service stations across 35 countries,
Barclays, BNP Paribas, HSBC and JP Morgan pandemic’s progression. but SSP may have been harder hit due to the
were bookrunners, with Santander as co-lead fact that its business centres on food.
manager. Greenhill advised the company. SURVIVING AND PREPARING “Effectively, SSP had lost its working capital,
Banks wall-crossed investors on Monday so As well as raising cash to survive throughout around £150m, because it is a food business
the deal was covered on indications at launch. the crisis, companies are also contemplating and as you unwind you will naturally lose the
issuing equity as a preparatory measure to be stock,” said Calvert, “WH Smith will have most
TRAVEL DEMAND PLUNGES positioned to seize opportunities as markets of its stock to sell, although it still has to pay
With a business made up of travel and high improve. suppliers”.
street retail stores, WH Smith is suffering from WH Smith has been focused on international The offering of 15.8m shares, representing
the dramatic halt in economic activity resulting expansion in recent years, and is thought to have a 13.7% capital increase, was priced at £10.50
from lockdown measures in place across many this long-term strategy in mind as it reinforces each, a 4% discount to the £10.94 Monday close.
countries. its equity. The stock had closed the day up 8%.
It operates more than 1,700 stores worldwide, “It is probably an element of both; it probably The top 20 accounts took approximately 75% of a
comprising more than 590 UK travel stores, 570 had the cashflow to get through a prolonged book of more than 110 lines. Senior management also
high street stores and over 600 international period, but they don’t want to come out with subscribed for 50,942 shares at the placing price and
outlets. huge amounts of debt at the end because they the company is subject to a 120-day lock-up.
Its travel branches include stores in airports, want to continue with their original expansion There was strong support from UK accounts,
which are likely to be worse hit, as well as strategy,” said Calvert. with good interest from US investors that had
motorway service stations and hospitals. A small Following its acquisition of Marshall spent time following the story. A banker involved
boon comes in the form of WH Smith’s more Retail Group and InMotion in 2019 and 2018, said that launching after the close was helpful
than 200 UK post offices, which are still running respectively, WH Smith’s 600 international in garnering US support. The final book was
as essential services. stores span 31 countries, including more than several times covered.
“Travel accounts for about 70% of profits 280 travel stores in North America. Shares held firm on Tuesday and had risen to
and high street is the rest,” said Kate Calvert, £13.10 at 4pm on Thursday.
Investec equity analyst covering retail. “But LENDERS INCREASE FLEXIBILITY Combined with a sub-7% capital increase of
travel is going into peak season, while the high WH Smith’s combination of an equity raising £155m in October 2019 to fund the US$400m
street has already had its peak at Christmas. with an expansion of its debt facilities also acquisition of Marshall, Monday’s trade takes
With all the airlines either grounded or reflects the reaction of lenders to help borrowers the total amount of shares issued on a non pre-
significantly cut back, the major impact will be through the crisis. Increased debt facilities will emptive basis to 19.9%.
there.” allow companies to raise a smaller percentage of That takes WH Smith to the limit of what the
Global air travel fell 14.1% in February, equity quickly, avoiding the risks associated with UK’s Pre-Emption Group has agreed can be
according to the International Air Transport larger equity raisings. done in a 12-month period, but the key message
Association, before European and US lockdowns No-one wants to raise more equity than of this fundraising was that it should not need to
had taken force. At the time, Asia-Pacific carriers’ needed, said one ECM banker. “We’re having return to capital markets any time soon.
demand was down 41%. chats with debt providers and they are being Lucy Raitano, Robert Venes
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ACQUISITIONS Citic Securities ISûTHEûSPONSOR 53
Troubled mortgage REIT CHIMERA INVESTMENT 50 cents to 30 cents alongside the offering. convertible that is a large amount of stock to
got what it was asking for and a little more by With the stock’s 9.4% bounce to US$7.11 place.
landing US$325m of fresh capital from the sale on Wednesday (after a 20.2% shellacking Investors, in turn, are protected by a bond
of three-year CBs. over the Tuesday deal marketing), the implied floor, of say 80 or 90, but that is only theoretical.
While technically a CB, the security is equity annual yield on its shares stands at a lofty The conversion price represents 0.5x–0.6x
for all intents and purposes. The CB issue is 16.9%. estimated book value of US$12.25–$12.75 at
the first in the US to feature no conversion Chimera’s CB will be physically settled in March 31.
premium, making it a proxy of the underlying stock. Typically, in order to gain as-if converted Chimera reduced repo borrowings in Q1
stock with the superior downside protection of accounting treatment, most CBs are net-share/ by 45% to US$7bn by selling off slugs of its
a bond. par cash settlement. agency-backed mortgage portfolio. That left
Credit Suisse, sole bookrunner on the “There is a possibility [the security] converts it with US$221m of cash and US$300m of
transaction, located enough interest in that early depending upon the underlying cash unencumbered assets, a thin cushion against
investment premise to bump the offering size flows,” explained one equity-linked banker. “If the potential of having its lines of credit
from US$250m to US$325m, albeit with a holders believe the dividend is safe and the pulled.
7% coupon that was the wide end of 6%–7% yield higher than the 7% coupon, they can While Chimera management did talk about
talk. convert.” the potential of redeploying capital in new
Chimera, which is in the midst of a portfolio On the base deal and reference price, the investments, this raising is more defensive than
liquidation to lower repo borrowings, flagged CBs are convertible into 50m shares, about 27% offensive.
plans to reduce its quarterly stock dividend from of the outstanding. Whether straight equity or Stephen Lacey
Issuer Country Date Amount Greenshoe Tenor Coupon/YTM % Premium (%) Bookrunner(s)
Booking Holdings US 08/04/2020 US$750.0m US$112.5m 5y 0.75 37.5 BofA, Deutsche Bank, JP Morgan,
Goldman Sachs
Chimera Investments US 07/04/2020 US$325.0m US$48.8m 3y 7 0.00 Credit Suisse
Health Catalyst US 08/04/2020 US$200.0m US$30.0m 5y 2.5 27.5 Goldman Sachs, JP Morgan
Slack Technologies US 06/04/2020 US$750.0m US$112.5m 5y 0.5 27.5 Morgan Stanley, Goldman Sachs
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LPC Collateral also includes LPC’s loan market news and data, enabling users to dive into the
underlying collateral of CLOs. The historical performance of CLOs can be analysed using
LPC Collateral’s charting function, then benchmarked against other deals and market segments.
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