JUNE 13 2020 ISSUE 2337 www.ifre.

com

Too much, too soon for frenzied credit market:

reality bites at end of rollercoaster week

In demand: six European sovereigns raise

€40bn from €303bn of orders in just two days

Lift-off for €10bn buyout financing for

ThyssenKrupp’s elevators division

STRUCTURED FINANCE PEOPLE & MARKETS LOANS LOANS

Morgan Stanley Loss adjuster: EQT’s €2.3bn fund 3ANTANDERûROCKETSû
to reopen UK derivatives losses lNANCINGûRAISESû UPûRANKINGSûASû
RMBS with weigh on trading the bar for private CRISISûSHAKESûUPû
£300m BTL deal PROlTS equity and ESG European lending
05 06 07 10
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Upfront
The coming storm
F inancial markets got a dose of reality last week. They
needed it. At the begining of the week, equity and credit
markets were chugging along as if the March and April sell-
offs were an aberration. Data showing the US unemployment
rate was “only” 13.3% in May was deemed good news. It
wasn’t. It was terrible and a stark illustration of the economic
devastation being wrought by Covid-19.
„ OPINION INTERNATIONAL FINANCING REVIEW
Secondary education
I f the latest Hong Kong listings are any guide, Chinese
companies have little to fear from US threats to kick them
off American exchanges.
The rapturous response to the secondary listings of
Netease and JD.com underlines the depth of the local
following for big Chinese technology stocks. JD.com’s
53BNûSHAREûSALEûISûTHEûCITYSûMOSTûPOPULARûPUBLICû
Yet the S&P 500 had turned positive for the year, the
Nasdaq hit a record high and credit market indices were
DAYû
moving closer towards levels that prevailed in January and
February rather than the peak of the sell-off in March.
That changed on Wednesday after Federal Reserve Chair
Jerome Powell’s sober assessment of the US economy and
THENûCONlRMATIONûOFûANûUPTURNûINûREPORTEDûCORONAVIRUSû
OFFERINGûOFûTHEûYEARûWITHûTHEûRETAILûPORTIONûCLOSEûTOûû
TIMESûOVERSUBSCRIBEDû.ETEASEûPOSTEDûAûSOLIDûlRST
pop, and traded on Friday at a small premium to its US
price.
These listings challenge the assumption that Chinese
companies would somehow struggle to fund their expansion
without access to the US equity market.
cases in parts of the US. Both were blunt reminders of what is -OREûSIGNIlCANTLYûTHEYûALSOûLESSENûTHEûTHREATûOFûAûFORCEDû
actually happening to those who had got heady on the easing delisting if Chinese companies fail to make their audit trail
of lockdowns and the prospect of a quick recovery. available to US regulators. Once a secondary listing is in
As a result, on Thursday, US and European equity markets
saw their biggest one-day falls since March – and credit
markets suffered in sympathy.
Whether this becomes another prolonged sell-off or a few
unsettling days before markets go on their merry way again
remains to be seen.
But the shock was coming. In the bond market, issuers were
getting greedy and investors were back in “hunt for yield” mode.
“Madness”, “nuts”, “ridiculous” were just some of the
words bankers used to describe the action.
Corporate hybrids? Yes please. Bank AT1s? Not a problem.
Asian real estate? Here’s a US$20m order.
4HEûDISCONNECTûBETWEENûECONOMICûREALITYûANDûlNANCIALû
markets has never been greater.
We all know why, of course. So far this year, announced
PLACEûITûWOULDûNOTûBEûDIFlCULTûFORûAû#HINESEûCOMPANYûTOû
make Hong Kong its primary trading venue, bringing
international shareholders along with them.
In fact, that switch may be already under way.
Alibaba, which started the ball rolling with its US$13bn
Hong Kong listing last November, has seen a much bigger
shift in its shareholder base than expected, with about
46% of all trading over the past month now taking place in
the city.
On Thursday, 33 million Alibaba shares changed hands in
Hong Kong, versus 29.7 million (via 3.71 million ADRs) the
same day in New York, giving Hong Kong a 53% share. At 55%,
the Hong Kong stock will be deemed to have become
Alibaba’s primary listing, in a test the exchange applies over
THEûWHOLEûlNANCIALûYEAR
GLOBALûlSCALûANDûMONETARYûSTIMULUSûAMOUNTSûTOû53TRNû
according to Bank of America.
!NDûTHATûlREPOWERûHASNTûALLûBEENûUSEDûUPû"UTûWHILEûTHEû
support of governments and central banks is necessary and
right following the coronavirus outbreak, one day there will
have to be a reckoning.
One day, companies that are maintaining a zombie-like
existence will be unable to borrow any more money to cover
their ever-bigger debt piles.
One day, the economic realities of what’s happening will
make themselves felt.
International Financing Review June 13 2020
A Hong Kong primary listing would not exempt Alibaba
from any US disclosure rules, but it would make it eligible for
the Stock Connect trading link with mainland China,
opening up a new investor base. It would also simplify the
cancellation of its New York listing, if such a move were to be
enforced.
If trading in JD.com and Netease follows a similar path,
any US attempts to use the capital markets as a trade or
political bargaining chip will carry little weight. The
sooner politicians come to that conclusion, the
better.
1
Top news
Bottomless demand for sovereigns 04 Return of UK RMBS 05 Derivatives losses weigh 06
Too much, too soon for frenzied
credit market?
„ Bonds Investors gravitate towards riskier structures but mini sell-off brings renewed doubts
BY SUDIP ROY
Questions about the intensity of
the credit binge were being
raised towards the end of last
week after US and European
equity markets suffered their
biggest one-day falls since March
on Thursday, bringing doubts
about whether the pace would
be sustained.
A sober assessment of the US
economic outlook by Federal
Reserve Chair Jerome Powell on
Wednesday, and a jump in
reported coronavirus cases in
some US states in the south and
west on Thursday, led to
renewed selling.
Whether this becomes a
prolonged sell-off or just a minor
correction of a market that had
risen too fast, too soon remains
to be seen, but both Powell’s
comments and the coronavirus
data delivered a reality check to
investors who had begun to get
think we slow a bit, but don’t
stop,” said the banker.
Even on Thursday as the S&P
500 fell nearly 6%, some bond
issuers still managed to print
deals. While a public holiday in
parts of Europe meant the euro
market took a breather, three US
high-yield issuers priced deals
and THAIOIL sold a US$1bn dual-
tranche offering – inside fair
value too – with some of the
paper going to US accounts.
The second half of the week
WASûINûSTARKûCONTRASTûTOûTHEûlRSTû
half as primary markets on both
sides of the Atlantic were busy –
despite the odd no-go call.
While sovereigns led the way,
WITHûlVEûEUROZONEûGOVERNMENTSû
raising funds and three other
European nations pricing
publicly syndicated bonds, the
credit markets across the world
were also active as investors
gravitated towards lower-rated
issuers and riskier structures.
credit spreads haven’t recovered
to the tights of that period.
h4HEûMARKETûISûONûlREûANDû
probably better than January
and February when it was
thought we were in a utopian
phase,” said a syndicate banker
before Powell’s comments.
“I personally don’t
buy this strength.
Give it three to six
months and I think
it has to unravel as
the reality and costs
of Covid are seen”
REALITY CHECK?
SURPASSEDûõBNû4HEûlRSTû
three days of last week saw
about €60bn of issuance – from
SSA through to high-yield – with
the week shortened by the
Corpus Christi holiday on
Thursday.
It is an even more incredible
story in the US where
investment-grade issuance
volume of US$1.1trn is just
US$27bn shy of the amount
raised in the whole of 2019. The
full-year record of US$1.33trn set
in 2017 looks set to be smashed.
But while supply has boomed
ever since central banks began
pumping unprecedented
amounts of liquidity into the
lNANCIALûSYSTEMûINûRESPONSEûTOû
the coronavirus outbreak, the
rally was causing a sense of
disquiet in some quarters.
“I personally don’t buy this
STRENGTHû3HORTûTERMûlNEûTHEREû
is a huge amount of cash trying
TOûlNDûAûHOMEûANDûCERTAINû
excited about the prospect of a
quick economic recovery.
“I think we needed it as the
market was too frothy and
issuers were getting greedy,”
said a senior banker on Friday.
Bankers may now have to
reassess their pipelines and the
speed at which they planned to
bring deals into the market. “We
had a few issuers early in the
week that said ‘no’ as we were a
few basis points wider. Now I
guess they are 25bp wider. So
“The huge bid for bank
capital, corporate hybrids, Asian
high-yield and so on is
incredible,” said another senior
banker earlier in the week.
The market backdrop was so
good ahead of Wednesday’s
FOMC meeting that some
thought it was even better than
at the start of the year even if
RECOVERING GROUND
THE AVERAGE YIELD ON EURO BB CREDITS
%
7.5
At €269bn, publicly syndicated
issuance by European sovereigns
in the euro and sterling markets
is already almost double the
amount raised in the whole of
2019. No other year in recent
times has seen €200bn of
issuance.
As for euro issuance overall,
the total for the year has already
SECTORSûSUCHûASûTECHûWILLûBENElTû
and rightly should be strong. But
give it three to six months and I
think it has to unravel as the
reality and costs of Covid are
seen,” said one fund manager.
Others agreed that there will
be an eventual fallout. “Maybe
lNANCIALûMARKETSûHAVEûNOWûJUSTû
BEENûCOMMODITISEDûBYûlSCALûANDû
monetary stimulus, the latter
mostly. It’s simply now too
much money chasing too few
lNANCIALûASSETSûWHETHERûTHATûISû
that could mean they say ‘no bonds or stocks,” wrote Tim Ash,
way, I need to get the 25bp back’ 6.5 EM sovereign strategist at
or they could say ‘OK, I messed BlueBay.
5.5
up and this could retrace more’. “And the instruments
It’s too early to tell,” said the 4.5 themselves now have no
banker. relationship to the underlying
3.5
The good news for bond assets or investments, whether
markets is that the technical 2.5 that is companies or sovereigns.
support is still huge. “Investors – There has to be a price for all
and the ECB – are still buying. 1.5 this, surely. Maybe later on in
2/1/20 2/2/20 2/3/20 2/4/20 2/5/20 2/6/20
We will just need to see higher INmATIONûORûPERHAPSûBADûPOLICYû
new-issue premiums. Net-net, I Source: iBoxx/Refinitiv choices.”

2 International Financing Review June 13 2020

 For daily news stories
@ visit www.ifre.com

EQT raises the bar for ESG 07 Lift-off for TKE 08 Santander rockets up rankings 10

In the meantime, though, the credits was evident in the euro IN ON THE ACT that’s reducing defaults,” said
fear of missing out pushed
investors into corners of the
market they would not have
looked at just a few weeks ago.
“It looks like the yield hunt
has reached its illogically logical
height,” said Olga Budnovits, a
portfolio manager at Main
Partners.
TAKING ADVANTAGE
Borrowers can hardly be
blamed for taking advantage.
In emerging markets, for
example, supply from Africa
tentatively started again even
though several governments
from the region are seeking
debt relief.
HELIOS TOWERS (B2/B), a
telecommunications company
in Africa with a portfolio of
corporate market as three High-yield issuers were also !ZHARû(USSAINûHEADûOFûGLOBALû
unrated issuers – Portuguese getting in on the act. Following credit at Royal London Asset
utility GALP ENERGIA, French only a trickle of deals in Management.
small appliance manufacturer European primary over the past “That creates an environment
SEB, and ILIAD, a three months, supply began to on the technical side that is very
telecommunications operator pick up. supportive. Defaults aren’t
across France and Italy – raised going to be anything like what
funds. Galp and SEB had not “Hybrids are of great people thought they were going
issued since 2017. interest to us at the to be two months or even a
“It was not that long ago moment. I am getting month ago.”
that you would have advised
against unrated borrowers
something like a CAUTIONARY TALE
issuing, but the market is in Double B yield on a But while sectors such as
good shape,” said another bond from what is high-yield and emerging
syndicate banker as these usually a very high markets play catch up, other
deals priced. quality issuer” areas were providing a
cautionary tale.
MOMENTUM PLAY On Monday, Additional Tier 1
DEUTSCHE BORSE and VW, transactions from COMMERZBANK
meanwhile, maintained the and ABN AMRO demonstrated the
momentum in the recently strength of the primary market,
reopened corporate hybrid with combined demand for the
AROUNDûûTOWERSûACROSSûlVEû
countries, priced a US$750m
5.5-year non-call two issue at a
yield of 7.125%. That compared
with initial talk of the 7.75%
area.
Initially the company was
targeting a US$425m deal to
fund a tender offer on its
US$600mn 9.125% senior notes
due 2022.
But such was the level of
interest following a day of
marketing, the tender was
cancelled and the deal was
UPSIZEDûWITHûTHEûPROCEEDSûNOWû
to be used to fully take out the
2022s at their call date next
month.
Another regional issuer,
AFRICA FINANCE CORP (A3,
negative outlook) was also in
the market on the same
DENOMINATEDû!4û
day. The pan-African
multilateral institution,
based in Nigeria, sold a
53MûlVE
YEARûBONDûATûAû 3,200
yield of 3.25%, signifying a
minimal premium at most.
“The screen was full on
Tuesday and order books
everywhere were stellar. Fish
aren’t biting – they’re
swallowing the whole bloody
arm you hold out,” said the
syndicate banker.
Another example of the
growing interest in esoteric
market. two trades peaking above
h)TûISûAMAZINGûHOWûSOMEûOFû €19.5bn.
those credits that a few months Leading the way was VIRGIN But by mid-morning on
ago you would have been wary MEDIA as it dipped into the euro, Tuesday both deals were bid
of have really rallied,” said a sterling and US dollar markets below par, at 99 and 98.60,
banker at one of the leads as VW to clean up its debt stack prior respectively, setting a new tone,
priced its €3bn dual-tranche to its merger with O2. bankers said. By Friday morning
offering. “Finally the European issuers they had fallen to 97 and 97.62
“Hybrids are of great interest are coming out of hiding,” said a respectively, according to
to us at the moment. I am high-yield analyst. 2ElNITIVûPRICES
getting something like a Average junk bond yields Still, demand for less
Double B yield on a bond have recovered to 4.3%, down straightforward deals did not
from what is usually a very from a peak of 8.9% in March, disappear as on Wednesday BPER
high quality issuer,” said an ACCORDINGûTOû2ElNITIVûDATAû BANCA BECAMEûTHEûlRSTû)TALIANû
investor. Some analysts are cautiously lender outside the country’s top
h'IVENûTHEûYIELDû)ûCANûlNDûINû optimistic about the outlook, tier to enter the market since
senior, even if I go to the more thanks to supportive technicals. the coronavirus outbreak.
riskier issuers which I don’t “In high-yield, there’s been And NATIONWIDE BUILDING SOCIETY
really want to do, there is a clear no supply, because issuers took the AT1 revival to the
BENElTûTOûHYBRIDSûANDûWEûHAVEû haven’t needed to come. But sterling market, printing a
actually increased their share in because of government support £750m deal on more than
our portfolio.” they’ve got liquidity anyway and £4.4bn of demand. It was the
lRSTûSTERLING
RUNNING OUT OF STEAM
since November.
S&P 500 INDEX
h)TSûAMAZINGûHOWûFARûWEVEû
3,300
come and we really are getting
3,250
very close [to pre-crisis
3,150
spreads],” said a DCM
3,100 banker. “The worry is whether
3,050 we have, in the last three or
3,000 four days, moved too far too
2,950 fast?”
2,900 “The market needs to
2,850 consolidate because you can’t go
2,800 10bp tighter every day.”
11/5/20
13/5/20
15/5/20
17/5/20
19/5/20
21/5/20
23/5/20
25/5/20
27/5/20
29/5/20
31/5/20
10/6/20
6/6/20
8/6/20
2/6/20
4/6/20
Additional reporting by Eleanor
Duncan, Tom Revell, Ed Clark, Robert
Source: Refinitiv Hogg „
International Financing Review June 13 2020 3
Top news
Bottomless demand for sovereign issues
„ Bonds Investors clamour for sovereign paper in banner week for syndications
BY HELENE DURAND
Six sovereign issuers descended
on the European primary market
last week, raising €40bn-
equivalent over two days in an
extraordinary manifestation of
demand that saw books peak over
€303.5bn-equivalent, despite the
relentless pace that has
characterised the sector in 2020.
IRELAND, SPAIN and GREECE, three
issuers that almost a decade ago
were caught up in one of the
worst sovereign crises to hit the
region, were greeted by a deluge
of investor demand.
we have an unprecedented level
of central bank support which
GIVESûTHEûMARKETûCONlDENCEv
Syndications have become a
mainstay for sovereign issuers
trying to chip away at their
increased funding needs
resulting from the coronavirus
pandemic.
Over €269bn-equivalent has
been raised using the method in
euros and sterling this year,
versus over €139bn-equivalent
for the whole of 2019, according
to IFR data, and bankers expect
the tempo to remain rapid while
conditions are strong.
they need more [funding] and
they all want to come before the
summer,” another DCM banker
said.
Spain and Ireland, for
example, had recently outlined
UPSIZEDûFUNDINGûNEEDS
“The ECB has buoyed markets
and the tone is phenomenal, so
clearly the decision to come now
is the right one,” he said, adding
that other sovereigns that had
wanted to bring their deals last
Tuesday, opted to step back
when it became clear how much
supply was expected.
“You could have had a bit of a
though they were higher-rated
names,” he said.
Not that bumper supply has
been an issue for the market.
Spain’s €12bn 20-year saw
books pass €78bn, Ireland’s
€6bn 10-year had demand over
€69bn, while Greece’s €3bn 10-
year had interest of more than
€15.75bn, all thanks to a market
held aloft by an all-powerful
central bank.
“If the ECB didn’t buy any
bonds, we would be in a very
different place, but not just in
sovereigns, it would have an
impact on all markets,” said a
They emerged on the same
day as the UK brought a £9bn
October 2050 and ahead of
another €9bn that was priced
the following day by GERMANY
and FINLAND.
“There are six hundred billion
reasons why, as an investor, you
should buy bonds,” said a DCM
banker referring to the ECB
Pandemic Emergency Purchase
Programme that was increased
by €600bn at its last meeting.
He added: “You have to
remember, some of the big issuers
like ESM or KfW have been
missing from the market, while
Technicals overwhelm fundamentals
„ Bonds Cashed up investors look past flashing economic warning signs
BY WILLIAM HOFFMAN
US high-grade credit spreads
have retraced their wides of the
year and many market
participants believe strong
technicals will keep the
premium over Treasuries low
despite weak underlying
economic fundamentals.
Spreads for high-quality
names have retraced 90% of their
coronavirus crisis-induced
INCOMEûSTRATEGIESû
widening as average high-grade
credit spreads fell to 156bp over
Treasuries last Monday in from
400bp over in late March,
according to ICE BofA data.
Current levels match average
4 International Financing Review June 13 2020
“All these sovereigns are
accelerating their plans because
BUMPER YEAR FOR SOVEREIGN SYNDICATIONS
€bn
equivalent
300
250
200
150
100
171 125 121
50
0
2013 2014 2015
Source: IFR
spreads seen in January 2019
when concerns of excessive
corporate debt peaked, but
spreads are still wide of the
tights of January when average
spreads were 99bp over.
This spread tightening was
triggered by the combination of
the Federal Reserve’s
commitment to back the bond
market with corporate
purchases in primary and
secondary markets and the
US$1.1trn injected into the
market on the back of that
promise.
“The speed of the recovery in
risk appetite has positively
surprised us,” Goldman Sachs
TRAFlCûJAMûBUTûSOMEûISSUERSû
decided to step back, even
133 167 122 139 269
2016 2017 2018 2019 2020 ytd
analysts noted in a report
released last week.
“With recent data suggesting
that the most severe recession
since World War II will also
likely be the shortest one, risk
premia will likely remain well-
behaved as investors continue to
look through the unprecedented
contraction in earnings and
REVENUEûTHATûMARKEDûTHEûlRSTû
half of the year.”
The short-term picture is
certainly bleak as Fed chairman
Jerome Powell made clear in a
PRESSûBRIElNGûONû7EDNESDAY
He expects the US
unemployment rate to end the
year around 9.3% and only
lead banker on Spain’s trade.
NORMALISING
Bankers across the board agreed
that concessions, having been
elevated during the peak of the
pandemic, were showing signs
of normalising and getting back
to pre-coronavirus levels at
around 3bp–4bp.
“Concessions are narrowing and
compressing,” a head of SSA
syndicate said. “Sovereigns are
clearly cheaper than they were
pre-Covid, but given the amount of
supply that’s out there, it’s getting
absorbed so easily. The ECB is a
improve to around 5.5% by 2022,
while output is expected to have
contracted by 6.5% at the end of
this year, compared with the
lNALûQUARTERûOFû
“Sooner or later spreads have
to adjust to the reality that
economic data are going to be
bad for a very long time or the
fundamentals – earnings, GDP
growth, consumption – need to
improve,” said Jeff MacDonald,
HEADûOFûlXED
at Fiduciary Trust International.
“Someone needs to blink in
this game of chicken between
economic fundamentals and the
pricing of risk assets, especially
spreads in investment grade.”

driving force in terms of spread
performance and concession
compression. It’s the main route
alongside the EU plan which is
spurring on this compression.”
Leads started marketing
Ireland’s trade at the 34bp area
over mid-swaps and then
managed to land it 4bp tighter.
@ For daily news stories
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While France may have
cracked open the 20-year part of Morgan Stanley to
the curve for sovereigns last
month, Spain surpassed its
EUROZONEûPEERûBOTHûINûTERMSûOFû
reopen UK RMBS
DEMANDûANDûDEALûSIZE „ Structured Finance Buy-to-let deal due this week
“It’s a testament to Spain that
ITûCOULDûRAISEûSUCHûAûLARGEûSIZEûINû BY CHRIS MOORE €80bn–€85bn, which would have
20-year,” a banker working on been the highest since 2009.
h)TSûPHENOMENALvûTHEûlRSTû
DCM banker said. “It has to be
one of Ireland’s biggest books, if
not the biggest, and a great
follow-on from their seven-year.
And it’s of extremely high
quality, a real barnstormer.”
Italy’s €14bn 10-year deal the
previous week had shown the
depth of the investor base in that
part of the curve, though
Ireland’s absence from the tenor
in the syndicated format in recent
times helped spur demand.
“Ireland’s on-the-run 10-year
was getting old, so it was time
for them to do a new 10-year,”
the DCM banker said.
“Also, in pre-Covid days, they
were trading very close to
the deal said.
“Rates are very low so
investors appreciate the yield
they can get with Spain against
a relatively limited political
uncertainty.”
STRONG STATEMENT
And for Greece, which was
bringing its second syndication
since the ECB started purchasing
its paper, demand closed over
€15.75bn for a €3bn deal. Pricing
landed at 160bp over mid-swaps,
the tight end of the 170bp–
175bp IPTs and offering around
10bp of concession.
At 160bp, the deal offered a
coupon of 1.5%, versus Italy’s
1.65% last week.
MORGAN STANLEY PRINCIPAL FUNDING is
CLOSEûTOûPRICINGûTHEûlRSTûPUBLICLYû
offered UK securitisation since the
coronavirus outbreak shuttered
markets.
Last week sole lead Morgan
Stanley announced a £300m UK
buy-to-let RMBS called TUDOR ROSE
MORTGAGES 2020-1, securitising
mortgages it bought from Axis
Bank UK. Axis is a subsidiary of
India’s Axis Bank and is being
wound down by its parent.
“It is not what we would have
wanted but we should be
grateful for small mercies,” said
one ABS investor.
Back in 2009 it was Lloyds
Bank that reopened UK RMBS
AFTERûTHEûlNANCIALûCRISISûWITHûANû
In the UK, non-bank lenders,
which typically rely on
securitisation for funding, are
likely to contribute the bulk of
new issuance through the rest of
the year.
However their portfolios are
typically more vulnerable than
banks’ to economic stress caused
by the coronavirus, and there are
concerns about how many of the
mortgages currently on payment
holidays may end up defaulting.
Some 15.8% of the mortgages in
the Tudor Rose portfolio were on
Covid-19-related payment
holidays as of April 30.
!"3ûSYNDICATEûOFlCIALSûREPORTû
a growing, but modest, sterling
pipeline from non-high street
&RANCEûPRETTYûMUCHûmATûBUTûTHEû
spread is back to high teens/20s
area versus France, so Ireland
offers value again.”
QUARTERûLULLûWHENûINVESTORSû price thoughts it will surpass
In the case of Spain’s 20-year,
the pricing level was set at 28bp
over the mid-price of the
sovereign’s July 2035 Bono,
down from initial price
thoughts in the low 30s.
TECHNICALS OVER
FUNDAMENTALS
The market continues to look
past these dismal economic
numbers as spreads are now
tighter than at any point during
the previous recession.
$URINGûTHEûOFlCIALû
recessionary period from
January 2008 to June 2009 the
lowest average high-grade credit
spreads fall was 205bp over
Treasuries and the median over
that same period was 251bp,
according to ICE BofA data.
While there is an
acknowledgement that the
economics are extremely poor
right now, investors believe the
“Greece has been on quite a
journey in the last couple of
years,” a lead banker said. “So
much of their long-term
funding has been soaked up for
OFlCIALûINSTITUTIONSûWHICHû
means that they have very little
funding needs. For them to
price at this level versus Italy
was really impressive.” „
“You can look at the rebound
and say that markets are too far
out ahead of it, but at the end of
the day the technical is just so
strong that it’s likely that credit
moves tighter,” said Jason Shoup,
head of global credit strategy at
Legal & General Investment
Management America.
At the start of the year one
bank’s head of US syndicate
predicted spreads would end the
year in the 150bp–180bp range.
Despite all the volatility from
the pandemic he still thinks
spreads will end up in that
range.
However, that prediction is
dependent on a smooth
issue from its Permanent RMBS
master trust.
And last year, after a
lRST
and issuers fretted over Libor
replacement and new regulations,
it was Nationwide’s Silverstone
master trust that successfully
reopened the market.
But Tudor Rose – for all the
historical associations of the SPV
name – is a far cry from those
established programmes from
familiar high street lenders.
However those lenders show
no sign they want to securitise.
This year should have been a
bumper year for UK RMBS as
banks and building societies
upped issuance to fund
redemptions coming due from
the Bank of England’s Term
Funding Scheme.
But now the opposite is true:
those redemptions can be met by
the renewed central bank support,
including the new TFSME
operation, which was introduced
following the onset of Covid-19.
FORECAST SLASHED
issuers – all waiting to see what
investors make of Tudor Rose.
“If it tightens in from initial
many expectations, which
would be super-encouraging,
and other programmes and
shelves could build from there,”
said one securitisation banker
away from the deal.
“And if reception is a bit more
lukewarm, that wouldn’t give
me any concerns about investor
appetite or cash because it’s
evident that that’s out there –
it’s just a question of [spread]
levels currently, and levels are
improving week by week.”
Tudor Rose is offering a £253.9m
Triple A (S&P/DBRS) tranche with
the spread set at Sonia plus 125bp
and issue price to be decided.
Initial price thoughts on Thursday
were Sonia plus mid 100s, and by
Friday afternoon the tranche was
more than 1.7 times covered.
Also on offer are AA/AA, A+/A
and A–/BBB tranches, with IPTs of
low to mid 200s, high 200s and mid
to high 300s. The BBB–/BB, BB/B and
BB+/BBH tranches are shown as
technicals such as low supply
expectation in the second half of
THEûYEARûANDûANûINmUXûOFûFOREIGNû
investors outweigh the
fundamentals.
reopening of the economy.
While conditions in New York
have improved, at least 20 states
are reporting a new surge in
Covid-19 cases this week. „
That has led Barclays to slash its
forecast for 2020 European
securitisation (excluding CLOs) to
€50bn, the lowest annual total
since 2009. It previously expected
hCALLûDESKvûWITHû)04SûONûTHEûlRSTû
two tranches at mid to high 400s to
500bp area, and low 600s.
Pricing is targeted for early
this week. „

International Financing Review June 13 2020 5

Top news
Derivatives losses weigh
on bank trading profits
„ People & Markets Provisions seen as a major focus in the coming quarters
BY CHRISTOPHER WHITTALL
The largest investment banks
reported a tenfold annual
increase in losses related to
DERIVATIVESûTRADESûINûTHEûlRSTû
quarter, a foretaste of how these
activities are likely to curb
PROlTABILITYûINûTRADINGûUNITSûTHISû
year and may even force some to
reassess their presence in these
markets.
Losses from credit and
funding charges on derivatives
positions at the top 12
investment banks totalled more
THANû53BNûINûTHEûlRSTûTHREEû
months of the year, according to
Amrit Shahani, research director
Securities, which competes with
banks trading products
including bonds and cleared
derivatives, suggested the losses
could even cause some banks to
reassess their activities.
“What we always see after
these types of crises is that
certain banks reconsider their
positions in these markets
because they either lost more
money than expected or they
just realise that the capital
commitment to being involved
isn’t commensurate with the
opportunity,” he said.
SUBSTANTIAL RISKS
Trading derivatives, while
when markets nosedive, as they
did earlier this year.
Instead, the bank must judge
how likely a client is to default
over the life of a trade and bake
that into how it accounts for the
position, via a so-called credit
valuation adjustment.
The bank also adds a funding
valuation adjustment to account
for times when it effectively
lends to (or borrows from) the
client during the life of a trade –
a common feature of long-dated
derivatives.
“CVA and FVA numbers tend
to be large for any banks that
have a big derivatives business,”
said Jon Gregory, a senior
swap in which it regularly pays a
BANKûAûlXEDûSUMûINûEXCHANGEû
for an amount pegged to a
mOATINGûINTERESTûRATEûnûAû
common trade for those looking
to hedge against an increase in
borrowing costs. March’s decline
in interest rates caused the
BANKSûmOATINGûPAYMENTSûTOû
decrease markedly, putting it “in
the money” on the swap.
But even though the value of
the bank’s position rose, it can
only realise those gains if its
client remains solvent and keeps
making its swaps payments. As
the corporate treasurer doesn’t
post margin, the bank now has a
greater exposure to its client and
ATûANALYTICSûlRMû#OALITIONûAû
tenfold increase compared with
the previous year. That took the
shine off a bumper quarter for
most banks’ trading units,
whose annual revenue gains of
more than 32% declined to 14%
when including the losses.
The scale of the losses – which
mainly relate to provisions
against a potential rise in client
defaults as well as an increase in
banks’ funding rates – lay bare
the eye-watering costs banks can
incur on these complex products
when market volatility rises.
Analysts say the charges will
remain a major focus in the
quarters to come, not least
because of discrepancies in the
SIZEûOFûPROVISIONSûDIFFERENTû
banks have made.
h)TûWILLûBEûSIGNIlCANTûGIVENû
how much these charges impact
their performance. It changes
their market share, it changes
their rankings and it changes
the return on equity for
shareholders,” said Shahani.
“Some banks that have been
conservative in booking these
charges could start looking
better as the quarters go by,
while those who were more
optimistic could end up looking
much worse.”
Paul Hamill, global head of
FICC distribution at Citadel
6 International Financing Review June 13 2020
usually a lucrative activity for
banks, is also fraught with risks
that go far beyond whether the
value of a position rises or falls.
Chief among these is
counterparty risk, the danger
that the entity on the other side
of the trade goes bust.
Derivatives contracts are
often lengthy, tying a bank to its
client for years or even decades.
Most trades pass through
middlemen known as clearing
houses to combat counterparty
risk, but many clients such as
corporate treasurers deal
directly with banks to avoid
having to post large sums of
margin if a trade moves against
them.
Not receiving margin poses a
SIGNIlCANTûPROBLEMûFORûTHEû
bank, leaving it open to losses
TOP 12 INVESTMENT BANKS' CREDIT AND FUNDING DERIVATIVES
LOSSES IN FIRST QUARTER
US$m
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
All 12 banks
0
2019
Source: Coalition (aggregate numbers); company earnings (individual bank losses)
adviser at consultancy Solum
Financial, who has written
extensively on the subject.
“It’s a business that, in very
abnormal market conditions
when volatility is high, is very
sensitive to basis risks and
second order risks that can
suddenly look really
substantial.”
MARKET SLUMP
-ARCHSûSLUMPûINûlNANCIALû
markets proved a potent
cocktail for desks handling
banks’ derivatives trades.
Interest rates plummeted,
altering the value of contracts
struck at higher levels, while
company borrowing costs
rocketed.
Consider a corporate
treasurer with an interest-rate
HSBC
UBS
BofA
Goldman Sachs
JP Morgan
All others
2020
MUSTûINCREASEûITSû#6!ûTOûREmECTû
that.
If the crisis has also made the
client more likely to default, as
measured by wider credit
spreads, the bank will have to
raise credit provisions still
further.
“The fact that banks are being
cautious in terms of provisions is
to be expected,” said a senior
bank trader. “No one knows
what the actual data look like in
terms of bankruptcies. The only
thing you can do is to be
cautious.”
There is a also funding
component to consider, as the
bank may have to meet margin
calls on trades it had entered in
the cleared, interbank swaps
market to offset its client
position. Financing those margin
calls may become costlier still if
the bank’s own borrowing rate
has increased. As a result, the
bank’s FVA on the trade rises.
JP Morgan reported the
heaviest losses related to
DERIVATIVESûCHARGESûINûTHEûlRSTû
quarter – US$951m - which it
said was predominantly driven
by a widening in funding
spreads. Bank of America and
Goldman Sachs recorded losses
in the region of US$500m.
JP Morgan has the largest
derivatives book of all US banks,

ACCORDINGûTOûTHEû/FlCEûOFûTHEû
Comptroller of the Currency, at
nearly US$70trn, 63% of which
aren’t centrally cleared.
FUNDING LOSSES
A lack of transparency around
how banks calculate and
disclose their numbers makes it
hard to predict how the
situation will evolve in the
coming quarters.
“We are driving beta actions,
One central takeaway is
that funding losses appear to
have been the dominant
force so far. UBS reported a
US$378m loss on FVA and
53MûONû#6!ûINûTHEûlRSTû
quarter, a breakdown experts
say is broadly indicative of the
wider industry.
EQT raises the bar for ESG
„ People & Markets Private equity firms start to show ESG colours
BY TESSA WALSH
A sharp rise in ESG-linked fund
lNANCINGûTOPPEDûBYûAûõBNû
sustainability-linked loan for
Sweden’s EQT shows that
PRIVATEûEQUITYûlRMSûAREûFUTURE
stage to insert ESG into the heart
PROOlNGûPORTFOLIOûCOMPANIESûTOû
protect their returns, and
highlights a potentially lucrative
stream of new deals for banks.
%14SûFUNDûlNANCINGûCANûTOPû
out at €5bn and raises the bar for
the private equity sector as the
biggest ESG-linked fund bridge
facility. It follows a deal for
focus on biodiversity, climate
and social responsibility.
4HEûlRMûHASûõBNûOFûASSETSû
under management across 19
active funds in private capital,
real assets and credit.
where we want to increase the
ESG hygiene level overall in the
portfolio because the market
needs to reach a new level,” said
Therese Lennehag, head of
sustainability at EQT. “Then we
dive in to each of EQT’s portfolio
companies and work with the
things that will create alpha
@ For daily news stories
visit www.ifre.com
companies to maximise social
change and generate valuable
data.
“We see this fund facility as
the most suitable and
interesting opportunity at this
of the value proposition for our
clients and accelerate a system
transformation,” Lennehag said.
TWO TRACKS
&UNDûlNANCINGSûAREûUSEDûTOû
IMPROVEûPRIVATEûEQUITYûlRMSû
returns by bridging capital
commitments from limited
That may be, in part, because KKR’s Global Impact Fund earlier VALUEûSPECIlCûTOûTHEIRûINDUSTRYû partners. Two types of fund
there is no simple way for
banks to guard against an
increase in FVA. By contrast,
they can hedge counterparty
risk at the outset of trades by
buying instruments such as
credit-default swaps.
LASTûWEEKûWHICHûWASûTHEûlRSTû53û
FUNDûlNANCING
It is a bold move designed to
drive change throughout the
companies that EQT owns by
linking pricing on the
sustainability-linked loan to the
operations and value
proposition.”
EQT has a 10-year track record
in ESG, which puts it at the
forefront of ESG adoption in the
PRIVATEûEQUITYûINDUSTRYû4HEûlRMû
was also an early signatory to
lNANCINGûDEALSûLINKEDûTOû%3'û
commitments are emerging,
in line with similar
developments in the loan and
bond markets.
Deals that focus on “use of
proceeds” are earmarked for
“FVA is something that can’t
be hedged ... so it tends to be
more volatile,” said a second
senior bank trader.
The fact that there is no
performance of EQT’s future
portfolio companies.
“This is a game-changing
moment for EQT, but also for
the private equity industry,” said
the UN’s Principles of
Responsible Investing.
4HEûlNANCINGûISûBEINGû
provided by a syndicate of 17
global banks, including BNP
SPECIlCûPROJECTSûWHEREASû
sustainability-linked deals tie
THEûCOSTûOFûCAPITALûTOûlRMSû
progress on ESG targets outlined
in corporate CSR strategies
industry standard for 0ERû&RANZENûPARTNERûANDûCO
Paribas and SEB as sustainability aligned with the UN’s
calculating FVA muddies the head of EQT’s private equity coordinators. BNP Paribas is also Sustainable Development Goals
waters still further. Some banks advisory team. facility agent and sustainability and Paris climate targets.
may use internal funding Pricing on the loan is tied to agent. KKR’s recent deal was a use of
CURVESûOTHERSûMAYûDECIDEûANû whether EQT’s portfolio h0RIVATEûEQUITYûlRMSûREALISEû PROCEEDSûFUNDûlNANCINGûALONGû
aggregated industry borrowing companies hit key performance they can play a role in furthering with another €80m deal for an
rate is more appropriate. Some
may even ignore a rise in
borrowing rates if they think it
will be temporary.
Whatever the approach,
indicators. Aggregated results
will drive improved pricing on
the bridge facility, creating a
virtuous circle, where better
ESG progress lowers capital costs
THEûSUSTAINABLEûlNANCEûAGENDAû
and incorporating ESG in fund
lNANCINGûFACILITIESûISûAû
demonstration of this,” said
Alexandra Basirov, global head
unnamed global private equity
lRMûINûLATEû-AYû"OTHûDEALSûWEREû
arranged by Standard Chartered.
&RENCHû0%ûSHOPû%URAZEOûALSOû
completed a €1.5bn SLL fund
there’s no getting around the and improves resilience. OFûSUSTAINABLEûlNANCEû&)#ûATû lNANCINGûINû*ANUARYûTHATûLINKEDû
fact that these enormous EQT has selected three KPIs, BNP Paribas. to carbon neutrality at the
costs exist for banks and will for gender equality, renewable EQT is well capitalised after its corporate level, and
have to be absorbed at some energy transition and IPO in September 2019 and sustainability governance for its
point. GOVERNANCEûWHICHûlTûTHEûlRMSû opted to focus on its portfolio portfolio companies. „
Exiting these trading
activities is also easier said than
done, not least because the
losses are mainly driven by
popular client products such as Are your colleagues as well-informed as you?
interest-rate and cross-currency
swaps. If there are other people in your team, department or company who you think would benefit from the
“That’s bread and butter for authoritative and independent content that IFR offers, you should know that considerable discounts are
most banks alongside offering available to companies with multiple subscriptions.
loans,” said Gregory. “There’s a
To discuss your requirements, please contact your local IFR representative:
general acceptance among
BANKSûTHATûTHISûISûAûDIFlCULTûANDû EMEA: +44 (0)20 7542 45 69, cmi.emeasales@refinitiv.com
sometimes low return-on- Americas: +1 (646) 223 5543, cmi.americassales@refinitiv.com
capital business to be in – and a Asia-Pacific and Japan: +852 291 26606, cmi.asiasales@refinitiv.com
volatile one as well.” „

International Financing Review June 13 2020 7

Top news
Lift-off for €10bn TKE financing
„ Loans/Bonds Jumbo leveraged deal for buyout of ThyssenKrupp’s elevators division to launch this month

BY CLAIRE RUCKIN Deutsche Bank, Barclays, Credit and the European high-yield movement working out how
Suisse, RBC and UBS, are on track market is open. All these things much should be loans, the split
Banks are preparing to launch a to do that. are positive indicators for between Term Loan A or Term
widely-expected €10bn dual-
currency loan and bond
lNANCINGûTOûBACKûAûBUYOUTûOFû
THYSSENKRUPP’s elevators division,
pre-sounding investor appetite
'IVENûITSûSIZEûTHEûDEALûHASû
been eagerly awaited.
Had it launched in March or
April the underwriters would have
lost money as the underwritten
receptivity,” a senior banker said.
SLICE AND DICE
A number of investors are being
PRE
Loan B, the amount of bonds and
the currency split between euros
and US dollars.
“It is a big deal and a big
SOUNDEDûONûTHEûlNANCINGû
to optimise the structure and
play the markets off each other
to achieve best execution.
Advent, Cinven and
Germany’s RAG Foundation
agreed a €17.2bn acquisition of
ThyssenKrupp’s elevators
chunk of the market has to play
terms were set pre-coronavirus
and the market widened
SIGNIlCANTLYûDURINGûTHATûPERIOD
But markets have regained a
lot of ground and lead banks are
now focused on minimising any
losses and perhaps even making
with materials set to go out
shortly on the company,
performance and the proposed
capital structure. Syndication is
due to launch at the end of June
when the offering
memorandums are ready.
it. Will there be an A and B on
the term loans? Will the loan get
DOWNSIZEDûANDûTHEûBONDû
UPSIZEDû$OûYOUûPLAYûEUROSûANDû
dollars off each other to slice and
dice it? It is about optimising the
structure and comes down to
division in February, AûPROlTûPLACINGûAûHUGEûEMPHASISû The funded part of the pricing in the context of how
underwritten with a debt
lNANCINGûPUTûTOGETHERûBEFOREû
Covid-19 disrupted markets and
put sell-downs and new issuance
on hold.
The plan was always to
syndicate towards the end of
June and arranging banks, led by
Goldman Sachs and including
on getting the sell-down strategy
correct.
“They will be asking people
what they think they can do and
at what price. The secondary loan
market is up, the iTraxx is in, the
US high-yield market is going
gangbusters, the European loan
market has proved constructive
lNANCINGûTOTALSûõBNû
comprising €6.55bn of senior
leveraged loans and senior
secured notes and €1.7bn of
senior unsecured notes.
The split between the secured
and unsecured is set but within
the secured part of the capital
structure there could be a lot of
much there is to sell and
liquidity,” a second senior
banker said.
4HEûlNANCINGûALSOûCOMPRISESû
unfunded loans. The original
commitment totalled an €800m
revolving credit facility and
some €1.2bn of guarantee
facilities that could prove

ICMA principles to help sustainable push

„ People & Markets But critics question effectiveness of self-regulation when it comes to sustainable debt

BY TESSA WALSH its carbon emissions and its “We don’t see this as an be followed by a thorough strategy
transition to renewables. alternative to green bonds or use- explanation and documented KPI
The International Capital Lars Eiberholm, head of of-proceeds bonds, but more as a targets,” Eiberholm said.
Markets Association has treasury and sustainability at complement,” said Orith 4HEû3,"ûPRINCIPLESûHAVEûlVEû
completed two important pieces
of work that aim to give impetus
TOûTHEûmEDGLINGûSUSTAINABILITY
executive committees, said the
linked bond market and
maintain standards in the social
Nordic Investment Bank and chair
of ICMA’s green and social bond
“It’s opening the door to a
principles are key to developing
SLBs and to ensuring market
!ZOULAYûGLOBALûHEADûOFûGREENûANDû
sustainable lending at Natixis.
sustainability performance
number of issuers that were not
lNDINGûITûEASYûTOûSTRUCTUREûUSE
core components that cover the
selection of KPIs, calibrating
targets, bond characteristics,
REPORTINGûANDûVERIlCATIONûANDû
bond market, which has seen integrity and transparency. of-proceeds bonds and still offer detail that aims to bring
rapid growth during the Issuance of SLBs, which tie believed that they had some role clarity and consistency to the
coronavirus crisis. pricing to companies’ ESG in environmental and social SLB market.
ICMA’s publication of strategies and the UN’s transactions.” KPIs, for example, must be
principles for sustainability- Sustainable Development Goals relevant, material to the issuer’s
linked bonds (SLBs) is expected (SDGs) by monitoring TRANSITION POTENTIAL overall business, measurable
to encourage more issuers to
link bond pricing to their ability
to hit general ESG targets, rather
than take the traditional green
bond route of earmarking
money – via “use of proceeds”
performance against targets – or
key performance indicators – is
expected to grow and could
match or exceed the success of
the product in the private loan
market. More than US$38bn of
The instrument could also be
suitable for helping “brown”
companies transition to being
more environmentally friendly.
Another ICMA working group
ONûCLIMATEûTRANSITIONûlNANCEûHASû
ANDûQUANTIlABLEûEXTERNALLYû
VERIlABLEûANDûABLEûTOûBEû
benchmarked.
However, not everyone is
convinced yet, with pressure
group ShareAction asking for
STRUCTURESûnûFORûSPECIlCûPROJECTS
The industry body hopes that
more companies will follow
Italian utility Enel’s lead into the
market for SLBs. Enel is the only
issuer so far to use the structure,
having sold two deals last year
with coupon step-ups linked to
sustainability-linked loans have
been issued this year, according
TOû2ElNITIVû,0#ûDATA
SLBs are designed to appeal to
COMPANIESûlNDINGûITûDIFlCULTûTOû
IDENTIFYûSPECIlCûPROJECTSûORû
capital expenditure to back
traditional bonds.
YETûTOûPRESENTûITSûlNALûREPORTû
but is expected to offer
DElNITIONSûAFTERûCONSULTINGûWITHû
the market.
“Can this instrument be used for
issuers in transition? I believe so. It
might even be a very good
instrument for that, but needs to
more transparency.
“We are not seeing a
transparent methodology to set
THEûBOUNDARIESûOFûlNANCIALû
products or to set companies
transition plans in line with Paris
goals,” said ShareAction’s
communications manager Beau

8 International Financing Review June 13 2020


expensive for the arranging
banks depending on the fees
they have to pay to bring in
additional banks. However, the
SIZEûOFûTHEûUNFUNDEDûFACILITIESû
could be subject to change.
The sponsors are also
expected to have placed around
€1.5bn of PIK that ranks behind
the senior unsecured notes.
SIZE MATTERS
A number of investors have been
apprehensive about taking on
risk as a result of Covid-19.
maximum capacity. The Asian
market is also opening up for
new builds again.
“There could be a lot more
pain if it was a marginal credit.
It is a great credit,” the second
banker said.
Although a few M&A situations
are starting to emerge, there is
UNLIKELYûTOûBEûAûmOODûOFûNEWûDEALSû
this year, especially if a feared
second wave of the pandemic
arrives in the autumn. That could
also swing in TKE’s favour as
investors look to put money to
Coty assembles
record club loan
„ Loans KKR calls in relationship banks
BY CLAIRE RUCKIN
KKR’s acquisition of a majority
stake in US-based cosmetics
maker COTY‘s hair and nail care
business is being backed with a
US$1.3bn club loan, the largest
in Europe’s leveraged debt
For daily news stories
@ visit www.ifre.com
Term Loan B, as well as a
US$300m revolving credit facility.
The loans will be denominated in
US dollars, euros and sterling.
Both banks and investors will
take the TLA and TLB. The TLB
WILLûBEûPRICEDûWITHûAûlVEûHANDLEû
and will be leveraged around 3.5
(OWEVERûGIVENûTHEûSIZEûOFûTHEû work in new deals. MARKETûSINCEûTHEûlNANCIALûCRISISû times the company’s
lNANCINGû4HYSSEN+RUPPSû
elevators division is a benchmark
deal that most investors will need
to play to prove their portfolio is
diverse and representative of the
market.
The business is also seen as a
strong credit that has proved
resilient during the pandemic.
Some 70%–75% of its business
comes from servicing elevators
and many of those contracts
“TKE is a benchmark deal and
the sort of deal that accounts need
to own on top of which it is Covid-
resilient and an excellent credit.
There are not many opportunities
to do high quality new deals for
the foreseeable next couple of
quarters. This is new money, not a
RElNANCINGûORûAûRESCUEûISSUEûSOûITû
is a chance to put money to work
and get a good return that just
isn’t available in the secondary
after banks were unwilling to
UNDERWRITEûAûlNANCINGûAMIDûTHEû
coronavirus pandemic.
KKR agreed to acquire a 60%
stake in certain Coty brands,
including Wella, Clairol, OPI and
GHD – known collectively as
Wella – in early May, valuing the
company at US$4.3bn.
“There is nothing
that is normal about
approximate US$350m Ebitda.
4HEûlNANCINGûWILLûHAVEûAû
leveraged covenant and is offered
with 101 soft call for 12 months,
MEANINGûITûWONTûBEûRElNANCEDû
or repriced during that period.
CLOSE RELATIONS
KKR drew on its relationships
with banks and funds to put in
PLACEûSUCHûAûBIGûCLUBûlNANCING
While some other borrowers
have been upheld even if
buildings were closed or not at
O’Sullivan, referring to the 2015
Paris climate agreement designed
to keep the rise in global
warming to below two degrees.
The fact that issuers set and
monitor their own targets on
sustainable debt is also
controversial.
“If you leave economic actors
to self-regulate you will end up
protecting insiders and the
status quo,” said Gianfranco
Gianfrate, the sustainable
lNANCEûLEADûEXPERTûATûTHEû
EDHEC risk institute in Paris.
TECHNICAL ISSUES
Some technical issues around
MARKETvûTHEûlRSTûSENIORûBANKERû
said. „
ICMA chief executive Martin
Scheck said that the “highly
innovative and versatile debt
instrument ... can really expand
THEûSUSTAINABLEûlNANCEûMARKETû
while preserving its integrity”.
EVERYONE IN
ICMA also released a 2020 update
of the social bond principles that
expands eligible social bond
CATEGORIESûANDûTHEûDElNITIONûOFû
target populations to a global
population, in line with recent
guidance for social bonds
addressing the coronavirus crisis.
It also published a collection of
case studies.
the market we are in
and what is unique
is raising US$1.3bn
on a club basis. It is
a highly impressive
achievement”
Buyouts are typically backed
WITHûUNDERWRITTENûlNANCINGSû
that are subsequently syndicated
to investors, but banks had
lower risk appetite due to Covid-
19 and were unable to provide
an underwrite for Coty.
KKR opted to raise a club loan,
which is set to close in June,
securing around 10 banks and a
handful of investors to commit
US$1.3bn, where the exposure
might try to do something
similar, it is unlikely to become
a trend and could be reserved
solely for top-tier sponsors.
“It is a relationship-based
transaction. People need to like the
credit and KKR otherwise they
won’t be doing it. The fact the deal
is done is testament that banks
have been super supportive,” the
senior banker said.
4HEûlNANCINGûWASûPUTû
together towards the end of
April when banks were still
averse to underwriting risk.
Since then, a trio of banks –
Morgan Stanley, Barclays and BNP
Paribas – agreed to underwrite
€3.5bn of debt to back a takeover
bid for Spanish telecoms
company MASMOVIL. Emerging on
SLBs remain to be resolved,
CHIEmYûREGARDINGûTHEûCOUPONû
step-up mechanism that
activates if borrowers fail to hit
their targets, which could be
DIFlCULTûFORûINVESTORSûTOûINCLUDEû
in conventional portfolios and
also make bonds ineligible for
the ECB’s bond-buying
programme.
Hopes are high, however, that
the instrument will deliver after
a slow start, and the new
principles are expected to give
COMFORTûANDûCONlDENCEûTOû
market is developing rapidly,”
issuers.
The trade association updated
its framework for impact
reporting to include guidance
for biodiversity and a
framework for impact reporting
for social bonds, as well as
guidance on mapping green,
social and sustainability bonds
to the UN’s SDGs.
“The update of the social
bond principles accompanies a
pivotal moment for social bonds
that have shown their relevance
with a surge of issuance
addressing the consequences of
Covid-19,” Scheck said. „
International Financing Review June 13 2020
will be held on balance sheet.
“There wasn’t an underwriting
market so KKRûHADûTOûlNDûMOREû
CREATIVEûWAYSûTOûlNANCEûTHEû
transaction,” a senior banker
said. “There is nothing that is
normal about the market we are
in and what is unique is raising
US$1.3bn on a club basis. It is a
highly impressive achievement.
"ANKûCLUBûlNANCINGSû;INûTHEû
leveraged market] are normally
US$200m to US$300m.”
4HEûlNANCINGûCOMPRISESû
53BNûOFûFUNDEDûDEBTûVIAûAûlVE
year Term Loan A and a six-year
*UNEûû-AS-OVILûWASûTHEûlRSTû
underwrite in Europe’s leveraged
loan market since the pandemic.
It is also a KKR deal.
While the market is now open
to some underwrites, MasMovil
is a very different credit to
Wella, as it is rated and has an
existing loan borrower base.
“MasMovil came four weeks
after Coty. MasMovil is rated and
has existing debt outstanding –
it is a different set of
circumstances. However, the
the senior banker said. „
9
Top news
Santander rockets up rankings as
crisis shakes up Europe lending
„ Loans Spanish bank climbs to third in loan league tables – up fifteen places from a year ago

BY GARETH GORE, ALASDAIR REILLY revolving credit facilities taken loans league table in Europe. our clients as soon as they need
out by ALSTOM, BP, BOSCH and UPM- Santander now ranks third, it,” said Rafael Noya, Santander’s
SANTANDER is embarking on a
major push in the European
corporate debt space, with the
Spanish lender keen to take
advantage of any market
distortions caused by the current
crisis to increase its market
share and win new clients from
rivals.
It has aggressively deployed
its balance sheet in recent
weeks, leading several large
deals for some of the region’s
biggest corporates, including
three €10bn-plus facilities – for
aircraft manufacturer AIRBUS,
carmaker DAIMLER and oil and gas
producer ROYAL DUTCH SHELL.
Although those three have
long-standing relationships with
Santander, the bank has also
won a number of new loan
mandates, and regained clients
it has not banked for years,
acting as a lead arranger on new
UPL bond finds fertile ground
„ Emerging Markets Indian agrochemicals giant shows market is open for high-grade issuers
BY DANIEL STANTON
Investors handed India a vote
0ACIlCûTAKINGûûOFûTHEû end of July.
OFûCONlDENCEûLASTûWEEKûWITHû
strong support for the country’s
lRSTû53ûDOLLARûBONDûISSUEûINû
almost a month, despite a
sovereign downgrade and a
mounting toll from the Covid-19
outbreak.
Agrochemicals maker UPL CORP
raised US$500m of 10-year
KYMMENE in recent weeks.
The sudden surge in lending –
the bank increased its corporate
LENDINGûBYûõBNûINûTHEûlRSTû
seven weeks of the crisis – has
propelled it up the syndicated
EMEA LOANS BOOKRUNNERS –
FULLY SYNDICATED VOLUME
BOOKRUNNERS: 1/1/2020 TO DATE
Managing
bank or group
1 BNP Paribas
2 Credit Agricole
3 Santander
4 HSBC
5 SG
6 UniCredit
7 JP Morgan
8 Deutsche Bank
9 Citigroup
10 Natixis
Total
Proportional credit
Source: Refinitiv
An outstanding 2028 bond
issue was bid at a G-spread of
377bp and, accounting for the
longer tenor, one bookrunner
estimated the new 10-year had
been priced 10bp–15bp inside
the curve.
Not only that, but the new
issue rallied 10bp in secondary
trading on Wednesday, despite
generally weaker market
conditions.
ACCORDINGûTOû2ElNITIVûDATAûUPûû HEADûOFûGLOBALûDEBTûlNANCEûh7Eû
places on its ranking at this are deploying capital to clients
point a year ago. and have been fully open for
“We are very agile and have business since the inception of
been able to approve substantial the crisis.”
transactions in order to support
CHANGING DYNAMICS
Santander’s rise up the league
tables has to be seen in the
context of the crisis, however.
No of Total Share Many corporates have fully
issues US$(m) (%) drawn down their existing
86 57,362.70 18.4 facilities, which has drained the
59 24,569.60 7.9 balance sheets of many banks
57 20,483.90 6.6 and left them unable to compete
51 16,653.17 5.3 as aggressively on new facilities
42 15,380.77 4.9 launched.
56 15,125.75 4.9 At the same time, some banks
35 14,993.19 4.8 based outside the region – those
37 14,330.76 4.6 from the US and Japan, which
31 12,631.06 4.1 are traditionally big corporate
24 8,559.75 2.7 lenders in Europe – have at least
313 311,720.25 partially refocused their efforts
back home, leaving a gap in the
SDC code: R17 market for a bank such as
Final orders for UPL were over being overwhelmed by more
US$2bn from 146 accounts, with than half a million cases by the
!SIA
Reg S notes and EMEA 36%. Fund UPL is rated on par with the
managers and asset managers sovereign at Baa3/BBB–/BBB–,
booked 72%, insurers 13%, banks with negative outlooks on the
7%, private banks 4% and others S&P and Fitch ratings. Moody’s
4%. said that UPL’s business was
The strong response came fairly resilient during the
despite Moody’s decision on coronavirus pandemic and
June 1 to downgrade the Indian national lockdown, and
sovereign by a notch to Baa3, the noted that only 10% of its
MONEYûONû4UESDAYûlNDINGûTHATû “A lot of curves are repricing lowest rung of investment revenues come from India –
market conditions had actually after primary issues. It grade, with a negative outlook. explaining why its UPL rating
improved since Moody’s happened with Thailand, The rating agency warned that outlook is stable while it has a
downgraded the sovereign now it’s happening with India faces a period of sustained negative outlook for the Indian
earlier this month. India,” said a banker at one slower growth and highlighted sovereign.
UPL’s 4.625% 2030 bond of the bookrunner, referring the persistent stress in the 4HISûWASûTHEûlRSTû)NDIANûDOLLARû
offering was priced at 99.565 to to the previous week’s new lNANCIALûSYSTEMû#OVID
ûCASESû issue since state-owned REC sold
yield 4.68%, or Treasuries plus issue from Thai oil group also continued to climb last US$500m of three-year bonds on
385bp, tightening 50bp from PTT Exploration and WEEKûWITHûOFlCIALSûWARNINGû May 12. That deal had to comply
initial guidance. Production. that Delhi’s health system faces with a Reserve Bank of India rule

10 International Financing Review June 13 2020


Santander with spare balance
sheet.
But rivals have nonetheless
taken note of the Spanish
bank’s sudden surge up the
rankings. They say that, while
DEALûmOWûISûDOWNûYEARûTO
also has his eye on improving
the bank’s standing in the
sovereign, supranational and
agency space – although that is
more a medium rather than
short-term plan.
PUNCHING BELOW
If successful, the strategy will
address something of an
anomaly. Despite being one of
the largest banks in Europe –
with assets of €1.5trn it
@ For daily news stories
visit www.ifre.com
BALANCEûSHEETSûnûHAVEûSEIZEDûTHEû
moment and stepped into a gap
left by regular Anglo-Saxon
lenders,” said another senior
LOANûBANKERûATûAûRIVALûlRM
But when the big M&A
DATEûnû But his strategy is not just ranks only behind HSBC, lNANCINGSûANDûTHEûSPECIALISTû
the number of syndicated deals about throwing around money. BNP Paribas, Credit Agricole advice and long-standing
has declined by about a quarter The bank has increased its and Deutsche Bank – it has relationships that go with it,
from a year ago – Santander’s distribution capacity in recent perennially punched well returns, will Santander get the
MOVEûISûSIGNIlCANT years and aims to consistently below its weight in the loan call?
“Santander has been pursuing be a top 10 bank in the markets and bond markets. Noya expects the bank’s
an aggressive strategy,” said one where it chooses to compete. The bank counters that it is current stock of loans – it had
BANKERûATûAûRIVALûlRMûPOINTINGû
to its success in the UK. “It has
taken advantage of the crisis to
basically throw money at its
clients – to get as large tickets
and as much market share as
possible on deals.”
CHANGE OF GUARD
The big push from the bank
coincides with a change of
guard. Noya, who has spent the
past 13 years working for
Last year, it ranked 15th in
European syndicated loans with
a 2.4% market share.
“Santander increased over
the past few years its ability
to distribute assets in the
market, with the idea of
structuring our portfolio not
only to put assets in our balance
sheet until they matured, but
also to sell them in the market,”
said Noya.
“Santander has invested
strong where it chooses to
compete – and in particular in a
few niche markets such as
PROJECTûlNANCEû7HILEûITûISûNOTû
considered a big player in bonds
and loans, it does make good
money in the space: last year it
earned €1.5bn, more than many
higher-ranked players.
Whether its current push will
lead to bigger revenues remains
to be seen. It is clearly hoping
that lending to clients during
extended €80bn of credit to
corporates in Europe at the
ENDûOFûTHEûlRSTûQUARTERûnûTOû
gradually be paid back over
coming months as clients take
out borrowing in the bond
market. Nonetheless, he says
the bank has the capacity to do
more.
“Given the current liquidity
and market conditions, we don’t
expect the existing revolvers to
remain drawn for a long time,”
3ANTANDERûINû"RAZILûTOOKûONûHISû heavily on several fronts: how to these times will be rewarded said Noya. “Probably they will
new role at the end of March. He tap the market, accessing the with new business. But as many be repaid this year or at the
took over from Ignacio market, sales, syndicate and also banks will testify, lending is not beginning of the next one, so
$OMINGUEZû!DAMEûWHOûHASû
moved to head Santander’s
investment bank across Iberia.
Noya has big plans for the
business. As well as expanding
the corporate debt footprint, he
requiring issuers to pay all-in
funding costs of not more than
450bp over US dollar Libor for
offshore bonds.
REC barely managed to
structuring. We want to position
ourselves as a house that can
support clients, but which at the
same time, can handle the
exposure that we carry on our
balance sheet.”
Since issuer UPL Corp is not
incorporated in India it is not
subject to the RBI yield cap, but
it would have priced the issue
comfortably within that limit.
always enough to secure
ancillary business.
“In the absence of the normal
stream of M&A activity, both
BNP Paribas and Santander –
backed with very extensive
PIPELINE INTACT
The deal bodes well for Indian
state-owned issuers such as
POWER FINANCE CORP and STATE BANK
OF INDIA, which are considering
it’s a temporary use of our
balance sheet.”
“We are still underwriting
very large transactions, and
we’ll continue to do that at the
right conditions.” „
widening 14bp in the last three
days of the week.
Price tension for UPL’s new
deal was also helped by a tender
offer at par for UPL Corp’s
SQUEEZEûBELOWûTHEû2")ûCEILINGû
paying a yield of 4.865% and a
spread over Treasuries in the
high 400s.
At the time, long-tenor bonds
looked out of reach for Indian
issuers, but UPL managed to
print at a longer tenor than REC
and beat both its yield and
spread, thanks to improvements
in market conditions.
The 10-year US Treasury yield
rose to 0.83% at the time of
pricing from 0.67% on May 12.
Over the same period the cost of
lVE
YEARû#$3ûFORû3TATEû"ANKûOFû
India, the nearest thing to an
Indian sovereign benchmark,
declined to 132bp mid from
217bp on May 12 – a long way
from the peak of 305bp in late
March.
India-headquartered UPL Ltd US dollar bond offerings. US$500m 3.25% bonds due
owns about 78% of Mauritius- Bankers said the pipeline October 31 2021, which the
incorporated UPL Corp, while remained unaffected by the issue will fund. The Treasury
PRIVATEûEQUITYûlRMû40'û#APITALû correction in risk appetite after spread on the 2021s declined
and the Abu Dhabi Investment UPL priced, with the Asian from 511bp on May 12 to 329bp
Authority each hold 11%. iTraxx investment-grade index on Tuesday, having reached a
peak of 772bp in late April.
HOW MANY INDIAN RUPEES US$1 BUYS “The lack of recent primary
77
supply from India certainly
helped, but so did the tender,”
76
said another banker involved.
75 “Hopefully, this will encourage
other Indian issuers.”
74
Bank of America, JP Morgan,
73 MUFG, Citigroup, Rabobank, Societe
72 Generale and UBS were joint
global coordinators and
71
bookrunners for the new issue.
70 BofA, JP Morgan and MUFG are
Feb 20
Jan 20
Mar 20
Apr 20
May 20
Jun 20
dealer-managers for the tender
offer, which ends on June 15. DF
Source: Refinitiv King is information agent. „
International Financing Review June 13 2020 11
Top news
FTSE names embrace retail revolution
„ Equities Retail orders flood in for UK accelerated bookbuilds
BY LUCY RAITANO
The revolution in European
equity capital markets resulting
from the coronavirus pandemic
HASûlNALLYûSEENûRETAILûINVESTORSû
embraced by UK corporates that
have traditionally shied away
from the hassle of catering to
individual buyers.
Where previously accelerated
bookbuilds in the UK have
excluded retail, nine ABBs from
main market FTSE companies in
the past month (that raised a
combined £3.8bn in total) have
included retail.
Complaints that retail
shareholders were missing out
on participating in the wave of
FOLLOW
ONûACTIVITYûHASûlNALLYûSEENû PrimaryBid to serve their
existing technology embraced.
The move follows the
PRE-EMPTION FOR THE MANY
UK fundraising guidelines were
relaxed at the start of April to
allow companies desperate for
cash during the pandemic to
increase share capital by up to
20% without having to give
SHAREHOLDERSûTHEûRIGHTûOFûlRSTû
refusal, known as pre-emption.
Dropping pre-emption means
fundraisings can be completed
in a day rather than several
weeks and also makes deal
execution considerably cheaper.
Corporates have done their
best to allocate shares to existing
shareholders, giving them soft
pre-emption. Now they are
turning in increasing number to
UK digital investment platform
companies to have recently used
individual shareholders.
In response to the rule
investors. Signed by industry
heavyweights such as Andy Bell
and Peter Hargreaves, the letter
seems to have worked.
A source at one company that
has used PrimaryBid’s services in
recent weeks said including
retail was now deemed
necessary to avoid bad publicity.
“A retail tranche is something
that always should have
happened,” said Anand
Sambasivan, co-founder and
CEO of PrimaryBid. “The only
reason it didn’t was because
retail was too fragmented, and
all the admin that went along
with it, but if you point
technology at it you can solve it.”
Main market London-listed
through the platform.
the PrimaryBid platform to tap
retail investors include Compass
been aiming to “democratise”
capital markets for years and
stepped up his campaign as
corporates completed large
fundraisings in March and April.
SSP Group, ASOS and WH Smith
WEREûAMONGûTHEûlRSTûCOMPANIESûTOû
raise emergency cash in excess of
the previous guideline of 10% in
March and April and provided
quick returns for participants in
the fundraisings.
COMPASS SETS THE DIRECTION
Sambasivan gives credit to
“forward-thinking” Compass
'ROUPûFORûBECOMINGûTHEûlRSTû
FTSE 100 company to use the
platform on its £2bn capital raise
on May 19, raising £559,035
The Compass deal went a long
way to set a precedent due to its
dramatic abandonment of the
default way of marketing IPOs in
Europe which has enabled the
new-issue market to be revived
despite lockdowns.
change, PrimaryBid published
an open letter on April 20 calling
for UK public companies to
mandate retail tranches to
ensure fair treatment of all
Group, Avacta, Segro, Biffa,
Ocado and IWG.
Sambasivan, who previously
worked in capital markets at Bank
of America and Credit Suisse, has
SIZEûWITHûAûSPATEûOFûOTHERSû
following suit.
Another stand-out deal was
the £48m fundraising by Avacta,
which was surging on the back

Banks step up for Cathay rights

„ Equities Struggling carrier takes in US$5.3bn from rights issue and government aid

BY FIONA LAU,
ANURADHA SUBRAMANYAN
Four banks are underwriting a
portion of CATHAY PACIFIC AIRWAYS’
HK$11.7bn (US$1.5bn) rights
0ACIlCû!IRû#HINAûANDû1ATARû
Airways will take up their
entitlements in full, but will see
their stakes slightly diluted as a
result of the government bailout.
After the recapitalisation, Swire
The four banks will
underwrite 376m shares or
about 15% of the deal, equivalent
to US$226m. Morgan Stanley
will underwrite half of that
amount, BOCI 20%, HSBC 20%
Wednesday before closing 1%
lower at HK$8.72. The stock fell
a further 3.4% to HK$8.42 last
Thursday and was quoted at
HK$8.28 on Friday, down 6%
since the announcement.
ISSUEûTHEûlRSTûTIMEûINTERNATIONALû
banks have backed a major
Asian rights issue since the
coronavirus outbreak.
Cathay last Tuesday
0ACIlCû business will recover gradually.
announced the rights issue
alongside a HK$29.3bn bailout
from the Hong Kong
government that will help the
CITYSûmAGûCARRIERûWEATHERûTHEû
pandemic.
The Hong Kong-listed airline
is selling 2.5bn shares on a 7-for-
WILLûOWNûûOFû#ATHAYû0ACIlCû
down from 45%, Air China 28.2%,
down from 29.99%, and Qatar
Airways 9.4%, down from 9.9%.
2IGHTSûISSUESûINû!SIA
government, which is also
have become more common
since the Covid-19 outbreak, but
most have been underwritten by
government-related entities and
majority shareholders. The
#ATHAYû0ACIlCûTRANSACTIONûSHOWSû
that banks remain capable of
BACKSTOPPINGûRESCUEûlNANCINGSû
and BNP 10%. The underwriting
commission is 2%.
“Cathay is a leading carrier in
Hong Kong and we believe its
The government bailout also
GIVESûUSûCONlDENCEûTOûJOINûTHEû
deal,” said a banker on the deal.
“We think the discount
offered by the rights price is big
enough to attract investors.”
Cathay’s shares took a wild
ride last week, highlighting the
The rights issue comes alongside
an issue of HK$19.5bn preference
shares and a HK$1.95bn warrants
issue to the Hong Kong
providing a HK$7.8bn bridge loan.
The government, in return, will
own a 6.08% stake in the company,
have the right to appoint two
observers to attend Cathay’s board
meetings and have access to
management and information.
According to Hong Kong’s
11 basis at a rights price of
HK$4.68 each, a discount of 47%
to last Monday’s close of
HK$8.81 and of 35% to the
theoretical ex-rights price.
even in one of the hardest-hit
industries.
BNP Paribas, BOC International,
HSBC and Morgan Stanley are the
underwriters. Morgan Stanley is
risks facing the underwriters in
a volatile market. Down 24% this
year before the recapitalisation
plans were announced, Cathay
SHARESûBRIEmYûREBOUNDEDûBYûASû
lNANCIALûSECRETARYû0AULû#HANûTHEû
government does not plan to hold
the Cathay stake for the long term.
The preference shares carry a
3% dividend, which will step up
Major shareholders Swire also the sole adviser to Cathay. much as 19% at one point on TOûûAFTERûlVEûYEARSûWHILEûTHEû

12 International Financing Review June 13 2020


of providing Covid-19 tests,
WHEREûTHEû!""ûWASûUPSIZEDûBYû
£3m because of the strength of
RETAILûDEMANDûnûAûDElNITEûlRSTû
Retail bought £4.9m of the deal.
Last week both UK warehouse
REIT SEGRO and supermarket OCADO
maxed out at £7m through the
platform alongside institutional
offers of £680m and £650m
respectively. EU prospectus
regulations allow up to
€8m-equivalent to be raised from
retail in this way – so this could
easily spread across Europe.
Sambasivan described the
Ocado placing as “poetic”, given
that when he was a shareholder
he was frustrated at being
unable to participate in one of
the online grocer’s fundraisings.
7ASTEûMANAGEMENTûlRMûBIFFA
wrapped up last week with a
£100m capital raise, £1m of which
ASûTHEûBENElTSûOFûAûRETAILûOFFERING
ECM bankers have always
been cool on including retail,
more often in the context of
IPOs, as the additional demand is
deemed marginal and requires
other brokers to be involved
increasing overall complexity.
But retail has shown it can act
just as quickly as institutional
investors, with books open for
the same time for both investor
groups. And while retail proceeds
may be small change alongside a
deal like Ocado’s it can be
meaningful for others and is a big
win for investor relations.
“We’ve regularly got north of
£20m in just a few hours of
demand, we feel like we’re
breaking records on each new
offering,” said Sambasivan.
Bankers are not rushing to
embrace the approach – they
Albertsons de-risks
IPO ahead of launch
„ Equities Apollo steps in to cash out owners
BY STEPHEN LACEY
A clear benchmark has been set
for US grocer ALBERTSONS‘ IPO
after Apollo Global Management
invested US$1.75bn through
convertible preferreds at a
US$10bn valuation – with no
adjustment for the IPO pricing.
The all-secondary investment
that was agreed in May gave
Apollo a 17.5% stake as Cerberus
Capital Management and other
owners cashed out the same
amount.
Albertsons is one of the most
eagerly awaited US listings of
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Albertsons’ valuation when it
goes public. If Albertsons were
to be valued at a market cap of
US$8bn, then Apollo will be
deeply in the hole on its
investment. At US$12bn, it
would be deeply in the money.
Apollo essentially stepped in
as a surrogate for the MCB that
would have been sold to the
public. Albertsons IPO is now
entirely secondary stock, with
those shares presumably coming
from Cerberus and other
owners.
Apollo will receive a 6.75%
annual dividend payable
was raised through PrimaryBid.
û due on September 30. If an IPO
CULTURE SHIFT
Behavioural shifts in risk-adverse
capital markets can be tricky to
trigger but quick to catch on, and
it is apparent that issuers are
quickly becoming more
CONlDENTûINûTHEûPLATFORMûASûWELLû
won’t after all get paid for the
retail tranche – but one
syndicate banker involved in
one of the recent transactions
acknowledged it hadn’t made a
huge difference to the process.
“They don’t need to do it, but
if they want to do it we’re
supportive,” he said. „
the year, especially as a
BENElCIARYûOFûTHEû#OVID
pandemic as restaurants were
closed.
Those positives were known
at the time Apollo and Cerberus
agreed to the early takeout.
What was not was how quickly
the US IPO market would
recover. Already in June, 14
companies have completed
QUARTERLYûWITHûTHEûlRSTûPAYMENTû
raising at least US$1bn does not
happen by October 2021 the
dividend steps up to 8.75%, the
GROCERûDISCLOSEDûINûlLINGSûLASTû
week.
Apollo’s investment is
convertible at US$35.68 per
share. The security cannot be
called for three years and
exercise price of the warrants is
set at HK$4.68. The interest rate
on the bridge loan is Hibor plus
150bp.
The company said last month
that it had made an unaudited
loss of HK$4.5bn at Cathay
0ACIlCûANDûTHEûCOMPANYSûOTHERû
airline Cathay Dragon from
January to April. Last Tuesday, it
said the drop in passenger
revenue to around only 1% of
prior year levels has meant that
it has been burning cash at a
rate of HK$2.5bn to HK$3bn per
month since February.
OTHER RIGHTS ISSUES
A W1trn (US$829m) rights issue
for KOREAN AIR LINES, which won
the support of local banks, is a
similar story. South Korea’s
largest airline announced the
rights plans in May alongside a
W1.2trn government capital
injection to help it withstand
the effects of the crisis.
KB Securities, Kiwoom Securities,
Korea Investment & Securities, Mirae
Asset Daewoo and NH Investment
and Securities are underwriting
the offer, which is priced at a 31%
discount to the pre-deal close.
In Singapore, state-owned
INVESTMENTûlRMû4EMASEKû
Holdings continues to back local
lRMSû)TûISûUNDERWRITINGû3Mû
(US$431m) of loss-making
SEMBCORP MARINE’s S$2.1bn rights
issue.
Parent Sembcorp Industries
will subscribe to its S$1.27bn
entitlement and an additional
S$230m in case of
undersubscription.
Sembcorp Marine is selling
5-for-1 rights shares at S$0.20
apiece or a 76% discount to the
pre-deal close of S$0.85.
In India, it is common for
controlling shareholders, not
banks, to underwrite rights issues
– even if the shareholders may
REQUIREûBANKûlNANCINGûTOûDOûSO
Likely rights issuers are
MAHINDRA AND MAHINDRA FINANCIAL
SERVICES (Rs35bn), SHRIRAM
TRANSPORT FINANCE (Rs20bn) and
ADITYA BIRLA FASHION & RETAIL
(Rs10bn). „
International Financing Review June 13 2020
mOATSûRAISINGû53BNûTHEû
highest monthly total by both
number and volume since
May 2019, according to
2ElNITIVûDATA
As a result, Apollo appears to
have a peach of deal. Albertsons
had considered launching its IPO
in June, though that timeline
has now been pushed into July,
bankers involved in the process
told IFR.
“We were originally thinking
about doing a mandatory
[convertible] side-by-side with
the IPO, but then the IPO market
closed,” said one banker who
advised on the Apollo
investment. “The strength of the
BUSINESSûANDûDIFlCULTYûOFûTHEû)0/û
market contributed to a deal
happening between Apollo and
Cerberus.
“The goal was not to pressure
the company to go public, but to
PROVIDEûTHEMûmEXIBILITYûTOûHITû
the window that makes most
sense.”
Unlike other pre-IPO converts,
there is no ratchet tied to
thereafter only at prices above
US$42.47, a 19% premium to the
base conversion price.
Existing owners led by
Cerberus sold their shares at
US$34.26 apiece, the difference
in prices covering bank fees.
Credit Suisse, a bookrunner on
the IPO, advised Cerberus while
Barclays, also a bookrunner on
the IPO, advised Apollo.
Bank of America, Goldman Sachs,
JP Morgan, Citigroup, Morgan
Stanley, Wells Fargo and Deutsche
Bank are the other bookrunners
on an 18-strong IPO syndicate.
Albertsons also disclosed in
THEûLATESTûlLINGSûTHATûITûHADû
entered into a new 20-year
master lease agreement at an
initial annual rate of US$179.4m.
Albertsons, which failed in an
earlier run at the public markets
in late 2015, is now ripe to go
public.
Cerberus initially invested in
Albertsons in 2006 and doubled
down in 2013 by helping to fund
the acquisitions of Supervalu
and Safeway. „
13
Top news
North Korea forages for dollars
„ Emerging Markets Government bond issue targets elite’s foreign currency holdings

BY DANIEL STANTON, JIHYE HWANG
North Korea’s introduction of US
COUPONûBONDSûAFTERûITû rating division, expects the
dollar bonds signals a foreign
currency shortage rather than a
step towards engagement with
the global capital markets,
according to experts.
News sources and analysts
said that the North Korean
regime appeared to sell
government bonds onshore last
KOREA has embarked on a so-
called “bond-buying”
programme. In 2003, it sold
People’s Life Bonds denominated
in North Korean Won and
targeted at resident individuals.
The bonds had a 10-year tenor
and did not pay coupons, but
bondholders selected by a
lottery were due to be repaid
more than the principal.
“The last time the government
Pyongyang’s loans from Western
governments were repackaged
INTOûZERO
stopped servicing the debt in the
1980s, and turned into a €163m
tranche denominated in
Deutschmark and a SFr240m
(US$253m) tranche, both of
which were supposed to mature
in March this year but are
believed to be outstanding.
Fitch Solutions, which is
independent of Fitch’s credit
North Korean economy to shrink
by 6% this year.
Exports to China dropped to
US$50m last year from US$350m
in 2016, according to North
Korea watchers, and are
expected to be even lower this
year. That could make it hard to
fund new projects.
month after sanctions and the
global coronavirus pandemic
caused its foreign currency
reserves to dwindle.
Details of the issue are not
known, but Daily NK, a news
service focused on North Korea
and considered credible by
of an iron and steel factory.
experts, reported that 60% of the
bonds were allocated to state-
owned enterprises and 40% to
individuals, including donju, or
entrepreneurs.
4HISûISûNOTûTHEûlRSTûTIMEûTHATû
the DEMOCRATIC PEOPLE’S REPUBLIC OF
J.Crew blockers take fashionable turn
in junk bond market
„ Bonds US junk bond markets see a rise in asset-stripping restrictions but do they go far enough?
BY PAUL KILBY
“J.Crew blockers” are back in
vogue, this time in the junk
bond market where issuers are
increasingly inserting such
provisions to prohibit the
issued bonds, it was alleged that
they essentially coerced
individuals and businesses to
purchase [them],” wrote Fitch
Solutions, the credit and country
research unit of Fitch Group, in a
report on May 22.
It is not known whether that is
the case this time, although some
Western commentators have
pointed to the likelihood that it
is. In any case, investing in North
Korea’s debt is not for the faint-
hearted: it has never repaid any
of its offshore borrowings.
“In the current environment
PEOPLEûAREûFOCUSEDûONûPRIZEDû
assets and this is a way of being
protected from the company
moving them elsewhere.”
Ever since J.Crew used
loopholes in debt covenants to
ECONOMIC CRISIS
Tomas Ojea Quintana, UN
special rapporteur on human
rights in North Korea, voiced
alarm on Tuesday at “widespread
food shortages and
malnutrition” in the country,
MADEûWORSEûBYûAûNEARLYûlVE
month border closure with
China and strict quarantine
measures against Covid-19,
Reuters reported. He urged the
UN Security Council to ease
sanctions to ensure food
supplies.
has left companies seeking
creative ways to raise capital.
A long list of high-yield bonds
are being scrutinised for their J.
Crew potential, as some borrowers
openly exploit such loopholes.
Diamond Sports even leveraged
2ODONGû3INMUNûTHEûOFlCIALû
newspaper of North Korea’s
Workers’ Party, wrote in April
that major projects due to be
completed this year include the
construction of Pyongyang
General Hospital and the upgrade
Fitch Solutions wrote that
state-owned enterprises like
Construction Bureau 8, which is
building the hospital, would use
the bond proceeds to procure
raw materials from local
companies.
and cruise operators have sought
liquidity through asset-backed
bonds and in some cases have hit
their secured debt capacity.
“We expect the buy-side,
especially in high-yield, to
continue to protect assets,” said
transfer of assets out of
INCOMEû
creditors’ reach.
2ETAILERû'!0ûWASûTHEûlRSTû
company post Covid-19 to add
J.Crew blockers on bonds,
followed by Viking Cruises and a
little over a week ago Victoria’s
Secret and Bath & Body Works
owner L Brands came with its
own version.
“Since the Covid-19 shutdown,
we have seen some companies
put J.Crew blockers into their
indentures,” said Scott Webster,
a senior covenant analyst at
Covenant Review.
14
shift intellectual property to an
unrestricted subsidiary in
2016, the name of the now
bankrupt clothing retailer has
become a byword for what are
seen as shifty manoeuvres by
borrowers.
Blockers have been more
common in the loan and direct
lending market where lenders
have more leverage.
But this type of asset-stripping
has received renewed focus
in the bond market at a time
when the economic fallout
from the Covid-19 pandemic
International Financing Review June 13 2020
its ability to use unrestricted
subsidiaries to move collateral as
an incentive to get bondholders to
participate in its exchange offer,
albeit with little success.
“Issuers have been more
COGNISANTûOFûTHEûBENElTSûOFûTHESEû
loopholes, creating more risk of
exploitation,” said Charlotta
Chung, head of US legal research
at CreditSights. “But that risk is
tempered by lender and creditor
awareness.”
This is particularly true in
sectors hard hit by the health
crisis where retailers, airlines
3COTTû+IMBALLûlXED
portfolio manager at BMO
Global Asset Management.
h2EVENUEûANDûCASHmOWSû
remain stressed in this still
partially shutdown economy, so
preserving IP and other assets is
a needed protection.”
Over the past few months
borrowers have offered various
versions of J.Crew blockers. Most
of them such as Viking Cruises
and L Brands have focused on
imposing limitations on the
transfer of intellectual property
– which J.Crew famously used.

“After the programme was
announced, the black market
value of the North Korean Won
went down, which supports the
possibility that foreign currency
savings were involved,” said
Florian Schmidt, CEO of
Frontier Strategies, a capital
MARKETSûCONSULTANCYûlRMûFORû
Asian frontier markets. “There
seems to be a shortage of euros
and dollars in the system right
now, whereas in the past the
both supply and demand are
down after it closed its border
with China in January to limit the
spread of the coronavirus.
Experts on the North Korean
economy estimated in early
2018 that it would face foreign
currency shortages as the
sanctions began to bite, yet
imports of non-sanctioned
products increased in 2018–19
as purchasing power in the
private sector increased.
PG&E eyes US$27bn
capital raise
„ Bonds/Equities Utility to emerge from Chapter 11
BY PAUL KILBY, PHILIP SCIPIO
California-based utility PG&E is
readying a massive US$27bn
capital raise across both debt
and equity markets to fund its
@ For daily news stories
visit www.ifre.com
debt, which is typically not
counted in debt metrics,
according to CreditSights.
On top of that, the company
has amended terms on US$9bn
in equity backstop commitments
access to foreign currency has
always been relatively easy and
was tacitly accepted by the
government.”
A researcher from a South
Korean government-linked
“Chairman Kim Jong Un has
promoted the idea of a
prosperous economy with
people saving and accumulating
wealth,” said Schmidt. “As a
result a fairly wealthy middle
way out of bankruptcy and pay
off billions of dollars in legal
claims stemming from its
INVOLVEMENTûINûDEADLYûWILDlRES
4HEûCOMPANYûlLEDûFORû#HAPTERû
11 protection early last year and
TOûSIMPLIFYûTHEûEXITûlNANCINGû
PG&E CFO Jason Wells said in a
statement last week.
“Today’s announcement is
another positive step towards
PG&E’s emergence from
institution said that the last class has emerged in Pyongyang. is now nearing the end of the #HAPTERûûENSURINGûWILDlREû
time North Korea sold bonds, it Now might be payback time.” process with an reorganisation victims are paid more quickly
WASûTOûTACKLEûINmATIONû(EûDIDû Schmidt said that the “bond- plan that will involve some and positioning the company for
not wish to be named because
his institution had not been able
TOûCONlRMûTHEûNEWûBONDûISSUE
PROlLEûINVESTORSûSUCHûASû
Another Seoul-based researcher
estimated that North Korea’s
COMMODITYûTRADEûDElCITûWASû
US$2.3bn last year and would have
worsened this year. He believes
that North Korea is currently
buying” programme, if
successful, could fund more
than half of this year’s budget.
Rodong Sinmun reported that
state budgetary revenue was
expected to grow 4.2% from the
previous year, while
expenditure would increase by
6%. It did not give any monetary
US$57bn in funding, of which
US$27bn will be sourced from
public offerings.
The company will emerge
with a bigger balance sheet –
carrying some US$17bn more
debt than it did before,
according to CreditSights. But it
will be one that is arguably more
AûSUSTAINABLEûlNANCIALûFUTUREvû
he said on Monday.
(IGH
David Tepper’s Appaloosa, Dan
Loeb’s Third Point, and Fidelity
have now agreed to buy
US$3.25bn of common PG&E
stock at up to US$10.50 a share
through placement agents
SUFFERINGûFROMûDEmATIONûBECAUSEû
GAP expanded those provisions
with prohibitions on the transfer
of both real-estate and IP from the
values. „
creditors’ reach as it expressly
prevents collateral being held
by a non-guarantor – a very rare
favourable to bondholders who
will be better protected against
FURTHERûWILDlREûLIABILITIESûANDûSITû
higher up the capital structure.
“It is recapitalisation story and
they are doing it in a split-rated
Goldman Sachs and JP Morgan after
PG&E emerges from Chapter 11.
Those investors can back out
of the deal if the equity backstop
commitments are drawn or if
PG&E does not emerge from
company or guarantor to a non-
Chapter 11 within 45 days
guarantor restricted subsidiary or
to an unrestricted subsidiary.
“They have done a good job of
blocking the collateral from
going out of the creditor group,
which is something refreshing to
provision in high-yield bonds.
“They even expressly block such
transfers as asset sales,” she said.
Covenant analysts have been
calling for stricter and broader
blockers to prevent asset
stripping, even the elimination
FASHIONvûSAIDû3COTTû+IMBALLûlXED
income portfolio manager at BMO
Global.
“If they market it wide with a
decent concession they will get
an audience in both [high-grade
and high-yield]. Right now the
starting June 8.
That deal and where it prices
is contingent upon the closing
and pricing levels on a separate
US$5.75bn sale of straight equity
and equity units that are similar
SEEvûSAIDû6ALERIEû0OTENZAûHEADû
of high-yield research at Xtract, a
COVENANTûRESEARCHûlRM
NOT BULLET-PROOF
Even so, none of the blocking
provisions are seen as bullet-
proof and borrowers would
HAVEûLITTLEûDIFlCULTYûlNDINGû
ways around them, say analysts.
“GAP only goes half way,” said
INCOMEû
of unrestricted subsidiaries
altogether.
But with the US junk bond
market back in full force as
volumes pick up and investors
prioritise yield over covenant
protections, such safety shields
may be less forthcoming.
And in the meantime,
borrowers are likely to continue
exploiting such loopholes.
market has transitioned back in
favour of the issuer.”
About US$17bn of that
US$27bn in public funding will
take the form of debt, including
US$4.8bn of new high-yield
holdco bonds and US$5.9bn of
new high-grade secured opco
bonds, which are expected to
come to market soon through JP
Morgan and Bank of America,
to mandatory convertibles.
h4HEûlNALûBOXûTOûCHECKûISûFORû
the bankruptcy judge to sign off
on it, and I don’t see any reason
why he wouldn’t,” said Andrew
Devries, senior utility and power
analyst at CreditSights.
The new and better US$9bn
equity offering as part of the
funding package may help
ENTICEûSOMEûlXED
0OTENZAûh!ûFEWûBONDSûSUCHûASû
GAP’s have blocked the company
from using investment capacity
to move certain assets, but they
could still use an asset sale.”
0OTENZAûARGUESûINûAûREPORTû
that Royal Caribbean’s recent
lRST
LIENûNOTEûISûPERHAPSûTHEû
strongest in terms of stopping
assets being transferred out of
“Over the past years, the bond
market has grown to accept
MOREûmEXIBILITYûINûMOVINGûASSETSû
to unrestricted subsidiaries,” said
Eric Leicht, head of White &
Case’s global banking practice.
“There is a lot of value that can
be moved away from creditors.
Those agreements are out there
and the path is clear.” „
International Financing Review June 13 2020
respectively.
PG&E is also issuing new
4.55% 2030 and 4.95% 2050
bonds to replace existing bonds
with coupons of over 5%, as well
as US$6bn of what it calls new
temporary utility debt.
That temporary debt is
probably bank borrowings that
will be replaced by securitisation
INVESTORSûTHOUGHûFUTUREûWILDlREû
risks remain a major concern for
the buyside.
“I am assuming it will be well
received given the equity raise
and the strength of this market,”
said another investor.
“[But] I am not sure how the
MARKETûWILLûEVALUATEûWILDlREû
risk.” „
15
THE MORE
YOU LOOK,
THE MORE
YOU SEE.
Test your investment strategies with our
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 People

19
&
Cerberus,
named after
Markets
21 Former trader
Robert Begbie 26 India’s
freeze on
the mythological is named permanent fresh bankruptcy
hound of Hades, calls CEO of NatWest proceedings could
on Commerzbank to Markets, and needs to hurt its fragile banking
adopt a new strategy cut costs to revive its system and delay the
fortunes clear-up of bad debts

„ FRONT STORY POLITICS

HSBC, StanChart under fire for HK stance

Investor Aviva rebukes banks for publicy supporting China law
HSBC and STANDARD CHARTERED faced more GROUPûPROlTû3TANDARDû#HARTEREDûHASûMADEû “That show of fealty seems to have earned
criticism last week following their public US$3.3bn in Hong Kong in the last two HSBC little respect in Beijing, which
support for China’s planned security law in
Hong Kong, earning a rebuke from a major
shareholder in both banks.
AVIVA INVESTORS, which is the 18th and 20th
largest shareholder in HSBC and StanChart
respectively, publicly criticised the pair’s
backing of Beijing’s proposal.
“We are uneasy at the decisions of HSBC
and Standard Chartered to publicly support
the proposed new national security law in
Hong Kong without knowing the details of
the law or how it will operate in practice,”
said Aviva Investors’ equities chief
INVESTMENTûOFlCERû$AVIDû#UMMING
“If companies make political statements,
they must accept the corporate
YEARSûORûûOFûITSûUNDERLYINGûPROlT
But the banks’ stances on the new law
have prompted a backlash among politicians
in the UK and the US with both governments
having strongly criticised the new law.
WALKING A TIGHTROPE
The UK has mooted the possibility of
offering refuge to up to nearly 3 million
Hong Kong citizens eligible for British
National (Overseas) passports. The US has
said it will remove some of the economic
privileges afforded to the city after it was
DEEMEDûNOûLONGERûSUFlCIENTLYûAUTONOMOUSû
from mainland China by US Secretary of
State Mike Pompeo.
continues to use the bank’s business in
China as political leverage against London,”
Pompeo said.
Several market observers expressed
disquiet about HSBC’s support for the new
law, although some said the Anglo-Asian
lender, which makes around a third of its
revenues from Hong Kong and literally has a
licence to print money in the special
administrative region, was left with few
options.
“HSBC doesn’t really have much of a
choice in the matter,” said Patrick Perret-
Green, the former head of foreign exchange
and local markets strategy in Asia at
Citigroup, who now runs his own
responsibilities that follow. Consequently,
WEûEXPECTûBOTHûCOMPANIESûTOûCONlRMûTHATû
they will also speak out publicly if there are
any future abuses of democratic freedoms
connected to this law.”
Cumming’s statement came after HSBC
released a picture on WeChat of its Asia-
0ACIlCûCHIEFûEXECUTIVEû0ETERû7ONGûSIGNINGûAû
petition backing the new law. Beijing says
the new law is necessary to tackle
separatism, subversion and terrorist
activities, but critics say it undermines the
autonomy that was promised to Hong Kong
for 50 years under the Sino-British Joint
$ECLARATION
Pompeo weighed in on HSBC’s response
on Tuesday, saying “the CCP’s browbeating
of HSBC . . . should serve as a cautionary
tale”, in a statement titled: “On China’s
Attempted Coercion of the United
Kingdom”.
HONG KONG: PROFIT CASHCOW
HSBC PRE-TAX PROFITS 2017-19, IN US$bn
9.02
8.22
INDEPENDENTûRESEARCHûlRMû!D-ACRO
“It’s been suggested in the Chinese media
before that if the bank doesn’t cooperate
then they could easily be replaced by the
Chinese banks in Hong Kong,” he said.
Thomas Blott
STANCHART UNDERLYING OPERATING PROFIT
2018-19, IN US$bn
3.99
3.35

Standard Chartered released a short

statement earlier this month saying “the
national security law can help maintain the
long-term economic and social stability of
Hong Kong”.
Hong Kong is a crucial market for the 33.16
0.69
London-headquartered banks. HSBC has
z Hong Kong z Mainland China z Rest of the World
MADEû53BNûINûPROlTSûINû(ONGû+ONGûINû
the last three years, or a whopping 66% of Source: Annual reports

International Financing Review June 13 2020 17

“Over the last 10 years we haven’t needed
to focus on costs down to the gnat’s ass”
EVERCORE CEO RALPH SCHLOSSTEIN, P20
Traders gear up for office return
US investment banks will use the dog days of
summer – when bankers often close their
laptops and open beach umbrellas – to test a
RETURNûTOûOFlCESûAFTERûTHEûCORONAVIRUSûLOCKDOWN
At least a quarter of traders are expected
to test a return to trading desks in July and
August, several sources said. They said the
protocols for keeping employees safe. But
they are likely to feature socially distanced
desks, temperature checks, limits on elevator
capacity and regular deep cleansing.
3PEAKINGûATû-ORGANû3TANLEYSûlNANCIALû
services conference last week, several bank
executives said they expect to return at least
“The stresses that even our most senior
people working from home, particularly if
they’ve got kids and family running about, is
putting a lot of pressure on people,” Gorman
said.
Working from home has also upset the
balance between personal time and work –
posing mental health concerns. Without the
TRANSITIONûOFûLEAVINGûTHEûOFlCEûTOûSEPARATEû
the workday from home everyone is trying
timing is ideal given the typical slowdown in
trading and the number of people normally
away from the desks.
While JP Morgan, Citigroup, Bank of America,
Goldman Sachs and Morgan Stanley have all
touted the successful migration of traders – as
80% of employees to bank sites when plans
are fully operable.
Morgan Stanley chief executive James
Gorman said systems had held up well while
90% of staff had worked from home. He has
previously targeted for 50% of staff to return
TOûlNDûAûBALANCEûHEûSAID
Gorman batted back the idea that Morgan
3TANLEYûWOULDûREDUCEûITSû.EWû9ORKûOFlCEû
footprint.
“The vast majority of our employees for the
vast majority of their time will continue to
WELLûASûOTHERûBANKûSTAFFûnûAWAYûFROMûOFlCESû
during the outbreak of a global pandemic, most
have been preparing for traders to return to
centralised hubs before September, sources said.
The banks declined to comment on plans
TOûRETURNûTOûOFlCESûORûPOST
CORONAVIRUSû without problems.
Germany loss drags down EU bank returns to 6%
TOû.EWû9ORKûOFlCESûLATERûTHISûYEAR WORKûINûOFlCESvû'ORMANûSAIDûh"UTûAREûTHEREû
.EWû9ORKûBANKSûCLOSEDûTHEIRûOFlCESûINû ways in which we can consolidate and learn,
mid-March and while the technical aspects particularly in some of the big money centres,
of having 90% of staff working from home where you want less density of people?
MAYûHAVEûWORKEDûmAWLESSLYûTHEYûAREûNOTû Absolutely. But it’s not like we’re going to
suddenly cut our real estate footprint in half.”
Europe’s major banks made an aggregate Germany’s 17 biggest banks lost money in SOVEREIGNûDEBTûEXPOSUREûATûTHEûENDûOFû$ECEMBERû
PROlTûOFûõBNûLASTûYEARûTOûDELIVERûAûRETURNû aggregate last year, leaving them with a accounting for 12% of their total assets. Of that,
on regulatory capital of just 6%, which negative return on regulatory capital (RoRC) õTRNûWASûDOMESTICûSOVEREIGNûEXPOSURE
INCLUDEDûAûõMûLOSSûFORû'ERMANûLENDERSû of 0.2%, the EBA said. The eurozone crisis of 2011 raised concerns
the EU’s banking watchdog said. The leading 10 banks in France made a that banks in some countries held too much
4HEûLOWûPROlTABILITYûOFû%UROPEANûBANKSûISû õBNûPROlTûLASTûYEARûDELIVERINGûAû2O2#ûOFû debt issued by their own government,
one of the biggest problems for the industry 7.9%, the report said. potentially feeding a sovereign doom loop,
and means recovering from problems such as "RITAINSûTOPûBANKSûMADEûAûPROlTûOFû especially in Southern European countries.
the current coronavirus and lockdown could õBNû2O2#ûOFû ûINûû3PAINSûMADEû )TALYSûBANKSûHADûõBNûOFûSOVEREIGNû
take years. It also deters new investment. US AûõBNûPROlTû û)TALYSûMADEûõBNû exposure, representing 13.9% of their assets,
banks typically deliver far higher returns, (6.1%) and banks in the Netherlands made INCLUDINGûõBNûOFûDOMESTICûBONDSû3PAINSû
making them quicker to recover from õBNû û"ANKSûINû.ORWAYû3WEDENûANDû BANKSûHELDûõBNûOFûSOVEREIGNûEXPOSUREû
setbacks and more attractive for investors. Poland delivered average RoRC of more than ûOFûASSETS ûINCLUDINGûõBNûOFû
The scale of EU banks’ low returns is 10%, and in Austria the average was 9.8%. domestic bonds.
rarely exposed, but the European Banking &RANCESûBANKSûHADûõBNûOFûSOVEREIGNû
Authority showed the scale of the problem SOVEREIGN DOOM LOOP? exposure at the end of last year (11.3% of
in its latest transparency exercise, covering The EBA, which postponed its planned stress test ASSETS ûINCLUDINGûõBNûOFû&RENCHûBONDSû
127 banks from 27 countries (including the of EU banks this year due to the coronavirus 5+ûBANKSûHADûSOVEREIGNûEXPOSUREûOFûõBNû
UK) up to the end of 2019. CRISISûSAIDûTHEûûBANKSûHADûõTRNûOFû INCLUDINGûõBNûOFûDOMESTICûEXPOSURE

Who’s moving where…

Ashish Jhajharia and Benelux region. NATIXIS has Eedle joined Natixis in
Saadi Soudavar have Josef Ritter, head of appointed Simon 2012 as regional head
been promoted to EMEA ECM since Eedle to head its of CIB for the Middle
co-heads of EMEA the departure of corporate and East, based in Dubai.
ECM at DEUTSCHE co-head Ed Sankey investment banking Riccardi joined Natixis
BANK. Jhajharia to HSBC last June, business in Britain in 2010 and will stay
was previously head is now co-head of and Barbara Riccardi in Dubai and oversee
of syndicate and global ECM alongside (left) as regional head CIB there, in Turkey
Soudavar covered a Jeff Bunzel. He is of CIB for the Middle and a new office in
number of countries also taking on the East. Eedle takes over Saudi Arabia.
including the UK, chairmanship of the from Serge Ekue, who
Greece, Turkey, the EMEA reputational left in March, and will
Nordics and the risk committee. be based in London.

18 International Financing Review June 13 2020


NEW NORMAL
#ITIGROUPûCHIEFûlNANCIALûOFlCERû-ARKû-ASONû
said it’s too soon to tell what the new
normal looks like.
But, having bankers spread out from
centralised hubs has revealed potential real
estate opportunities.
“We’ve got to let some of this play out a
bit more to see what the new normal looks
like, but we expect there will be some things
worthy of considering,” Mason said.
Some, however, expect the new normal to
look a lot like the old normal.
Cerberus demands changes at
‘disastrous’ Commerzbank
53ûPRIVATEûEQUITYûlRMûCERBERUS is calling on
COMMERZBANK to appoint two of its nominees
to the supervisory board, cut costs and adopt
a new strategy, as it battles to make a
success of a big bet on German banks.
In a letter to Commerzbank’s chairman
last week, Cerberus complained that the
bank had failed to heed its advice after
more than 70 meetings. Shares in
People
& Markets
COST CUTS
The 150-year-old Commerzbank has had a
rough few months as it swung to a loss,
halted its 2019 dividend plans, backtracked
on the sale of its Polish lender mBank, faced
credit rating downgrades, and lost a long-
standing sponsorship deal with a local
SOCCERûTEAMûTOûRIVALû$EUTSCHEû"ANK
Commerzbank, bailed out by the state
“We’re in the relationship-building
business,” said Moelis co-president Navid
Mahmoodzadegan. “And it’s hard to build
relationships if you’re not sitting in front of
people. So I suspect once we get through
this crisis, our real estate footprint won’t
look too much different than it has in the
past.”
Philip Scipio
The EBA report said capital ratios
continued to improve last year, and the
weighted average Common Equity Tier 1
Germany’s second-biggest bank have
fallen about 60% since Cerberus bought
a 5% stake in 2017.
The investor, describing Commerzbank’s
performance as “disastrous”, demanded it
APPOINTûTWOûhHIGHLYûQUALIlEDûINDIVIDUALSûTOû
BEûIDENTIlEDûBYûUSvûTOûITSûSUPERVISORYûBOARD
Cerberus said shareholders would be
HIGHLYûSUPPORTIVEûOFûhSIGNIlCANTûCHANGEvûTOû
the supervisory board, management board
and strategy, but did not give details on
what the new strategy should be.
“The window of opportunity to address
the challenges faced by Commerzbank is
DURINGûTHEûLASTûlNANCIALûCRISISûHASûALSOû
WARNEDûITSûTARGETûFORûTURNINGûAûPROlTûINûû
now seems “very ambitious” amid the
coronavirus outbreak.
Commerzbank CEO Martin Zielke said on
Thursday the bank was focused on cutting
costs and “we see additional potential
beyond current plans”. He plans to present
additional savings measures in August. It is
in talks with unions about staff reductions.
“The precarious situation of
Commerzbank requires swift
ratio across the banks was 14.8% at the end RAPIDLYûCLOSINGvû#ERBERUSûWROTEûINûTHEûlVE
and decisive action now”
OFû$ECEMBERûUPûFROMûûATûTHEûENDûOFû
September.
All banks had a ratio above 11%, well
above regulatory requirements, the EBA
said. Banks in Spain had the lowest average
#%4ûRATIOûOFûûATûTHEûENDûOFû$ECEMBER
The EBA said asset quality of EU banks
also remains on an improving trend,
although it warned last month that could
TERMûPROlTSû STAKEûINû$EUTSCHEû"ANK
reverse due to the impact of the coronavirus.
Non-performing loans represented 2.7% of
page letter, seen by Reuters.
Commerzbank said in a statement it was
FOCUSEDûONûCOSTSûANDûEFlCIENCYûh4HEûBANKû
takes careful note of shareholders’ opinions
– including critical ones,” it said.
Such public shareholder campaigns are
rare in Europe, and in Germany activist
investors are often viewed warily – as
SHAREHOLDERSûFOCUSEDûONûSHORT
rather than what is best for companies in
the long term. The German government is
One top investor said Cerberus’ pressure
could help in that regard. “Perhaps
Cerberus’ move will even help management
to push through more cost-cutting measures
with the unions,” the investor said.
Just months after buying into
Commerzbank, Cerberus also took a 3%
Cerberus was behind a push to merge the
two banks last year, people told Reuters at the
ASSETSûATûTHEûENDûOFû$ECEMBERûLESSûTHANûHALFû
THEûLEVELûlVEûYEARSûAGOû"UTûTHEûSCALEûOFû.0,Sû
remains a problem in several countries – the
ratio was 35.2% in Greece, 19.3% in Cyprus
and 6.7% in Italy.
Steve Slater
the largest shareholder in Commerzbank
with a 15% stake.
“In my view, state ownership does not
make it any easier for Cerberus to achieve
its strategic goals,” said Klaus Nieding of
SHAREHOLDERûLOBBYûGROUPû$37
time, though the effort failed and both banks
embarked on separate restructuring measures.
“The precarious situation of Commerzbank
requires swift and decisive action now,”
Cerberus wrote, demanding a reply by June 12.
Patricia Uhlig, Tom Sims

Please contact us if you have information about job moves: peoplemarkets@refinitiv.com

Daiwa Securities in Guggenheim’s UNICREDIT has hired Marracino replaces

Group’s boutique restructuring group Roberta Marracino Maurizio Beretta, who
investment bank, and was previously as head of ESG has led the Italian
DC ADVISORY, has a managing director strategy and impact bank’s ESG and
hired Ajay Bijoor in the restructuring banking. Marracino social impact banking
from Guggenheim group at Peter J will start on July 1 and in recent years.
Securities as a Solomon. He began will also coordinate Marracino joins from
managing director his career at Credit the UniCredit Zurich Insurance and
in its debt advisory Suisse First Boston. Foundation’s previously spent 15
and restructuring activities. She will years in two spells at
group. Bijoor was report to Wouter McKinsey.
most recently a Devriendt, head of
managing director finance and controls.

International Financing Review June 13 2020 19

Bellwether
Bellwether: n. From the practice of placing a bell around the by Jernej Omahen, Goldman’s head of European bank
neck of a castrated ram so that it might lead its flock RESEARCHûATûTHEû53ûlRMSûVIRTUALûBANKûCONFERENCE
Although it was online, you could still feel the tension
#%2"%253û7()#(û(/,$3 a stake in Commerzbank, appears
to have lost patience in Germany’s second biggest lender
and recently lambasted it for a disastrous performance
and demanded a change in strategy.
"UTûTHEûPRIVATEûEQUITYûlRMûISûAûGLUTTONûFORûPUNISHMENTû
and is also a shareholder in Commerz’s bigger rival
when Omahen opened up by saying Khan joined at “an
interesting time”. Was he actually going to ‘go there?’
Sadly, it turned out he was referring to the coronavirus,
not Spygate.
%6%2#/2%3û02%3)$%.4û!.$ûCEO
$EUTSCHEû"ANKûWHEREûITûISûUNDERSTOODûTOûHAVEûHADûAû If you work Ralph Schlosstein says the global
hand in the seemingly immovable Paul Achleitner’s at Evercore downturn in M&A due to the
“decision” to stand down as the bank’s chairman in 2022. and see Ralph CORONAVIRUSûHASûPLACEDûTHEûlRMûINû
So it’s not to be messed with, something that will return to the unfamiliar territory. “Over the last
come as no surprise to those with a working knowledge 10 years we haven’t needed to focus
office after
of Greek mythology – or access to Wikipedia. on costs down to the gnat’s ass,”
Cerberus, often referred to as the hound of Hades, lockdown Schlosstein told Morgan Stanley’s
is a multi-headed dog that guards the gates of the armed with bank conference.
underworld to prevent the dead from leaving. Which a magnifying Now, Evercore is looking to do
makes its shareholding in Germany’s two troubled banks glass and a fly just that as it grapples with a lower
entirely logical. swatter, look growth environment. So if you
As any fool knows, the important thing about hounds work at Evercore and see Ralph
is not to show them any fear. But that may be too late
busy RETURNûTOûTHEûOFlCEûAFTERûLOCKDOWNû
for Commerz, whose shares have fallen a terrifying 60% armed with a magnifying glass and
since Cerberus bought a 5% stake in 2017. AûmYûSWATTERûLOOKûBUSY
“The window of opportunity to address the challenges
faced by Commerzbank is rapidly closing,” Cerberus ROYAL BANK OF Scotland has shaken up the management
wrote ominously in a letter to the bank, in which it of NatWest Markets for the second time in six
demanded the appointment to the bank’s board of two months.
hHIGHLYûQUALIlEDûINDIVIDUALSûTOûBEûIDENTIlEDûBYûUSvû 3INCEû$ECEMBERûTHEûUNITûHASûBEENûRUNûBYû#%/û2OBERTû
(IGHLYûQUALIlEDûINûWHATûTHOUGH Begbie and CFO Robert Horrocks on an interim basis.
But now Begbie has been appointed to the job full-
IQBAL KHAN LASTûWEEKûGAVEûHISûlRSTûBIGûPUBLICû TIMEûWHILEû(ORROCKSûHASûMADEûWAYûFORû$AVIDû+INGû3Oû
presentation since taking over as co-head of global the unit’s two-Bob management team now has a more
wealth management at UBS. He was being interviewed permanent look. „

Who’s moving where…

„ MOELIS has hired banking experience „ Simon Field has of public-sector „ Jonas Wikmark has „ Josh Presley has
Philippe Gallone from and advised on been appointed global banking for South and been promoted to moved back to
Morgan Stanley as over US$200bn of head of escrow in South-East Asia. He co-head of Nordics London from New
a managing director transactions. He HSBC‘s investment joined HSBC in 2008 banking for JP York at CREDIT
in its healthcare started his career at bank, as part of a and has worked in MORGAN, tasked with SUISSE and switched
group, based in Credit Suisse First push to expand the securities services and driving growth in one roles from syndicate to
London. Gallone Boston, and is a business. Field will global banking. HSBC of its major European debt capital markets.
had been co-head physician by training. be part of the issuer said it plans to grow markets. Wikmark, a Presley will head
of EMEA healthcare services team and is its escrow business, 17-year veteran of the corporates for the UK
banking at Morgan based in Singapore, in which an agent US bank, will share and Swiss regions.
Stanley since 2016. where he relocated holds an asset for his new role with
He has more than 15 to two years ago, safekeeping. Klaus Thune, Reuters
years of investment and is currently head reported.

20 International Financing Review June 13 2020


Begbie given reins to lead NatWest
Markets turnaround
ROYAL BANK OF SCOTLAND has appointed former
lXED
INCOMEûTRADERûRobert Begbie as chief
executive of NATWEST MARKETS on a
People
& Markets
and structured investor product sales, head tasks: the business has been shrinking for
of balance sheet management, and head of years but still made a £25m loss last year and
capital planning and management for US a £70m loss in 2018.
permanent basis and hired former MUFG
executive David King as the investment bank
UNITSûlNANCEûCHIEF
They will have the task of turning round
the business after years of struggle, which
will include halving its size and axing jobs to
focus on core products such foreign
UNITû#ITIZENSûACCORDINGûTOûHISûPROlLEûONû
LinkedIn.
RBS said King was expected to take over as
CFO some time this summer. He was
previously CEO of MUFG Securities EMEA
for nine years until April 2019, according to
HISû,INKED)NûPROlLE
“When I took over as CEO, re-focusing
NatWest Markets was one of my top
priorities, and our work here is well under
way to deliver against the strategy set out in
February,” Rose said in a statement last
week.
That strategy includes halving NWM’s
EXCHANGEûlNANCINGûANDûHEDGINGûFORû
corporate clients.
Begbie has been interim CEO of NatWest
-ARKETSûSINCEû$ECEMBERûû(EûTOOKûOVERû
from Chris Marks, who was axed by RBS
CEO Alison Rose shortly after she took over
in November.
Begbie was previously treasurer of RBS.
He joined RBS in 1994 as head of
lXED
INCOMEûTRADINGûANDûHASûHELDûVARIOUSû
roles, including head of equity derivative
UBS rejigs private markets unit
King replaces Robert Horrocks, who has
BEENûINTERIMû#&/ûSINCEû$ECEMBERû(ORROCKSû
took over from Richard Place in the role and
WASûPREVIOUSLYûTREASURYûlNANCEûDIRECTOR
King will join Begbie on the NWM board
as an executive director.
Rose axed NWM’s two leaders a month
after she took over, putting her stamp on
the business before announcing another
restructuring attempt in February. Fixing
the investment bank is one of her biggest
risk-weighted assets to £20bn in the
medium term. RBS said last year the
turnaround could take three to four years.
NWM has about 5,000 staff – fewer than
one-third of the 16,800 employees in the
investment bank in 2009.
RBS also said Donal Quaid would be group
treasurer on a permanent basis. Quaid has
been interim treasurer since Begbie moved
UPûINû$ECEMBER
Steve Slater
clients for illiquid investment opportunities
SUCHûASûPRE
)0/ûlNANCINGûSTRUCTUREDûCREDITû
UBS has made changes to its private markets- within the wealth management division, and secondary equity monetisations.
focused groups in its investment banking including unlisted equity, private debt, special The new committees are designed to
and wealth management divisions aimed at situations, real estate and infrastructure. improve coordination between groups
bolstering collaboration between the two $Eû&ILIPPOûWHOûLEADSû5"3SûCORPORATEû looking at private market opportunities in
units so it can capitalise on increased client lNANCEûTEAMûANDû-ATTOLIûWHOûHEADSûUPûTHEû UBS’s wealth management and investment
demand for private market opportunities.
The changes include newly created regional
positions of head of distribution within the
direct investments group. Giuseppe De Filippo
has been appointed to that position for
'REATERû#HINAûFAMILYûOFlCEûBUSINESSûWILLû
also co-chair new private markets
committees in their respective regions.
The other co-heads of the new committees
are Isabelle Toledano-Koutsouris in EMEA and
banking divisions.
The changes come as more investment
banks are bolstering their private market
offerings as more private companies delay
going public and ultra-high-net-worth and
Europe, the Middle East and Africa, and Enrico Selina Cheung in APAC. Toledano-Koutsouris FAMILYûOFlCEûCLIENTSûINûPARTICULARûAREû
Mattoli WILLûLEADûITûFORû!SIA
0ACIlCûACCORDINGûTOû and Cheung are the heads in their regions of targeting private market deals in order to
a memo sent to staff and seen by IFR. THEûPRIVATEûlNANCINGûMARKETSûTEAMSûWHICHû ENHANCEûTHEIRûPORTFOLIOûDIVERSIlCATIONûORû
The direct investments group effectively sit within the investment bank and were set increase returns.
comprises the bank’s alternatives business up last year to meet demand from the bank’s Thomas Blott

Please contact us if you have information about job moves: peoplemarkets@refinitiv.com

„ Ed Hoyle has taken „ Emerging markets „ EM credit traders „ CREDIT SUISSE has „ JEFFERIES has „ Ed Jenkins, HSBC‘s
over Carl Piccolo’s trader Akash Garg Mark Shillam and appointed Edmond hired Shujin Chen as chief risk officer for
fixed income syndicate has left BNP Paribas Thomas Layzell have Huang as head of head of China FIG Asia-Pacific, will step
responsibilities at to join JP MORGAN left Mizuho and are China equity strategy. research from Chinese down from his role
STANDARD BANK, trading CEEMEA heading to BNP Huang retains his brokerage firm Huatai on July 1 for family
sources said. One credit in London, PARIBAS, sources existing positions as Securities. Chen spent reasons. Jenkins will
source said Piccolo, sources said. He said. Shillam, who head of Hong Kong and three years at Huatai, take a sabbatical
who was global joined BNP Paribas in was head of emerging China equity research where she led H-share and plans to return
head of fixed income 2019, following a two- markets trading at and regional head of research. in October. Mark
syndicate, is retiring year spell at ING as an the Japanese bank, industrial research. He McKeown will handle
after 20 years at the EM credit trader. joined Mizuho in 2013. replaces Vincent Chan, Jenkins’ role on an
bank. Layzell joined Mizuho who recently joined interim basis.
in 2018. Aletheia Capital.

International Financing Review June 13 2020 21

“The window of opportunity to address the challenges
faced by Commerzbank is rapidly closing”
PRIVATE EQUITY FIRM CERBERUS, A DISGRUNTLED INVESTOR, P19

Capital markets week ahead:

Royalty Pharma, ThyssenKrupp, Via Varejo
DRUG MONEY Royalty Pharma hopes to win
the crown for the biggest US IPO of the year
on Tuesday when it prices its US$2bn
Nasdaq listing. The company, which was
founded in 1996, pitches itself as a kind of
(US$800m) capital raise on Monday. It’s
selling new shares to shore up its balance
sheet after the pandemic forced it to close
its 1,000 stores across the country.
Although it has since reopened some
issue from Scandic Hotels. The Nordic hotel
OPERATORûISûRAISINGûFUNDSûTOûGETûITSûlNANCIALû
health back on track after a collapse in
bookings sent its occupancy rate to a record
low of 6% in April. It has since reported an
venture capitalist for the pharmaceutical BRANCHESûITSûlNANCESûHAVEûBEENûHARDûHITû upswing in demand, and is hopeful of a
INDUSTRYûINJECTINGûCAPITALûINTOûlRMSû
developing new drugs in exchange for a
share in the royalties.
The deal hopes to tap into strong demand
for the jumbo IPOs that have made it to
market since the coronavirus crisis began.
3UCHûWASûTHEûDEMANDûFORûTHEû*$%û0EETSûANDû
Warner Music listings that banks were able
to wrap up bookbuilding early on both
deals. But Royalty Pharma is coming up
against some tough markets, following a 6%
plunge in the S&P 500 on Thursday.
LIFT MUSIC Banks are set to begin sounding
OUTûINVESTORSûONûAûEAGERLYûAWAITEDûõBNû
loan backing the leveraged buyout of
ThyssenKrupp’s lifts business by a
consortium that includes Advent, Cinven
and German coal industry foundation RAG-
Stiftung. Given the size of the deal and
uncertain outlook, banks are keen to hear
how best to structure the deal, which is
expected to launch later this month.
DIP STICK A US$1bn loan backing the
acquisition of Lummus Technology by The
Chatterjee Group and Rhone Capital closes
on Monday. The company, which develops
and the cash call will give it some breathing
space.
FILTER TIPS GVS hopes to raise more than
õMûFROMûITSû-ILANû)0/ûONû4HURSDAYû4HEû
COMPANYûMANUFACTURESûlLTERSûFORûTHEû
healthcare and energy industries and has
seen a surge in demand during the
pandemic, especially for its masks. That
business line in particular has helped keep
the listing on track while other planned
Italian listings have fallen by the wayside
due to the pandemic.
OVER THE COUNTER PharmaSGP prices its
õMû&RANKFURTû)0/ûTHEûSAMEûDAYû4HEû
German drugmaker focuses on over-the-
counter products based on natural
ingredients – an approach that has
attracted a lot of ESG-focused investors to
THEûDEALû*USTûTWOûANALYSTSûHAVEûlELDEDû
questions from 170 investors over an eight-
day marketing period for the listing.
REELING THEM IN Grieg Seafood hosts a
series of calls with investors starting on
Monday as it seeks to lure them into a
planned green bond in Norwegian krone.
decent holiday season.
SALES RACK UK clothes retailer Ted Baker is
set to wrap up a £100m open offer on
Wednesday that it hopes will put its
lNANCESûINûAûMUCHûBETTERûPOSITIONûTOû
weather the crisis. The company, which is
on its third chief executive in little over a
year, has embarked on a top-to-bottom
strategy overhaul, restructured its debt and
sold off its headquarters in a bid to steady
the ship.
TURNDOWN SERVICE Creditors to the UK
budget hotel chain Travelodge hold a vote
on Wednesday on whether or not to accept
a huge cut in the money owed to them. The
owners of the chain, which include
Goldman Sachs and hedge funds Avenue
Capital and Goldentree, are attempting to
engineer a cramdown plan, making use of
new insolvency legislation brought in for
the pandemic.
LAST WEEK IN NUMBERS
€241bn – Total demand for syndicated
TECHNOLOGYûFORûOILûRElNERIESûISûBEINGûSPUNû The Norwegian salmon and trout farmer deals from Italy, Spain, Greece and the
OFFûFROMû-C$ERMOTTû)NTERNATIONALûWHICHû was spun off from the Grieg Group, a UK on Tuesday
lLEDûFORûBANKRUPTCYûINû*ANUARYû0ROCEEDSû privately held company that specialises in HK$29bn – Bailout for airline Cathay
from the sale will go towards paying down
a debtor-in-possession loan.
EVERYTHING MUST GO Brazilian home
appliances and electronics retailer Via
Varejo hopes to wrap up a R$4bn
22
shipping, in 2007. It is the latest green
transaction to hit the market following a
slower-than-expected start to the year.
NO VACANCIES Subscription ends on
Wednesday for a SKr1.8bn (US$180m) rights
International Financing Review June 13 2020
0ACIlCûINCLUDINGûRIGHTSûISSUEûWARRANTSû
and a government loan
€3bn – Amount raised by automaker
Volkswagen through a dual-tranche
subordinated bond deal

Investors eye Asian private credit
Institutional investors expect an uptick in
private credit activity in Asia, as the
economic dislocation caused by the Covid-19
pandemic is expected to lead to a pullback
in lending from both international and local
banks.
Private debt volumes, encompassing
everything from senior secured lending
through to distressed debt, have increased
SIGNIlCANTLYûINû!SIAûSINCEûTHEûGLOBALû
lNANCIALûCRISISûASûINVESTORSûGLOBALLYûHAVEû
sought out alternative investment
opportunities because of the relatively
attractive yields on offer.
Volumes in the region are still dwarfed by
those in North America and Europe,
however. According to research from
alternative investment information provider
Preqin, total private debt assets under
management in Asia, which reached a
record US$56.8bn last year, were less than a
lFTHûTHEûSIZEûOFûTHOSEûINû.ORTHû!MERICA
Still, several institutional investors told
IFR they were allocating more capital, as
well as resources, to the region because of
the increasing demand among borrowers
ANDûBECAUSEûCOMPETITIONûISûLESSûlERCEûTHANû
in Europe or North America.
Most institutional investors typically
invest using a combination of their balance
sheet and capital from their global credit
funds, although a few such as BlackRock
LIMITED COMPETITION
The majority of institutional investors in
Asia to-date have focused their efforts on
direct lending, due to the number of small
and mid-sized borrowers that struggle to
access bank credit in the region.
The target clients for these institutional
investors tend to be companies with
earnings before interest, tax, depreciation
and amortisation of between US$15m and
US$100m, which are usually below the radar
of most major banks, sources said.
Larger deals, at least in developing Asia, are
rare, but institutional lenders have closed
some big deals with private equity-backed
BORROWERSûBYûOFFERINGûMOREûmEXIBLEûTERMSû
than banks are willing to provide, such as less
amortisation or a delayed drawdown.
Whereas in Europe and North America mid-
market deals have become increasingly
crowded, leading to lower pricing and looser
covenants, most institutional investors were
sanguine about the situation in Asia, saying that
competition was limited and the terms more
investor-friendly than seen in other regions.
“The US and Europe are certainly more
established markets and hence more
crowded,” said Neeraj Seth, head of Asian
credit at BlackRock.
“In Asia, if you analyse the market in a
matrix structure with different countries on
one axis and various private credit strategies
People
& Markets
eyeing distressed debt opportunities in China
and India, in particular.
According to the China Banking and
Insurance Regulatory Commission, total
NPLs in China’s banking sector are
Rmb2.61trn (US$369bn), equivalent to 1.9%
of total loans, although most analysts
ESTIMATEûTHEûlGUREûTOûBEûFARûHIGHER
In India, total NPLs are Rs8.94trn
(US$118bn), equivalent to 9.1% of total
sector loans, according to data from the
Reserve Bank of India. Analysts are
predicting that the NPL ratio could double to
18%–20% over the next 12 months as a result
of the economic impact from the country’s
lockdown. Several institutional investors
said that they were looking at distressed
debt opportunities in India already.
In China, international investors have had
limited exposure to distressed debt as NPLs
are typically sold to the country’s big four
asset management companies, which in
turn are reluctant to sell them on at a
discount that would satisfy institutional
investors’ return targets.
According to research from PwC, only 14
deals closed last year involving a foreign buyer,
with around US$1.1bn in foreign capital
committed. However, several investors said that
the pandemic had increased the opportunities
for international investors, especially given that
China was already pushing deleveraging in its
already have closed Asian private credit
funds.
“It [private credit] has grown for sure
since the GFC, but relative to the rest of the
world, it has trailed very far behind,” said
across the risk-return spectrum on the other
axis, the competitive landscape doesn’t look
intense relative to the number of
institutions that are active in broader
private credit strategies.”
lNANCIALûSECTORûBEFOREûTHEûCRISISûHITûINCLUDINGû
among the big four AMCs.
“Because the shadow banking system was
already being reined in by the government
over the last few years, and commercial
"RIANû$ILLARDûHEADûOFû!SIAûCREDITûATû++2û
h!SIAûISûAROUNDûTWO
THIRDSûOFûGLOBALû'$0û FEW OPTIONS
growth, which is a useful proxy for capital
consumption, but only around 7% of private
credit AUM is dedicated to Asia.”
HK activist Webb takes step back
Hong Kong-based activist investor and
banks are focused on cleaning up their NPLs,
companies in China today have fewer
The economic disruption caused by Covid-19 sources of credit to turn to,” said Benjamin
is expected to lead to a rise in non-performing Fanger, managing partner at ShoreVest.
loans, with a number of institutional investors Thomas Blott
has made him arguably the city’s most known to trigger stock market routs,
corporate governance evangelist David Webb
is stepping back from posting regular
opinion pieces after being diagnosed with
prostate cancer.
Webb, 54, whose research on Webb-site.
com is widely read in Hong Kong banking
circles, said he would only be posting
sporadically as he concentrates on battling
the disease. He said he would eschew some
of the in-depth, investigative research that
FAMOUSûGADmYûALTHOUGHûHEûWOULDûSTILLû
continue to speak out on important issues.
Having retired from a career in
investment banking in 1998 at the age of 33,
Webb has spent the past 20 plus years
splitting his time between managing his
own money and championing good
corporate governance practice. His research,
which often involves painstakingly sifting
through reams of disclosures, has been
International Financing Review June 13 2020
although he has always said he does
NOTûPROlTûFROMûANYûRESEARCHûHEûMAKESû
public.
Around six weeks after he published his
“Enigma” report in 2017, detailing a
complex web of cross-shareholdings among
Hong Kong-listed companies, the share
prices of dozens of the companies he wrote
about plummeted.
Thomas Blott
23
“If companies make political statements, they must
accept the corporate responsibilities that follow”
AVIVA CHIEF INVESTMENT OFFICER DAVID CUMMING, P17

Ratings agencies wary of corporate credit rebound

Corporate bond issuers rated by Fitch are surveys, and was based on the views of more typically that leads to a downgrade 50%–60%
likely to see revenues tumble by US$5trn in than 100 individual sector analysts. of the time in the following 12 months.
AGGREGATEûTHISûYEARûORûONE
lFTHûRAISINGû
doubts about their ability to service their
US$14trn of debts and meaning downgrades
may lie ahead.
The slump is due to the economic
problems wrought by the coronavirus
pandemic, compounded by a low oil price.
A large component of the rated
companies are in the oil and gas sector,
particularly hit by the low oil price this year.
A smaller proportion are in sectors, such as
retail, leisure and transport, that have been
severely impacted by the lockdown
measures many countries have had to adopt.
4HEûAGGREGATEûlGURESûSHOWûTHEûTOUGHû
MARKET BOUNCE
Prices of existing corporate bonds have
recovered dramatically from their lows in
late March when the economic lockdowns
WEREûlRSTûIMPOSED
“The rate at which spreads have tightened
from the late-March wides has been
remarkable,” said Craig Nicol, strategist at
$EUTSCHEû"ANKû(EûSAIDûûOFû3INGLEûANDû
$OUBLEû"ûCORPORATEûCREDITSûWEREûNOWû
showing a cash price higher than before the
pandemic started.
“While we wouldn’t go as far as saying that
these names are fully priced, the upside from
DOWNGRADES AHEAD
Other ratings agencies are also reluctant to
lift corporate ratings just yet, despite the
roaring primary market.
“Our reactions have been more measured
than the market reactions have been. Some
credits blew out dramatically then came back
in,” said Anne Van Praagh, managing director
of global strategy and research at Moody’s.
“Our reactions are more stable. We said at
the beginning we might move ratings down
or put them on watch but did not move
things down as much as people thought
relative to the market. We still see lots of
situation facing corporate bond issuers and
INDICATEûTHATûINDEBTEDûlRMSûMAYûFACEûAû
harder time. The global economy is
expected to decline by 3% this year and some
countries may see output declines of more
than 10%, the International Monetary Fund
has estimated.
“It will be a long slow climb back and take
until the end of next year for aggregate
revenues to get back to 2019 levels,” said
Richard Hunter, global head of corporate
ratings at Fitch.
He said Fitch’s analysis, unlike many
others, was a bottom-up look at the impact
of the pandemic on individual issuers rather
than extrapolating from general economic
Bankrupt Hertz asks to sell US$1bn in stock
Will investors buy shares in a company
already in bankruptcy? Car rental company
HEREûHASûDIMINISHEDûSIGNIlCANTLYvûHEûSAIDû%VENû
the other names in this bucket of corporate
CREDITûWEREûNOWûONLYûlVEûPOINTSûBELOWûWHEREû
they were pre-pandemic, on a cash basis.
Hunter said it was not clear the current
strong primary market for corporate bonds
would be sustained in the second half of the
year.
“Second-quarter numbers due out in July
and August may not be pretty and there
could be a spike in the virus leading to more
travel bans. There could also be investor
fatigue in the relief rally,” he said.
He said 85% of companies that suffered
negative action in the last three months had
stayed on negative outlook or watch, and
nears an exit from bankruptcy protection.
PG&E’s existing shares traded throughout
uncertainty regarding the economy even if
less than three months ago.”
S&P also still sees problems ahead. The
agency said European speculative-grade
corporate defaults could spike to 8.5% by March
2021 from 2.4% in March this year. That would
mean 62 such companies would default.
h%XPANSIVEûMONETARYûANDûlSCALûSUPPORTû
could lessen defaults over the near term, but
much assistance to-date adds to existing
debt piles at a time when basic revenue is
lacking, which could lead to a protracted
period of higher defaults, rather than typical
cyclical behaviour,” said Nick Kraemer, head
of performance analytics at S&P.
Christopher Spink
The request to the court is to authorise,
but not require, Jefferies to sell 246.7m
HERTZ GLOBALûISûHOPINGûTOûlNDûOUTû(ERTZû
advised by Jefferies, is asking the US
bankruptcy court to approve a US$1bn
offering of existing but unissued shares.
(ERTZûlLEDûFORûBANKRUPTCYûPROTECTIONûONû
May 22 as economic shutdown related to the
with the presumption that the company had
SIGNIlCANTûVALUEûBEYONDûITSûLIABILITIES
“Offering shares during the early part of a
case is opportunistic,” said one investment
banker. “It’s possible because the markets are
extremely frothy at the moment, with
shares through at-the-market transactions
worth up to US$1bn. Jefferies would receive
a selling commission of up to 3% of the gross
proceeds of any shares.
The request to the bankruptcy court said
Hertz shares traded at 56 cents a share
coronavirus dried up its revenue stream.
%QUITYûISûUSUALLYûTHEûlRSTûCASUALTYûINû
bankruptcy proceedings as creditors holding
SECUREDûLOANSûANDûBONDûDEBTûAREûlRSTûINûLINEû
to be repaid. Existing equity is typically
wiped out and new equity is issued near the
end of a case to repay creditors or
recapitalise the company.
investors buying almost anything.” But, he said,
if equity investors are willing to bet that Hertz
is valuable and poised to rebound after the
economy reopens, this could be a great trade.
EMERGENCY RELIEF
Hertz is asking the court for “emergency
relief” to test the willingness of the market
ONûTHEûlRSTûDAYûOFûITSûBANKRUPTCYûBUTûROSEû
more than tenfold to trade at US$5.53 on
June 8.
“The recent market prices of and the
trading volumes in Hertz’s common stock
potentially present a unique opportunity for
the debtors to raise capital on terms that are
far superior to any debtor-in-possession
There are cases when the value of the to buy its equity. While shares of bankrupt lNANCINGvû(ERTZûSAID
bankrupt company exceeds its debts and companies have often traded up during the !NDûUNLIKEûTYPICALûBANKRUPTCYûlNANCINGû
existing equity holders see a recovery. course of a bankruptcy proceeding, an selling stock would not impose new
California utility PG&E last week prepared offering of new shares during the case is covenants, it said.
to offer debt, loans and new equity as it highly unusual. Philip Scipio

24 International Financing Review June 13 2020


European banks say Q2 activity robust
European banking executives expressed
cautious optimism last week about second-
quarter trading – although they held back
from some of the bullish predictions made
economic activity during the third quarter,
which could fuel an acceleration later in the
YEARûINû-!ûhASûCORPORATESûANDûlNANCIALû
sponsors vie to get ahead of the pack”.
People
& Markets
were mainly involved in groceries, he said at
the Goldman conference.
“We have done a bottom-up look across all
those high and medium-risk sectors. We
by US peers in recent weeks. It said more corporate carve-outs could HAVEûIDENTIlEDûTHEûSINGLEûASSETSûTHATûNEEDû
CREDIT SUISSE‘s new chief executive Thomas occur as clients “strive for optimum business say, more attention. Clearly some have
'OTTSTEINûINûOFlCEûSINCEû&EBRUARYûSAIDûACTIVITYû models and structures in lower growth moved to work out,” he said. “[We] will be
so far had been “robust” in May and June. environment”. helping our clients as well as we can through
“Those early indications that we have seen US bank chiefs have indicated trading THEIRûCASHmOWûDIFlCULTIESv
now in the last couple of weeks have been revenues in the second quarter will continue Credit Suisse’s Mathers said the outlook
actually quite promising and going in the THEIRûSTRONGûlRST
QUARTERûPERFORMANCEû*0û for its corporate loans had improved since
RIGHTûDIRECTIONvûHEûSAIDûATûAûlNANCIALSû
conference organised by Goldman Sachs.
“We clearly had a lot of stress in the system
in the second half of March, but things really
calmed down in April and they continue to be
quite robust in May and June.”
Gottstein warned that economic data for
the second quarter would be “very bad” for
Morgan last month said its Q2 markets
revenues were on track to be up 50% from
the same period last year.
LOANS OUTLOOK
DEUTSCHE BANK@SûCHIEFûRISKûOFlCERû3TUARTû,EWISû
WASûCAUTIOUSûBUTûCONlDENTûABOUTûLOANSûMADEû
by its corporate and investment bank to
THEûENDûOFûTHEûlRSTûQUARTERûPARTICULARLYûFORû
oil and gas names. The bank had SFr2.9bn
(US$3.06bn) of exposure to non investment
grade oil and gas at the end of March.
“There’s been a very substantial narrowing
of spreads over the course of the last two
months, which I think one would expect to
BEûBENElCIALûTOûTHEûRESERVEûBUILDûTHATûWEû
Europe and the US. But he said investment
banking colleagues were having a high level
of engagement with clients.
Many corporate clients have made the
MOSTûOFûTHEûLOWERûRATESûAVAILABLEûTOûRElNANCEû
companies involved in commercial real
estate, oil and gas, aviation and retail.
He said the CRE portfolio was “pretty
ROBUSTvûSINCEûITûWASûWELLûDIVERSIlEDûANDûHADû
reasonably low loan-to-value ratios of around
TALKEDûABOUTûATûTHEûENDûOFûTHEûlRSTûQUARTERvû
he said, citing central bank support for sub-
investment grade credit.
“We’ve obviously seen a very sharp rise in
oil and gas prices from the very distressed
THEMSELVESûSAIDûCHIEFûlNANCIALûOFlCERû$AVIDû
Mathers. He said there had been a “very high
degree” of appetite.
exposures have probably improved since the
In a separate piece of research Credit Suisse
said it expected a solid rebound in European
Travelodge uses new law for relief
TRAVELODGE last month fought off an
application by some of its landlords to
wind-up the UK hotel chain, after it failed to
pay its second-quarter rents. The company
cited a planned new UK law aimed at
60%. Similarly the aviation loans were
AGAINSTûMODERNûmEETS
$EUTSCHEûHADûLIMITEDûEXPOSUREûTOûNON
investment-grade oil and gas credits such as
US shale developers and its retail names
by value of landlords owed rent will be
allowed to vote on the deal.
Travelodge said the CVA was designed to
temporarily reduce its obligations
“particularly those relating to its largest
PERIODûATûTHEûENDûOFûTHEûlRSTûQUARTERû3Oû)û
think in many ways, those types of risk
ENDûOFûTHEûlRSTûQUARTERv
Christopher Spink
default. But Travelodge’s proposals were not
considered adequate by all the landlords.
“As this is a complex process involving
around 300 individual landlords, each with
differing interests, the company has decided to
protecting tenants from eviction during the
coronavirus crisis – even though it is not yet
in force.
The measures have since been put forward
to parliament, as part of the corporate
insolvency and governance bill, and are
being debated. Travelodge, owned by
GOLDMAN SACHS, GoldenTree and Avenue
Capital, obtained the secret injunction
despite the laws not being passed.
The High Court judgment was published
on Monday, days after Travelodge launched a
company voluntary arrangement. It is
proposing to reduce the rents it pays on its
564 hotels by at least 50% until the end of
2021. Creditors, including landlords, will
vote on the proposals on June 19.
There has been upset among its 300
landlords, since the CVA allows holders of
other unsecured debts to vote on the plans,
including those held by Travelodge’s equity
owners. At the same time only a proportion
lXEDûCOSTûITEMûLANDLORDûRENTSvû)TûSAIDûITûDIDû
not want to “compromise the claims of other
creditors” such as its bank lenders and
holders of its senior secured 2025 bonds.
It said such other creditors will not be
impacted by the CVA, except by waiving their
rights to declare a cross-default on launch of the
CVA. These creditors had already agreed to that.
At least 75% of unsecured creditors by value
must approve the CVA and at least 50% of those
unconnected with the company. The CVA can
also be challenged up to 28 days after the vote.
Goldman and Travelodge’s shareholders
have agreed to invest £40m more in the
company, £10m of which is only available if
the CVA goes through and any challenge is
rejected. The remaining £30m is contingent
on a £60m facility already provided by the
SHAREHOLDERSûBEINGûRElNANCED
Before the CVA was launched, discussions
had been held between the company and its
landlords about how to cure the rental
International Financing Review June 13 2020
move to a formal CVA process to achieve the
temporary rent reductions required,” it said.
If the CVA is rejected, Travelodge has said it
could make use of the new cram-down proposals
in the corporate insolvency and governance bill,
which allow haircuts to be imposed on all
creditors provided one class approves them.
Travelodge said the business could lose
£350m of revenues this year due to closures,
with much in its peak period between April
and September. The company’s annual rent
bill is £215m. Under the CVA, £230m in rent
will be paid up to the end of 2021.
Nick Leslau’s Prestbury is Travelodge’s
biggest investor with 123 hotels. It said it was
scrutinising the proposals “in order to best
protect its position”.
Another landlord said the CVA was likely
to go through since it would be hard for most
landlords to let their buildings to alternative
tenants currently.
Christopher Spink
25
“It’s hard to build relationships if
you’re not sitting in front of people”
MOELIS CO-PRESIDENT NAVID MAHMOODZADEGAN, P19
India bankruptcy freeze to hurt banks
India’s freeze on fresh bankruptcy
proceedings due to the coronavirus
pandemic is expected to hurt the country’s
already fragile banking system and delay
bad debt resolutions.
The government amended the Insolvency
and Bankruptcy Code 2016 so that no new
BANKRUPTCYûCASESûCANûBEûlLEDûFORûDEFAULTSû
arising on or after March 25, when the
lockdown was declared, with the suspension
to last for six to 12 months.
Some analysts believe there could be an
incentive for banks to revert to their old
ways for handling large non-performing
accounts in the absence of bankruptcy
proceedings and with weak progress on
inter-creditor agreements.
“Any such action would be negative as it
would delay timely recognition of bad assets
and affect recoverability,” said Saswata
Guha, director at Fitch.
Also, given the suspension of section 10
months to limit the spread of the
coronavirus.
DISTRESSED OPPORTUNITIES
$EPENDINGûONûTHEûPACEûOFûECONOMICû
recovery, there is a risk that bad loans as a
percentage of total loans will rise more than
500bp, or even double in the next two years
from an estimated 9% at the end of March
quarter, according to Fitch.
Banks are also likely to face bigger principal
While the suspension of fresh bankruptcy lLINGSûUNDERûTHEû)"#ûWHEREBYûCORPORATEû losses. Corporate insolvency resolution
cases will help businesses facing a near-term DEBTORSûCANNOTûVOLUNTARILYûlLEûFORû proceedings are likely to suffer from lower
LIQUIDITYûCRUNCHûhBANKSûANDûlNANCIALû
institutions are worried that the credit
discipline which was enforced by the
bankruptcy code may go for a toss”, said Aviral
Jain, co-head and managing director of global
insolvency, some businesses may not be able
to get the immediate support that was
previously available under the bankruptcy
code.
“This will lead to unnecessary decay of
valuations and a possible decline in interest
from bidders because of the uncertainty across
many sectors of the economy.
“This in turn may result in creditors
having to agree on higher haircuts,” said
RESTRUCTURINGûADVISORYûATû$UFFûû0HELPS their businesses for the next six to 12 !BHISHEKû$AFRIAûVICE
PRESIDENTûOFû)CRAûINûAû
India introduced a new insolvency and
bankruptcy framework in 2016 to try to
speed up debt workouts and has tweaked it
over the years.
The clean-up track record for India’s
banking system is weak, though, with few
SIGNIlCANTûRESTRUCTURINGSûINûTHEûPASTûUNTILû
THEûCENTRALûBANKûPUSHEDûlNANCIALû
institutions to appropriately recognise the
BANKINGûlNANCIALûCOMPANIESû
stress on their balance sheet. The Reserve
Bank of India forced lenders in 2017 to begin
insolvency proceedings against some of the
biggest defaulters, rather than rolling over
bad debts or understating them.
Please contact us if you have
information about job moves at
your firm or within the market
Call +44 (0)20 7542 4367
or email steve.slater@refinitiv.com
26
MONTHSvûSAIDû*AINûATû$UFFûû0HELPSûh'IVENû
these circumstances, it would be prudent if
the central bank announces a one-time
restructuring scheme to resolve such
stressed assets during the six-months
moratorium period.”
On March 27, the RBI offered a three-
month moratorium on loans, which was
extended by another three months on May
22, to tide debtors over the economic crisis.
Goldman Sachs expects India’s economy to
shrink 45% year on year in the April to June
QUARTERûANDûûINûlSCALûûAFTERû)NDIAû
imposed a lockdown lasting more than two
International Financing Review June 13 2020
recent note.
However, the economic pain is expected
to throw up opportunities for distressed
debt investors.
“There is an opportunity to extend credit
to good quality borrowers due to an increase
in demand for capital following the
slowdown in growth, and a constraint in
SUPPLYûASûNON
are less able to provide liquidity,” said
Haseeb Malik, partner and head of Asia
corporate and traded credit at Varde
Partners.
Krishna Merchant
 BONDS
SSAR  Corporates  FIG  Covered Bonds  High-Yield  Structured Finance 

„ FRONT STORY FINANCIALS

Nationwide demonstrates sub recovery

AT1 revival goes up a notch after UK lender prints
Bankers eye more opportunities as calls come due
NATIONWIDE BUILDING SOCIETY laid bare the They said the deal should perform better h'ENERICALLYûSPEAKINGûIFûTHEûRElNANCINGû
remarkable recovery in subordinated debt on the secondary market than cost is higher than the reset, there is still a
levels as it brought the Additional Tier 1 Commerzbank and ABN AMRO’s euro tolerance window where an issuer will want
revival to the UK on Wednesday, printing a trades, which have traded below par after TOûBEûMOREûINVESTOR
FRIENDLYû;ANDûCALL=vûSAIDû
£750m deal on more than £4.4bn of demand. having been priced without premiums. THEûlRSTûSYNDICATEûBANKER
.ATIONWIDESûDEALûTHEûlRSTûSTERLING
“Coming off the back of weaker “But it’s hard put a number on. Things
denominated AT1 since November, followed performance yesterday, perhaps [Nationwide] are subjective on things like investor
the reopening of the euro AT1 market on
Monday by Commerzbank and ABN AMRO,
CURRENCYûSWAPû
with combined demand for the duo peaking
above €19.5bn.
But the UK lender was entering a softer
STARTEDûAûBITûMOREûTENTATIVELYvûSAIDûAûBANKERû RELATIONSv
away from the trade. “That’s not a criticism, "ANKERSûSAIDûTHEûCROSS
ITSûJUSTûTHEûRIGHTûTHINGûTOûDOv must also be considered, as some issuers
The deal initially traded below par on favour the US dollar market for their
Thursday as markets deteriorated, falling as low subordinated issuance.
market, after the credit rally stalled on ASûûBUTûROSEûTOûûONû&RIDAYûMORNING 2"3Sû53BNûû!4ûnûBIDûATûûnûISû
Tuesday. up for call on August 10.
Leads Bank of America, Citigroup, JP Morgan HUNT BACK ON Analysts at Morgan Stanley expect RBS to
and Morgan Stanley opened books for the Bankers suggested the success of last week’s extend the bond, because redeeming it will
PERPETUALûNON
CALLû$ECEMBERûû AT1s will prompt other issuers with INCURûANû&8ûHITûTHATûTHEYûCALCULATEûTOûBEû
transaction with initial guidance of the UNRElNANCEDû!4ûCALLSûTOûLOOKûMOREûCLOSELYû AROUNDûaM
ûAREA at the market. “While we believe it could easily tap the
4HEûCOUPONûWASûSUBSEQUENTLYûSETûATûû “The hunt for yield is back on, and I think market with a new AT1 and at a coupon
for an expected £600m–£750m, before THATLLûmUSHûOUTûAûFEWûMOREvûSAIDûAû$#-ûBANKER. comparable with where its current bond
BEINGûlXEDûATûaM &ELLOWû5+ûISSUERSû2"3ûANDû"ARCLAYSûANDû WILLûRESETûOURûVIEWûISûTHATûTHISû&8ûLOSSûWILLû
Notably, Nationwide was able to secure a Ireland’s AIB are among those banks with drive the decision to leave the current AT1
lower coupon than it achieved with a AT1s coming up for call this year that have OUTSTANDINGvûTHEYûSAID
SMALLERûSHORTER
DATEDû!4ûBEFOREûTHEû not been fully replaced. Barclays’ and AIB’s deals are callable in
coronavirus outbreak. As the levels available in primary close on $ECEMBER
In September it priced a £600m perpetual the reset spreads of outstanding deals, the
NON
CALLû$ECEMBERûû!4ûATû likelihood of some issuers, at least, CAPITAL ENHANCEMENT
Bankers said the deal demonstrated just RElNANCINGûANDûREDEEMINGûTHEIRûDEALSûISû Nationwide said it was entering the market
how far the market has rallied since the increasing, bankers said. TOûENHANCEûITSûhALREADYûROBUSTvûCAPITALûLEVELSû
GLOBALûSELL
OFFûINû-ARCHûWHICHûHITûTHEûSECTORû
hard.
The iBoxx GBP Banks Subordinated Index
against a backdrop of heightened
uncertainty arising from the coronavirus
STERLING SUB DEBT RECOVERS
AVERAGE YIELD OF IBOXX GBP BANKS
pandemic. The building society already
PEAKEDûATûûONû-ARCHûûBUTûHASû SUBORDINATED INDEX meets all of its capital requirements.
TIGHTENEDûSIGNIlCANTLYûSINCEûANDûCLOSEDûATû 5.0 )TSû5+ûLEVERAGEûRATIOûSTOODûATûûATûTHEû
ûONû4UESDAYûITSûLOWESTûLEVELûSINCEû ENDûOFûTHEûlRSTûQUARTERûDOWNûFROMûûAû
March 11. 4.5 year earlier. The fall was mostly due to the
When Nationwide tapped the market in REDEMPTIONûOFûAûaBNû!4ûINû*UNEûû
3EPTEMBERûTHEûINDEXûWASûATû mitigated by its £600m issue in September.
4.0
“AT1s have moved a fair clip from the )TSû#%4ûRATIOûWASûûOFûITSûRISKû
wides and are pretty much back to where WEIGHTEDûASSETSûATûTHEûENDûOFûTHEûlRSTû
3.5
WEûWEREûATûBACK
ENDûOFûvûSAIDûAû quarter, the highest among major European
syndicate banker. “It’s remarkable we’ve banks, according to analysts.
3.0
GONEûALLûWAYûOUTûANDûBACKûINûAGAINv 4HEûRATIOûFELLûFROMûûATû1ûûBUTû
.ATIONWIDESûaMûûPERPûNON
CALLû remains far in excess of its CET1
SûnûITSûONLYû!4ûOUTSTANDINGûnûWEREû 2.5 REQUIREMENTûOFû
TRADINGûATûAûYIELD
TO
CALLûOFûûATû 4HEûBONDSûHAVEûAûSIX
MONTHûANYTIMEûCALLû
Wednesday’s open, according to Tradeweb. 2.0 OPTIONûAHEADûOFûITSûlRSTûRESETûDATEûANDû
3/5/20

3/6/20
3/4/20
3/1/20

3/2/20

3/3/20

Bankers put fair value for the new issue at CONVERTûINTOû#OREû#APITALû$EFERREDû3HARESûIFû

nûIMPLYINGûAûBPnBPû .ATIONWIDESû#%4ûRATIOûDROPSûBELOWû
concession. Source: Eikon Tom Revell

International Financing Review June 13 2020 27

Delta prints before airline sell-off WEEK IN NUMBERS

Bonds fall in secondary as rally runs out of steam 0.70%

„ THE YIELD ON 10-YEAR TREASURIES
DELTA AIR LINES returned to the bond market defaults and collateral repossession across AFTER THE FOMC’S MEETING LAST WEEK,
on Wednesday to take advantage of strong the company’s capital structure. IN WHICH THE FED MAINTAINED ITS
primary conditions as it continues to shore DOVISH STANCE AS IT PLAYED DOWN
up its liquidity position. MORE LIQUIDITY THE CHANCES OF A QUICK ECONOMIC
4HEûAIRLINEûPRICEDû53BNûOFûlVE
YEARû $ESPITEûRAISINGûOVERû53BNûINûTHEûCAPITALû RECOVERY
UNSECUREDûNOTESûATûûAFTERûTIGHTENINGû markets since early March – as well as %
FROMûINITIALûPRICEûTHOUGHTSûOFûûANDû 53BNûOFûSUPPORTûUNDERûTHEû#!2%3û!CTûnû 2.0
1.8
GUIDANCEûOFûTHEûûAREA $ELTAûISûLOOKINGûTOûFURTHERûBOLSTERûITSû
1.6
But the bonds dipped in the secondary market liquidity position, saying it expects to report
1.4
on Thursday amid a resurgence of concerns over AûûDROPûINûSECOND
QUARTERûREVENUESûATûTHEû
1.2
the state of the economy and the extent of the end of June. 1.0
#OVID
ûPANDEMICûANDûASûBONDûINVESTORSûTOOKû 0.8
DOWNûSOMEûPROlTSûAFTERûAûLONGûRALLY 0.6
4HEûûûUNSECUREDûNOTESûDROPPEDû “Our stress test shows Delta 0.4
2/1/20 2/2/20 2/3/20 2/4/20 2/5/20 2/6/20
TOûûTOûYIELDûûINûSECONDARYûTRADINGû
HAVINGûPRICEDûATûûONû7EDNESDAY
“Airlines in general started to sell off (on
7EDNESDAY ûWHILEû$ELTAûWASûPRINTINGûTHEûNEWû
deal, and it falls squarely into the camp of
things that are going to dip on a day like
having sufficient liquidity
to withstand a two-year
downcycle, but the outlook
for US major airlines remains
€3bn
„ THE AMOUNT THAT VW RAISED
speculative based on timing THROUGH A DUAL-TRANCHE
TODAYvûSAIDûONEûHIGH
YIELDûBONDûTRADERûh4HATû uncertainties of domestic and SUBORDINATED BOND DEAL AS THE
NEWûISSUEûHASûTOûREPRICEûWITHûTHEûMARKETv international traffic rebounds” REOPENING OF THE CORPORATE HYBRID
!MERICANû!IRLINESûûSûWEREûALSOû MARKET GATHERS MOMENTUM
down six points to 59 on Thursday, United
!IRLINESûûSûDROPPEDûûPOINTSûTOû This time it approached the market with
79 and aerospace components supplier
4RANS$IGMûSAWûITSûûûNOTESûDROPûlVEû
points to 94.40, according to MarketAxess.
$ELTASûBONDûOFFERINGûWASûRUNûBYûTHEû
INVESTMENT
GRADEûSYNDICATEûDESKSûOFûGoldman
Sachs and Morgan Stanley.
YIELDûINVESTORS
“Airlines in general started to
sell off on Wednesday while
Delta was printing the new
deal, and it falls squarely into
the camp of things that are
going to dip on a day like today”
4WOûHIGH
YIELDûBUYSIDEûSOURCESûSAIDûTHEREû ZEROûBYûTHEûENDûOFûûASûTRAVELûDEMANDû
was a large amount of reverse enquiry on
THEûDEALûFROMûINVESTMENT
UNSECUREDûBONDSûRATEDû"AA""""ûWITHû
proceeds being used to support liquidity,
which may include the repayment of debt
49%
„ THE SIZE OF THE ECB’S BALANCE SHEET
MATURINGûOVERûTHEûNEXTûûMONTHS AS A PERCENTAGE OF GDP, UP FROM 39%
7HILEûmIGHTûACTIVITYûISûSTARTINGûTOûPICKûUPûnû AT THE END OF 2019
$ELTAûADDEDûûDOMESTICûmIGHTSûINû*UNEûnûTHEû Balance sheet as % of GDP
140
AIRLINEûSECTORûREMAINSûAûDIFlCULTûONEûFORûMANYû
HIGH
120
One bond buyer said he was cautious on 100
investing in an unsecured airline bond at par 80
with potential zero recovery rate. 60
At the end of March, the company was 40
burning US$100m of cash a day, which it 20
expects to drop to around US$40m by the 0
Fed ECB BoE BoJ
end of June. End 2019 Current
)TûHOPESûTOûREDUCEûTHISûDAILYûOUTmOWûTOû Source: Bank of America
picks up. It also aims to garner over US$14bn
GRADEûACCOUNTSû
WITHûBOTHûINVESTORSûREPORTINGûSMALLER
THAN
expected allocations in the new issue.
While investors who receive small
allocations tend to try to source more bonds in
YEARû SPAIN, GREECE AND THE UK ON TUESDAY.
the secondary market, the selling seen on
Thursday discouraged that, the sources said.
$ELTAûALSOûWARNEDûONû7EDNESDAYûEVENINGû
of liquidity by the end of June, as well as
US$6bn of unencumbered assets, as it tries
to weather the storm.
h/URûSTRESSûTESTûSHOWSû;$ELTA=ûHAVINGû
SUFlCIENTûLIQUIDITYûTOûWITHSTANDûAûTWO
downcycle, but the outlook for US major
airlines remains speculative based on timing
uncertainties of domestic and international
€241bn
„ THE AMOUNT OF PEAK DEMAND FOR
THE SYNDICATED DEALS FROM ITALY,
THE LATTER GOT £70bn OF ORDERS,
WHILE THE OTHER THREE GOT MORE
THAN €160bn COMBINED
THATûITûEXPECTEDûTOûFAILûTHEûlXEDûCHARGEûRATIOû
on its primary credit facilities early next
year – a test of a company’s ability to meet
obligations such as debt and equipment
lease payments.
The company said it expected to obtain an
TRAFlCûREBOUNDSvûWROTEû#REDIT3IGHTSûANALYSTû
Roger King in a note on Wednesday.
Still, the bonds were seen as coming
relatively cheap – particularly at initial price
TALKûOFûûnûGIVENûITSûûû
€2.316bn
„ THE AMOUNT OF CORPORATE BONDS THE
unsecured notes were trading at a yield of ECB BOUGHT (NET) IN THE WEEK TO JUNE
amendment prior to breaching that ûONû4UESDAYûBEFOREûTHEûNEWûDEALûWASû 5 AS PART OF ITS CSPP COMPARED WITH
covenant, but if it failed to, a breach could announced. PURCHASES OF €642m THE WEEK EARLIER
lead to a default which could trigger other David Bell In total, it has bought €32.205bn

28 International Financing Review June 13 2020

 BONDS SSAR

versus the benchmark for these trades is “As soon as you go beyond two years, you
EXCEEDINGLYûATTRACTIVEv LOSEûONSHOREûMONEYûMARKETûDEMANDvûHEû
SSAR BMO, Goldman Sachs, Morgan Stanley and said. “This, though, looks like it’s in the top
Nomura WEREûLEADûMANAGERSûFORû)$" ûOFû3/&2ûDEALSûINûTERMSûOFûSIZEûIFûNOTûû
h)ûTHINKûTHEû2OLLS
2OYCEûOFûTHEûTRADESûWASû for a trade longer than two years. So it’s a
US DOLLARS )$"ûWHICHûWASûAûCOREûBORROWERûBRINGINGûAû NUANCEDûTRADEûTHATSûGONEûVERYûWELLv
core maturity, but both KBN and the World The proceeds will support the World
SSA ISSUERS HIT THEIR MARKS IN "ANKûHAVEûDONEûPHENOMENALLYûWELLvûSAIDû Bank’s sustainable development activities in
DOLLARS the second banker. member countries.
+".ûWHICHûISûûOWNEDûBYûTHEû+INGDOMûOFû
Three Triple A issuers mined the dollar .ORWAYûCUTûPRICINGûBYûBPûFORûITSû53BNû
DEVELOPING SITUATION
market on Tuesday, with the INTER-AMERICAN YEARûOFFERINGûFORûAûLAUNCHûATûSWAPSûPLUSûBP NEW DEVELOPMENT BANK has made further
DEVELOPMENT BANK, KOMMUNALBANKEN and the h)TSûTOUGHûTOûlNDûFAIRûVALUEûBUTûITûLOOKSû progress towards its international capital
WORLD BANK all bringing off successful trades. CLOSEûTOûITvûSAIDûTHEûSECONDûBANKER markets debut, holding a global investor call
)$"û!AA!!! ûSHEDûBPûFROMû)04SûOFûTHEû "OOKSûGREWûTOûMOREûTHANû53BNû on Wednesday.
BPûAREAûOVERûSWAPSûFORûITSû53BNûlVE
YEARû excluding lead manager orders. 0REVIOUSLYû3HANGHAI
BASEDû.$"ûHASûONLYû
'LOBALûBENCHMARKû4HEûlNALûSPREADûOFûBPû KBN was making a return to the dollar issued Panda debt in the domestic Chinese
saw it print the trade through its curve. MARKETûAFTERûPRINTINGûAû53BNûlVE
YEARû market. However, it has voiced ambitions of
h)TSûANOTHERûSUPERBûRESULTûFORûTHEMvûSAIDû in March at 15bp over swaps. issuing in other member state currencies.
a banker away from the trade. “They’ve )TûHASûAûFUNDINGûPROGRAMMEûOFû53BN
Citigroup, Credit Agricole, Goldman Sachs
been very aggressive in terms of new issue
concessions this year but it doesn’t look like
it’s affected their deals, they’ve managed to
PULLûOFFûTHEIRûTRADESû'REATûRESULTv
IoIs exceeded US$4.5bn and demand grew
through the bookbuild to peak at more than
US$6bn. Books closed at over US$5.75bn.
A second banker said that as spreads have
tightened over the past weeks, so the quality of
YEARû'LOBALû3/&2
LINKEDû&2.
the books has increased as fast money retreats.
EQUIVALENTûFORûûACROSSûBENCHMARKSû International, HSBC and JP Morgan are leads for
private placements, retail and other the proposed US dollar Reg S senior
institutional markets. The aim is to issue unsecured Covid Response bond, which was
AROUNDûnûOFûTHATûTARGETûINûDOLLARûANDû lRSTûANNOUNCEDûINûLATEû-AY
euro benchmarks.
Bank of America, BMO, Citigroup and Morgan
Stanley were lead managers. EUROS
4HEû7ORLDû"ANKû!AA!!! ûWASûOUTûWITHûAû
53MûFOUR
GERMANY, FINLAND LAND TIGHT ON
The was set 1bp inside IPTs, landing at SECOND SYNDICATION ROUND
“4HEûDOLLARûMARKETûISûINûVERYûlNEûFETTLEvû BPûVIAûBMO and WFS.
said the second banker. “The central banks The second banker said that it looked as if 'ERMANYûANDû&INLANDûMANAGEDûTOûENTICEû
are always looking to beat the benchmark, THEûISSUERûHADûNOTûPAIDûUPûVERSUSûITSûlXED
investors to their syndications despite
WHICHûISû4REASURIESû4HEûRELATIVEûPICK
UPû rate dollar curve. printing at no concession to their curves, an

ALL INTERNATIONAL GREEN BONDS ALL INTERNATIONAL BONDS (ALL CURRENCIES) ALL BONDS IN EUROS
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$(m) (%) bank or group issues US$(m) (%) bank or group issues €(m) (%)
1 BNP Paribas 21 3,841.05 7.2 1 JP Morgan 824 234,557.91 8.7 1 BNP Paribas 262 80,065.84 8.6
2 Citigroup 14 3,408.82 6.4 2 Citigroup 653 199,759.76 7.4 2 JP Morgan 213 67,394.81 7.2
3 JP Morgan 20 3,319.23 6.2 3 BofA Securities 663 190,427.86 7.1 3 Barclays 208 59,096.26 6.3
4 Credit Agricole 16 3,267.38 6.1 4 Barclays 585 184,440.48 6.9 4 HSBC 217 58,971.73 6.3
5 SG 13 3,135.83 5.9 5 Goldman Sachs 451 141,757.37 5.3 5 Credit Agricole 189 55,718.84 6.0
6 ING 20 3,073.64 5.7 6 HSBC 528 136,570.95 5.1 6 Deutsche Bank 180 49,790.69 5.3
7 Barclays 17 2,907.19 5.4 7 BNP Paribas 442 129,793.57 4.8 7 UniCredit 167 47,532.92 5.1
8 BofA Securities 20 2,726.27 5.1 8 Deutsche Bank 434 118,522.38 4.4 8 SG 155 46,298.10 5.0
9 Deutsche Bank 11 2,358.98 4.4 9 Morgan Stanley 349 117,084.56 4.4 9 Citigroup 149 45,532.85 4.9
10 HSBC 16 2,183.94 4.1 10 Credit Agricole 319 85,079.21 3.2 10 BofA Securities 149 41,581.21 4.5
Total 96 53,603.38 Total 2,893 2,691,623.74 Total 948 931,848.69
Excludes social bonds and mixed use of proceeds. Including Euro, foreign, global issues. Excluding equity-related debt, Including Euro-preferreds. Excluding equity-related debt,
US Global ABS/MBS. US Global ABS/MBS.
Source: Refinitiv SDC code: JG1 Source: Refinitiv SDC code: J1 Source: Refinitiv SDC code: N1

EUROPEAN SOVEREIGN BOND AUCTION RESULTS WEEK ENDING JUNE 12 2020

Pricing date Issuer Size Coupon (%) Maturity Average Yield (%) Bid-to-cover
Jun 9 2020 Germany €2.4885bn 0.00 Nov 15 2027 -0.47 1.92
Jun 10 2020 UK (i) £900m 0.125 Nov 22 2036 -2.55 2.52
Jun 10 2020 Portugal €585m 2.875 Jul 21 2026 0.137 2.08
Jun 10 2020 Portugal €920m 0.475 Oct 18 2030 0.595 1.50
Jun 11 2020 UK £3.25bn 1.00 Apr 22 2024 -0.041 2.52
Jun 11 2020 UK £3.25bn 0.125 Jan 31 2028 0.111 2.06
Jun 11 2020 Italy €5bn 0.30 Oct 15 2023 0.46 1.37
Jun 11 2020 Italy €2.5bn 0.85 Jan 15 2027 1.10 1.43
Jun 11 2020 Italy €2bn 1.45 Mar 1 2036 1.91 1.42
Source: IFR

International Financing Review June 13 2020 29

impressive feat given that their deals
emerged just a day after four sovereigns had
already pummelled the market with new
paper (see Top News story).
Sweden schedules green
7ITHûõBNûRAISEDûINûTHEûSINGLEûCURRENCYû
alone by sovereigns the day before, concerns
bond for August
about possible indigestion would have been
valid, especially given that Germany and „ SSAR Scandinavian sovereign aims to join green cohort
&INLANDûAREûMUCHûTIGHTERûNAMESûTHANû
Ireland, Spain or Greece. SWEDEN is getting ready to issue a green bond of makes it even more attractive,” said Hans
Yet, once again, demand far surpassed the around SKr20bn (US$2.17bn) in August which Lindblad, director general of the debt office.
amount on offer, with books passing will finance government expenditures aimed at The bond is expected to be issued at SKr20bn,
õBNûFORûTHEûõBNûRAISEDû meeting the country’s environmental and climate but Sweden has already targeted SKr30bn of
“Markets are clearly performing and have targets. green expenditure. The size of the issue reflects
CLEARLYûBENElTEDûFROMûTHEûLIQUIDITYûTHATSû The planned deal is the latest in a wave of the country’s funding strategy and current
been pumped into the system by central anticipated European sovereign green bonds market conditions.
BANKSvûAû$#-ûBANKERûSAIDû
“Whether it’s right or not you can debate,
but central banks have dusted off their
PLAYBOOKSûFROMûTHEûûCRISISûANDû
responded to this one very quickly and kept
MARKETSûOPENû7EûHAVENTûBLINKEDv
Triple A rated GERMANY, returning to
syndication barely over a month since
PRICINGûITSûlRSTûEUROûSYNDICATEDûCONVENTIONALû
trade, once again offered little in the way of
premium.
Books peaked at over €44bn, but a sharp
PRICINGûREVISIONûANDûAûPRINTûmATûTOûFAIRûVALUEû
meant some accounts did not stay for the
RIDEûANDûORDERSûFELLûTOûOVERûõBN
“It was very much the same as the last
in the second half of the year. Hungary issued
a €1.5bn 15-year green bond recently with zero
new-issue premium and many sovereigns,
including Germany and Spain, are set to follow.
Sweden’s government has unveiled the
framework for the green bond, which will be issued
by its National Debt Office, and also outlined the
budget expenditure to which the bond will be linked,
which is primarily climate investments, seas and
water, biodiversity and railway maintenance.
The framework has been given the highest
“dark green” rating by ESG ratings firm Cicero,
and the bond will be issued under the debt
office’s EMTN programme.
“The fact that the bond has the highest
possible green rating is an affirmation that
“We are now finalising the details in
order to be ready to issue the green bond in
August. With this new bond, we can offer an
investment alternative with low risk and a
distinctly green stamp of approval,” said Anna
Sjulander, acting head of debt management
at the debt office.
Sweden will mandate banks to syndicate the
green bond, and set the maturity closer to the
issue date.
The green bond will supplement Sweden’s
traditional government bonds and allow
investors to monitor the country’s green
investments and how they help it meet broader
environmental and climate targets.
Tessa Walsh
ONEvûANOTHERû$#-ûBANKERûSAIDûh4HEYûHADûAû
very clear view on pricing and knew what
they wanted to get. Most of the drops were WITHûDEMANDûESPECIALLYûFROMûTHEûREAL
adopted syndications for its conventional
LEVERAGEDûACCOUNTSv money community. About a year ago, they euro trades, and other sovereigns that have
Hedge funds featured heavily in ALLûTHOUGHTûITûWASûFARûTOOûEXPENSIVEv syndicated maturities they do not typically
'ERMANYSûõBNû
YEARûINû-AYûTAKINGû 5NLIKEûTHEû
YEARûTHATûCAMEûWITHûAû do, the borrower has had to adapt.
ûOFûTHEûTRADEûWHILEûASSETûMANAGERSûANDû negative yield, the tap was in positive “Syndications are very helpful for these
INSURANCEPENSIONûFUNDSûTOOKûûANDûû TERRITORYûALBEITûBYûAûSMALLûMARGINûATûû sovereigns in that it allows them to raise a lot
respectively. Similar to Germany, there was price more in a single event than they would at
And while they might have dropped from sensitivity in the book for FINLAND@SûõBNû
AUCTIONSvûTHEûlRSTû$#-ûBANKERûSAIDûh)TûMEANSû
THEû
YEARûTAPûTHEYûSTILLûFEATUREDûHEAVILYûINû YEARûWITHûINTERESTûDROPPINGûTOûõBNûFROMûAû you can establish a line with immediate
THEûlNALûDISTRIBUTIONûWITHûûPLACEDûWITHû PEAKûOFûOVERûõBNû LIQUIDITYûRATHERûTHANûHAVEûTOûBUILDûITûOVERûTIMEv
HEDGEûFUNDSû5+ûACCOUNTSûTOOKûûOFûTHEû “The size of the order book was a record
deal. high, similar to what has been witnessed in FRENCH AGENCIES REMAIN IN VOGUE
other euro sovereign bond syndications
SENSITIVITY LATELYvûSAIDû!NUû3AMMALLAHTIûDEPUTYû The second social bond in as many months from
Last Wednesday’s €6bn tap of the August director, funding, liquidity and investor UNEDIC has been greeted with an impressive
ûTRADEûVIAûBNP Paribas, Danske, Goldman RELATIONSûATû&INLANDSûSTATEûTREASURYûINûAû reception as the SSA market continues to attract
Sachs and JP MorganûPRICEDûATûBPûOVERûTHEû statement. strong levels of investor demand.
!UGUSTûûINSIDEûTHEûBPûAREAûGUIDANCE Leads BNP Paribas, Credit Agricole, Goldman &OLLOWINGûONûFROMûITSûINAUGURALûSOCIALû
h4HEûBOOKûDROPPEDûBUTûTHATSûAûREmECTIONû Sachs, NatWest Markets and Nomura started OFFERINGûINû-AYûTHEûISSUERû!A!! ûPLACEDûAû
OFûTHEûTIGHTENINGûANDûTHEûZEROûCONCESSIONvûAû MARKETINGûTHEûBONDûATûMID
SWAPSûPLUSûBPû õBNûû.OVEMBERûûDEALûLASTû
banker close to the deal said. AREAû)04SûBUTûLANDEDûATûBPûmATûTOûFAIRû Wednesday that was more than twice
“But you have to remember, this trade value. subscribed.
was well telegraphed and a bit like the UK h)TSûAûFANTASTICûTRADEvûTHEûSECONDû$#-û “Momentum is clearly very good with all
$-/ûDEALSûTHEûMARKETûHADûTIMEûTOûADJUSTv BANKERûSAIDûh%VENûTHOUGHûITSûPRICINGûmATûTOû trades getting large order books, and it feels
He added that, while it looked tight on a fair value, the book is of very high quality. that investors are really chasing the market
headline basis, some accounts had been 4HEûMARKETûISûVERYûMUCHûRISK
ONûAFTERûLASTû ATûTHEûMOMENTvûAûBOOKRUNNERûSAID
drawn to the deal by the repricing of week and investors are looking to pick up “There’s very good demand in general and
Germany’s curve versus asset swaps. extra yield in any way they can, which WEREûSEEINGûGOODûDEMANDûFORû&RENCHû
h)NûMID
-ARCHûTHEûûWASûAROUNDûLESSû MEANSûGOINGûLONGûINûNAMESûLIKEû&INLANDv agencies too. There’s been some broad
BPnBPûANDûITSûNOWûmATTISHvûHEûSAIDû 4HEûDEALûWASû&INLANDSûlRSTû
YEARû tightening of SSA spreads but it still feels like
“That’s quite a difference and clearly helps syndication. Like Germany, which has THEû&RENCHûNAMESûHAVEûSOMEûVALUEûINûTHEMv

30 International Financing Review June 13 2020

 BONDS SSAR

"OOKSûOPENEDûATûBPûAREAûOVERûTHEû PARTûOFûTHEûCURVEûWITHûAû YEARûDEALûTHATû expect it to receive a good level of support

.OVEMBERûû/!4ûANDûWITHûDEMANDû MARKEDûITSûlRSTûCONVENTIONALûEUROûOFFERINGû FROMûTHEû&RENCHûGOVERNMENT
PASSINGûTHEûõBNûMARKûEXCLUDINGû*,-û without an EPIC label. “We still consider our comparables to be
interest), the issuer was able to achieve an 4HEûISSUERûnûSTILLûû&RENCHûSTATE
OWNEDû &RENCHûPUBLICûAGENCIESûINûGENERALûANDû
OVERALLûTIGHTENINGûOFûBPûlXINGûTHEûlNALû
SPREADûATûBP
Bank of America, Credit Agricole, HSBC, JP
Morgan, Natixis and NatWest Markets were lead
managers.
ûCRISISûORû
4HEû&RENCHûUNEMPLOYMENTûAGENCYûAIMSû
ANDûINûCHARGEûOFûTHEûlNANCINGûOFûTHEû3.#&û NATIONALûTRANSPORTATIONûCOMPANIESvû
Group – announced plans for a benchmark Marchessaux said.
deal last Monday through joint lead “We have noticed a widening of our
managers BNP Paribas, Credit Agricole, Natixis, spread but it’s hard to determine whether
NatWest Markets and Societe Generale. THISûISûDUEûTOûTHEûONGOINGû#OVID
They opened order books the following something more structural with potentially,
to respond to its surging funding MORNINGûATûTHEûBPûAREAûOVERû/!4SûHAVINGû THEûVIEWûOFûSOMEûINVESTORSûSHIFTINGû3.#&û
REQUIREMENTSûDUEûTOûTHEû#OVID
ûPANDEMICû received indications of interest in excess of FROMûAGENCYûTOûCORPORATEv
through the issuance of social bonds, with €400m (excluding JLM interest).
the last two rounds of social issuance 5LTIMATELYûTHEûBOOKûTOPPEDûõBNû DIFFERENT STROKES FOR
ACCOUNTINGûFORûALMOSTûûOFûTHEûPLANNEDû BOOSTEDûBYûõMûOFû*,-ûINTERESTûANDû3.#&û DIFFERENT LAENDER
total funding requirement for the year. WASûABLEûTOûlXûTHEûSPREADûATûBPû4HISû
To put the size of the recent funding in allowed it to print a deal size of €1bn with a LOWER SAXONY and NORTH RHINE-WESTPHALIA
context, the medium and long term funding ûCOUPON maintained the run of German Laender
programme has been increased to €14bn for h7EûWEREûEXPECTINGûTOûDOûAROUNDûTHREE
grinding new issue pricing levels tighter last
ûCOMPAREDûWITHûTHEûõBNnõBNû quarters of a billion, so the result was pretty week, but investors gave the two bonds on
the issuer raised in each of the past two GOODûSIZE
WISEûANDûSPREAD
WISEvûSAIDû.ICOLASû offer very different receptions.
years. -ARCHESSAUXû3.#&SûHEADûOFûCAPITALû So while investors piled into Lower
A syndicate banker described the trade as markets and investor relations. 3AXONYSûEIGHT
YEARûBONDûTHEû
YEARûTAPû
well received, with the spread more or less 4HEûGEOGRAPHICûDIVERSIlCATIONûANDûTHEû FROMû.ORTHû2HINE
7ESTPHALIAûWASûMETûWITHû
at fair value. proportion of real money investors were a more restrained reaction.
“It’s the right kind of maturity and you very strong, according to Marchessaux. .27û!A!!!!! ûREOPENEDûITSûû*UNEû
could argue the spread is decent as well. All “This was never expected to be a jumbo û,3!ûONû7EDNESDAYûANDûTHEûSTATEûWASû
in all, a really nice outcome and a bit of a trade, and you also have to remember that vying for investors’ attention alongside the
CRACKERûTOûPRINTv THEYREûSTILLûAûRELATIVELYûNEWûNAMEvûSAIDûAû 'ERMANûSOVEREIGNSûõBNûTAPûOFûITSûû
In addition to a favourable backdrop in
YEARûEUROûTRADEû
terms of general market sentiment, the
EXPLICITûGUARANTEEûFROMûTHEû&RENCHûSTATEû
also aided the deal.
SWAPSû
Unedic typically issues benchmarks with
an explicit guarantee, but its previous social
ISSUANCEûCAMEûINûNON
$#-ûBANKERûWHOûDESCRIBEDûTHEûBOOKûASû !UGUSTûûANDûANOTHERû
SOLIDûh)TSûMOREûOFûAûSLOWûBURNERv FROMû&INLAND
But given the exuberant nature of the BayernLB, BNP Paribas, Erste, LBBW and
markets recently, the outcome left some NordLBûSTARTEDûMARKETINGûATûTHEûMID
observers wondering whether the deal got a plus 14bp area, a level that caught onlookers
bit lost in the mix on a busy day of issuance. off guard, as it marked a departure from the
GUARANTEEDûFORMAT h)TûDIDNTûREALLYûGETûGOINGvûSAIDûAû issuer’s usual bookbuilding process.
“There’s always a bit of a question around syndicate banker away from the trade, who NRW is one of the few German regions
SOMEûOFûTHEû&RENCHûNAMESûANDûTHEûKINDûOFû described the pricing as very cheap versus that has historically started marketing with
implicit type guarantees, the EPIC ones, so I OATs. AûNEWûISSUEûPREMIUMûTYPICALLYûBPnBPû
think the explicit guarantee really helps “Unfortunately, whether they pay 55bp or This time, however, bankers said it began
THEREûFORûSUREvûTHEûSYNDICATEûBANKERûSAID 65bp over OATs, I don’t think that changes mATûTOûTHEûCURVEûWITHûONEûEVENûSEEINGûITûASû
the picture materially because of the through the curve.
SNCF DEAL SHOWS MARKET IS NO underlying issues that they have, which is a “The level was shockingly tight. They
RUNAWAY TRAIN bit of a shame but that’s the reality. How started marketing at the same level as
THEYûCHANGEûTHATûISûTRICKYûTOûSEEv &INLANDûTHATûTELLSûYOUûEVERYTHINGûYOUûNEEDû
SOCIETE NATIONALE SNCF SAseemed to receive a !LTHOUGHûTHEûISSUERû!A!!n! ûLOSTûITSû TOûKNOWvûAûBANKERûAWAYûFROMûTHEûTRADEû
lacklustre response as it ventured into a new EPIC status in January, ratings agencies still said.

ALL US DOLLAR FIXED-RATE GLOBALS ALL INTERNATIONAL US$ BONDS ALL SOVEREIGN BONDS IN EUROS
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$(m) (%) bank or group issues US$(m) (%) bank or group issues €(m) (%)
1 JP Morgan 189 72,470.55 11.5 1 JP Morgan 534 152,903.84 10.3 1 BNP Paribas 29 29,228.76 11.3
2 Citigroup 174 71,082.24 11.2 2 Citigroup 480 141,020.76 9.5 2 JP Morgan 35 25,390.10 9.8
3 BofA Securities 190 69,912.56 11.0 3 BofA Securities 486 137,010.82 9.2 3 Citigroup 22 17,212.77 6.7
4 Goldman Sachs 113 49,337.22 7.8 4 Barclays 325 107,727.60 7.2 4 HSBC 16 15,413.47 6.0
5 Morgan Stanley 92 39,021.91 6.2 5 Goldman Sachs 339 102,940.15 6.9 5 Barclays 26 15,004.07 5.8
6 Wells Fargo 111 36,107.96 5.7 6 Morgan Stanley 266 89,614.32 6.0 6 Credit Agricole 17 14,276.63 5.5
7 Barclays 90 33,415.56 5.3 7 Wells Fargo 255 70,968.02 4.8 7 SG 16 13,932.02 5.4
8 Deutsche Bank 65 25,435.98 4.0 8 HSBC 222 56,498.79 3.8 8 UniCredit 8 12,884.59 5.0
9 RBC 65 22,031.25 3.5 9 Deutsche Bank 236 56,478.66 3.8 9 Goldman Sachs 16 12,106.66 4.7
10 TD Securities 56 20,907.38 3.3 10 RBC 165 44,532.72 3.0 10 BofA Securities 20 11,788.20 4.6
Total 347 632,870.63 Total 1,348 1,489,492.60 Total 98 258,368.04
Excluding equity-related debt, ABS/MBS. Including Euro, foreign and global issues. Excluding equity-related debt, Excluding ABS/MBS.
US Global ABS/MBS.
Source: Refinitiv SDC code: O5 Source: Refinitiv SDC code: O1 Source: Refinitiv SDC code: N4

International Financing Review June 13 2020 31

 &INLANDû!A!!!! ûSOLDûAûõBNû YEARû POWERINGûTHROUGHûTHEûaBNû'ILTûSALEû attribute their absence to the fact that the
on Wednesday at swaps plus 10bp, having TARGETûITûHASûFORûTHEû!PRILûTOû*ULYûûPERIOD arbitrage has looked unattractive.
started with IPTs of the 14bp area. )NCLUDINGûLASTûWEEKSûaBNû/CTOBERûû “There’s been very little from EIB and
“If you go tight and have competing supply trade through Barclays, Goldman Sachs, JP NOTHINGûFROMû+F7û)TSûGOODûTHATû, "ANKû
at the long end of the curve, people will pass if Morgan, Nomura and Santander, the issuer has SPOTTEDûTHEûOPPORTUNITYûlRSTûANDûTHEûRESULTSû
THERESûJUSTûNOTûENOUGHûPREMIUMûONûITvûAû NOWûRAISEDûMOREûTHANûaBNûVIAûTHEû AREûVERYûSTRONGvûAûBANKERûAWAYûSAID
second banker away from the transaction said. syndication method, around £7bn more The arbitrage has been improving in
In the end, NRW added €500m to the THANûTHEûENTIREûnûPROGRAMME recent weeks, and although it is not as
outstanding bond, with pricing unchanged. “[The deal] saw the largest number of compelling as prior to the pandemic crisis,
“We knew it was aggressive but we INVESTORûORDERSûRECEIVEDûATûANYû$-/û bankers say it looks good.
wanted to know how far we could push SYNDICATIONûûSEPARATEûORDERSvûSAIDû3IRû h7EVEûSEENûAûSIGNIlCANTûTIGHTENINGûINûTHEû
THINGSvûAûLEADûSAID 2OBERTû3THEEMANûTHEû$-/SûCHIEFû sterling secondary space, there’s been a lack of
The issuer was reticent to release book executive, in a statement. SUPPLYûANDûINCREASINGûDEMANDûFROMûOFlCIALû
updates, which outsiders took as an “This provides another very encouraging INSTITUTIONSûANDûCENTRALûBANKSvûAûLEADûSAID
indication that the trade was not subscribed. indication of the strength and depth of the -AKINGûTHEûMOSTûOFûTHATûSITUATIONû, "ANKû
The lack of updates was similar to Berlin’s Gilt market and the degree of support we opted to extend its sterling curve with a
MOSTûRECENTûLONG DATEDûFORAYû)Nû-AYûITûDIDû receive from market participants in FOUR YEARûTRADEû
not disclose demand levels for a €500m DELIVERINGûAûRECORDû'ILTûlNANCINGû The lead said shorter maturities worked
û*UNEûûPAPERûITûSOLDûATûPLUSûBPû PROGRAMMEv better in the sterling sector, but that most
with the price seen as aggressive. "OOKSûCLOSEDûAROUNDûaBNûNOTûFARûOFFû tenors would have gone well due to the
the record demand the issuer received for its supply shortage.
LOWER SAXONY PUSHES TIGHTER aBNû/CTOBERûûTRANSACTIONûINûMID -AY 0RIORûTOûTHEûNEWûTRADEû, "ANKûONLYûHADû
In contrast, LOWER SAXONY on Tuesday “They’ve done three big issues over a period three outstanding bonds in the currency: its
RECEIVEDûROBUSTûDEMANDûANDûSETûAûNEWûmOORû of about four weeks, and what’s key here is LONGESTûWASûAûaMûû$ECEMBERûû
FORûPRICINGûWHENûITûSOLDûAûõBNû*UNEûû that they’ve been able to mobilise a WHICHûPRICEDûATûBPûOVERû'ILTSûINû*ULYûû
LSA at a spread of swaps plus 1bp. historically sizeable deal yet they were able to ANDûISûPRESENTLYûQUOTEDûATûPLUSûBPûONû
“Lower Saxony was tighter than previous PRICEûITûATûTHEûTIGHTûENDvûAûLEADûMANAGERûSAID Tradeweb.
trades and now serves as a new reference 4HEûBONDûPRICEDûATûBPûOVERûTHEûû Marketing started with the spread
POINTvûAûLEADûSAID Gilt, the tight end of the 0.5bp–1bp ALREADYûSETûATûBPûOVERû'ILTSûFORûAûMINIMUMû
h)FûWEûGETûANOTHERûEIGHT YEARûINûTHEûMARKETû guidance. DEALûSIZEûOFûaM
ITûMAYûOPENûATûPLUSûBPûORûEVENûmATv “I don’t think they were targeting such a The lead said the spread was aligned with
Barclays, DekaBank, Natixis, NordLB and large size but the £9bn was very much based HISûFAIRûVALUEûESTIMATEûOFûPLUSûBP
UniCreditûSTARTEDûMARKETINGûmATûTOûTHEûCURVEû ONûDEMANDvûTHEû$#-ûBANKERûSAIDûh)TûWASû Other leads pointed out that the level was
OPENINGûBOOKSûATûTHEûPLUSûBPûAREA driven by investors. What that allows them ATTRACTIVEûVERSUSû+F7Sûû$ECEMBERû
“This was a shorter tenor than NRW and to have is immediate liquidity in the bond SûWHICHûWEREûSEENûTRADINGûINûTHEûLOWû
in contrast to that trade we got €1bn in ANDûTHATSûVERYûPOWERFULv SûATûTHEûBEGINNINGûOFûTHEûSESSION
ORDERSûINûNOûTIMEvûTHEûLEADûSAIDû/RDERSû , "ANKûWASûABLEûTOûlXûTHEûDEALûSIZEûATû
ULTIMATELYûPEAKEDûINûEXCESSûOFûõBN L-BANK CATERS TO INVESTORS’ NEEDS £750m after orders passed the £950m mark.
WITH RARE STERLING OUTING The books subsequently closed in excess of
£1.05bn.
STERLING L-BANKûEXECUTEDûITSûlRSTûSTERLINGûDEALûINûTWOû !ûSECONDûLEADûSAIDûTHEû, "ANKûTRADEû
YEARSûONû7EDNESDAYûANDûTAPPEDûPENT UPû HIGHLIGHTEDûTHEûONGOINGûDEMANDûFORûSAFE
UK DMO COMPLETES SYNDICATION DEMANDûWITHûAûaMû$ECEMBERûû haven names offering some yield.
HAT TRICK transaction arranged through Bank of , "ANKSû$ECEMBERûûPAPERûYIELDSû
America, BMO, NatWest Markets and RBC. ûSEMI ANNUALLYûWHILEû+F7Sû
The UK DMO completed the third syndication %URO BASEDûISSUERSûHAVEûBEENûSCARCEûINûTHEû $ECEMBERûûBONDûWASûQUOTEDûATûû
FROMûITSûnûPROGRAMMEûLASTûWEEKû STERLINGûMARKETûSINCEûMID !PRILûANDûBANKERSû on Tradeweb.

ALL AGENCY BONDS IN EUROS ALL SUPRANATIONAL BONDS IN EUROS MUNICIPAL, CITY, STATE, PROVINCE ISSUES IN EUROS
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 €(m) (%) bank or group issues €(m) (%) bank or group issues €(m) (%)

1 HSBC 28 9,863.21 12.0 1 JP Morgan 12 5,517.23 10.1 1 UniCredit 31 10,500.31 17.1

2 JP Morgan 23 8,630.45 10.5 2 Credit Agricole 10 4,789.84 8.8 2 JP Morgan 16 4,829.45 7.9
3 Barclays 18 6,535.15 7.9 3 Goldman Sachs 7 4,685.00 8.6 3 Barclays 19 4,631.60 7.5
4 Credit Agricole 23 6,191.72 7.5 4 HSBC 7 4,420.76 8.1 4 DGZ-DekaBank 25 4,088.56 6.7
5 Deutsche Bank 14 5,642.12 6.9 5 BNP Paribas 11 4,317.13 7.9 5 Deutsche Bank 18 3,695.58 6.0
6 BNP Paribas 22 5,224.83 6.3 6 SG 8 4,152.33 7.6 6 Nord/LB 23 3,692.54 6.0
7 BofA Securities 11 4,871.92 5.9 7 Deutsche Bank 9 4,041.09 7.4 7 BayernLB 15 3,613.83 5.9
8 SG 18 4,661.63 5.7 8 BofA Securities 9 3,830.37 7.0 8 HSBC 21 3,251.61 5.3
9 NatWest Markets 12 4,401.28 5.3 9 UniCredit 5 3,502.13 6.4 9 TD Securities 12 2,236.38 3.6
10 Natixis 14 4,196.77 5.1 10 Natixis 5 3,323.08 6.1 10 NatWest Markets 10 2,120.69 3.5
Total 103 82,283.12 Total 36 54,617.66 Total 102 61,350.07

Excluding equity-related debt. Including publicly owned institutions. Excluding ABS/MBS. Excluding ABS/MBS.
Source: Refinitiv SDC code: N6 Source: Refinitiv SDC code: N5 Source: Refinitiv SDC code: N7

32 International Financing Review June 13 2020

 BONDS SSAR

CPPIB SUCCESSFULLY BUILDS ITSû3EPTEMBERûSûITSûTHIRDûVISITûTOûTHEû The sustainable development bonds will
STERLING CURVE CURRENCYûINû contribute to the AIIB’s regular operations,
!WAYûFROMûTHEû5+û$-/ûTHEûSTERLINGû INCLUDINGûITSûRESPONSEûTOûTHEû#OVID
û
The CANADA PENSION PLAN INVESTMENT BOARD has market has been relatively quiet of late pandemic. They were offered to onshore
landed the biggest sterling deal, excluding compared to the frenzied action in US investors as well as offshore institutional
THEû5+û$-/ûINûOVERûAûFORTNIGHTûASûTHEû dollars and euros, but there have been some investors via Bond Connect.
issuer continues to ramp up its funding in recent signs of increased activity with “The issuance will raise important capital
the currency. ISSUERSûLOOKINGûTOûTAPûPENT
UPûDEMAND TOûFACILITATEû!))"SûRESPONSEûTOû#OVID
ûINû
&OLLOWINGûITSûaMûlVE
YEARûDEBUTûINû h!FTERûTHEûSUCCESSûOFû,
BANKûYESTERDAYûITSû the short term and maintain its
*ANUARYûANDûAûaMû
YEARûINû!PRILûLASTû CLEARûTHATûTHERESûGOODûDEMANDûOUTûTHEREvû commitment to investing in sustainable
&RIDAYSûûaBNû*ULYûûBONDûNOTûONLYû
marked another increase in size and the
biggest round of sterling funding yet for the
"ANKûEXECUTEDûITSûlRSTûSTERLINGûDEALûINû
Triple A rated issuer, but also a new tenor.
A bookrunner noted that despite the
issuer being relatively new, the level of
engagement with investors base was strong.
“Within the space of six months they’ve
said a syndicate banker, speaking last
Thursday.
,
Liqun, said in a press release.
two years last Wednesday, printing a £750m
$ECEMBERûûONûBOOKSûOVERûaBNû
)$"û!AA!!! ûBEGANûMARKETINGûAûaMû
MINIMUMûTAPûOFûITSûû3EPTEMBERûûINû
an attempt to improve its liquidity by taking
INFRASTRUCTUREûINûTHEûLONGûTERMvûTHEû!))"Sû
president and chairman of the board, Jin
“As an international organisation
headquartered in Beijing, AIIB is also playing
a role in the internationalisation of China’s
capital markets by providing both onshore
ANDûOFFSHOREûINVESTORSûWITHûAûVERYûHIGH
JUSTûPUTûAûWHOLEûCURVEûOUTûTHEREûTHREEûlVEû the total outstanding to over £500m. quality RMB investment. This successful
and 10 years which is pretty quick by “They wanted to try and get it to £500m, transaction serves as an important
ANYONESûSTANDARDSvûAûSECONDûBOOKRUNNERû as that tends to open it up, as a few of the benchmark for our future issues in the years
said. “Each one of these deals had to be good BIGûTREASURIESûDONTûBUYûSUBûaMûTRADESvû AHEADvû,IQUNûSAIDû4HEû!))"ûISûûOWNEDûBYû
to do the next one and they’ve had a the banker said. China.
FANTASTICûSETûOFûRESULTSvû 7ITHûlNALûBOOKSûPASSINGûaMûAûaMû &INALûORDERSûREACHEDû2MBBNûORûû
After appointing Barclays, Bank of America, tap was priced, taking the new deal size to TIMESûTHEûISSUEûSIZEûFROMûMOREûTHANûû
NatWest Markets and TD Securities as lead aMûANDûTHEûTOTALûAMOUNTûRAISEDûBYûTHEû INVESTORSû$OMESTICûINVESTORSûWEREûALLOCATEDû
managers last Wednesday, books grew from ISSUERûINûTHEûCURRENCYûTOûaBNûTHISûYEAR ûOFûTHEûNOTESûANDûINTERNATIONALûINVESTORSû
AûlRSTûUPDATEûOFûaBN
PLUSûTOûENDûINûEXCESSû There was no movement from guidance û4HEûLATTERûINCLUDEDûCENTRALûBANKSûSAIDû
of £1.7bn. INûTHEûlNALûSPREADûOFûBPûOVERûTHEûû a person familiar with the deal.
û)NITIALûPRICEûTHOUGHTSûWEREûBPûAREAûn
BPû70)2 ûOVERûTHEûû*ULYûû'ILTû4HEû
YEARûSUSTAINABLEûDEVELOPMENTû
lNALûSPREADûlXEDûINûTHEûMIDDLEûOFûTHEûRANGEû
û#RISISû
at 47bp.
The second lead estimated fair value at
3EPTEMBERûû'ILTû
Barclays, BofA Securities and HSBC were joint
lead managers.
The rationale behind the trade looked
more opportunistic than strategic, and
,ASTûMONTHûTHEû!))"ûISSUEDû53BNûOFû
ûlVE
BONDSûTOûHELPûFUNDûITSû#OVID
2ECOVERYû&ACILITYûOFûUPûTOû53BN
#HIEFûlNANCIALûOFlCERû!NDREWû#ROSSûSAIDû
45bp. while still not as attractive as before the THEû0ANDAûBONDûISSUEûTHEû!))"SûlRSTûLOCALû
In terms of comparables, bankers looked pandemic, the arbitrage has improved. currency bond offering, was another
at EIB and World Bank – two key sterling “Sterling secondaries in general have MILESTONEûINûITSûDIVERSIlEDûFUNDINGûSTRATEGYû
issuers. been getting tighter in the past few trading with access to investors globally. The bank
The EIB and World Bank both have July SESSIONSvûSAIDûANOTHERûSYNDICATEûBANKERû has registered a Rmb10bn quota with
ûPAPERûWHICHûWEREûQUOTEDûONû%IKONûATû û)$"ûHADûALREADYûBEENûACTIVEûDURINGûTHEû Chinese regulators.
'ILTSûPLUSûBPûANDûBPûRESPECTIVELYûONû WEEKûRAISINGû53BNûTHROUGHûAûlVE
YEARû )Nû!PRILûTHEû!))"ûAPPROVEDûAû2MBBNû
&RIDAYû offering on Tuesday. The spread on that loan to upgrade China’s public health
The motivation behind the deal appears trade was tightened by 4bp from IPTs to end infrastructure and provide emergency
to be clearly strategic with the issuer ATûMID
SWAPSûPLUSûBPûONûBOOKSûINûEXCESSû equipment and supplies in response to the
RECENTLYûREITERATINGûITSûCOMMITMENTûTOûLONG
of US$5.75bn. #OVID
ûPANDEMIC
term investments in the UK. .EWû$EVELOPMENTû"ANKûRATEDû!!ûBYû
/VERûûOFûTOTALûPORTFOLIOûASSETSûWEREû BOTHû30ûANDû&ITCHûINûEARLYû!PRILûISSUEDû
invested in the UK as of the end of March NON-CORE CURRENCIES 2MBBNûOFûTHREE
YEARû0ANDAûBONDSûATûû
and with two rounds of sterling funding
since, CPPIB seem to be looking to increase
THEMEDû
their exposure.
“The most important thing, and not a lot
WHICHûWASûmATûTOûTHEû#$"ûCURVEûATûTHATûTIMEû
AIIB ISSUES DEBUT PANDA BOND 4HEûDEALûWASûTHEûlRSTûCORONAVIRUS
Panda bond issue from a multilateral
The ASIAN INFRASTRUCTURE INVESTMENT BANK, lNANCIALûINSTITUTION
of people know this, is that CPP Investments RATEDû!AA!!!!!!ûHASûPRICEDûAû2MBBNû Another person familiar with the deal
has a massive presence in the UK. They do 53M ûTHREE
YEARûDEBUTû0ANDAûBONDû expects more international issuers will visit
NEEDûSTERLINGvûSAIDûTHEûlRSTûLEADûMANAGER ISSUEûATûûNEARûTHEûTIGHTûENDûOFûTHEû the Panda market after the AIIB’s successful
UK investments for the issuer include INDICATIVEûRANGEûOFûn print.
sizeable stakes in the parent company of The multilateral development bank is the “Some international Triple A issuers are
!NGLIANû7ATERû7ESTlELDû3TRATFORDû#ITYûANDû lRSTûISSUERûWITHûINTERNATIONALû4RIPLEû!û planning to issue Panda bonds and are in
Wembley Park. ratings to tap the Panda market since different stages of preparation. One may
Chinese regulators relaxed and streamlined COMEûOUTûINûTHEûNEARûFUTUREvûSAIDûTHEû
IDB PICKS UP MORE POUNDS the guidelines governing Panda bonds in person. The AIIB is also highly likely to issue
 other Panda bonds under its remaining
The INTER-AMERICAN DEVELOPMENT BANK jumped &INALûPRICINGûWASûBPûINSIDEû#HINAû quota to establish a more complete curve.
in ahead of an expected benchmark deal for $EVELOPMENTû"ANKSûCURVEûTHEûDEûFACTOû 4RIPLEû!ûRATEDû)NTERNATIONALû&INANCEû#ORPû
#00)"ûONû&RIDAYûWITHûANûOPPORTUNISTICûTAPûOFû benchmark for Panda bonds. International Bank for Reconstruction and

International Financing Review June 13 2020 33

$EVELOPMENTû7ORLDû"ANK ûANDû!SIANû benchmark such as BBSW that includes a BPnBPûFROMûINITIALûTALKûTOûLAUNCHûAû
$EVELOPMENTû"ANKûHAVEûPREVIOUSLYûISSUEDû counterparty risk premium and can blow 53BNûTHREE
PARTûDEAL
Panda bonds. OUTûDURINGûTIMESûOFûlNANCIALûSTRESS û(0ûPRICEDûAû53BNûlVE
YEARûATûBPû
Bank of China was the lead underwriter and
YEARûATû
bookrunner on the AIIB’s transaction. BNP
YEARûATûBPû
Paribas (China), China Construction Bank, China
PARTûDEALûWASûANNOUNCEDû
International Capital Corp and HSBC Bank
(China) were joint lead underwriters. Credit
Agricole CIB (China)ûWASûlNANCIALûADVISER
SAFA EXPANDS AONIA-LINKED MARKET
/BVIOUSûCANDIDATESûINCLUDEûREGULARû&2.û
ISSUERSûSUCHûASû1UEENSLANDûANDû7ESTERNû
Australia, though both seem perfectly happy
using the dominant BBSW regime,
ACCORDINGûTOûONEû$#-ûMANAGER
Outside the states he pointed to SSAs that
have already issued bonds referencing
OFFSHOREûRISK
OVERû4REASURIESûAû53BNûSEVEN
BPûANDûAû53Mû
4HEûTHREE
ALONGSIDEûAûTENDERûOFFERûFORû53BNû
outstanding across four notes maturing this
year and next.
HP’s printing and laptop business is separate
FREEûOVERNIGHTûRATESûESPECIALLYû from the more active participant in the capital
Sonia, the Sterling Overnight Index Average, MARKETSû(EWLETT
0ACKARDû%NTERPRISEûWHICHûISû
The SOUTH AUSTRALIAN GOVERNMENT FINANCING and Sofr, the US Secured Overnight ALSOûRATEDû"AA""""""ûBUTûFOCUSESûONûSERVERSû
AUTHORITY further broadened the local &INANCINGû2ATE and networking equipment.
MARKETûFORûRISK
FREEûREFERENCEûRATESûLASTû Local and overseas banks could also use )Nû!PRILû(0%ûPRICEDûAû53BNûTHREE

4HURSDAYûWITHûAûRECORD
BREAKINGû Aonia as more and more investors adopt the YEARûATûBPûOVERûANDûAû53BNûlVE
YEARû
!BNû53M ûSALEûOFûTHREE
YEARû required systems and become comfortable ATûBPûOVERû
!ONIA
LINKEDûmOATING
RATEûNOTES WITHûTHEûPRODUCTûTHEû$#-ûMANAGERû 4HOSEûNOTESûHAVEûTIGHTENEDûSIGNIlCANTLYû
4HEûNOTESûWHICHûFOLLOWû3!&!SûTRIOûOFû suggested. INûTHEûSECONDARYûWHEREûTHEûû/CTOBERû
ONE
YEARû!ONIA
LINKEDû&2.SûWEREûPRICEDûATû "EYONDû3!&!û#OMMONWEALTHû"ANKûOFû SûNOWûTRADEûAROUNDûBPûOVERû
DAILYûCOMPOUNDEDû!ONIAûPLUSûBPûANDû !USTRALIAûLASTû.OVEMBERûSOLDûANû!ONIA
considerably tighter than where HP Inc’s
raised more than the targeted A$100m– linked securitisation, the A$1.5bn Medallion lVE
YEARûTRADEûPRICEDû
$1bn issue size as the accumulated order 4RUSTû3ERIESû
ûPRIMEû2-"3ûANDûPLANSû Even so, if the deal is completed as
book was allocated in full.
TERMû
The enlarged deal attracted several
investors new to Aonia and one that had
COUPONûDEBTû
to use Aonia for all its future new RMBS. PLANNEDûALLûOFûTHEûCOMPANYSûSHORT
notes will be tendered and replaced with
NO LEADS REQUIRED LOWER
NEVERûBOUGHTûANYû3!&!ûNOTESûBEFOREû4HEû )NTERESTINGLYû3!&!ûEMPLOYEDûNOûLEADû 7ITHû
YEAR
AND
SHORTERû4REASURIESûSTILLû
majority of demand came from local or managers for its latest transaction, with TRADINGûBELOWûûTHEûNEWûBONDSûPRICEDû
FOREIGNûBANKSûSEEKINGûHIGH
QUALITYûLIQUIDû investors instead invited to bid through WITHûCOUPONSûOFûnûnûMUCHûLOWERû
assets, while there was strong interest from 3!&!Sû
STRONGûDEALûPANELûMEMBERSû than the bonds targeted in the tender,
ASSETûMANAGERSûANDûOFlCIALûINSTITUTIONSûFROMû comprising ANZ, Bank of America, Citigroup, WHICHûHAVEûCOUPONSûOFûnû
Australia, Asia and Europe. #"!û$EUTSCHEû"ANKû(3"#û*0û-ORGANû.!"û 2ESEARCHûlRMû#REDIT3IGHTSûHOWEVERûDIDû
“Considering the challenging environment, .OMURAû2"#û#APITALû-ARKETSû4ORONTO
note that HP Inc. landed wide of software
it was a remarkable achievement to extend the $OMINIONû"ANKû5"3ûANDû7ESTPAC company VMware, which is majority owned
curve, adopt a new quarterly rather than 4HEûOVERALLûFEESûPAIDûBYû3!&!ûAREûONûAûPARû BYû$ELLû4ECHNOLOGIESû
monthly coupon payment format, while with the combined payments typically made 6-WARESûûSûWEREûLASTûSEENû
attracting new investors and larger volumes to a much smaller subset of lead managers. TRADINGûAROUNDûBPûOVERû4REASURIESû
FROMûTHEûEXISTINGûINVESTORûBASEvûSAIDû!NDREWû They were distributed to the panel members according to MarketAxess data.
+ENNEDYûDIRECTORûFORûTREASURYûSERVICESûATû3!&!
Kennedy estimated the new issue
CONCESSIONûTOûBEûAROUNDûBPûVERSUSû3!&!Sû
interpolated Aonia curve, once adapted for
quarterly coupon payments.
Aonia is the Reserve Bank of Australia’s
overnight cash rate, which is published
DAILYûANDûOFFERSûAûRISK
according to the allocated amounts each of
them brought in.
“We have had many discussions with the
panel banks and thought it fair to allow all
of them to participate, a decision which
generated greater awareness of the deal and
many more bilateral discussions between
COVID-19 IMPACTS
HP Inc. faces some challenges, especially as
COMPANIESûBUYûFEWERûOFlCEûSUPPLIESûWITHû
remote working environments still largely
in place.
Management already fended off an
FREEûALTERNATIVEûTOûTHEû BANKSûANDûINVESTORSvûEXPLAINEDû+ENNEDY attempted hostile takeover by printing
domestic Bank Bill Swap Rate (BBSW), the COMPANYû8EROXûWHICHûDROPPEDûTHEûBIDû
conventional reference point for Australian amid new pressures from the economic
DOLLARûmOATING
RATEûNOTES FALLOUTûCAUSEDûBYûTHEû#OVI
ûPANDEMICû
3!&!ûSOLDûTHEûINAUGURALû!MûONE
YEARû h$RIVENûBYûTHEûCORONAVIRUS
DRIVENû
!ONIA
LINKEDûmOATERûINû*UNEûûFOLLOWEDû CORPORATES economic weakness over the next few
BYûAû!MûONE
YEARû&2.ûOFFERINGûINû quarters, Moody’s expects varying degrees
$ECEMBERûANDûAûFURTHERû!MûONE
YEARû of challenges in [HP Inc.’s] portfolio, led by a
note issue this March. US DOLLARS full quarter of ongoing weakness in
commercial printing and related supplies as
POTENTIAL ENTRANTS HP INC PRICES DEBUT BOND AS many businesses worldwide continue to
3!&!ûRATEDû!A!!û-OODYS30 û INDEPENDENT PRINTING COMPANY OPERATEûREMOTELYûANDûPRINTûLESSvû-OODYSû
REMAINSûTHEûONLYû!ONIA
LINKEDûISSUERûINûTHEû wrote in a report.
senior unsecured market, but that could HP INC.ûSTEPPEDûINTOûTHEû53ûHIGH
GRADEûBONDû Yet HP Inc. has ample liquidity to bridge
change as the success and size of its latest MARKETûLASTû4UESDAYûFORûTHEûlRSTûTIMEûASûAû the gap, including some US$4bn of cash on
deal at least encourages discussions with SEPARATEûENTITYûSINCEû(EWLETT
0ACKARDûSPLITû hand and US$5bn in undrawn revolving
potential participants. INûTWOûINûûASûITûSOUGHTûTOûRElNANCEû credit facilities, according to an investor
Aonia is seen as especially suitable for expensive legacy debt at cheaper levels. presentation.
highly rated state governments that want to The printer and computer business, rated The company stated it is committed to
PRICEûOFFûAûRISK
FREEûRATEûRATHERûTHANûAûCREDITû "AA""""""ûMANAGEDûTOûTIGHTENûSPREADSû MAINTAININGûHIGH
GRADEûRATINGSûANDûLEVERAGEû

34 International Financing Review June 13 2020

 BONDS CORPORATES

ONûTHEûLOWûENDûOFûITSû ûTIMESûDEBTûTOû TREMENDOUSûMARKETûRALLYvû"RIANû+ENNEDYû ABOUTû53BNûFORûITSû53BNû

Ebitda range, up from 1.1 times gross portfolio manager at Loomis Sayles, said on transaction.
LEVERAGEûANDûûTIMESûNETûLEVERAGEû Wednesday. Many of the trades also came with negative
currently, HP Inc.’s Treasurer Zac Nesper h7EûHAVEûSEENûSOMEûPROlT
TAKINGûTHEûPASTû NEWûISSUEûCONCESSIONSûACCORDINGûTOû)&2ûDATAû
said during the presentation. couple of days. What you are really seeing is including bonds from eBay, Equinix,
h/PERATINGûTRENDSûAREûWEAKûDUEûTOû#OVID
û investors are being forced down in credit 7ESTLAKEû&LORIDAû'ASû4RANSMISSIONû.ORTHERNû
and other ongoing issues (eg, print supplies QUALITYv States Power and Phillips 66.
decline due to increased competition), "Yû4HURSDAYûHOWEVERûAVERAGEûHIGH
The rest of the week saw a mixed
although the company has a strong PC grade spreads had widened back to 170bp, performance, with an eclectic group of
BUSINESSûANDûGROWTHûOPPORTUNITIESûINû$û BPûWIDERûTHANûTHEûPREVIOUSû&RIDAYûASû borrowers rushing to raise funding before
PRINTINGvû#REDIT3IGHTSûNOTEDûINûITSûREPORTû INVESTORSûTOOKûPROlTSûANDûMARKETSûSOLDûOFFû THEûENDûOFûTHEû&/-#ûMEETINGû
on concerns over the underlying FLORIDA GAS TRANSMISSION managed a 7bp
IG MARKETS SHOW SHIFT IN SENTIMENT fundamentals of the economy. negative new issue concession on its
FOLLOWING PAYROLL REPORT -ONDAYûSAWûûBORROWERSûRAISEû 53Mû
YEARûONûAûCLOSEûTOû53BNûBOOKû
53BNû
ûAûRISK
ONûDAYûTHATûSAWûDECENTû But on Thursday, HPûHADûTOûPAYûAûHEFTYûBPû
&EARSûOVERûAûSPIKEûINûCORONAVIRUSûINFECTIONSû book sizes and negative new issue PREMIUMûONûITSûTWO
PARTûDEALû
ûITSûDEBUTûASûAû
ANDû&EDûCHAIRû*EROMEû0OWELLSûGRIMMER
concessions across virtually all trades. separate entity since Hewlett Packard split
THAN
EXPECTEDûECONOMICûOUTLOOKûTOOKûTHEû .EWSûTHATûDAYûTHATûTHEû53ûHADûOFlCIALLYû INûTWOûINûûSEEûSEPARATEûSTORY 
AIRûOUTûOFûVIBRANTûHIGH
GRADEûPRIMARYû ENTEREDûAûRECESSIONûINû&EBRUARYûENDINGûITSû
market last week after a strong start. longest ever economic expansion, did little
7ITHûTHEû&/-#ûMEETINGûBEINGûHELDûONû to put off bond buyers, who were still EUROS
Tuesday and Wednesday, syndicate desks FOCUSEDûONûTHEûPREVIOUSû&RIDAYSûBETTER
THAN

FRONT
LOADEDûDEALSûWITHûûBORROWERSû expected job numbers. RISK-ON SENTIMENT TEMPTS CYCLICAL
RAISINGû53BNûOVERûTHEûlRSTûTHREEûDAYSû “The market is embracing risk and there NAMES BACK TO MARKET
OFûTHEûWEEKû
ûSHORTûOFûTHEû53BN
BNû
bankers had predicted for the week.
The market reaction to Powell’s
comments was swift, with both credit and
equity markets sinking on Thursday and
JUSTûONEûHIGH
GRADEûDEALûPRICINGûTHATûDAYû
ûAû when there is solid risk appetite and I can
53BNûTWO
PARTûTRADEûFROMû4HAIû/IL
ISûAPPETITEvû*EFFREYû-AC$ONALDûHEADûOFû
lXEDûINCOMEûSTRATEGIESûATû&IDUCIARYû4RUSTû
Company, said on Monday.
“If I’m an issuer and I’m looking to bring
a deal to market, I want to bring it to market
more cyclical names.
GETûGOODûEXECUTIONûONûMYûNEWûISSUEvû
A number of issuers from sectors more at
risk during an economic downturn took to
the euro primary market last week,
encouraged by a heightened interest in
h)TSûAûFAIRLYûRISK
ONûMARKETvûSAIDûAû
Until then, markets had remained robust, Companies that priced deals on Monday banker. “You feel this is a market where
though the pace of deals has been slowing included EBAY and conglomerate GE, which HIGH
BETAûISSUERSûCANûTAKEûADVANTAGEv
of late, and volumes for the second half are SOLDûAû
YEARûTAPûTHROUGHû'%û#APITALû This refocusing on more volatile and
still on track to exceed last year’s total. &UNDINGûANDûAû
YEARûTAPûTHROUGHû'ENERALû cyclical names allowed issuers of senior
!SûOFû4HURSDAYûYEAR
TO
DATEûHIGH
GRADEû Electric Co. paper to ratchet in pricing to inside where
VOLUMEûSTOODûATû53TRNûVERSUSû Other deals were issued by KOREA ELECTRIC bankers saw fair value.
53TRNûFORûALLûOFûû4HISûCOMESûAFTERû POWER, EQUINIX, MAGNA INTERNATIONAL, BRIXMOR,
ANOTHERûWEEKûOFûHEFTYûINmOWSûWITHû ROPER TECHNOLOGIES, NORTHERN STATES POWER, OPPORTUNITIES IN OIL
53BNûENTERINGû53ûHIGH
GRADEûFUNDSû PHILLIPS 66, DUKE ENERGY FLORIDA and PLAINS ALL h#YCLICALû;SECTORS=ûAREûAûMINElELDûATûTHEû
for the week ending June 10, according to AMERICAN. moment, but one area I’d say there are
Lipper data. Transactions that day drew decent OPPORTUNITIESûINûISûOILvûSAIDûANûASSETû
That is close to the US$9.914bn seen the DEMANDûFROMûACCOUNTSûASûEXEMPLIlEDûBYû manager. “What we look for are companies
PREVIOUSûWEEKû
ûAûRECORDûAMOUNTûFORûTHEû 2OPERû4ECHNOLOGIESûWHICHûSAWûAû53BNû WITHûDIVERSIlEDûREVENUEûSTREAMSûTHATûOFFERû
asset class. book on its US$600m note. SOMEûSPREADvû
“You have had a tremendous amount of Other robust deals included TORONTO- Last Monday, Austrian integrated oil and
cash coming into the market and a DOMINION BANK, whose order books reached gas company OMVû!!n ûRAISEDûõBNûTOû

ALL INV-GRADE US CORPORATE BONDS ALL US INVESTMENT GRADE CORPORATE DEBT ALL CORPORATE BONDS IN EUROS
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$(m) (%) bank or group issues US$(m) (%) bank or group issues €(m) (%)
1 JP Morgan 92 22,536.82 11.0 1 JP Morgan 407 144,891.27 13.0 1 BNP Paribas 132 25,664.22 9.6
2 BofA Securities 93 22,156.75 10.8 2 BofA Securities 391 124,779.94 11.2 2 HSBC 96 18,516.35 6.9
3 Morgan Stanley 59 16,773.42 8.2 3 Citigroup 330 110,976.10 9.9 3 Barclays 71 17,023.52 6.4
4 Citigroup 66 16,360.70 8.0 4 Morgan Stanley 251 90,304.65 8.1 4 Deutsche Bank 76 16,891.13 6.3
5 Barclays 53 14,003.82 6.8 5 Goldman Sachs 229 83,518.31 7.5 5 BofA Securities 70 14,184.54 5.3
6 Goldman Sachs 47 13,494.26 6.6 6 Wells Fargo 227 76,978.52 6.9 6 Citigroup 72 13,993.02 5.2
7 Wells Fargo 60 10,432.67 5.1 7 Barclays 169 51,776.20 4.6 7 JP Morgan 77 13,766.07 5.2
8 Mizuho 44 8,473.35 4.1 8 Deutsche Bank 111 35,850.25 3.2 8 SG 76 12,996.84 4.9
9 MUFG 30 6,988.08 3.4 9 RBC 133 33,473.68 3.0 9 Credit Agricole 70 12,170.79 4.6
10 US Bancorp 35 6,426.27 3.1 10 HSBC 102 33,446.95 3.0 10 UniCredit 64 9,344.92 3.5
Total 174 205,745.49 Total 753 1,116,986.15 Total 279 266,875.82
Excluding equity-related debt, ABS/MBS, all foreign issues, global issues Excluding equity-related debt. FIGs, ABS/MBS.
and non corporates.
Source: Refinitiv SDC code: F6a Source: Refinitiv SDC code: F9 Source: Refinitiv SDC code: N8

International Financing Review June 13 2020 35

 Corporates flash ESG credentials in
European primary
„ CORPORATES ESG supply surge broadens across euros and sterling
European corporate markets maintained their
green streak last week, with borrowers offering
green and transitional bonds across euros and
sterling.
The pricing advantages for the issuers of ESG
bonds was apparent in the euro market, where
SNAM (Baa2/BBB+/BBB+) and ENEXIS (Aa3/A+)
completely erased premiums on their respective
bonds.
Italian energy infrastructure company Snam
brought a more controversial form of ESG debt,
a transition bond.
Transition bonds were considered the most
appropriate strategy for Snam, given that the
range of categories within the use of proceeds
exceed what could be aligned with the EU’s
green bond taxonomy, said a banker.
“But it shows that they are a part of this
transition to a new economy. For me, this is
the type of thing that needs doing, helping to
provide capital to sectors that need to transition.
When you are advising, you shouldn’t shy away
from the challenging issues.”
The new deal was the first to be issued under
the company’s new transition bond framework,
a shift from its previous “climate action”
framework.
Under the new framework, the issuer
announced, among other things, an updated
target of CH4 reduction of 40% by 2025
compared to the previous plan’s 25%, and the
setting of a new target to reduce direct and
indirect CO2 equivalent emissions by 40% by
2030.
Despite a book of only €1.8bn, Snam still
achieved good price progression on its €500m
0.75% June 2030s. Announcing at IPTs of mid-
swaps plus 115bp area, the deal was priced at
HELPûlNANCEûITSûACQUISITIONûOFûAûûSTAKEûINû
Borealis, increasing its shareholding of the
CHEMICALSûCOMPANYûTOû
“A lot of oil companies are seeing good
80bp, roughly flat to fair value, according to
some bankers.
On the same day, Dutch electricity and gas
network operator Enexis sold a €500m no-grow
June 2032 green bond 10bp through fair value at
a spread of 60bp over swaps. Books peaked at
over €2.8bn and the deal was announced at IPTs
of 95bp area.
“I think there is an argument to be made for
green giving you that price advantage, especially
when you have had broader supply picking back
up, perhaps that green label gives you a slightly
broader investor pool and less price sensitivity,”
said a banker.
The bond marked the issuer’s inaugural
green deal, having published its green finance
framework in May, with proceeds from the new
issue going towards eligible projects.
GREEN STERLING
The sterling market is playing its part in the
recent growth in supply of ESG debt, with
NORTHERN POWERGRID (A3/A/A–) selling its first
green bond last Tuesday, a £300m deal due
June 2062.
The pace of ESG issuance in sterling is on the
up as corporates turn their attention to green
and sustainable financing, following the trend in
the euro new-issue market.
Including Northern Powergrid’s trade, four
corporate borrowers have tapped the UK
currency for ESG funding since the start of May:
Southern Power, Severn Trent and Pearson
raised some £1.475bn of notes. Only two
appeared in the first four months of the year.
“It is the first distribution network operator
in the UK to do a green debt issue. These
instruments have so far been issued by energy
This was the second time OMV had taken
TOûTHEûBONDûMARKETûASûAûMEANSûOFûlNANCINGû
its growing stake in Borealis. In April, it
raised €1.75bn over three tranches, with
producers or transmission companies such
as National Grid,” said Arthur Krebbers,
NatWest Markets’ head of sustainable finance
corporates.
The deal was announced at price thoughts of
the 150bp area and investors proved receptive,
resulting in an order book that peaked above
£1bn. Demand slid back to around £930m as
pricing was tightened to mid-Gilts plus 130bp.
The inaugural bond was issued under
Northern Powergrid’s Green Finance Framework,
which enables the firm’s North East and
Yorkshire arms to finance green projects through
a variety of debt instruments.
Northern Powergrid is involved in carbon
transition in the UK and about 80% of the local
authorities where it operates have declared a
climate emergency.
KEEPING THINGS DOMESTIC
Although sterling ESG issuance has jumped over
the past month, the absence of international
issuers is stark.
CPI Property Group, the Luxembourg-listed
commercial real-estate owner, is the only
non-UK corporate to issue sterling bonds with
proceeds earmarked for green projects in the
past 18 months, according to IFR data.
“Sterling investors don’t always help
themselves. As a syndicate guy you know
sterling is the toughest market generally, and it
took a long time for them to start signalling they
wanted to buy again after March,” said a banker
away from Tuesday’s trade.
“Then, when you add in green, an issuer
usually needs to have the projects to fund in
sterling, so that leaves the UK corporates.”
Ed Clark
swaps plus 175bp area guidance,
DEMANDûFORûTHEû*UNEûSûWASûSOLIDû
enough for the spread to be tightened to
165bp. Leads began marketing the note
DEMANDûFROMûBONDûINVESTORSvûSAIDûAûSECONDû proceeds earmarked for the same purpose as ATûTHEûBPûAREA
banker. “They are still able to buy at a Monday’s bonds. h#ONSTRUCTIONûISûAûDIFlCULTûONEû&ORûUSû
decent spread, but the tone around oil has ,EADSûSAIDûFAIRûVALUEûONûTHEûTHREE
YEARûWASû there are certainly opportunities, but
IMPROVEDv AROUNDûBPûBASEDûONûSECONDARIESû&ORûTHEû
perhaps these are not as clear cut as
4OTALûBOOKSûFORû/-6SûDUAL
TRANCHEû year note, they pegged fair value at about 90bp. SOMETHINGûLIKEûOILûORûINDUSTRIALSvûSADûAû
DEALûEXCEEDEDûõBNûWITHûAûSKEWû second asset manager.
TOWARDSûTHEûõMû*UNEûSûWHICHû ACS CONSTRUCTS BOND MARKET RETURN ACS also opted to exceed the expected
LEADSûLANDEDûATûAûSPREADûOFûBPûOVERû ACS (BBB, S&P), the Spanish construction €500m and raise €750m.
swaps. It came alongside a €750m June company, also tapped the euro market, for Having no outstanding bonds itself,
ûNOTEûTHATûOFFEREDûAûlNALûSPREADûOFû ITSûlRSTûBONDûISSUEûINûlVEûYEARS bankers looked to sector and ratings peers
45bp. Both tranches priced through fair û$ESPITEûPICKINGûUPûAûRELATIVELYû SUCHûASû&ERROVIALû""" û(OCHTIEFû""" ûANDû
value. MODESTûBOOKûOFûOVERûõBNûATûTHEûMID
HeidelbergCement (BBB).

36 International Financing Review June 13 2020

 BONDS CORPORATES

MOHAWK DITCHES CP FOR BONDS h5TILITIESûWEREûTHEûlRSTûWINNERSûAFTERûTHEû SAYûSOMETHINGûINûTHEûTRAVELûINDUSTRYvûSAIDûAû

The only rated issuer in the euro corporate coronavirus outbreak but haven’t performed as second investor.
MARKETûLASTû4UESDAYûWASû53ûmOORINGû well since. But because they can offer the longer “And when you can get these wider levels,
manufacture MOHAWK INDUSTRIESû"AA""" MATURITIESûTHATSûWHEREûWEûSEEûINTERESTv WEûVIEWûTHEMûEVENûMOREûPOSITIVELYv
""" ûLOOKINGûTOûSECUREûLONGER
TERMû .OTûALLûBORROWERSûESCAPEDûPAYINGûNEW
A second banker said that sentiment
funding in the bond market to replace issue premiums last week. EDENREDû""" û appeared to be improving towards autos.
commercial paper. THEû&RENCHûPREPAIDûCORPORATEûSERVICESû “It is amazing how some of those credits
The deal was deliberately structured to be company, returned to the primary market that a few months ago you would have been
eligible for the ECB’s CSPP programme, AFTERûANû
MONTHûABSENCEûTOûRElNANCEû WARYûOFûHAVEûREALLYûRALLIEDvûHEûSAID
according to leads, with the trade issued out õMûOFûBONDSûDUEûINû/CTOBERûANDûPAIDûASû “And if [as an investor] you are going to be
OFûTHEû,UXEMBOURG
LISTEDû-OHAWKû#APITALû much as a 15bp NIP, according to one lead. in autos, I think you are certainly going to
&INANCE Sized at €600m, the issuer only brought in WANTûTOûBEûINû67v
Proceeds will primarily be used to repay AûlNALûBOOKûOFûõBNûWITHûLEADSûSETTINGûTHEû 9IELDSûWEREûSETûATûûANDûû
ALLûORûAûPORTIONûOFûTHEûõMûOUTSTANDINGû SPREADûONûTHEû*UNEûSûATûBPûJUSTûBPû Combined books were at more than €6.75bn
under Mohawk’s European commercial inside the 165bp area IPTs. ATûTIGHTûENDSûOFûTHEûûAREAûn û
paper programme, a strategy typically used ANDûnûGUIDANCE
when operating in stressed market YIELD APPETITE FUELS BLOWOUT BOOKS &ORûCOMPARABLESûLEADSûBarclays, Bank of
conditions. FOR CORPORATE HYBRIDS America, BNP Paribas, Deutsche Bank and Royal
“In volatile markets it is too risky to rely Bank of Canada used the borrower’s
ONûYOURûSHORT
TERMûFUNDINGûFROMûROLLINGû VOLKSWAGEN and DEUTSCHE BOERSE capitalised outstanding hybrids, including its €1.75bn
OVERû#0vûSAIDûAûTHIRDûBANKER ONûGROWINGûINTERESTûINûHIGHER
YIELDINGû ûNON
CALLû-ARCHûSûANDûõBNû
“Therefore, terming the debt out through structures last week to bring in hefty books ûNON
CALLû*UNEûSûBIDûATûYIELDSûOFû
the bond market is more expensive but
ANNOUNCEMENTû4HEû
safer. As well as Mohawk, there are quite a
few other examples of this recently, but
MAINLYû53ûCOMPANIESvû
Although leads did not release book updates
GIVENûTHEûõMûNO
GROWû*UNEûûISû3%#
and fourth corporate hybrid issuers since
FORûHYBRIDûRElNANCINGS
Lower yields and negative concessions in
other products have been encouraging
investors towards riskier instruments, with
last week’s borrower’s becoming the third
FORûRElNANCINGû67SûõBNûûNON
ûANDûûPRE
NEWûISSUEûISûEXPECTEDûTOûBEûRATEDû"AA"""
PRINTING WHILE THE PRICING’S GOOD
Proceeds from the new bonds are earmarked
registered, bankers away from the trade
suggested a book around €4.6bn. Based on
price progression, demand appeared to have
been strong, with the borrower shedding 55bp
of spread from IPTs to land at 195bp.
the market reopened in late May.
“Hybrids are of great interest to us at the
moment. I am getting something like a
$OUBLEû"ûYIELDûONûAûBONDûFROMûWHATûISû
USUALLYûAûVERYûHIGH
CALLûûHYBRIDûASûWELLûASûGENERALû
corporate purposes.
With pricing on newly issued euro
hybrids returning to acceptable levels for
QUALITYûISSUERvûSAIDûONEû issuers, corporates have begun taking the
The corporate is far from a regular issuer asset manager. OPPORTUNITYûTOûRElNANCEûCALLSûFALLINGûNEXTû
in the euro market, last funding in the h'IVENûTHEûYIELDû)ûCANûlNDûINûSENIORûEVENû year.
COMMONûCURRENCYûINûBONDûFORMATûlVEûYEARSû if I go to the more riskier issuers, which I h9OUûTENDûTOûRElNANCEûAûHYBRIDûWAYûAHEADû
AGOû4HATûTRADEûAûõMûû*ANUARYûû don’t really want to do, there is a clear of time because the market is more
which was not eligible for CSPP, is BENElTûTOûHYBRIDSûANDûWEûHAVEûACTUALLYû VOLATILEvûSAIDûAûTHIRDûBANKERûh"UTûNOWûYOUû
Mohawk’s only outstanding euro INCREASEDûTHEIRûSHAREûINûOURûPORTFOLIOv have the extra dynamic of all the recent
BENCHMARKûANDûPRE
ANNOUNCEMENTûWASûBIDû 67ûISSUEDûõBNûOFûSUBORDINATEDûBONDSû market volatility and the uncertainty about
ATûBP
Other comparables for the new issue used
by leads included the issuer’s US dollar
bonds, as well as euro trades from the likes
OFûPACKAGINGûANDûPAPERûGROUPû-ONDIû"AA
TRANCHEûISSUEûWASû DEUTSCHE BOERSE hit the sweet spot for hybrid
""" ûANDû53ûHOMEûAPPLIANCEûMANUFACTUREû
RATEDûNAMEû
7HIRLPOOLû"AA""" 
YIELDINGûDEBT
DURATION DOMINATES NON-CYCLICALS
LASTû7EDNESDAYûFARûEXCEEDINGûITûRElNANCINGû
NEEDûOFûõBN
The carmaker is arguably the banner
credit for the product, so a book peaking at
OVERûõBNûFORûTHEûDUAL
an encouraging sign.
However, VW had to offer attractive
terms. Not only did the trade offer yield in
absolute terms, but also provided a
the future, which can give issuers the
IMPETUSûTOûBEGINûLOOKINGûNOWv
HIGH QUALITY, HIGHER YIELD
ISSUANCEûLASTû-ONDAYûASûAûWELL
OFFERINGûHIGHER
The German exchange operator returned
to a market highly accommodating towards
,ASTû-ONDAYû&RENCHûUTILITYûVEOLIAû"AA""" û SUBSTANTIALûPICK
UPûOVERûITSûSENIORûBONDS HYBRIDûDEBTûANDûWASûLOOKINGûTOûRElNANCEû
was able to tighten the pricing on its new h&ORûAûLOTûOFûINVESTORSûTHEûATTRACTIONûISûTHATû THEûUPCOMINGûCALLûONûITSûõMûû
bond through fair value. CLEARûDElNITIONûYOUûAREûGETTINGûBETWEENû HYBRIDûDUEûû4HEûTRADEûISûCALLABLEûINû
û4HEû*ANUARYûSûWEREûANNOUNCEDûATû some issuers’ senior and subordinated &EBRUARYûûBUTû$EUTSCHEû"OERSEûWANTEDû
)04SûOFûBPûAREAûBUTûLEADSûMANAGEDûTOû CURVESvûSAIDûAûBANKER to capitalise on the current clear interest in
PRINTûTHEûõMûDEALûATûAûSPREADûOFûBPû !Tû)04SûOFûTHEûûAREAûFORûTHEû0.#û THEûPRODUCTûANDûRElNANCEûAHEADûOFûTIMEû
Some saw this as much as 10bp inside fair ANDûûFORûTHEû0.#ûTHEûBONDSûOFFEREDû according to a lead.
value. RESPECTIVEûYIELDûPICK
UPSûOFûAROUNDûBPû $EUTSCHEû"OERSEûISûRATEDû!!ûBYû30ûATû
Although utilities have not seen the same ANDûBPûOVERû67SûSENIORûCURVE the senior level, with the hybrid expected
PERFORMANCEûASûHIGHER
BETAûNAMESû Although auto credits are seen as TOûBEûRATEDû!û)TûANNOUNCEDûITSûõMûNO

investors are still showing a keen interest in particularly exposed to the negative GROWû.#ûATûINITIALûPRICEûTHOUGHTSûOFû
the sector, especially when they come at economic impact of the global spread of nûAREAû!CTIVEûBOOKRUNNERSûBNP
longer maturities. #OVID
ûTHISûDIDûNOTûAPPEARûTOûWEIGHûONû Paribas, Citigroup, Deutsche Bank and JP
“There is a clear bid for duration among demand for the VW’s new hybrid. Morgan were able to tighten the yield to
THEûHIGH
QUALITYûNAMESvûSAIDûTHEûlRSTûASSETû h!ûGEOGRAPHICALLYûDIVERSIlEDûLARGE
SCALEû ûTHANKSûTOûANûORDERûBOOKûOFûOVERû
manager. auto is better positioned to recover than, õBN

International Financing Review June 13 2020 37

 Corporate market undaunted by softer tone
„ IG CORPORATES Bankers still expect healthy supply though hybrids may take back seat
Supply in the European corporate primary this
month should prove resilient to a substantial
softening in markets, but the spread widening
could affect the willingness of high-beta
credits and issuers of riskier instruments to
bring deals.
Sentiment was hit hard by a sober assessment
of the US economic outlook by Fed Chair Jerome
Powell last week. It took another blow from
a reported increase in coronavirus cases in
some US states the following day, which led to
renewed selling.
“It is weird when you think about it. Arguably
the market shouldn’t have rallied like it did, but
equally it probably shouldn’t have sold off like it
has,” said a syndicate banker.
“Nothing has really changed that much.”
How this shapes future supply from corporate
issuers in Europe is up for debate, but some
bankers are actually predicting heavier issuance
this week.
“I have the feeling supply next week will be
much larger. Issuers are still on the lookout for
debt,” said a second syndicate official.
“Some of this will be refis, some is M&A
driven. Not necessarily funding for new capex.
But this will come with further widening and
increases in NIPs.”
Issuers should still be able to access the
market at acceptable levels, although may have
to pay higher premiums than has been the norm
over recent weeks.
Although fair value was hard to pinpoint,
BASEDûONûCOMPARABLESûSUCHûASû$EUTSCHEû
Bahn or Alliander, bankers plumped for a
lGUREûAROUNDûn
SECONDARY PERFORMANCE
As investors have fully resumed their search
for yield, subordinated debt has rallied hard
GRADEûCORPORATEûMARKETû “Now that you have some unrated issuers
“Ultimately you still have a huge amount of
support from central banks and if issuers end
up paying slightly higher spreads or premiums
to issue, that is not bad for us,” said an asset
manager.
“The rally was itself quite surprising and
we already had to take a cautious approach to
issuers and sectors.”
The second banker said that technicals
remained very strong, which means the widening
should remain manageable.
One factor that has the potential to slow
the pace of supply is the high level of issuance
already seen this year. With corporate treasuries
taking advantage in recent weeks of the
tightening in spreads and low concessions,
many have fulfilled much of their funding
requirements.
If pricing becomes less attractive some issuers
may have little incentive to print.
“Corporates have done such a huge amount
of funding already on the basis that even if they
didn’t immediately need it, conditions were good
and the future is uncertain,” said a DCM banker.
“This means there are plenty that don’t
necessarily need to issue.”
However, some signs of sentiment improving
had already begun to appear and European
equities rallied last Friday.
“The market has firmed up since the weak
opening despite the volatility in stocks,” said a
second DCM banker.
“So now they are rushing back in and
looking for yield, so those assets will tighten
EVENûFURTHERv
UNRATED ISSUERS PUSH INTO THRIVING
IG PRIMARY
4HEûINVESTMENT
NOT SO HUNGRY FOR HYBRIDS
Issuers’ appetite to raise subordinated debt,
however, may have been dented by the sell-off,
as bonds widen in the secondary market.
“The big attraction for issuers was the
performance of their outstanding hybrids.
I mean you saw VW’s tighten something
like 100bp before they issued,” said the first
syndicate banker.
“Coupons have been going up so this
performance was what was bringing issuers to
the market. If secondaries aren’t doing as well
then this clearly impacts the reasoning behind
issuing.”
Volkswagen raised €3bn via a pair of hybrids
last week, but the yield on both legs has
already begun to rise. Its €1.5bn 3.5% PNC5,
for example, was issued at a yield of 3.5% on
Wednesday and last Friday morning was bid at
3.625% on Tradeweb.
Equally, as risk appetite wavers, the
momentum built by unrated issuers could fade.
Unrated companies were able to print deals last
week, many bringing trades that were three or
four times subscribed and came with limited or
no new-issue premiums.
Unrated borrowers already have to issue
at relatively wide spreads compared to their
rated peers and some may be put off from new
issuance if the levels needed to print widens
further, said bankers.
Ed Clark
May, this has translated into very strong
PRIMARYûMARKETSv
NO RATING, NO PROBLEM
A number of infrequent borrowers were
LOOKINGûTOûRAISEûFUNDINGûINûTHEûINVESTMENT
grade market last week.
in the secondary market. maintained its increasingly positive tone ANNOUNCINGû)ûTHINKûTHISûREmECTSûTHATû
“Now is a great time for these issuers LASTûWEEKûASûUNRATEDûISSUERSûRE
EMERGEDûTOû INCREASEDûRISK
ONûSENTIMENTvûSAIDûAûSECONDû
TOûBEûISSUINGûHYBRIDSvûSAIDûAûFOURTHû raise new funding. syndicate banker.
banker away. )NmOWSûINTOûCREDITûFUNDSûTHEû “It was not that long ago that you would
“Not only have the new deals been announcement of the EU’s €750bn rescue have advised against unrated borrowers
selling well but they have been trading fund, an expansion of the pandemic ISSUINGûBUTûTHEûMARKETûISûINûGOODûSHAPEv
well, so more borrowers should be emergency purchase programme and GALP ENERGIA, the unrated Portuguese
looking at this now that pricing has come BETTER
THAN
EXPECTEDûNONFARMûPAYROLLSû ENERGYûCOMPANYûSOLDûITSûlRSTûDEALûINûTHEû
BACKûINv NUMBERSûCREATEDûFERTILEûCONDITIONSûFORûHIGH
European primary for two and a half years
4HEûõMûû0.#ûHYBRIDû grade borrowers. ONû4UESDAYûPRINTINGûAûõMûNO
GROWû
&IRMENICHûISSUEDûINû-AYûATûAûYIELDûOFûû “Investors have been seeing strong *ANUARYûûATûSWAPSûPLUSûBPûHAVINGû
FORûEXAMPLEûWASûLASTûWEEKûBIDûATûû INmOWSûANDûTHEYûNEEDûTOûDEPLOYûTHISûMONEYû ANNOUNCEDûTHEûDEALûATûTHEûBPûAREAû4HEû
according to Tradeweb. INTOûYIELD
PRODUCINGûPRODUCTSûLIKEûCREDITû ISSUERûAMASSEDûORDERSûOFûAROUNDûõBN
“I think some investors were caught out by GIVENûHOWûNEGATIVEûRATESûAREûINû%UROPEvû “It is marketed very much like a crossover
how aggressive the price tightening in said one syndicate banker. CREDITvûSAIDûAûTHIRDûBANKER
CORPORATEûCREDITûWOULDûBEvûSAIDûTHEûSECONDû “Combined with slightly less issuance 4HEûUTILITYûWASûJOINEDûBYû&RENCHûSMALLû
asset manager. volumes than we were seeing in April and appliance manufacturer SEB, also returning

38 International Financing Review June 13 2020

 BONDS FIG

TOûTHEûPUBLICûMARKETûFORûTHEûlRSTûTIMEûSINCEû government bonds, in the most extreme March, but they have returned to buying as
ûANDûWHICHûSAWûAûSIMILARûAMOUNTûOFû example of its impact on the domestic credit THEû&EDERALû2ESERVEûANDû%UROPEANû#ENTRALû
movement in spread. market. Bank have also demonstrated their
2AISINGûõMûWITHûAûNO
GROWû*UNEûû The central bank on Tuesday offered to willingness to support credit markets,
the issuer initially offered the deal at the buy corporate bonds with one to three years causing spreads to tighten again.
BPûAREAûBEFOREûCUTTINGûITûTOûBPûONûAû TOûMATURITYûANDûRECEIVEDûcBNûOFûBIDS The BoJ is scheduled to buy corporate bonds
book of around €1.6bn. Market participants were able to sell WITHûTHREEûTOûlVEûYEARSûTOûMATURITYûONû*UNEûû
Although subscription rates did not reach CORPORATEûBONDSûATûAVERAGEûYIELDSûOFûnû It has not announced yet whether it will again
the levels seen on some rated deals recently, but the BoJ actually bought some bonds at SETûAûmOORûFORûTHATûOPERATIONûBUTûSOMEû
BANKERSûSAIDûTHATûWASûLARGELYûAûREmECTIONûOFû
some buyers being unable to invest in
unrated names rather than signalling a
weakening in overall market sentiment.
YEARû*'"SûHADûCLOSEDû
YIELDSûASûLOWûASûnûTHEûmOORûTHEûCENTRALû participants believe it will do so by using a JGB
bank put in place for this operation. WITHûlVEûYEARSûTOûMATURITYûASûAûREFERENCE
0ARTICIPANTSûBELIEVEDûTHATûTHEûmOORûWASû
BASEDûONûWHEREûTHREE
ILIADûAûTELECOMSûOPERATORSûINû&RANCEûANDû
Italy, generated similar interest a day later,
SELLINGûAûõMû*UNEûûOFFûAûBOOKûOFûOVERû
€1.9bn.
“Ultimately, those unrated names might
get some larger books because they come at
the previous day. They also said it was
REASONABLEûTOûHAVEûAûmOORûINûORDERûTOû
prevent the Japanese credit market from FIG
overheating, especially after the BoJ decided
to boost its corporate debt purchases in
March and increased those purchases in EUROS
MUCHûWIDERûSPREADSvûSAIDûAûTHIRDûBANKER April to help Japanese companies raise funds
“It can be a strange balancing between smoothly. COMMERZ, ABN AMRO REAP HUGE
seeing good demand because they come at a “There is nothing wrong with setting the AT1 DEMAND
wider spread and demand being limited mOORvûSAIDûAûSALESPERSONûATûAû*APANESEû
BECAUSEûNOTûEVERYONEûCANûBUYûUNRATEDv securities house. “There is no need for them COMMERZBANK and ABN AMRO reopened the
)LIADSûNEWûTRADEûWASûOFFEREDûATûTHEûBPû to buy corporate bonds at a yield below European Additional Tier 1 market in style
AREAûOVERûMID
SWAPSûEQUIVALENTûTOûAûYIELDûOFû *'"Svû(EûADDEDûTHATûONEûOFûHISûCLIENTSûASKEDû
AROUNDûû$EMANDûWASûSUCHûTHATûLEADSû
COULDûTAKEûTHISûINûTOûBPûFORûAûYIELDûOFû

SWISS FRANCS
STRAUMANN EXTENDS WITH SECOND
DEAL OF THE YEAR
LASTû-ONDAYûASûAûCONmUENCEûOFûSUPPORTIVEû
him to sell electric power company bonds
through the operation.
In effect, the results of the operation
indicated that Japanese investors were so
CONlDENTûOFûTHEûCENTRALûBANKSûSUPPORTûFORû
the credit markets they chose not to let go of
bonds unless they could sell at yields
equivalent to those of JGBs.
The strong results came even after heavy
supply in the domestic market the previous
technicals and positive signs on coupon risk
saw combined demand peak at more than
€19.5bn despite big moves in price
progression.
Bankers billed the simultaneous deals as
the biggest test of the AT1 market since the
coronavirus crisis began.
Only one AT1 had been sold in Europe
since the crisis hit, a €675m deal for Bank of
Ireland on May 14 for which investors were
STRAUMANN HOLDING returned to the market WEEKû!CCORDINGûTOû$EAL7ATCHû)&2SûSISTERû WALL
CROSSEDûWHILEû"ANKûOFû.OVAû3COTIAûSOLDû
WITHûAûLONGûlVE
YEARûISSUEûONû7EDNESDAYû publication, 16 corporate issuers tapped the Aû53BNû!4ûONû-AYû
4HEû/CTOBERûûBONDûWASûINITIALLYû MARKETûRAISINGûcBNû4HEûISSUERSû h".3ûWASûTHEûlRSTûPROPERûTESTûOFûMARKETû
MARKETEDûATûMID
SWAPSûPLUSûBPnBPû included TOKYO METRO, which borrowed strength, albeit in US dollars, and this is a
BEFOREûBOOKSûOPENEDûFORûAû3&RMû cBNûVIAûAûûûûANDû
YEARûBONDû real reopening of the euro market, with two
53M ûNO
GROWûATûPLUSûBPnBPû offering, and Z HOLDINGS, formerly Yahoo national champions coming to top up their
The bond priced at the tight end. *APANûWHICHûRAISEDûcBNûFROMûAûlVE
!4ûBUCKETSvûSAIDûAû$#-ûBANKER
7ITHûONLYûONEûOTHERûBONDûTHEûû/CTOBERû tranche bond issue. "OOKSûFORû#OMMERZBANKSûPERPETUALûNON

SûTHEû.)0ûWASûHARDûTOûPINPOINTû Japanese issuers’ aggressive pricing CALLû!PRILûûTRANSACTIONûWEREûOPENEDû
although one banker away from the deal expectations – the result of the BoJ’s WITHûINITIALûPRICEûTHOUGHTSûOFûTHEûûAREAûBYû
spotted it coming 10bp inside fair value. willingness to buy corporate bonds at zero leads Barclays, BNP Paribas, Commerzbank,
0RIVATEûBANKSûTOOKûûANDûASSETû credit spreads – are also pushing domestic Deutsche Bank and UBS.
MANAGERSûûFROMûANûALL
3WISSûGROUPûOFû investors to focus more on international 'UIDANCEûWASûSETûATûûWITHûBOOKSû
ûACCOUNTSû credits, which are not eligible for the BoJ’s OVERûõBNûBEFOREûAûõBNûDEALûWASû
UBS and ZKB were leads on the deal, which purchases. LAUNCHEDûATûû4HEûBOOKûCLOSEDûATû
ISûRATEDû"""ûBYûBOTHûLEADSû4HEû “Some pension funds are starting to walk AROUNDûõBNûHAVINGûPEAKEDûABOVEûõBN
3WITZERLAND
BASEDûCOMPANYûISûACTIVEûINûTHEû away from domestic bonds as they feel pricing ABN AMRO followed, with themselves,
lELDûOFûIMPLANTûANDûRESTORATIVEûDENTISTRYû levels in some deals are too aggressive, so they Credit Suisse, Goldman Sachs, HSBC and
and oral tissue regeneration. have started to look at the international yen Morgan Stanley MARKETINGûTHEûPERPETUALûNON

market hoping that foreign issuers will price CALLû3EPTEMBERûûDEALûWITHû)04SûOFûTHEû
their bonds in line with the secondary market 
ûAREA
YEN LEVELSûINûDOLLARSûANDûEUROSvûSAIDûAû*APANESEû 'UIDANCEûWASûSETûATûTHEûûAREAûANDû
syndicate banker. THEûSIZEûATûõBNûWITHûBOOKSûOVERûõBNû4HEû
BOJ BUYS CORPORATE BONDS FLAT Indeed, the latest Samurai bond offering book continued to grow and the coupon was
TO JGBS from Credit Agricole earlier this month SETûATû
DREWûAûHEFTYûcBNûOFûORDERSûWITHûSTRONGû 4HEûlNALûBOOKûSTOODûATûOVERûõBNûAFTERû
The BANK OF JAPANûBOUGHTûcBNû53BN û support coming from pension funds. peaking above €10bn.
of corporate bonds last week at negative Pension funds had been facing unrealised “Even though we knew the market was
YIELDSûINCLUDINGûAûPORTIONûmATûTOû*APANESEû losses after global credit spreads widened in strong and we were expecting a very good

International Financing Review June 13 2020 39

deal, we were surprised to the upside in VERYûSTRONGûTIGHTENINGûINûCREDITûLASTûWEEKû
û were bid at 99 at last Monday’s open. By
terms of the depth of demand, with books you don’t get more strong signals than that &RIDAYûMORNINGûTHEYûHADûFALLENûFURTHERû
TOUCHINGûõBNûFORûTHEû!".ûTRADEvûSAIDûAû ALLûINûONEûGOvûSAIDûAûSYNDICATEûBANKERûONû THANKSûTOûAûBROADERûMARKETûSELL
OFFûTOûûANDû
syndicate banker at one of ABN’s leads.
“There was also a surprise to the upside in
PRICINGv
Both deals were deemed to have been
PRICEDûWITHûNOûNEW
Commerzbank’s deal. ûRESPECTIVELYûACCORDINGûTOû2ElNITIVû
prices.
RATIONALES
The two transactions were seemingly driven FIG MARKET REFLECTS AS PREMIUMS
ISSUEûPREMIUMûANDû by different motivations. RISE, DEMAND FALLS
bankers highlighted the size of the moves The new issue is Commerzbank’s second
from guidance to reoffer as being AT1, following a US$1bn debut last July. 4HEû&)'ûMARKETûTOOKûAûBREATHERûLASTûWEEKûASû
particularly impressive. As a relative newcomer to the market, the exuberance of previous days gave way to
h5SUALLYûAFTERûAûSIZEABLEûlRSTûMOVEû;FROMû #OMMERZBANKûISûYETûTOûlLLûITSû!4ûBUCKETû)Tû a more sober tone, with premiums rising
IPTs to guidance] you’re then looking to recently unveiled a dedicated AT1 issuance and books shrinking, yet a diverse cast of
TIGHTENûANûEIGHTHûORûSOûFROMûTHEREvûSAIDûTHEû PROGRAMMEûALLOWINGûITûTOûISSUEûUPûTOûõBNû issuers still scored successful trades.
$#-ûBANKERûh)FûYOUREûTHENûTAKINGûTWOûORû of the product. Amid a global rally, spreads across the
THREE
EIGHTHSûTHATûSHOWSûYOUûHAVEûAûREALLYû Commerzbank said the programme lNANCIALûSPACEûTIGHTENEDûSIGNIlCANTLYûINûTHEû
STRONGûMARKETv would enable it to take advantage of recent lRSTûWEEKûOFû*UNEûANDûINTOûLASTû-ONDAYû
Bankers saw fair value for changes to banks’ capital requirements, allowing issuers to reap huge books in the
Commerzbank’s new issue at around WHICHûALLOWûTHEMûTOûUSEû!4ûANDû4IERûû primary market while pricing deals inside
û4HEYûCITEDû#OMMERZBANKSû53BNû BONDSûTOWARDSûTHEIRû0ILLARûû2EQUIREMENTS fair value.
û0.#û!4ûTRADINGûATûAûYIELD
TO
CALLû Market participants interpreted ABN But on Tuesday the sustainability of the
EQUIVALENTûTOûAROUNDûûINûEUROS !-2/SûDEALûASûAûRElNANCINGûOFûITSûõBNû rally was questioned, before renewed
&AIRûVALUEûFORû!".û!-2/SûDEALûWASûSEENû û!4ûWHICHûISûCALLABLEûONû turbulence in equities later in the week cast
ATû
û4HEû$UTCHûLENDERSûõBNû 3EPTEMBERû further doubt on the direction of the market.
û0.#SûWEREûBIDûATû The bonds traded well below par for much “It’s been an interesting day. The notion
of the last three months, hitting a low of that things were getting too good to be true,
PATH CLEARED? ûINûMID
-ARCHûREmECTINGûINVESTORSû and we required some sort of collective
AT1 coupon risk has been in focus after expectation they would be extended. But PAUSEûFORûBREATHûCAMEûTOûFRUITIONvûSAIDûAû
MEPs last month put forward amendments they have recovered in recent weeks and syndicate banker.
to the European Union’s Capital
ALL FINANCIAL INSTITUTION BONDS IN EUROS ALL SUBORDINATED FINANCIAL INSTITUTION
Requirements Regulation proposing a
BOOKRUNNERS: 1/1/2020 TO DATE BONDS (ALL CURRENCIES)
suspension of such distributions.
Managing No of Total Share BOOKRUNNERS: 1/1/2020 TO DATE
But by Monday, market participants were
bank or group issues €(m) (%) Managing No of Total Share
INCREASINGLYûCONlDENTûTHEûPROPOSALSûWOULDû
1 Credit Agricole 39 11,590.06 10.7 bank or group issues US$(m) (%)
not be taken up, after a statement by the
2 SG 27 8,573.90 7.9 1 Citigroup 17 3,269.04 13.9
Greens said politicians of other parties were
3 BNP Paribas 25 6,500.25 6.0 2 Credit Agricole 9 2,438.77 10.3
not prepared to accept “legally binding
4 Natixis 19 6,494.61 6.0 3 HSBC 12 1,922.54 8.2
LIABILITYûFORûBANKûINVESTORSvûINûTHEûFORMûOFû
5 JP Morgan 34 6,415.13 5.9 4 BofA Securities 11 1,882.57 8.0
an AT1 coupon ban.
6 Deutsche Bank 29 6,329.84 5.8 5 JP Morgan 10 1,584.41 6.7
4HATûCONlDENCEûWASûPROVEDûWELLûPLACEDû
7 Barclays 26 6,299.18 5.8 6 Barclays 10 1,477.29 6.3
on Tuesday when the parliamentary ECON
8 HSBC 29 4,532.80 4.2 7 Morgan Stanley 9 1,271.38 5.4
COMMITTEEûlNALISEDûITSûPOSITION
9 UniCredit 23 4,335.86 4.0 8 Goldman Sachs 7 1,072.75 4.5
4HEûlNALûTEXTûSTATESûONLYûTHATûTHEû
10 Lloyds Bank 5 3,240.45 3.0 9 UBS 4 918.72 3.9
European Commission should consider by
Total 166 108,521.77 10 BNP Paribas 5 861.68 3.7
END
ûIFûADDITIONALûPOWERSûAREûREQUIREDû
Including banks, insurance companies and finance companies. Excluding Total 31 23,581.62
for regulators to impose restrictions on equity-related and covered bonds. Excluding publicly owned institutions.
banks’ distributions in exceptional Source: Refinitiv SDC code: N11 Source: Refinitiv SDC code: J3a
circumstances.
ALL GLOBAL AND EUROMARKET YEN BONDS ALL INTERNATIONAL YEN BONDS
Supportive technicals have also
BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE
contributed to perfect conditions, bankers
Managing No of Total Share Managing No of Total Share
said.
bank or group issues ¥(m) (%) bank or group issues ¥(m) (%)
AT1s, the riskiest form of bank debt, were
HITûHARDûINûTHEûGLOBALûSELL
OFFûTRIGGEREDûBYû 1 Mizuho 4 83,608.33 22.0 1 Sumitomo Mitsui 9 113,483.33 20.2
the pandemic. The average yield of the Bank 2 Goldman Sachs 2 60,275.00 15.9 2 Mizuho 7 103,958.33 18.5
of America CoCo index more than doubled 3 BofA Securities 1 48,875.00 12.9 3 Goldman Sachs 2 60,275.00 10.7
WITHINûAûFEWûWEEKSûPEAKINGûATûûONû 4 JP Morgan 1 48,875.00 12.9 4 JP Morgan 1 48,875.00 8.7
March 19. 5 Sumitomo Mitsui 3 32,233.33 8.5 5 BofA Securities 1 48,875.00 8.7

But much of that has now been reversed 6 Nomura 2 20,833.33 5.5 6 Nomura 5 41,183.33 7.3

amid the sizeable and sustained rally in 7 Mitsubishi UFJ MS 2 19,733.33 5.2 7 Mitsubishi UFJ MS 5 40,083.33 7.1
8 MUFG 1 12,500.00 3.3 8 Credit Agricole 5 32,100.00 5.7
credit markets. The index tightened from
9 BNP Paribas 1 12,500.00 3.3 9 Daiwa Securities 4 28,683.33 5.1
ûTOûûINûTHEûWEEKûRUNNINGûUPûTOû
10 Credit Agricole 2 11,750.00 3.1 10 MUFG 1 12,500.00 2.2
the new issues, returning to its lowest level
Total 7 379,250.00 Total 13 562,250.00
since March 6.
Excluding equity-related debt. Including preferreds. Including all Euro, foreign and global issues. Excluding equity-related
“Expectations for AT1 supply are low and debt.
THEREûWEREûMASSIVEû;CREDITûFUND=ûINmOWSûANDû Source: Refinitiv SDC code: K10 Source: Refinitiv SDC code: K12

40 International Financing Review June 13 2020

 BONDS FIG

“The problem is transactions paying no ZURICH INSURANCE COMPANY brought the day’s FRENCH DUO INJECT FURTHER VIGOUR
new issue premiums, or negative premiums, other subordinated trade, printing €750m of TO SNP MARKET
can continue only as long as we see an û.#ûSUBORDINATEDûNOTESûATûBPû
OVERALLûRALLYûûANDûTODAYûISûTHEûlRSTûDAYûINûAû OVERûMID
SWAPSûWITHûBOOKSûLASTûREPORTEDû
FEWûSESSIONSûWEVEûNOTûHADûTHATv
PREFERREDû
Last Monday, Additional Tier 1
transactions from Commerzbank and ABN
AMRO demonstrated the strength of the
primary market, with combined demand for
the two trades peaking above €19.5bn.
TIMEûISSUERû
"UTûBYûMID
MORNINGûONû4UESDAYûBOTHûDEALSû
PREFERREDûDEBT
4WOûMOREû&RENCHûISSUERSûHAVEûTAPPEDûTHEû
above €1.5bn. REJUVENATEDûEUROûSENIORûNON
Bankers away from the deal said it was market with deals that were well received
priced with a 0bp–5bp concession. and in high demand.
SOCIETE GENERALE entered the SNP market
NORMALISATION for the second time in under a month, while
Elsewhere, KBC GROUP sold its second LA BANQUE POSTALEûBECAMEûAûlRST
benchmark green bond issue, following its OFûCALLABLEûSENIORûNON
WEREûBIDûBELOWûPARûATûûANDûû õMûlVE
YEARûDEBUTûINû*UNEû h)TSûAûBIGûDAYûFORûTHEûMARKETvûSAIDûAû
respectively, setting a new tone, bankers said. Leads BofA, Credit Agricole, Commerzbank, syndicate banker, “although people will
“It’s amazing how far we’ve come and we ING, KBC and Natixis opened books for the probably be disappointed with the rest of
REALLYûAREûGETTINGûVERYûCLOSEû;TOûPRE
CRISISû NEWûõMûNO
GROW ûSEVEN
YEARûNON
CALLû THEûWEEKûnûASûWEûEXPECTûITûTOûBEûQUIETvû
SPREADS=vûSAIDûAû$#-ûBANKERûh4HEûWORRYûISû six holdco senior offering with initial price La Banque Postale started marketing a
have we, in the last three or four days, THOUGHTSûOFûMID
SWAPSûPLUSûBPûAREA õMNûû.#ûATûGUIDANCEûOFûMID

MOVEDûTOOûFARûTOOûFASTv 4HEûSPREADûWASûREVISEDûTOûBPûnBPû70)2 û SWAPSûPLUSûBPûAREAûLANDINGûTHEûTRADEû
“The market needs to consolidate because BEFOREûBEINGûlXEDûATûTHEûTIGHTûENDûOFûTHATûRANGEû ATûBPûWITHûBOOKSûPEAKINGûINûEXCESSûOFû
you can’t go 10bp tighter every day. I’m not with books closing in excess of €1.75bn. õBNûWITHûONEûOFlCIALûFROMûTHEû
saying this is the top of the market, but Bankers away from the deal judged it to syndicate expressing pleasure at the
PERHAPSûPEOPLEûNEEDûTOûREASSESSûAûLITTLEûBITv BEûLANDINGûROUGHLYûmATûTOûFAIRûVALUE outcome.
Bankers suggested some investor They said KBC’s deal, and a €750m six Bookrunners were BNP Paribas, Citigroup,
attention was also drawn away to the SSA YEARûNON
CALLûlVEûSENIORûNON
PREFERREDû3.0 û Commerzbank, La Banque Postale, UBS and
MARKETûWHEREûõBN
EQUIVALENTûOFû PRICEDûATûBPûBYû,Aû"ANQUEû0OSTALEûONû UniCredit.
demand was poured into syndications on Monday, show how far senior spreads have “With a call premium of around 15bp,
Tuesday. moved in recent weeks. THEYûPAIDûPRETTYûMUCHûZEROûNEW
ISSUEû
Nevertheless, bankers said all the h)TSûGOODûTOûSEEû3.0SHOLDCOûSENIORSû PREMIUMvûSAIDûAûBANKERûAWAYûFROMûTHEû
lNANCIALûINSTITUTIONSûINûTHEûMARKETûONû
Tuesday were able to achieve solid results, at
least.
“We are seeing smaller order books, yet I
suspect issuers in most cases have been able
GETTINGûDONEûINSIDEûBPûAGAINvûSAIDûTHEû
lRSTû$#-ûBANKER
“Levels are normalising, and that brings into
play higher beta, larger spread names. And for
these lower beta guys, the best in class, levels
deal.
As market sentiment continued to
strengthen in recent weeks, there has been
an increasing appetite for SNP deals, with
lenders offering callable structures to
TOûACHIEVEûTHEIRûSIZEûANDûPRICEûOBJECTIVESvû
SAIDûTHEûlRSTûSYNDICATEûBANKER
UPûTOûlNALûMATURITY
“It does feel like NIPs and book sizes have
gone backwards, but they are still
PALATABLEv
YEARûNON
CALLûlVEûSENIORûPREFERREDû compared to the widening in spreads.
RISK APPETITE
"ANKERSûSINGLEDûOUTûAûõMû4IERûûISSUEû
HAVEûBECOMEûVERYûATTRACTIVEûAGAINv
ITALIANS RETURN
UNICREDITûWASûMEANWHILEûMAKINGûITSûlRSTû
FORAYûINTOûTHEûMARKETûSINCEû&EBRUARYû
)TSûSIX
issue was marketed with initial price
THOUGHTSûOFûMID
mitigate the reduction in regulatory value in
THEûRUN
Higher spreads have also made callables
more palatable to issuers of SNP, as the cost
of the call option remains relatively stable
3OCIETEû'ENERALEûOPENEDûBOOKSûFORûAûSELF
SWAPSûPLUSûBPûAREAûVIAû LEDûõBNûû*UNEûûWITHû)04SûOFû
from RAIFFEISEN BANK INTERNATIONAL as proof sole bookrunner UniCredit. MID
SWAPSûPLUSûBPûAREA
that the market, while not as strong as it 4HEûSPREADûWASûSUBSEQUENTLYûlXEDûATûBPû “The maturity was an empty point of the
was, still had much to offer.
Leads BNP Paribas, BofA Securities, Morgan
Stanley, Raiffeisen Bank International and Societe
GeneraleûMARKETEDûTHEûõMûNO
GROW û
SIGNIlCANTûRALLYûINû)TALIANûSPREADS
BEFOREûTHEûSIZEûWASûSETûATûõBNûWITHûTHEû CURVEûANDûTHEûLASTûDEALûWASûAû.#vûSAIDûAû
lNALûBOOKSûSTANDINGûINûEXCESSûOFûõBN syndicate banker.
The deal comes on the back of a The trade was ultimately launched at
MID
SWAPSûPLUSûBPûWITHûTHEûlNALûBOOKû
YEARûNON
CALLûSEVENûTRANSACTIONûWITHûINITIALû Intesa Sanpaolo, for example, priced a STANDINGûABOVEûõBN
PRICEûTHOUGHTSûOFûMID
SWAPSûPLUSûBPû õBNûlVE
YEARûBULLETûSENIORûPREFERREDû “This was a pretty strong result, with the
area. OFFERINGûATûBPûONû-AYûû4HEûDEALûWASû 
YEARûEXTREMELYûWELLûBIDûLATELYvûSAIDûAû
'UIDANCEûWASûSETûATûBPûAREAûBEFOREûTHEû BIDûATûBPûONû4UESDAY banker away.
SPREADûWASûlXEDûATûBPûWITHûTHEûBOOKSû The tightening paved the way for BPER SNP issuance, and in particular demand
CLOSINGûABOVEûõBN BANCAûTOûSELLûITSûlRSTûSENIORûPREFERREDû FORûLONGER
DATEDûMATURITIESûHASûIMPROVEDûOFû
#ITINGû2")Sûû-ARCHûûNON
CALLû BENCHMARKûONû7EDNESDAYûPRINTINGûAûTWICE
late as the extreme levels of volatility caused
SûATûBPûATû4UESDAYSûOPENûBANKERSû SUBSCRIBEDûõMûlVE
YEARûDEALûATûBPû by the coronavirus pandemic have
saw fair value for the new issue at about INSIDEû)04SûOFûBP DISSIPATEDûSIGNIlCANTLYûASûEUROZONEû
BPûIMPLYINGûAûNEWûISSUEûCONCESSIONûOFû "ANKERSûDEEMEDûITûAûGOODûRESULTûFORûAûLESS
countries ease lockdown measures and look
around 5bp. FOLLOWEDûSECOND
TIERûPERIPHERALûNAMEû to return to business.
While demand was more modest than for despite the softer market backdrop. “The big risk is that [spreads] have moved
other recent subordinated offerings, “The exercise worked well, they were able so much that even in spite of all the positive
bankers said the result was impressive given to get a good trade and a reasonable price market technicals it makes sense that we
Tuesday’s weaker backdrop. MOVEvûSAIDûAûBANKERûATûONEûOFûTHEûLEADS might see a step back in terms of spreads.
“It shows you investors’ appetite for risk "0%2ûWASûTHEûlRSTû)TALIANûBANKûOUTSIDEûTHEû We typically see that, so it’s key for issuers
ISûSTILLûVERYûMUCHûTHEREvûSAIDûAûSECONDû country’s top tier to enter the market since TOûGETûTHEIRûDEALSûOUTûQUICKLYvûTHEûlRSTû
syndicate banker. THEûCORONAVIRUSûCRISISûlRSTûHITûMARKETS banker said.

International Financing Review June 13 2020 41

 METLIFE AND ATHENE AWAKEN securities as it looks to make them more And they have pushed back against
FA-BACKED SUPPLY EFlCIENTûFROMûAûREGULATORYûPERSPECTIVEû suggestions that the coronavirus might
4HEû$ANISHûLENDERûISûSEEKINGûTOûSWAPûTHEû cause that deadline to be delayed.
METLIFE GLOBAL FUNDINGûBROKEûAûMONTHS LONGû ûBULLETSûFORûûNON CALLûS 7HILEûTHEREûMAYûBEûAûNEEDûFORûhSHORT TERMû
IMPASSEûFORû&! BACKEDûDEBTûONû4UESDAYûWITHû $ANSKEûSAIDûTHEûPURPOSEûOFûTHEûOFFERûWASû REPRIORITISATIONvûBECAUSEûOFû#OVID ûMARKETû
AûõMûSEVEN YEARûBONDûRECEIVINGûONLYû to manage its MREL “as the new notes are participants “should remain focused on the
modest demand despite offering a meaty expected to be eligible for MREL until the continued importance of removing reliance on
NEW ISSUEûPREMIUM OPTIONALûREDEMPTIONûDATEvû ,IBORûBYûTHEûENDûOFûvûTHEû"ANKûOFû
In terms of comparables, bookrunners The bonds would lose their regulatory %NGLANDSû&INANCIALû0OLICYû#OMMITTEEûSAIDûINû
looked at MetLife’s euro curve. Prior to the value for MREL purposes in their last year to -AYSû)NTERIMû&INANCIALû3TABILITYû2EPORT
new trade, the issuer’s longest bond was a maturity.
ûûWHICHûWASûQUOTEDûATûMID SWAPSû Bankers said the swap made sense for
PLUSûBPûONû4RADEWEB both the issuer and its bondholders. SWISS FRANCS
4HEYûALSOûLOOKEDûATûTHEûMOSTûRECENTû&! “Going from bullets to callables is, in
BACKEDûTRANSACTIONûANûõMûûû TERMSûOFû-2%,ûEFlCIENCYûMUCHûBETTERûFORû FINANCIALS TO THE FORE IN
NOTEûSOLDûBYû.EWû9ORKû,IFEû'LOBALû&UNDINGû THEûISSUERvûSAIDûAû$#-ûBANKERû SWISS FRANCS
INû*ANUARYûTHATûWASûATûMID SWAPSûPLUSûBPû h!NDûASSUMINGûTHEYûGETûCALLEDûONûTHEûlRSTû
on Tradeweb on Tuesday. call date, for all intents and purposes the CREDIT AGRICOLEûBROUGHTûAû3&RMû
Barclays, Credit Suisse, Deutsche Bank and JP investor is getting the same instrument and 53M ûNO GROWû YEARûSENIORûNON
Morgan set the ball rolling with initial price getting a fee ... it seems a simple, fair preferred deal on Thursday. Books for the
THOUGHTSûATûBPnBPûOVERûMID SWAPS EXCHANGEv /CTOBERûûISSUEûOPENEDûATûMID SWAPSû
One banker close to the trade saw fair )NûTHEûANY AND ALLûEXCHANGEûOFFERSû plus 95bp area and it priced in line with
value around 67bp, while a second banker, LAUNCHEDûONû&RIDAYûMORNINGû$ANSKEûISû GUIDANCEûFORûAûûYIELDûEQUIVALENTûTOû
away from the deal, gauged it closer to 60bp. TARGETINGûITSû53BNûû*ANUARYûSûANDû 96.4bp over government bonds.
&INALûBOOKSûCLOSEDûINûEXCESSûOFûõMû ITSûõBNûû-AYûSû #REDITû!GRICOLEûONLYûPAIDûAûBPûPREMIUMû
after peaking at over €950m. This enabled It is seeking to shift investors into two versus its euro SNP curve, when adjusted for
MetLife to print a €500m bond at 75bp. new securities whose terms will be almost currency basis, according to one banker
“On the face of it, it looks a bit soggy. It’s the identical to the outstanding bonds’, except away from the deal.
lRSTûSUB õBNûBOOKûWEVEûSEENûFORûAûWHILEû THEYûWILLûMATUREûINûûANDûCANûBEûCALLEDû The bonds went mainly to asset
Only moving 10bp–15bp is a smaller move INûûnûWITHûTHEûRESETûDATESûMATCHINGû MANAGERSûWHICHûTOOKûMOREûTHANûûWHILEû
THANûMOSTûWEVEûSEENvûTHEûSECONDûBANKERûSAID precisely the outstanding notes’ maturity INSURERSûTOOKûJUSTûOVERûû!ûTOTALûOFûû
h)DûSAYûITSûJUSTûTOûDOûWITHû&!ûNOTESûBEINGû dates. accounts took part for an average ticket of
a bit niche and the overall audience being $ANSKEûHASûSETûMINIMUMûSIZESûFORûTHEû AROUNDû3&RM
NOTûASûLARGEûASûFORûRUN OF THE MILLû NEWûISSUESûOFû53MûANDûõM Credit Suisse was sole bookrunner, with
transactions, so they’ve had to pay up a bit. The bank is offering an exchange fee of Credit Agricole as joint lead no books,
They probably also got a bit unlucky with 53ûPERû53ûPRINCIPALûAMOUNTûANDûõû The issuer, Credit Agricole London Branch
THEûTONEûONûTHEûDAYv per €1,000. ISûRATEDû!A!!!nûWHILEûTHEûISSUEûISûRATEDû
In comparison, MetLife offered no The offer will expire on June 19, with the "AA!n!
CONCESSIONûONûAûõMûûûTRANSACTIONû RESULTSûANNOUNCEDûONû*UNEûû Concurrently on Thursday, RAIFFEISEN
LASTû3EPTEMBERûANDûDREWûOVERûõBNûINû Bank of America, BNP Paribas, Danske Bank SCHWEIZ GENOSSENSCHAFT opened books for a
ORDERSûWHILEû.EWû9ORKû,IFESûSEVEN YEARû and JP Morgan are dealer managers. MINIMUMû3&RMûûONE YEARûSENIORû
PAPERûATTRACTEDûõBNûOFûDEMAND unsecured bond, with the price set from the
Looking ahead, ATHENE GLOBAL FUNDING will STARTûATûûFORûAûnûYIELD
KEEPûTHEûMOMENTUMûGOINGûWITHûITSûLONG STERLING 2ATEDû!ûSTABLEûBYû-OODYSûITûCAMEûINûAû
AWAITEDûMAIDENûEUROûTHREE YEARû&! BACKEDû 3&RMûSIZEûANDûWENTûMAINLYûTOûBANKû
transaction. NATWEST ISSUES ITS FIRST treasuries, with only seven accounts taking
Barclays, Credit Suisse and Deutsche Bank held SONIA-LINKED STRUCTURED NOTE PARTûFORûAû3&RMûAVERAGEûTICKET
an investor call on Tuesday for the upcoming Raiffeisen Schweiz itself was sole lead.
deal, which has been in the works since NATWEST MARKETSûHASûISSUEDûITSûlRSTû3ONIA
&EBRUARYû4HEûEXECUTIONûWASûDELAYEDûBECAUSEû LINKEDûSTRUCTUREDûNOTEûAûTHREE YEARûmOOREDû
OFûTHEûPANDEMICûCRISISûWITHû$EUTSCHEû"ANKû mOATERûINû-4.ûFORMAT
added to the ticket in the interim. NatWest has previously been at the
Both MetLife and Athene picked euros with forefront of UK efforts to switch from the COVERED BONDS
a view to diversifying their investor bases. Libor benchmark to Sonia. Last year, the
h4HERESûNOûCOSTûBENElTûFORûEITHERûISSUERû BANKûRANûTHEûlRSTûCONSENTûSOLICITATIONû
if anything, MetLife probably paid a couple process to switch a bond from Libor to EUROS
of basis points more to access the euro 3ONIAûBROUGHTûTHEûlRSTû3ONIAûLOANûTOûMARKETû
market. I think euro investors are getting a ANDûBROUGHTûTHEûlRSTû,IBOR TO 3ONIAûLOAN LBBW REVIVES PFANDBRIEF SECTOR
GOODûDEALvûTHEûlRSTûBANKERûSAID 4HEûNEWû3ONIA LINKEDû-4.ûISûSIZEDûATû WITH SIX-YEAR OEPFA
£10.704m and was executed for structured
DANSKE SEEKS SNP BULLET-CALLABLE SWAP PRODUCTSûDISTRIBUTORûI$!$û4HEûANNUALû LBBW breathed life into the Pfandbrief sector
COUPONûPAYSûTHEûGREATERûOFû3ONIAûORû ONû-ONDAYûWITHûAûõMûSIX YEARûPUBLICû
DANSKE BANK has launched an exchange offer The UK regulators want Libor to be SECTORûISSUEûTHEûlRSTûCOVEREDûBONDûISSUEDû
FORûTWOûOFûITSûSHORT DATEDû53ûDOLLARûANDûEURO PHASEDûOUTûBYûTHEûENDûOFûûWHENûTHEYû out of Germany since March, according to
DENOMINATEDûSENIORûNON PREFERREDû SAYûlRMSûCANûNOûLONGERûRELYûONûIT )&2ûDATA

42 International Financing Review June 13 2020


Like recent covered bond transactions,
LBBW followed the script of very limited
PACED
supply leading to exuberant demand – the
deal was more than three times subscribed
BONDS HIGH-YIELD
Bankers anticipate issuance will remain
SLOW
SWISS FRANCS
“The liquidity party will continue; the
ECB made it very clear it won’t take the CREDIT SUISSE GOES INTO COVEREDS
despite not offering any concession.
“We were wondering when the next
German covered bond would come. A lot of
YEARûANDûEIGHT
YEARû
issuers have parked their bonds or money
straight at the ECB due to its [purchase]
PUNCHBOWLûAWAYûANYTIMEûSOONvûTHEûTHIRDû
banker away said.
ACHMEA’S CPT GETS BLOWOUT DEMAND
CREDIT SUISSEûRAISEDû3&RMû53M ONû
7EDNESDAYûTHROUGHû
covered bonds.
-ARKETINGûBEGANûATûAûnûYIELDûFORû
programme, so they don’t have a great ACHMEA BANKûREVIVEDûAû$UTCHûCONDITIONALû THEûSHORTERûTRANCHEûANDûMID
SWAPSûPLUSû
MOTIVATIONûTOûTAPûTHEûMARKETvûAûBANKERû PASS
THROUGHûCOVEREDûBONDûSECTORûTHATûHASû 55bp–60bp for the longer. Books opened for
away said. seen limited supply since October, and AûSETû3&RMûnYEARûATûAûûYIELDûANDûAû
h4HISûWASûTHEûlRSTûTESTûOUTûOFû'ERMANYû received blowout demand for its efforts. MINIMUMû3&RMûEIGHT
YEARûATûPLUSûBPû
ANDû)ûTHINKûITûWASûMOREûTHANûSUCCESSFULvû A banker close to the deal said Tuesday’s area.
Leads ABN AMRO, Credit Agricole, trade was more than just a reopening of the 4HEûSHORTERûONEûWASûSETûATûûANDûTHEû
Commerzbank, LBBW and UBS started market and that it sent the upbeat message LONGERûUPPEDûTOû3&RMûATûPLUSûBP
MARKETINGûATûMID
SWAPSûPLUSûBPûAREAûFORûAû THATûNON
%#"
ELIGIBLEûNAMESûAREûALSOûINûGOODû 4HEûBONDSûAREûNOTû3."ûREPO
ELIGIBLEûSOû
õMûNO
GROWûTRANSACTIONûAûLEVELûTHATû demand in the sector. pay a premium over the benchmark PSHypo
IMPLIEDûANûINITIALûNEW
ISSUEûPREMIUMûOFû “Irrespective of whether the ECB is and PfZ curves.
4bp, according to bankers away. buying or not, there’s so much cash around Bank treasuries took the largest portions
,""7ûHASûOUTSTANDINGû3EPTEMBERûû in this market that people don’t really care. of both tranches at just under a half of each,
ANDû3EPTEMBERûûPUBLICûSECTORûDEALSûTHATû It’s the heyday of selling whatever you feel ASSETûMANAGERSûTOOKûûOFûEACHûANDû
were respectively quoted at plus 5bp and LIKEûSELLINGvûAûSECONDûBANKERûCLOSEûTOûTHEû insurers and pension funds together took
BPûPRE
MANDATEûONû4RADEWEB trade said. n
Orders peaked at €1.75bn within two The CPT structure has not been the Credit SuisseûWASûSOLEûLEADûONûTHEû&ITCHû!!!û
HOURSûENABLINGûTHEûISSUERûTOûRElNEûGUIDANCEû most favoured among covered bond rated deals.
TOûPLUSûBPûnBP û0RICINGûCAMEûINûATûTHEû INVESTORSûANDûTHEû%#"SûDECISIONûINûû
TIGHTûENDûOFûTHEûRANGEûWITHûTHEûlNALûORDERû to exclude these securities from its
book still in excess of €1.7bn. purchase programme did little to improve
“The market is really in very good shape, the product’s popularity.
NEW
ISSUEûCONCESSIONSûAREûDECREASINGûBONDSû 4HISûWASûDEMONSTRATEDûBYûTHEûDIFlCULTYû HIGH-YIELD
are coming at fair value and the tightening !CHMEAûHADûGETTINGûAûõMûû&EBRUARYû
POTENTIALûFORûISSUERSûISûQUITEûLARGEvûAûSECONDû
banker away said.
4HEûlRSTûBANKERûBELIEVESûSUBSEQUENTû
covered bonds will come at markedly tighter
spreads, provided nothing crucial occurs on
the macroeconomic front.
More measured in his views, a third banker
YIELDûBONDûSUPPLYûCONTINUEDûATûAûBRISKû
SAIDûTHATûALTHOUGHû'ERMANûANDû&RENCHûISSUERSû
û#04ûOFFûTHEûGROUNDûINû&EBRUARYûû
4HEûNOTESûOFFEREDûAûBPûNEWûISSUEû UNITED STATES
concession but were only marginally
oversubscribed with €590m in orders. HIGH-YIELD SUPPLY SURGES AMID
Now, however, a corner appears to have ECONOMY WORRIES
been turned in a context of limited covered
bond supply and wider CPT spreads. (IGH
$UTCHû#04SûHAVEûUNDERPERFORMEDû pace last week before worries resurfaced
MAYûBEûABLEûTOûMOVEûPRICINGûBYûBPûORûBPû $UTCHûSOFTûBULLETSûANDûCURRENTLYûOFFERûAû over the state of the US economy and a
the scope for tightening will be limited. BPûPICK
UPûACCORDINGûTOû!".û!-2/û RENEWEDûRISEûINû#OVID
ûINFECTIONS
h7EVEûMOREûORûLESSûREACHEDûPRE
#OVIDû research. $EALSûFROMûûBORROWERSûTOTALLINGû
levels already, so I think from now on it will This time around, bookrunners ABN 53BNûWEREûSOLDûONûTHEûlRSTûTHREEûDAYSû
be an uphill battle and not that easy to AMRO, DZ Bank, ING, Rabobank, Societe Generale of the week, with around half of them
justify a further push. There may be more and UniCredit BEGANûMARKETINGûAûlVE
YEARûATû upsized in a sign of strong funding
[tightening] potential for issuers that are still THEûMID
SWAPSûPLUSûBPûAREAûFORûAûõMû conditions.
OFFERINGûWIDERûSPREADSvûHEûSAID NO
GROWûDEAL 4HISûFOLLOWEDûTHEû53BNûTHATûWASû
!CHMEASûSûISSUEDûATûPLUSûBPûWEREû priced the week before, which was the fourth
ALL COVERED BONDS (ALL CURRENCIES) QUOTEDûATûPLUSûBPûONû4RADEWEB consecutive week of over US$10bn supply.
BOOKRUNNERS: 1/1/2020 TO DATE 'UIDANCEûWASûSUBSEQUENTLYûRElNEDûTOûTHEû (IGH
YIELDûVOLUMEûHASûSOAREDûTHISûYEARû
Managing No of Total Share BPûAREAûnBP ûAFTERûORDERSûPASSEDûTHEû WITHû53BNûSOLDûINûTHEûYEAR
TO
DATEû
bank or group issues US$(m) (%) õBNûMARKûh$EPENDINGûONûHOWûYOUûTWEAKû through Wednesday, compared with
1 Barclays 38 8,185.30 7.5 THEûCURVEûFAIRûVALUEûISûEITHERûBPûORûBPvû 53BNûINûTHEûSAMEûPERIODûINûû
2 Credit Suisse 20 8,049.04 7.3 the second banker said. ACCORDINGûTOû)&2ûDATA
3 BNP Paribas 26 5,947.88 5.4 Achmea printed its bond at the tight end 3TRONGûPRIMARYûCONDITIONSûONûTHEûlRSTû
4 HSBC 26 5,804.39 5.3 OFûTHEûGUIDANCEûRANGEûANDûDREWûAûlNALûORDERû three days of the week were supported by
5 Natixis 21 4,647.69 4.2 BOOKûTHATûEXCEEDEDûõBNûTHEûLARGESTû ANOTHERûBIGûWEEKûOFûINmOWSûINTOûHIGH
YIELDû
6 Credit Agricole 21 4,631.27 4.2 RECORDEDûFORûAû$UTCHû#04ûACCORDINGûTOû!".û FUNDSûWITHû53BNûPILEDûINTOûJUNKû
7 Commerzbank 20 4,536.92 4.1 AMRO analysts. bond funds in the reporting week through
8 ING 21 4,525.75 4.1 “The lack of supply [in covereds] is really Wednesday, according to Lipper data.
9 NatWest Markets 17 4,311.12 3.9 kicking in and redemptions are high in But the pace of the primary supply slowed
10 UBS 16 3,708.30 3.4 June. That book shows you how hot this on Thursday, with just two new deals
Total 129 109,567.31 MARKETûREALLYûISvûSAIDûAûBANKERûAWAYûFROMû emerging as the market sold off on concerns
Source: Refinitiv SDC code: J15a the trade. ABOUTûAûRESURGENCEûOFû#OVID
ûCASESûASûWELLû

International Financing Review June 13 2020 43

ASûTHEû&EDERALû2ESERVESûBLEAKûOUTLOOKûONû SAIDû3COTTû"UCHTAûHEADûOFûlXED
INCOMEû NOTESûWHICHûWEREûTRADINGûATûAûYIELDûOFûû
the economy that will mean rates stay close strategy at Brean Capital, in a note to clients on Monday.
TOûZEROûTHROUGHûTOû on Monday. 4HOSEûOUTSTANDINGûSûTRADEDûASûLOWûASû
Technical factors are also at play after a “This has caused many fundamental ûINûLATEû-ARCHûBUTûHAVEûRALLIEDûASûAUTOû
RALLYûTHATûSAWûAVERAGEûHIGH
YIELDûSPREADSû credit players to underperform their manufacturing and sales pick up.
ALMOSTûHALVEûFROMûBPûONû-ARCHûûTOû
550bp on June 5, according to the trader.
IN
THEûOUTSTANDINGûAMOUNTûONûITSûûû
“This week we saw the S&P 500 go
positive on the year, and I think that was an
awakening to a lot of people that the market
had gone a little too far given all of the
POTENTIALûRISKSû7EûSTILLûHAVEûTOûSEEû1û
earnings and we know they will be really
benchmarks, and may cause problems down The new notes are aimed at redeeming
THEûROADûASûINVESTORSûWHOûHADûANûUP
quality bias will be forced to reach for yield notes.
and do not have the luxury of simply Prior to the crisis, American Axle was on a
ABSORBINGûLOSSESûSHOULDûTHEYûOCCURvû deleveraging push that is now on hold,
CreditSights analysts said.
AUTO SUPPLIER AMERICAN AXLE Expense and capital expenditure
RAISES CASH FOR REFI reduction plans are now the priority.
BADvûSAIDûAûHIGH
YIELDûBONDûTRADER h7EûLIKEûTHEû!8,ûCREDITûSTORYûALTHOUGHûTHATû
(IGH
YIELDûSPREADSûSTARTEDûTOûWIDENûFROMû AMERICAN AXLE & MANUFACTURING raised ISûNOTûONEûOFûDE
LEVERAGINGûRIGHTûNOWûBUTûONEû
Monday through to Thursday, moving from 53MûONû4UESDAYûTOûRElNANCEûEXISTINGû OFûSURVIVINGûDOWNCYCLEvûSAIDû#REDIT3IGHTSûINûAû
BPûTOûBPûOVERû4REASURIESûONû bonds, as the auto sector restarts report on Tuesday. “We underscore that last
Wednesday. manufacturing in a boost for component DOWNTURNûALSOû!8,ûSURVIVEDûDESPITEûAûLOTûOFû
Where the market goes from here depends suppliers. (volatility) and two of its largest customers (GM
a lot on how investors weigh up weak The transaction followed a rally in the ANDû#HRYSLER ûlLINGûFORûBANKRUPTCYv
fundamentals against strong technical factors. company’s outstanding bonds which Still, ratings agencies drew attention to
h9OUûCOULDûARGUEûWEûWEREûDUEûAûPULL
tracked the reopening of the US economy THEûRISKûOFûAûSECONDûWAVEûOFû#OVID
û
BACKvûSAIDû3TEVEû2EPOFFûTAXABLEûBONDû
portfolio manager at GW&K Investment
Management.
YEARûNON
CALLûTHREEûSENIORûUNSECUREDû
and resumption of car manufacturing. infections interrupting the recovery in car
!MERICANû!XLEûPRICEDûTHEû""nûRATEDû production or from an extended recession
EIGHT
putting more pressure on vehicle demand.
“There has been a lot of momentum and
there’s a lot of people on the same side of
the boat now, but I would be surprised if we
saw the same severity of that downturn in
UPûTOûTHEûlRMSûEXISTINGûûû
-ARCHûJUSTûWITHûTHEû&EDûBEINGûTHEREv
NOTESûATûûINSIDEûPRICEûTALKûOFûTHEû Indeed, the new American Axle notes
ûAREA traded off on Thursday after a bleak
4HEûlNALûCOUPONûOFFEREDûONLYûAûSLIGHTû ECONOMICûOUTLOOKûFROMûTHEû&EDERALû2ESERVEû
PICK
on Wednesday.
/NûTOPûOFû&EDERALû2ESERVEûSUPPORTûANYû ALL US$ DENOMINATED HIGH-YIELD BONDS ALL NON-DOLLAR DENOMINATED HIGH-YIELD BONDS
PULL
BACKûINûSUPPLYûAMIDûSOFTERûFUNDINGû BOOKRUNNERS – 1/1/2020 TO DATE 1/1/2020 TO DATE
conditions would be another support for the Managing No of Total Share Managing No of Total Share
market, he said. bank or group issues US$(m) (%) bank or group issues €(m) (%)
“If issuance stops and people continue to 1 JP Morgan 149 18,463.84 10.2 1 JP Morgan 23 2,400.03 8.7
look for yield, the technicals will remain so 2 BofA Securities 146 17,922.90 9.9 2 Deutsche Bank 19 2,131.19 7.7
STRONGvûSAIDû2EPOFF 3 Citigroup 117 14,034.72 7.8 3 Citigroup 17 1,901.20 6.9
4 Barclays 110 13,435.38 7.4 4 BNP Paribas 18 1,773.81 6.4
OPTIMISM 5 Goldman Sachs 110 12,668.73 7.0 5 Barclays 16 1,643.71 6.0
Prior to last week, borrowers had been able 6 Morgan Stanley 76 10,897.28 6.0 6 Credit Suisse 12 1,510.63 5.5
to lock in cheap funding as optimistic 7 Wells Fargo 88 10,073.61 5.6 7 HSBC 18 1,400.73 5.1
investors drive credit spreads tighter 8 Deutsche Bank 89 8,775.35 4.9 8 BofA Securities 11 1,274.55 4.6
FOLLOWINGûTHEû&EDSûEFFORTSûTOûKEEPûRATESûLOWû 9 Credit Suisse 78 8,061.77 4.5 9 ING 13 1,247.05 4.5
and provide a backstop through its 10 RBC 53 5,633.67 3.1 10 Credit Agricole 9 1,180.65 4.3
secondary buying programme. Total 278 180,624.62 Total 53 27,524.21
h4HEûRALLYûOFûAûLOTûOFûLOW
ENDûNAMESûHASû Including US domestics, Euro, foreign, globals. Excluding equity-related debt. Excluding equity-related debt.
been dazzling in recent weeks with a Source: Refinitiv SDC code: B5 Source: Refinitiv SDC code: B6
material and impressive quality spread
compression pattern very much in evidence ALL ASIAN HIGH-YIELD ISSUERS ALL EUROPEAN HIGH-YIELD ISSUERS
within US HY and overall not factoring in 1/1/2020 TO DATE 1/1/2020 TO DATE
MUCHûCHANCEûOFûBADûNEWSvûWROTEû Managing No of Total Share Managing No of Total Share
CreditSights analysts in a note on Sunday. bank or group issues US$(m) (%) bank or group issues US$(m) (%)
4HEûRISKIESTûENDûOFûTHEûHIGH
YIELDûMARKETû 1 Citigroup 23 3,905.69 10.5
1 Credit Suisse 24 2,602.99 10.1
had been outperforming, with Triple C 2 JP Morgan 28 3,219.79 8.6
2 UBS 20 2,163.41 8.4
BONDSûDELIVERINGûOVERûûTOTALûRETURNSûINû 3 BofA Securities 8 1,704.13 6.6 3 Deutsche Bank 17 2,572.81 6.9
the past month as of Monday, compared 4 Goldman Sachs 12 1,444.22 5.6 4 BNP Paribas 21 2,449.48 6.6
WITHûûFORû$OUBLEû"ûCREDITSûACCORDINGûTOû 5 Haitong Secs 36 1,414.16 5.5 5 Barclays 18 2,409.62 6.5
ICE BofA data. 6 Tianfeng Securities 4 1,320.00 5.1 6 Credit Suisse 12 1,927.92 5.2
Part of this has been down to investors 7 Citic 23 1,299.33 5.0 7 BofA Securities 13 1,706.24 4.6
CHASINGûYIELDûINûAûRISK
ONûENVIRONMENTûANDû 8 Standard Chartered 10 951.95 3.7 8 HSBC 18 1,563.65 4.2
ASû&EDERALû2ESERVEûSUPPORTûDRIVESûSPREADSû 9 Morgan Stanley 11 908.74 3.5 9 ING 12 1,535.69 4.1
tighter. 10 Guotai Junan Secs 22 900.26 3.5 10 Credit Agricole 8 1,462.98 3.9
“While helping to lower borrowing costs Total 64 25,859.28 Total 58 37,239.00
for issuers, this rally has caused risk to be Excluding equity-related debt. Excluding equity-related debt.
SEVERELYûMISPRICEDûINûTHEûCREDITûMARKETSvû Source: Refinitiv SDC code: B06d Source: Refinitiv SDC code: B06c

44 International Financing Review June 13 2020

 BONDS HIGH-YIELD

The notes were seen trading as low as When the exchange offer was announced take down a ton of Virgin notes ahead of the
97.50 on Thursday, according to ONû-AYûûTHEûSENIORûNOTESûWEREûTRADINGûASû /ûTRANSACTIONûANDûTHEûPOTENTIALûNEWû
MarketAxess. low as 55. But they have since climbed to ISSUANCEûTHEREv
Both Moody’s and S&P have negative over 70 in secondary trading, according to A second investor welcomed the recent
OUTLOOKSûONûTHEûlRMSû""nûUNSECUREDû
ratings.
YIELDûINVESTORSûAREûINûNEEDûOFûISSUANCEû
American Axle had a cash position of
53MûATûTHEûENDûOFûTHEûlRSTûQUARTERûANDû
MarketAxess. SPATEûOFû6-%$ûBONDSûSAYINGûTHATû%UROPEANû
$IAMONDû3PORTSûWARNEDûINVESTORSûINû-AYû HIGH
that it was considering alternatives that from large capital structures following a
would strip collateral from secured prolonged drought in the primary market.
-OODYSûEXPECTSûITûTOûlNISHûTHEûYEARûWITHûAû bondholders if the exchange offer was h6-%$ûDEALSûHAVEûBEENûSUCKEDûUPûANDû
similar amount, as the substantial negative unsuccessful. HAVEûDONEûWELLûVERYûEASILYvûSAIDûTHEûSECONDû
CASHmOWûINûTHEûSECONDûQUARTERûISûOFFSETûBYû The company indicated it was considering investor. “There’s real demand for a bit of
the recovery in auto operations in the designating subsidiaries as “unrestricted YIELDûnûANDû6-%$ûISNTûEVENûALLûTHATûYIELDYv
second half of the year. SUBSIDIARIESvûWHICHûCOULDûBEûUSEDûTOûMOVEû )NVESTORSûINûTHEû2&.SûAREûFUNDAMENTALLYû
)NûAûREPORTûRELEASEDûONû4UESDAYû&ITCHûSAIDû collateral outside the reach of secured TAKINGû6-%$ûUNSECUREDûBONDûRISKû
that auto supplier earnings will have fallen bondholders and use it to raise new debt – a according to an investor presentation seen
to their lowest in the second quarter of move that was most commonly associated BYû)&2
ûBUTûWILLûGRADUALLYûIMPROVEûINûTHEûTHIRDû
quarter.
Component sales in the US are expected
TOûBEûDOWNûûINûTHEûSECONDûQUARTER
4HEûBIGGESTûIMPACTûONûFREEûCASHmOWûWILLû
HAVEûBEENûINûTHEûlRSTûHALFûOFûûASûAûRESULTû
of weak earnings, but this should also
WITHû*#REWûINû
!NALYSTSûATûCREDITûRESEARCHûlRMû#OVENANTû
Review said the company had the ability to
do this, regardless of the success of the
exchange offer, under the existing and
proposed covenants.
6-%$SûRECEIVABLEûlNANCINGûNOTESûRANKû
junior to Virgin Media’s secured debt but are
structurally senior to its senior unsecured
notes. Virgin Media is ultimately responsible
for the payment of coupon and principal.
With this bond, Virgin Media will have
RElNANCEDûALLûOFûITSûSENIORûUNSECUREDSûANDû
improve in the second half, the ratings
agency said.
“Auto suppliers are cyclical businesses,
they’re capital intensive and they’re
dependent on consumer buying power and
ALLûOFûITSûRECEIVABLEûlNANCINGûBONDSû
EUROPE/MIDDLE EAST/ according to CreditSights analysts.
AFRICA “Its next benchmark bonds do not
BECOMEûCALLABLEûUNTILû*ANUARYûûANDû
VIRGIN MEDIA REFINANCES DEBT AHEAD management are not in a rush to bring the
SENTIMENTvûSAIDû3TEVEû2EPOFFûTAXABLEûBONDû OF O2 TIE-UP NEWûSUPPLYûRELATEDûTOûTHEû/5+û
portfolio manager at GW&K Investment recapitalisation. As such, after this deal, we
Management. VIRGIN MEDIAûHASûBEENûONûAûRElNANCINGûSPREEû expect Virgin to give the primary market a
“But as long as they’re not overly levered hitting the market four times in two weeks, BREAKvûWROTEûANALYSTS
and they can take advantage of capital as it looks to clean up its debt stack ahead of Now that all of Virgin’s senior notes have
markets when they can, pushing out the ITSûCOMBINATIONûWITHû/ been taken out, it can undertake a
maturity runway far enough, investors are The latest deal from the UK cable operator h0ERMITTEDû3TRUCTUREû2EORGANISATIONvûSAIDû
willing to believe that this will pass and WASûAûaM
EQUIVALENTûEIGHT
YEARûNON
CALLû CreditSights.
STRESSûMAYûNOTûBEûACUTEv THREEûVENDORûlNANCINGûNOTESûSPLITûBETWEENû “This allows Virgin to release any and all
sterling and US dollars. of the guarantees of the senior notes and to
SINCLAIR DEBT SWAP FOR SPORTS Lead bookrunners Deutsche Bank (B&D) and grant a share pledge on the capital stock of
NETWORK BONDS FALLS FLAT Credit Suisse held calls with investors to THEûISSUERûANDûANYûAFlLIATEûISSUERvûANALYSTSû
market the bond on June 10. wrote.
An attempt by SINCLAIR BROADCAST GROUP to The sterling component was a tap of The move would bring the language of
ease the debt load on its regional sports 6-%$SûaMûû*ULYûSûISSUEDû Virgin’s senior notes in line with the other
network operator DIAMOND SPORTS was met JUSTûAûWEEKûEARLIERûONû*UNEû ,IBERTYûCABLE
SILOSûANDûMAYûALSOûRELATEûTOû
with tepid demand from investors as a Meanwhile, the other tranche was the MANAGEMENTûWANTINGûAûSINGLE
SILOûCAPITALû
debt exchange deadline passed on Tuesday COMPANYSûlRSTû2&.ûINû53ûDOLLARSû STRUCTUREûFORûTHEûNEWû6IRGIN
/û
night. ACCORDINGûTOû)&2ûDATAû7HISPERSûFORûTHATû53û combination, said CreditSights.
(OLDERSûOFûJUSTû53MûOFûTHEûlRMSû dollar bond were heard by one US investor The UK cable and broadband company
ûûSENIORûNOTESûORûûOFû ATûn announced on May 7 a plan to merge with
outstanding, agreed to swap their bonds for Virgin landed the £400m sterling tap at MOBILEûNETWORKûOPERATORû/ûINûAûDEALûTHATûHASûAû
NEWûûSENIORûSECUREDûNOTESûDUEû 99.50, and the US$500m US dollar bond at COMBINEDûENTERPRISEûVALUEûINûEXCESSûOFûaBN
4HOSEûINVESTORSûWILLûRECEIVEû53MûINû û"OTHûTRANCHESûPRICEDûONû*UNEû Liberty Global and Telefonica, which own
face value of new notes and US$10m in cash. 0ROCEEDSûFROMûTHEûDEALûRATEDû"""û 6IRGINû-EDIAûANDû/ûRESPECTIVELYûAREû
4HATûLEAVESûAROUNDû53BNû -OODYS30&ITCH ûWILLûBEûUSEDûTOû COMBININGûTHEûBUSINESSESûINûAû
ûJOINTû
outstanding on the senior notes, the RElNANCEûTHEûCOMPANYSûaMûRECEIVABLEû venture to take on the likes of BT and Sky.
company said on Thursday. lNANCINGûNOTESûDUEû The merger is expected to close in the
4HEûPOORûTAKE
UPûALSOûFAILEDûTOûMEETûTHEû Some investors grumbled that they felt MIDDLEûOFû
consent threshold to strip the covenants oversaturated by Virgin issuance. Virgin Media started its run of issuance
FROMûTHEûS “To be honest, I’m not inclined to play – WITHûAû53MûûUNSECUREDû*ULYûSûINû
The exchange offer was seen by WEûHAVEûENOUGHû6IRGINûNOWvûSAIDûONEû THEû53ûDOLLARûMARKETûONû*UNEûûTOûRElNANCEû
CreditSights analysts as an attempt to take INVESTORûWHOûHADûBOUGHTû6IRGINSûõMû
DOLLARûANDûEUROûBONDSûMATURINGûINû
advantage of the steep discounts on the YEARûNON
CALLûlVEûBONDûTHATûCAMEûONû*UNEû )TûFOLLOWEDûUPûONû*UNEûûWITHûaMûINû
company’s bonds in the secondary market “It just seems ridiculous how often we’re .#ûVENDORûlNANCINGûNOTESûATûûUSEDû
as it tries to deal with the shutdown of seeing them in the market over the past TOûRElNANCEû6IRGINû-EDIASûaMûû
sports broadcasting revenues. couple of weeks. It gets harder and harder to 2&.SûDUEû!PRILû

International Financing Review June 13 2020 45

 !NDûONû*UNEûûITûLANDEDûTHEûõMû
h4HEYREûUSINGûTHISûWINDOWûTOûRElNANCEû Proceeds from the bond will redeem all
YEARûNON
CALLûlVEûBONDûANDûAû53MûTAPû THEIRûOUTSTANDINGûCAPûSTRUCTUREvûHEûSAID OFûTHEûCOMPANYSûûEUROûNOTESûDUEû
OFûTHEûû*ULYûS “Market conditions are very constructive. /CTOBERûûCALLABLEûINû*ULYûANDûALSOûAû
Proceeds from those two bonds were used The timing of this deal is based on the portion of Iqvia’s revolving credit facility
TOûRElNANCEû6IRGINû-EDIASûCALLABLEûû53û recent rally, which followed the ECB’s balance.
DOLLARûSENIORûNOTESûDUEû*ANUARYûûû ANNOUNCEMENTûTHATûITûWASûINCREASINGû0%00v Iqvia priced its €711m bond on
STERLINGûSENIORûNOTESûDUEû&EBRUARYûû The ECB said on June 4 it would up its 7EDNESDAYûATûû0RICEûTALKûWASûTHEûû
û53ûDOLLARûSENIORûNOTESûDUEû&EBRUARYû Pandemic Emergency Purchase Programme area.
ûANDûITSûû53ûDOLLARûSENIORûNOTESûDUEû BYûõBNûTOûõTRN Virgin Media and Swiss packaging group
&EBRUARYû “Issuers like this have the luxury of SIG Combibloc both announced deals on
TIMINGûTHESEûTHINGSvûSAIDûAûSECONDûINVESTOR -ONDAYû*UNEûûTOûRElNANCEûPARTûOFûTHEIRû
SIG COMBIBLOC REPLACES ENTIRE “Once these guys have tested the waters it capital structures. Later on in the week,
DEBT STACK will be time for slightly riskier, more Virgin Media returned to the euro bond
NUANCEDûCREDITSûTOûCOMEûTOûMARKETv MARKETûWITHûAûDUAL
CURRENCYûRECEIVABLESû
Crossover credit SIG COMBIBLOC found strong Similar to recent crossover deals, SIG’s lNANCINGûTRADE
DEMANDûFORûITSûTWO
PARTûTRADEûONû4HURSDAYû bond will probably attract plenty of One buysider said he wanted to see more
paving the way for other, riskier credits to come INVESTMENT
GRADEûINVESTORSûSAIDûTHEûSECONDû borrowers with large capital stacks coming
TOûTHEûEUROûHIGH
YIELDûMARKETûSAIDûINVESTORS BANKERû7HILEûTHEûBONDSûAREûTAGGEDûNON
CALLû TOûTHEû%UROPEANûHIGH
YIELDûPRIMARYûMARKETû
!CCOUNTSûPLACEDûORDERSûOFûALMOSTûõBNûFORû LIFEûAûHIGH
YIELDûEXPRESSIONûTHEûDOCUMENTSû to loosen up what has been a chronically
the Swiss packaging company’s €1bn deal, are IG style, he said. illiquid secondary market.
WHICHûWASûSPLITûBETWEENûNON
CALLûLIFEûTHREEû h4HEûDEALûWILLûlTûWELLûINTOûBOTHû)'ûANDû(9û Lack of liquidity and the sheer expense of
ANDûlVE
YEARûNOTES POCKETSvûSAIDûTHEûSECONDûBANKER transacting in secondary has particularly
“SIG is a very good credit and it’s more !VERAGEûYIELDSûFORû$OUBLEû"ûCREDITSûHADû HURTûACTIVEûMANAGERSûINûHIGH
YIELDûASûTHEû
LOWû4RIPLEû"ûTHANûMIDû$OUBLEû"ûINûMYû COMPRESSEDûTOûAROUNDûûBYû&RIDAYûDOWNû market recovers, said a second investor.
OPINIONvûSAIDûONEûINVESTOR FROMûMID
-ARCHûHIGHSûINûEXCESSûOFû “The pain trade is watching the most
“Pricing is okay but it leaves a very Investors have been watching the rally BEATEN
UPûPARTûOFûTHEûMARKETûCONTINUEûTOû
SLENDERûNEWûISSUEûCONCESSIONv with some trepidation. DRIFTûUPvûSAIDûTHEûSECONDûINVESTOR
The buyside has shown keen interest for “I’m wary around primary because issuers !VERAGEûYIELDSûHADûRECOVEREDûTOûûLASTû
packaging names. SIG’s outing follows peer coming to the market after such a fast rally WEEKûDOWNûFROMûAûPEAKûOFûûINû-ARCHû
Ardagh, which has been in the market on will be hoping to print a lot tighter than according to Eikon data. In secondary, bonds
lVEûSEPARATEûOCCASIONSûnûINûDOLLARSûANDûEUROSû they would have been able to a couple of that were previously trading below a cash
– since the start of April. WEEKSûAGOvûSAIDûTHEûSECONDûINVESTOR PRICEûOFûûHAVEûJUMPEDûnûPOINTSûSAIDû
-ARKETINGûSTARTEDûATûTHEûûAREAûANDûû h)ûTHINKû1ûWILLûBEûAûBITûOFûAûWAKE
UPû THEûlRSTûINVESTOR
area, ahead of guidance for an expected €400m call for investors in terms of seeing what “Bonds have started to move up in
THREE
YEARûATûnûANDûANûEXPECTEDû sort of shape these companies are in, and vacuums on very thin liquidity. It’s just not
õMûlVE
YEARûATûn what the outlook is given how weak THATûEASYûTOûBUYûINûSECONDARYvûSAIDûTHEûlRSTû
4HEûSIZESûWEREûLATERûRESHUFmEDûWITHû3)'û
LANDINGûõMûTHREESûATûûANDûõMû
lVESûATû
YIELDûMARKETv
#OMPARABLESûINCLUDEDû$OUBLEû"û
PACKAGINGûCREDITSû"ERRYû'LOBALûANDû3MURlTû
Kappa, the investor said.
3MURlTû+APPAûHASûAûû&EBRUARYû
economic prospects are for the
FORESEEABLEûFUTUREv
A third investor called the rally
hINCREDIBLEvûBUTûNOTEDûTHATûITûHADûNOTû
reached all corners of the market.
h-OREûTHANûAûFEWûCREDITSûAREûBACKûTOûû
tights. Meanwhile there are a few that
investor.
h)TûISûREmECTIVEûOFûTHEûENDEMICûILLIQUIDITYû
OFûTHEû%UROPEANûHIGH
Iqvia has €4.5bn in bonds currently
outstanding, according to Eikon data.
“Iqvia is a credit that we like and it’s a
NICEûCREDITûTOûOWNû4HEYREûRElNANCINGûSOMEû
ûWHICHûWASûSEENûQUOTEDûATûû HAVENTûBOUNCEDûBACKûATûALLvûHEûSAIDû bonds, and [the way those bonds have
according to MarketAxess data. “Maybe the pause in the equity market rally behaved] is a pretty easy story, which says
)TûALSOûHASûû*ANUARYûSûBIDûATû
Global coordinators and bookrunners
Goldman Sachs "$ , UBS and UniCredit
started virtual investor meetings on Monday
*UNEûûCredit Suisse was a bookrunner.
h)ûWOULDûCALLûITûAûRElNANCINGûEXERCISEûONû
ûRELATEDûSHUTDOWNSû
the balance sheet – proceeds from this issue
together with a new term loan facility will
OFFûSEENûINû-ARCH
RElNANCEûEXISTINGûTERMûLOANûFACILITIESûANDûBEû
YIELDûMARKET )NûMID
MIGHTûCAUSEûAûBITûOFûRATIONALISATIONv SOMETHINGûABOUTûTHEûMARKETvûSAIDûTHEûlRSTû
investor.
EUROPEAN HIGH-YIELD PRIMARY CREAKS
OPEN ON MARKET EXUBERANCE PARTIAL RECOVERY
Junk bonds from issuers relatively
As markets rally across the world on hopes DECOUPLEDûFROMû#OVID
that economies will start to reopen, the have seen a partial recovery from the
OPTIMISMûHASûlNALLYûREACHEDûTHEûSHORESûOFû INDISCRIMINATEûSELL
THEû%UROPEANûHIGH
-ARCHû)QVIASûû/CTOBERûSû
USEDûFORûGENERALûCORPORATEûPURPOSESvûSAIDûAû &OLLOWINGûONLYûAûTRICKLEûOFûDEALSûINû WEREûSEENûBIDûATûAûYIELDûOFûûANDûAûPRICEû
banker familiar with the deal. primary over the past three months, US OFûû4HEûSAMEûBONDSûWEREûSEENûPRE

3)'û#OMBIBLOCûISûRElNANCINGûITSûENTIREû
capital structure. The notes come alongside
AûPROPOSEDûõMûTERMûLOANûANDûõMû
YIELDûBONDûTHATûWILLû EUROûNOTEûSEENûBIDûPRE
ANNOUNCEMENTûATû
revolving bank credit facility.
healthcare company IQVIA on Tuesday ANNOUNCEMENTûONû-ONDAYûATûûORû
became the third company in two days to )QVIAûALSOûHASûAûõMûû*ANUARYûû
ANNOUNCEûAûEUROûHIGH
RElNANCEûUPCOMINGûMATURITIES û$URINGû-ARCHSûSELL
OFFûTHOSEûBONDSû
SIG last tapped the public bond market in h&INALLYûTHEû%UROPEANûISSUERSûAREûCOMINGû WEREûSPOTTEDûATû
ûACCORDINGûTOû)&2ûDATAû!FTERûGOINGû OUTûOFûHIDINGvûSAIDûAûHIGH
YIELDûANALYST “Iqvia is a credit that is entirely
PUBLICûINûûTHEûCOMPANYûWANTEDûTOûSHIFTû Iqvia held investor calls on Tuesday for a independent of what is going on with
from a secured to an unsecured capital 53M
EQUIVALENTûûNON
CALLûTHREEû ;#OVID
=ûANDûITSûEQUITYûVALUEûISûVIRTUALLYû
structure, said a second banker. senior unsecured bond. BACKûATûWHEREûITûWASvûSAIDûTHEûlRSTûINVESTOR

46 International Financing Review June 13 2020

 BONDS HIGH-YIELD

Iqvia’s share price was last week at ACCORDINGûTOûBANKERSûSPEAKINGûTOû)&2ûATûTHEû )Nû&EBRUARYûûTHEû%UROPEANû

53ûHAVINGûFALLENûASûLOWûASû53ûINû time. Commission launched an investigation to
March. It had been trading around US$160 “We are considering issuing a green bond EXPLOREûPOTENTIALûANTI
COMPETITIVEû
INû&EBRUARYûBEFOREûTHEûGLOBALûSELL
OFF now because we recently launched an behaviour in the Norwegian salmon
“Look at where the bonds are trading now ambitious strategy for sustainable growth industry.
in comparison with March. That’s TOWARDSûûANDûWOULDûLIKEûTOûHAVEûOPTIONSû Grieg Seafood and Mowi are two of the
fundamentally why this issuer is going to FORûlNANCINGûTHEûINVESTMENTSvûSAIDû'RIEGû companies under investigation.
market – especially while the picture is still 3EAFOODû#&/û!TLEû(ARALDû3ANDTORV The investigation won’t necessarily affect
PRETTYûGOODvûSAIDûTHEûlRSTûINVESTOR
)QVIAûCARRIESûAû"AûRATINGûFROMû-OODYSû
and a BB rating from S&P.
Moody’s analysts noted that ESG
considerations for the credit include the
“There are few such bonds in the seafood
industry, so it will be an opportunity to
DIVERSIFYûPORTFOLIOSv
Grieg has a second opinion issued by the
climate research institution Cicero, which
the green nature of the bonds involved, and
Mowi’s green bond was comfortably
oversubscribed. But it could be taken into
consideration by investors with an ESG
element to their investing.
COMPANYSûAGGRESSIVEûlNANCIALûPOLICYû scored the green bond framework “medium One green bond investor, who said he
which they called a key governance risk. GREENvûSAIDû3ANDTORV wasn’t familiar with either Grieg Seafood or
h)QVIAûHASûMAINTAINEDûHIGHûlNANCIALû Sandtorv said the company has multiple Mowi, said he would “absolutely take into
LEVERAGEûPRIMARILYûTHROUGHûDEBT
FUNDINGû projects planned that aim to reduce the ACCOUNTûANYûMATERIALû%3'
RELATEDûCONCERNSû
SHAREûREPURCHASESvûWROTEûANALYSTS
Moody’s added that it expects the pace of
share repurchases and acquisitions will
moderate compared with prior years and the
COMPANYSûLEVERAGEûOFûûTIMESûDEBT%BITDAû
environmental impact from its operations
and value chain, and to improve the health
ANDûWELFAREûOFûITSûlSH
“This is an ethical responsibility, but it is also
KEYûTOûREACHûOURûOPERATIONALûANDûlNANCIALû
in our diligence whether it was a green bond
ORûNOTv
“We would be very unlikely to invest in a
company that was being formally
INVESTIGATEDûFORûPRICEûlXINGûASûAûDIRECTû
will decline modestly over the next few years. TARGETSvûHEûSAIDûh7EûFEELûTHATûTHESEûPROJECTSûlTû REmECTIONûOFûWEAKûGOVERNANCEvûHEûSAID
WELLûWITHINûAûGREENûBONDûFRAMEWORKv Based on the EU investigation, US
ECB FILLIP The results of the projects will in turn competition authorities launched their
4HEû%UROPEANûHIGH
YIELDûMARKETûGOTûANû IMPROVEû'RIEGSûOPERATIONALûANDûlNANCIALû OWNûINVESTIGATIONûINû.OVEMBERûANDûCLASS

ADDITIONALûTAIL
WINDûONû4UESDAYûAFTERû performance, said Sandtorv. ACTIONûLAWSUITSûHAVEûBEENûlLEDûBYûSOMEû
European Central Bank policymaker Olli One example of these projects includes customers.
Rehn was quoted saying that he had an POST
SMOLTûFACILITIESûWITHûRECIRCULATINGû h'RIEGû3EAFOODûISûNOTûAWAREûOFûANYûANTI

hOPENûMINDvûINûTHEûDEBATEûOVERûWHETHERûTHEû TECHNOLOGYû4HATûINVOLVESûKEEPINGûTHEûlSHû competitive behaviour, not in Norway, the
bank should buy corporate bonds that lose LONGERûINûLAND
BASEDûFACILITIESûANDûREDUCINGû EU, the US nor in any other countries where
THEIRûINVESTMENT
GRADEûRATINGûINûTHEûCURRENTû time in the sea, Sandtorv said. WEûOPERATEvûSAIDûAûSPOKESPERSONûWHOû
crisis, although he said that there has been 4HEûIDEAûISûTHATûTHEûlSHûWILLûBEûMOREûROBUSTû CONlRMEDûTHEûINVESTIGATIONS
no serious discussion over the issue. when they enter the sea phase – because they “We are fully collaborating with
h#ONCERNINGûPOSSIBLEûPURCHASESûOFûHIGH
would be less exposed to diseases, sea lice and European and American authorities in this
yield bonds, this is something that one can harmful plankton – and will increase survival matter, and are following up the lawsuits
contemplate and I look at the various rates. The aim of the technology is to decrease LEGALLYv
OPTIONSûWITHûANûOPENûMINDvû2EHNûSAID
“But we have not had serious discussions
ONûTHISûANDû)ûWOULDûRATHERûlRSTûHAVEûOURû
internal discussion on this matter before
COMMENTINGûONûITûINûPUBLICv
WINûFORûTHEû
THEûENVIRONMENTALûFOOTPRINTûOFûTHEûlSHûANDû Mowi did not immediately respond to a
also the company’s cost, said Sandtorv. request for comment.
The company has other projects on the go
THATûAIMûTOûIMPROVEûlSHûHEALTHûANDûWELFAREû ICELAND FOODS REASSURES
and reduce its carbon footprint. BONDHOLDERS AFTER BUYOUT
h4HESEûPROJECTSûAREûWIN
GRIEG SEAFOOD DEEPENS GREEN ENVIRONMENTûlSHûWELFAREûANDûCOMPANYû ICELAND FOODS‘ management looked to
BOND POOL PROlTSvûSAIDû3ANDTORV reassure bondholders last week that the
“If we decide to issue the green bond, it company will be able to repay its
GRIEG SEAFOOD is poised to add another will be an opportunity for investors who mOATING
RATEûBONDSûDUEû*ULYûAFTERûBUYINGû
building block to the nascent green bond care about the environment, animal welfare out South African investment company
aquaculture sector, despite a European ANDûPROlTSûCOMBINEDv Brait.
#OMMISSIONûANTI
COMPETITIVEûBEHAVIOURû DNB Markets and Nordea are bookrunners &OUNDERûANDûEXECUTIVEûCHAIRMANû-ALCOLMû
investigation hanging over the company. and green bond advisers. Investor calls Walker and chief executive Tarsem
Grieg’s proposed Norwegian krone senior BEGANûONû&RIDAY $HALIWALûSAIDûONû-ONDAYûTHATûTHEYûWILLûPAYû
UNSECUREDûlVE
YEARûNOTEûOFFERINGûWOULDû Some of the deal’s features, such as the £115m to acquire Brait’s stake in the
make it only the second borrower in the CALLûPERIODûANDûWHETHERûITûWILLûBEûINûlXEDûORû business, giving them and related parties
aquaculture sector to issue green bonds, mOATING
RATEûFORMATûAREûSTILLûUNDERû
ACCORDINGûTOû)&2ûDATA
It will follow fellow Norwegian seafood
producer Mowi, which joined the ranks of
corporate borrowers issuing green bonds
that burnish their ESG credentials.
3WEDISHû.ORDICûSUPPLYûOFûGREENû
-OWIûPRICEDûAûõMûlVE
YEARûNON
sole ownership of Iceland via a newly
consideration. established company.
While the Nordic green bond market is The £115m will be paid in three cash
dominated by Swedish debt, neighbouring instalments until July.
countries are gradually catching up. h)CELANDû&OODSûISûABLEûTOûCOMPLETEûTHISû
4HEûNON
transaction through a distribution made
CALLû BONDSûINCREASEDûBYûMOREûTHANûûLASTûYEARû entirely within the available restricted
THREEûUNRATEDûmOATING
RATEûTRANSACTIONûINû according to market players. payment capacity, while also leaving
January that, with demand of over €700m, But as with all new or expanding sectors enough capacity for deferred payments
OPENEDûTHEûGATESûFORûlSHûFARMINGûCOMPANIESû of the market, there have been some WHENûTHEYûFALLûDUEvûSAIDûAûSTATEMENTûSEENû
looking to tap the green bond market, hiccups. BYû)&2

International Financing Review June 13 2020 47

 3OMEûûOFû)CELANDûWASûOWNEDûBYû on to devalue mortgage collateral in the The deals are DUBLIN BAY SECURITIES 2018-1
*OHANNESBURG
LISTEDû"RAITûWITHûTHEûBALANCEû future. #LASSû#ûRATEDû"AA ûROUNDSTONE SECURITIES
held by Malcolm Walker, who founded the Last month the ECB set out a list of NO. 1û#LASSESû#û$ûANDû%ûRATEDû!û"AAûANDû
supermarket group in 1970, his son and supervisory expectations for European " ûDILOSK RMBS NO.2û#LASSESû#ûANDû$ûRATEDû
joint managing director, Richard Walker, BANKSûASKINGûTHEMûTOûIDENTIFYûCLIMATE
!ûANDû"AA ûANDûEUROPEAN RESIDENTIAL LOAN
and other management. related and environmental risks and SECURITISATION 2019-PL1û#LASSESû#û$ûANDû%û
Brait, under pressure to reduce debt, said incorporate them in their existing risk RATEDû!û"AAûANDû"A 
in November it planned to sell its stakes in management framework. Many of the loans in these deals have
several UK companies, including Iceland, 4HEû%#"ûREPORTûMENTIONSûONEûlRMûTHATû restructuring histories, and many were
WITHINûlVEûYEARS took the average energy label of its originated at the peak of the Irish house
)CELANDû
ûRATEDû""û
ûHASûTHREEûNOTESû mortgage portfolios into account. And it price bubble.
ISSUEDûBYûSUBSIDIARYû)CELANDû"ONDCOûaMû gives the example of another institution h$EALSûWITHûLOANSûORIGINATEDûBEFOREûû
INûû*ULYûSûaMûû-ARCHû that offers retail borrowers better mortgage FEATUREûBORROWERSûWHOûWEREûUNDERûlNANCIALû
SûANDûaMûINûû*ULYûûmOATING
RATESûWHENûLENDINGûAGAINSTûMOREûENERGY
strain during the crisis and still may not
RATEûBONDSûACCORDINGûTOû2ElNITIVû%IKONû
data.
h4HEûMANAGEMENTûOFû)CELANDû&OODSû
wishes to reassure the holders of the notes
issued by Iceland Bondco plc about
EFlCIENTûPROPERTIES
Moody’s expects building regulations
INVOLVINGûENERGYûEFlCIENCYûTOûBECOMEû
increasingly strict, while it says climate
change means physical risks to property,
HAVEûFULLYûRECOVEREDvû-OODYSûSAID
It expects rising unemployment to
weaken deal performance.
“The current recession will likely lead to a
second wave of restructurings, but previous
AFFORDABILITYvûSAIDûTHEûCOMPANYûSTATEMENT
h)CELANDû&OODSûHASûAûTRACKûRECORDûOFûCASHû
generation, and through diligent cash
management, combined with a reduced
capital expenditure programme (while not
compromising its store opening plans), its
ûSTRESSESû
SUCHûASûmOODINGûAREûLIKELYûTOûINCREASEûOVERû
time too.
)TûALSOûNOTESûTHATûlRMSûBRINGINGû2-"3û
with the EU’s simple, transparent and
standardised securitisation label will need to
make available information related to the
experience shows that these measures do
NOTûALWAYSûPREVENTûDELINQUENCIESv
The four deals all closed less than two
years ago, meaning they have had limited
time to build up extra credit enhancement
TOûHELPûOFFSETû#OVID
LEVERAGEûRATIOûFOLLOWINGûTHEûlRSTûPAYMENTûOFû environmental performance of the $ELINQUENCIESûBEGANûRISINGûSINCEûCLOSINGû
this transaction is below the ratio as at underlying mortgages. -OODYSûSAIDûWITHû$ILOSKûûTHEûMOSTû
-ARCHûûûANDûBELOWûTHEûRATIOûASûATûTHEû PRONOUNCEDûITûREPORTEDûûOFûLOANSûINû
SAMEûPOINTûûMONTHSûAGOûWHILEûITSûCASHû
balances are in excess of £140m, which
LEAVESûSUFlCIENTûHEADROOMûTOûREPAYûTHEû
aMû&2.ûREDEMPTIONûDUEûONû*UNEûû
CONFORMINGû2-"3ûDELINQUENCIESû
MOODY’S EYES GROWING COVID STRESSES,
PUTS FOUR IRISH RMBS ON REVIEW
5+ûNON
2ESIDENTIALû,OANû3ECURITISATIONû
arrears of 90 days or more, compared with
ûONEûYEARûAGO
One of the four RMBS, European
0,ûISû
v REPORTEDûINû-AYûROSEûûANDûAREûUPûBYû BACKEDûBYûPERFORMINGûANDûRE
PERFORMINGû
)CELANDSûaMû2#&ûFACILITYûREMAINSû MOREûTHANûûACROSSûALLû%UROPEANû2-"3û loans bought and securitised by Lone Star.
undrawn. The statement said that a loan has Moody’s said on Tuesday, comparing data Last week Moody’s acted on two other
BEENûESTABLISHEDûFROMû)CELANDû&OODSûTOûTHEû
NewCo to fund the payment.
“We view the acquisition somewhat
negatively, as it will increase net leverage at
)CELANDû&OODSûWHICHûISûTOûFUNDûTHEû
acquisition through distributions from the
WITHûTHEûlRSTûFOURûMONTHSûOFûTHEûYEAR
But investors will need to look beyond
defaults and delinquencies when assessing
deal performance in the coming months.
“As a result of payment moratoriums,
metrics that assess the level of portfolio
,ONEû3TARûDEALSûBOTHûBACKEDûBYûNON
performing Irish mortgages.
They are EUROPEAN RESIDENTIAL LOAN
SECURITISATION 2019-NPL1 and EUROPEAN
RESIDENTIAL LOAN SECURITISATION 2019-NPL2.
-OODYSûPUTûTHEûlRSTûDEALSû#LASSû"ûANDû#LASSû
RESTRICTEDûGROUP vû,UCRORû!NALYTICSûANALYSTSû INTERESTûANDûPRINCIPALûCASHmOWSûHAVEû #ûRATEDû"AAûANDû"ûUNDERûREVIEWûFORû
wrote on Tuesday. become more reliable performance possible downgrade.
Iceland’s management will present its indicators than traditional metrics like And it did the same for the second deal’s
FULL
YEARûRESULTSûONû*UNEû DEFAULTSûANDûDELINQUENCIESvûSAIDû!NTHONYû #LASSESû!ûTOû#ûWHICHûAREûRATEDû!û"AAûANDû
!Nû)CELANDû&OODSûSPOKESMANûDECLINEDûTOû
PRESIDENTûATû-OODYS
provide further comment.
STRUCTURED FINANCE
EMEA MBS
0ARRYûSENIORûVICE
"
Parry said interest and scheduled In the same rating action, Moody’s also
principal receipts showed small declines acted on Abanca’s Spanish NPL
across all sectors, although excess spread securitisation PROSIL ACQUISITION, putting its
remained healthy and reserve funds were "AAû#LASSû!ûUNDERûREVIEWûFORûPOSSIBLEû
largely fully funded. downgrade.
4HEREûWASûAûSHARPûDECLINEûINûPRE
payments, with May investor reports
SHOWINGû!"3ûDEALSûRECEIVEDûûLESSû EMEA ABS
PRINCIPALûCOMPAREDûWITHûTHEûlRSTûFOURû
months of the year. BBVA PRINTS SPANISH SRT AUTO ABS
RMBS, COVEREDS TO BENEFIT FROM ECB 4HATûlGUREûROSEûTOûûFORû5+ûAUTOû!"3û
CLIMATE CHANGE GUIDE – MOODY’S which have been particularly affected as the BBVAûCAMEûTOûMARKETûLASTûWEEKûWITHûITSûlRSTû
lockdown forced dealerships to close. PUBLICûTRANSACTIONûSINCEûûAûSIGNIlCANTû
A draft guide from the ECB on climate change &ORû%UROPEANû2-"3ûINûGENERALûPRE
risk transfer trade backed by a €1.1bn
RISKSûWILLûBENElTû2-"3ûANDûCOVEREDûBONDSû PAYMENTSûWEREûDOWNûûINû-AY portfolio of Spanish auto loans.
because it will force banks to manage and Moody’s most recent rating action in the Most of the capital structure for BBVA
disclose those risks, Moody’s said last week. sector involved four Irish RMBS backed by CONSUMER AUTO 2020-1ûWASûPRE
PLACEDûBUTûAû
Such proactive management should in legacy mortgages, with nine tranches put on õMûPORTIONûOFûTHEû#LASSû!ûWASûPUBLICLYû
turn reduce the chance of those risks going review for downgrade. marketed to investors.

48 International Financing Review June 13 2020

 STRUCTURED FINANCE

Arranger and sole lead Deutsche Bank !NDûITûISûFARûINSIDEûTHEûBPûSPREADûFROMû BBVA has not announced its rationale for
PRICEDûTHATû#LASSû!ûATûTHREE
MONTHû%URIBORû $UTCHûAUTOûLEASEû!"3û"UMPERû.,û
ûWHICHû THEûTRADEû"UTûITSû1ûRESULTSûPRESENTATIONû
PLUSûBPûAFTERûBPûAREAû)04SûONû was priced by LeasePlan one week earlier, but reported CET1 fell by 90bp over the previous
Wednesday followed by 75bp–77bp (WPIR) its residual value component meant it was not three months, something an SRT
guidance on Thursday morning. eligible for the ECB’s ABS Purchase Programme. securitisation could help improve.
4HEûõMûSENIORûTRANCHEûRATEDû!A ""6!SûDEALûWASûELIGIBLEûANDûTHEûTELL
TALEû 2EGULATORYûCHANGESûMEANûITSûû#%4û
!!!!û-OODYS30$"23 ûANDûWITHûAû
ûOFlCIALûINSTITUTIONûINVOLVEMENTû
year average life, was sold to 17 separate
accounts, including protected orders.
4HEûõMûPORTIONûTHATûWASûSOLDûAWAYû
FROMûPROTECTEDûORDERSûWASûûTIMESûCOVEREDû
REQUIREMENTûISûNOWûINûFACTûLOWERûATûû
probably indicates central bank buying. In FROMûûPREVIOUSLYû4HEûCURRENTûû
turn, the 45bp differential between its Class CET1 level puts it at the bottom of the
A and LeasePlan’s gives some indication of BPnBPûBUFFERûITûISûSEEKINGûTOû
the strong technical support that ECB maintain over the minimum required.
ATûTHEûlNALûSPREADûANDûWENTûTOûOFlCIALû eligibility can provide. On Thursday, just as the new issue was
INSTITUTIONû ûBANKûTREASURYû ûASSETû Two years ago BBVA sold a similar being priced, Moody’s put three tranches
MANAGERû ûANDûOTHERû ûINVESTORSû transaction called BBVA CONSUMER AUTO 2018-1, FROMûTHATûû""6!ûDEALûONûREVIEWûFORû
*URISDICTIONSûWEREû3PAINû û&RANCEû û selling only mezzanine and junior notes. DOWNGRADEûACTINGûONû#LASSESû#û$ûANDû%û
"ENELUXû ûANDû5+û  Two years ago that was enough to get capital WHICHûITûRATESû"AAû"AûANDû"
The 75bp spread compares with the 40bp RELIEFûBUTûSIGNIlCANTûRISKûTRANSFERû Moody’s said its rating action was
achieved last month by two German auto requirements have since changed and all prompted by expected economic disruption
DEALSûFROMû"-7ûANDû-ERCEDES
"ENZ tranches need to be placed. caused by the coronavirus outbreak.

NEW ASSET–BACKED SUMMARY DETAILS: WEEK ENDING 12/6/2020

Issuer Amount (m) WAL Coupon (%) Bookrunner(s) Rating Asset type
AXIS 2020-1 US$104.932 1.77 1.680 Keybanc Aaa/NR/NR ABS
AXIS 2020-1 US$15.279 3.00 2.500 Keybanc Aa1/NR/NR ABS
AXIS 2020-1 US$13.291 3.33 3.060 Keybanc Aa3/NR/NR ABS
AXIS 2020-1 US$17.266 3.58 5.040 Keybanc NR/NR/NR ABS
BBVA Consumer Auto 2020-1 €951.5 3.9 3mE+75bp Deutsche Bank Aa1/AA/NR ABS
BBVA Consumer Auto 2020-1 €27.5 3.9 3mE+120bp Deutsche Bank A1/A+/NR ABS
BBVA Consumer Auto 2020-1 €33 3.9 3mE+200bp Deutsche Bank A2/A-/NR ABS
BBVA Consumer Auto 2020-1 €33 3.9 3mE+300bp Deutsche Bank Baa3/BB+/NR ABS
BBVA Consumer Auto 2020-1 €22 3.9 3mE+675bp Deutsche Bank Ba1/B+/NR ABS
BBVA Consumer Auto 2020-1 €33 3.9 3mE+1100bp Deutsche Bank NR/NR/NR ABS
BBVA Consumer Auto 2020-1 €5.5 4.1 3mE+1500bp Deutsche Bank NR/NR/NR ABS
DRIVE 2020-2 US$109 0.12 0.324 JP Morgan/BMO/Santander/Societe Generale P1/A1+/NR ABS
DRIVE 2020-2 US$275 0.61 0.855 JP Morgan/BMO/Santander/Societe Generale Aaa/AAA/NR ABS
DRIVE 2020-2 US$65 0.61 1mUSL+53bp JP Morgan/BMO/Santander/Societe Generale Aaa/AAA/NR ABS
DRIVE 2020-2 US$129.52 1.51 0.830 JP Morgan/BMO/Santander/Societe Generale Aaa/AAA/NR ABS
DRIVE 2020-2 US$135.42 2.13 1.420 JP Morgan/BMO/Santander/Societe Generale Aa1/AA/NR ABS
DRIVE 2020-2 US$128.43 2.83 2.280 JP Morgan/BMO/Santander/Societe Generale A2/A/NR ABS
DRIVE 2020-2 US$100.45 3.53 3.050 JP Morgan/BMO/Santander/Societe Generale Baa3/BBB/NR ABS
Freddie Mac Series K-1515 US$105.800 9.64 1.433 JP Morgan/PNC NR/NR/NR CMBS
Freddie Mac Series K-1515 US$624.152 14.40 1.940 JP Morgan/PNC NR/NR/NR CMBS
Freddie Mac Series K-1515 US$729.952 13.22 1.513 JP Morgan/PNC NR/NR/NR CMBS
Freddie Mac Series K-1515 US$59.186 14.43 3.679 JP Morgan/PNC NR/NR/NR CMBS
GMALT 2020-2 US$128 0.24 0.28 Barclays/Mizuho/Deutsche Bank/Societe Generale P1/A1+/NR ABS
GMALT 2020-2 US$400 1.09 0.71 Barclays/Mizuho/Deutsche Bank/Societe Generale Aaa/AAA/NR ABS
GMALT 2020-2 US$60 1.09 1mUSL+40bp Barclays/Mizuho/Deutsche Bank/Societe Generale Aaa/AAA/NR ABS
GMALT 2020-2 US$429 1.96 .800 Barclays/Mizuho/Deutsche Bank/Societe Generale Aaa/AAA/NR ABS
GMALT 2020-2 US$90.14 2.40 1.010 Barclays/Mizuho/Deutsche Bank/Societe Generale Aaa/AAA/NR ABS
GMALT 2020-2 US$59.76 2.56 1.560 Barclays/Mizuho/Deutsche Bank/Societe Generale Aa1/AA+/NR ABS
GMALT 2020-2 US$55.63 2.69 2.560 Barclays/Mizuho/Deutsche Bank/Societe Generale Aa3/A+/NR ABS
GMALT 2020-2 US$34.34 2.80 3.210 Barclays/Mizuho/Deutsche Bank/Societe Generale A3/A/NR ABS
MEFA 2020-A US$198.08 3.87 2.30 RBC CM NR/AAA/NR ABS
MEFA 2020-A US$13.20 9.77 3.76 RBC CM NR/AA/NR ABS
Pepper Residential Sec Tr 26 A$160 0.6 1mBBSW+105bp CBA/Maquarie/NAB/Standard Chartered/Westpac Aaa/AAA/NR RMBS
Pepper Residential Sec Tr 26 A$330 3.10 1mBBSW+180bp CBA/Maquarie/NAB/Standard Chartered/Westpac Aaa/AAA/NR RMBS
Pepper Residential Sec Tr 26 A$108.5 3.10 1mBBSW+240bp CBA/Maquarie/NAB/Standard Chartered/Westpac Aaa/AAA/NR RMBS
Pepper Residential Sec Tr 26 A$38.5 4.10 1mBBSW+310bp CBA/Maquarie/NAB/Standard Chartered/Westpac NR/AA/NR RMBS
Pepper Residential Sec Tr 26 A$21 4.10 1mBBSW+410bp CBA/Maquarie/NAB/Standard Chartered/Westpac NR/A/NR RMBS
Pepper Residential Sec Tr 26 A$15.4 4.10 1mBBSW+535bp CBA/Maquarie/NAB/Standard Chartered/Westpac NR/BBB/NR RMBS
Pret 2020-Npl2 US$165 2.00 3.721 Credit Suisse NR/NR/NR RMBS
Pret 2020-Npl2 US$17 2.96 6.170 Credit Suisse NR/NR/NR RMBS

International Financing Review June 13 2020 49

 )TûSAYSûTHEûûPORTFOLIOSûHISTORICALLYû Last week’s new issue was structured with THEMûGOINGûFROMûINTOûDEFAULTû&ITCHû2ATINGSû
high default rates make it more likely to be AûTWO
YEARûREVOLVINGûPERIODûGIVINGûTHEû#LASSû said on June 5.
negatively impacted by the sudden, sharp !ûAû
YEARûAVERAGEûLIFEûANDûPUTTINGûTHEû Not surprisingly, retail loans led all CMBS
economic downturn. Cumulative defaults mezzanine at 5.4 years. PROPERTYûTYPESûFORû
DAYûPLUSûDELINQUENCIESû
STANDûATûûOFûTHEûORIGINALûPOOLûBALANCEû INû-AYûATûûWHICHûWASûUPûFROMûûINû
and replenishments. QANDER CONSUMER FINANCE MANDATES April.
The portfolio for the new deal comprises POSSIBLE DUTCH ABS Several large retail operators like JC
ûCONTRACTSûWITHûWEIGHTEDûAVERAGEû 0ENNEYûRECENTLYûlLEDûFORûBANKRUPTCYû
seasoning of 1.1 years and a WA interest rate QANDER CONSUMER FINANCE has mandated ABN protection while many store operators will
OFûû4HEûNEWUSEDûSPLITûISûû AMRO and Deutsche Bank to explore a run at reduced capacity for sometime.
ANDûTHEREûISûAû
YEARûREVOLVINGûPERIOD POTENTIALûNEWû$UTCHûCONSUMERû!"3û 4HIRTY
DAYûDELINQUENCIESûONûHOTELûLOANSû
transaction. INCREASEDûTOûûFROMûûASûGLOBALû
NEWDAY FUNDING 2017-1 TO BE !CCORDINGûTOûTHEûANNOUNCEMENTû1ANDERû travel has been slow to recover from the
CALLED IN JULY intends to use the proceeds to exercise the plunge even social distancing measures
seller call option of AURORUS 2017ûATûTHEûlRSTû have eased a bit.
.EW$AYû#ARDSûSAIDûLASTûWEEKûITûWILLûNOTû OPTIONALûREDEMPTIONûDATEûINû!UGUSTû (OTELûANDûRETAILûLOANSûMADEûUPûûANDû
EXERCISEûTHEûOPTIONûTOûEXTENDûAûûCARDû ûRESPECTIVELYûOFûTHEûTOTALû
DAYû
securitisation, NEWDAY FUNDING 2017-1. Instead, DELINQUENCIESûINû-AYû&ITCHûSAID
ITûWILLûREDEEMûTHEûDEALûONûITSû*ULYûûû US MBS )FûALLûOFûTHEû
DAYûDELINQUENTûLOANSû
scheduled redemption date. BECOMEû
DAYûDELINQUENTûNEXTûMONTHûITû
)Nû-ARCHû.EW$AYûCHOSEûTOûEXTENDû CMBS DELINQUENCIES SEEN HITTING WOULDûADDûBPûTOûTHEûOVERALLûDELINQUENCYû
another securitisation, NEWDAY PARTNERSHIP CRISIS-LEVEL IN JUNE: GOLDMAN RATEûTOûMAKEûITûûTHEûRATINGSûAGENCYû
FUNDING 2015-1, by one year beyond its April said.
scheduled redemption date. US CMBS spreads are set to remain at Almost half of all securitised loans are
This time, it says its decision to call HISTORICALûWIDEûLEVELSûAFTERûTHEû
PLUSûDAYû now in special servicing in May, while
hREmECTSûCURRENTûFUNDINGûMARKETûCONDITIONSû DELINQUENCYûRATEûONûPRIVATE
LABELû#-"3û roughly a quarter of all CMBS hotel loans are
and the strength of the liquidity position in JUMPEDûFROMûABOUTûûINû!PRILûTOûûINû INûSPECIALûSERVICINGû&ITCHûSAIDû
THEû.EW$AYû&UNDINGûMASTERûTRUSTûASûWELLûASû May for its biggest monthly rise on record,
THEû.EW$AYûGROUPûASûAûWHOLEv Goldman Sachs analysts said last week. US MALL OPERATOR CBL IN DEFAULT,
.EW$AYûSAYSûFUNDSûTOûREDEEMûWILLûCOMEû 4HEYûFORECASTûTHATûDELINQUENCYûlGUREû PUTTING CMBS AT RISK
from drawings under the existing WOULDûNEARLYûDOUBLEûTOûûTHISûMONTHûJUSTû
committed senior variable funding loan SHORTûOFûTHEûPEAKûSEENûINû US mall operator CBL & ASSOCIATES said on
NOTESûISSUEDûBYû.EW$AYû&UNDINGû,OANû.OTEû Spreads on conduit CMBS had retreated June 5 it has defaulted on a secured
Issuer Ltd, and from drawings under the
originator variable funding loan notes
ISSUEDûBYû.EW$AYû&UNDINGû,OANû.OTEû)SSUERû
û concern in the next year as rent
Ltd. Those drawings are funded by the
.EW$AYûGROUPSûCORPORATEûCASH
ûPANDEMIC
BANK11 PLACES PART OF REVOCAR
2020 MEZZ
DRAWINGûONûTHEû
German credit company BANK11 FUR
PRIVATKUNDEN UND HANDEL has privately placed
from their peaks in March on hopes the US
economy would recover quickly from
SUDDENûCONTRACTIONûDUEûTOûTHEû#OVID
pandemic.
The federal government’s latest jobs
REPORTûRELEASEDûONû&RIDAYûOFFEREDûAûGLIMMERû
of optimism as the jobless rate unexpectedly
FELLûTOûûINû-AYûFROMûûTHEûMONTHû
before.
However, the hotel and retail industries
are expected to struggle to meet their debt
CREDITûLINEûRAISINGûhSUBSTANTIALûDOUBTvû
about its ability to continue as a going
revenues have plummeted amid the
#OVID
The real estate investment trust breached
CERTAINûCOVENANTSûONûITSû53BNûSECUREDû
CREDITûFACILITYûAFTERûOVER
credit line, which is backed by 17 malls and
three related centres.
The administrative agents on the credit
AûSMALLûPORTIONûOFûõMû'ERMANûAUTOûLOANû
ABS REVOCAR 2020 through arranger UniCredit.
The deal’s Classes A and B were retained,
WHILEû#LASSESû#ûTOû%ûWEREûPARTIALLYûPRE
Worries about another surge in late
placed.
Bank11 typically places its securitisations
privately, but normally includes the seniors
payments even as local governments allow FACILITYûHAVEûNOTIlEDû#",ûTHATûISûINûDEFAULTû
more businesses to reopen, according to but the lenders have not yet exercised their
Goldman analysts. right to accelerate the debt. CBL is pursuing
a waiver, the company said in regulatory
payments from CMBS borrowers will likely lLINGSûONû&RIDAY
keep conduit CMBS spreads, especially those #",ûALSOûOPTEDûNOTûTOûMAKEûANû53Mû
ONûRISKIERûLOWER
RATEDûTRANCHESûATûELEVATEDû INTERESTûPAYMENTûDUEûONûITSûûUNSECUREDû
INûTHATûPROCESSûTOOû4HEûlRMSûTWOûNEWû levels, they said. BONDSûONû*UNEûû)TûHASûAû
DAYûGRACEûPERIODû
ISSUESûINûûBOTHûPRE
PLACEDûTHEIRû#LASSû!û “Widespread uncertainty about the to make the payment, and a skipped
RETAINEDûTHEû#LASSû"ûANDûPRE
PLACEDûTHEûRESTû ultimate outcomes for distressed property payment is an event of default under the
of the stack. sectors has caused CMBS BBB– spreads to secured credit facility.
4HEûPARTûPRE
PLACEDûTRANCHESûINûTHEûNEWû REMAINûWIDEûBYûHISTORICALûSTANDARDSvûTHEYû CBL owns mall properties that secure
ISSUEûCOMPRISEûAûõMû"""!nû#LASSû#ûAû wrote in a research note. loans that have been packaged into
õMû""n"""nû#LASSû$ûANDûAûõMû Spreads on Triple B minus rated conduit COMMERCIALûMORTGAGE
BACKEDûSECURITIES
unrated Class E. DEALSûAREûRUNNINGûATûJUSTûUNDERûBPû 7ELLSû&ARGOûANALYSTSûSAIDûTHEREûISû
4HEûlXEDûRATEûCOUPONSûONûTHOSEûTHREEû versus 1,100bp in March. But they are still 53BNûINû#-"3ûEXPOSUREûACROSSûûLOANSû
TRANCHESûAREûûûANDû FARûWIDERûTHANûTHEûBPûLEVELûATûSTARTûOFûTHEû TOûTHEûMALLûOPERATORûWITHû53MûOFûTHESEû
4HATûCOMPARESûWITHûûûANDûûFORû year. loans already with special servicers and two
the same Classes from its previous ABS in More of these early stage delinquent loans loans in foreclosure.
October last year. Ratings were slightly lower, will likely keep missing payments and be h!ûBANKRUPTCYûlLINGûWOULDûPROMPTûTHEû
ATû""""""ûANDû""""ûFORûTHEû#ûANDû$ moved into special servicing in a bid to keep REMAINDERûTOûBEûTRANSFERREDûIMMEDIATELYvû

50 International Financing Review June 13 2020

 STRUCTURED FINANCE

7ELLSû&ARGOûWROTEûINûAûRESEARCHûNOTEûONû extreme volatility in the mortgage bond “The overall agency CMBS market has
Monday. market and ignited margin calls for some STABILISEDûANDûTHEûNEEDûFORûTHEû&EDûTOû
About half of CBL’s CMBS loans are funds. provide unconditional support has
TRACKEDûBYû#-"8ûINDEXESûWITHûTHEûSERIESûû It also led to a plunge in revenues for hotels DIMINISHEDvû7ELLSû&ARGOûANALYSTSûWROTEûINûAû
having the greatest exposure at US$447m, and retailers, which are major borrowers in the research note last week.
according to JP Morgan. commercial real estate market. Last Tuesday, it bought only US$54m in
/Nû-ARCHûû#",ûREPORTEDûITûHADû Proceeds from the stock offering will go &ANNIEû-AEû#-"3ûOUTûOFûTHEû53Mû
53MûINûCASHûANDûCASHûEQUIVALENTSû towards working capital and general SUBMITTEDûBYûPRIMARYûDEALERSûFORûTHEû&EDûTOûBUY
COMPAREDûWITHû53MûONû$ECEMBERûû corporate purposes, including bolstering 3PREADSûONûSENIORû&ANNIEû#-"3ûAREû
 liquidity and originating commercial RUNNINGûATûBPûOVERûSWAPSûmATûFROMûTHEû
)TûPOSTEDûAûNETûLOSSûOFû53MûINûTHEû mortgage loans and other target assets and start of the year and tighter than their
lRSTûQUARTERûCOMPAREDûWITHûAûLOSSûOFû investments. recent wide of 160bp, according to Wells
53MûFORûTHEûSAMEûPERIODûINû &ARGO
CBL also said it will also probably fail to US FED TO KEEP BUYING AGENCY CMBS
meet the minimum debt yield covenant of ‘SCRATCH-AND-DENT’ RMBS ISSUERS
ûUNDERûTHEûCREDITûFACILITYûTHROUGHûTHEû 4HEû53û&EDERALû2ESERVEûSAIDûLASTû7EDNESDAYû SEE OPENING
lRSTûQUARTERûOFû it will continue to purchase agency
Meanwhile, CBL said it has hired Weil, COMMERCIALûMORTGAGE
BACKEDûSECURITIESû Investment managers are repackaging
Gotshal & Manges and Moelis & Co to help along with US Treasuries and agency hSCRATCH
AND
DENTvûMORTGAGESûINTOûBONDSûINû
explore ways to reduce overall leverage and MORTGAGE
BACKEDûSECURITIESûTOûMAINTAINû
interest expense and to extend the maturity
BACKEDûSECURITIESû
of its debt.
FAMILYû#-"3û
“Given the severity of the Covid
downturn, coupled with its high levels of
AûSIGNûOFûFURTHERûTHAWINGûINûTHEû53ûPRIVATE
stability in those markets amid a recession. LABELûRESIDENTIALûMORTGAGE
4HEû&EDûBEGANûBUYINGûMULTI
market.
backed by FANNIE MAE, FREDDIE MAC and GINNIE Investor appetite for riskier mortgage
MAE since late March in an effort to bolster bonds outside of those guaranteed by FANNIE
INDEBTEDNESSû#",ûMAYûFACEûDIFlCULTYûINû LENDINGûINûTHEûCOMMERCIALûREAL
ESTATEû MAE, FREDDIE MAC and GINNIE MAE has grown in
MEETINGûITSûDEBTûOBLIGATIONSvû7ELLSû&ARGOû
analysts said.
ûOUTBREAKûWORSENED
RATEDûSECURITISEDûBONDSûSUCHûASû
They added several of CBL’s holdings that
MAKERSûSAIDûINûAûSTATEMENTûAFTERûAû
secure CMBS deals are joint ventures so they
DAYûPOLICYûMEETINGûTHATûTHEû&EDûWOULDû
MAYûNOTûBEûINCLUDEDûINûAûBANKRUPTCYûlLING
BLACKSTONE MORTGAGE SELLS STOCKS
TO HELP FUND PROPERTY LOANS
PERFORMINGû
market, which had been virtually frozen as recent weeks with spreads on agency MBS
THEû#OVID
ANDûTOP
0OLICY
prime auto and credit card ABS returning to
TWO
levels seen prior to the global market rout in
purchase Treasuries, agency MBS and CMBS March.
“at least at the current pace to sustain Credit specialist PRETIUM CREDIT MANAGEMENT
smooth functioning of markets for these PRICEDûLASTû7EDNESDAYûAû53Mû
securities, thereby fostering effective TRANSACTIONûSECUREDûBYûNON
BLACKSTONE MORTGAGE TRUST said last Tuesday
ITûHADûRAISEDû53MûFROMûAûM
SHAREû
offering of Class A common stock to help it
transmission of monetary policy to broader home loans, PRET 2020-NPL2ûITSûlRSTûSUCHûDEALû
lNANCIALûCONDITIONSv since early March.
4HEû&EDûPLANSûTOûCONDUCTûWEEKLYû#-"3û A fund managed by asset manager PACIFIC
PURCHASESûRANGINGûFROMû53MûTOû INVESTMENT MANAGEMENT CO was set to price last
originate mortgage loans and other assets US$500m. WEEKûAû53Mû2-"3ûBRAVO 2020-RPL1,
(see Equity Americas section for more
details).
PERFORMINGûANDûREPERFORMINGûMORTGAGESû
4HEû.EWû9ORK
BASEDûREALûESTATEûINVESTMENTû
AND
DENTvû
trust, part of the world’s biggest private equity
manager BLACKSTONE, makes senior loans
collateralised by commercial real estate in
North America, Europe, and Australia.
The REIT sector was rattled in March as
FEARSûABOUTûTHEû#OVID
ûPANDEMICûCAUSEDû
OFFûINû-ARCH
3INCEû-ARCHûûTHEû&EDûHASûPURCHASEDû
53BNûINûAGENCYû#-"3
4HEû&EDûSAIDûITûWILLûALSOûREINVESTûALLû
principal payments from its holdings of
agency CMBS.
4HEû&EDûHASûSLOWEDûITSûPURCHASESûOFû
agency CMBS in recent weeks as spreads on
senior notes have largely returned to levels
PRIORûTOûTHEûMARKETûSELL
mortgages in the secondary market at a
backed by reperforming mortgages.
.ON
AREûSOMETIMESûREFERREDûTOûASûhSCRATCH
loans. They either are currently delinquent for
more than 90 days, or were once delinquent by
90 days or more but the borrowers have
resumed making payments.
Investment managers buy these

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 9 2,648.44 13.1 1 Credit Agricole 2 1,352.56 13.5 1 Goldman Sachs 33 8,231.69 10.0
2 BNP Paribas 7 2,138.59 10.6 2 BofA Securities 3 1,209.15 12.0 2 JP Morgan 37 7,127.39 8.6
3 Lloyds Bank 9 1,984.53 9.8 3 BNP Paribas 4 1,170.25 11.6 3 Citigroup 36 7,059.82 8.6
4 Citigroup 7 1,620.64 8.0 4 ING 2 873.04 8.7 4 Barclays 39 6,743.27 8.2
5 Credit Agricole 2 1,514.09 7.5 5 Commerzbank 2 873.04 8.7 5 Credit Suisse 34 6,305.70 7.6
6 Barclays 8 1,274.13 6.3 6 Goldman Sachs 2 791.39 7.9 6 BofA Securities 29 5,456.30 6.6
7 JP Morgan 4 1,091.33 5.4 7 LBBW 2 648.40 6.5 7 Wells Fargo 24 4,934.54 6.0
8 Commerzbank 2 956.17 4.7 8 JP Morgan 2 574.63 5.7 8 Deutsche Bank 32 4,924.79 6.0
9 ING 2 956.17 4.7 9 Morgan Stanley 2 547.58 5.4 9 Morgan Stanley 19 3,657.35 4.4
10 Morgan Stanley 3 850.78 4.2 10 Barclays 4 539.69 5.4 10 Nomura 22 3,579.25 4.3
Total 36 20,245.68 Total 17 10,048.57 Total 172 82,563.08
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

International Financing Review June 13 2020 51

 Pepper extends run of Aussie non-bank RMBS
„ RMBS No direct AOFM support required for A$700m non-conforming issue
PEPPER became the sixth non-bank lender
to access the RMBS market since Firstmac
reopened the segment on March 27 with last
Wednesday’s A$700m (US$484m) no-grow,
non-conforming sale via PEPPER RESIDENTIAL
SECURITIES TRUST NO 26 (PRS26).
The transaction was also the fourth
RMBS in a row not directly supported by the
Australian Office of Financial Management’s
A$15bn Structured Finance Support Fund
scheme.
Pepper has, however, benefited from a
combined A$224.6m of secondary market
purchases of its outstanding RMBS tranches
by the AOFM between May 6 and June 3, which
freed up existing investors to buy the new bonds
on offer.
The AOFM also invested A$39m in Pepper’s
warehouse facilities on May 28 under the SFSF,
which was formed on March 19 to underpin
DISCOUNTûINûHOPESûTHEYûCANûPROlTûFROMû
them by reselling them later in securitised
ûNOTEûANDûTHEûûYIELDûONûTHEû 

form.
ûINû0RETIUMSûPREVIOUSûNON
PERFORMINGû 4HEûAVERAGEû&)#/ûSCOREûOFû'-ûLEASEû
9EAR
TO
RMBS and other ABS originated by smaller
lenders during the Covid-19 crisis.
MARGIN PRESSURE
The Pepper PRS26 A$160m Class A1s notes with
a 0.6 year weighted-average life was priced at
one-month BBSW plus 105bp.
The A$330m Class A1a and A$108.5m Class
A2 notes, both with 3.1 year WALs, was priced
180bp and 240bp over one-month BBSW.
The A$38.5m Class B, A$21m Class C and
A$15.4m Class D notes, all with 4.1-year WALs,
was priced 310bp, 410bp and 535bp wide of
one-month BBSW.
Pricing was not disclosed for the A$9.1m
Class E, A$6.4m Class F or A$5.55m Class G1
notes, while the A$5.55m Class G2 notes were
retained.
Respective credit support for the Class A1s to
D notes is 30%, 30%, 14.5%, 9%, 6% and 3.8%.
"UTûTHEûYIELDSûWEREûABOVEûTHEûûYIELDû
ONûTHEû!
!
Pepper previously accessed the market
last October with the A$750m equivalent
non-conforming RMBS, Pepper PRS25,
which included a US dollar and green euro
tranche.
The senior Aussie tranche of PRS25, the
A$161.4m Class A1a notes, with a 2.3 year WAL,
was priced at one-month BBSW plus 128bp,
52bp tighter than the latest A1a note which has
a longer 3.1 year WAL.
The PRS25 A$100m Class A2, A$42.3m Class
B, A$23m Class C and A$16.5m Class D notes,
all with 4.0 year WALs, were priced at one-
month BBSW plus 160bp, 190bp, 280bp and
380bp or 80bp, 120bp, 130bp and 155bp inside
the PRS26 equivalents.
CBA was arranger for the latest trade and
joint lead manager with NAB, Macquarie,
Standard Chartered and Westpac.
John Weavers
matching what it had forecast for GMALT
DATEûREPERFORMINGû2-"3ûSUPPLYû deal in March. holders in the latest deal is high at 770,
HASûTOTALLEDû53BNûDOWNûFROMû which is in line with transactions going back
5BNûFORûTHEûSAMEûPERIODûINûû TOûûACCORDINGûTOû-OODYS
WHILEûNON
PERFORMINGû2-"3ûISSUANCEûHASû US ABS Used car prices slumped in April fuelled by
REACHEDû53BNûBELOWûTHEû53BNû the economic shutdown and expectations of a
for the same span last year, according to JP GM AUTO LEASE ABS KICKS INVESTOR surge in used car supply as troubled car rental
Morgan. DEMAND INTO HIGH GEAR COMPANIESûLOOKûTOûDOWNSIZEûTHEIRûmEETS
What has complicated the structuring The widely followed Manheim Used
of these types of RMBS is the number of
loans in forbearance as a result of the
pandemic, which could further delay
payments.
Subordinate tranches in reperforming
ANDûNON
1-û2-"3ûAREûMOSTûVULNERABLEûIFû
forbearance and delinquency rates go up in
GENERAL MOTORS‘ latest securitisation of
US vehicle leases last Monday showed
investor appetite for auto ABS is
spreading beyond prime car loans as
used car prices recover from their
plunge in April.
'-SûlRSTûAUTOûLEASEû!"3ûOFFERINGûSINCEû
6EHICLEû6ALUEû)NDEXûSANKûBYûûINû!PRILû
the steepest monthly drop on record,
ALTHOUGHûITûRECOVEREDûBYûNEARLYûûINû-AY
&ALLINGûUSEDûCARûPRICESûPUTûCARûLEASEû!"3û
transactions at risk of higher net losses,
according to Moody’s.
However, the residual value of GMALT
THEûSECONDûHALFûOFûû*0û-ORGANûANALYSTSû &EBRUARYûGMALT 2020-2ûRAISEDû53BNû deals “has been stronger than that of the
said. with all tranches multiple times OVERALLûMARKETvû-OODYSûANALYSTSûSAIDûINûAû
h)NTERESTûSHORTFALLSûINûNON
1-ûANDû20,û oversubscribed, according to a source PRE
SALEûREPORTûONû'-!,4û

SUBSûAREûTHEûMOSTûIMMEDIATEûRISKSvûTHEYû familiar with the deal.
WROTEûINûAûRESEARCHûNOTEûLASTû&RIDAY The senior Triple A tranches were 10 to 17 SUNNOVA THROWS SPOTLIGHT ON
)NûTHEûLATESTû0RETIUMûDEALûûOFûTHEû times oversubscribed, while the riskiest SOLAR LOAN ABS
loans that are at least 60 days past were !!ûRATEDûPAPERûWASûFOURûTIMESû
granted forbearance, according to deal oversubscribed, the source said. SUNNOVA ENERGY CORPûISûREADYINGûAû53Mû
documents. Spreads on most classes came 10bp to SOLARûLOAN
BACKEDûNOTEûBRINGINGûSOMEûLIFEûTOû
Given their potential risks, these two and
BACKEDûMARKETû
other forthcoming RMBS issues will
probably have to lure investors with higher
15bp narrower than the low end of their AûmEDGINGûPARTûOFûTHEûASSET
price guidance, but they were anywhere that has been virtually frozen for nearly four
FROMûBPûTOûBPûWIDERûTHANûLEVELSûINû months.
yields. '-SûPRIORûAUTOûLEASEûDEALû'-!,4û
 3UNNOVASûLATESTû!"3ûFOLLOWSûAû53Mû
Pretium sold its latest RMBS at yields Losses on this GM deal are expected to offering from LOANPAL – a provider of
BELOWûTHEIRûGUIDANCEû4HEû53Mû!
û stay low, even with the surge in lNANCINGûFORûTHEûRESIDENTIALûSOLARûINDUSTRYûnû
NOTEûCAMEûINûATûAûYIELDûOFûûLOWERûTHANûAû UNEMPLOYMENTûDUEûTOûTHEû#OVID
û and SOLAR MOSAIC, mandated last Thursday a
TALKEDûRANGEûOFûnûWHILEûTHEû pandemic, according to Moody’s. 53MûSOLARûLOANûOFFERINGûMSAIC 2020-1.
53Mû!ûTRANCHEûCLEAREDûATûûBELOWû It projected net credit losses on this pool Solar Mosaic and Sunnova’s deals are
ITSûGUIDANCEûOFûn OFûLEASESûONûMAINLYû356SûANDûTRUCKSûATûû expected to further test appetite for a sector

52 International Financing Review June 13 2020


THATûSTILLûCONTAINSûRISKSûINûAûPOSTû#OVID
û AUTO ABS ISSUERS BEEF UP RESERVES
economic landscape and has only seen
53MûOFû!"3ûISSUANCEûSOûFARûTHISûYEAR
4HEû(OUSTON
STRUCTURED FINANCE
delinquency for auto loans even as
AMID DELINQUENCY WORRIES unemployment will probably stay elevated
INTOûLATEûûFROMûTHEIRûRECORDûSURGEûINû
BASEDûCOMPANYûWHICHûISûAû Auto ABS issuers have shored up the cash April.
unit of Sunnova Energy International, last reserves on their recent deals in an effort to
TAPPEDûTHEû!"3ûMARKETûINû&EBRUARYûWITHûAû address investor concerns about a spike in
53MûOFFERINGûSECUREDûBYûRESIDENTIALû delinquencies after lender forbearance
leases and contracts. measures and government stimulus run out.
Moreover, some auto lenders have
allowed borrowers to defer their loan
PAYMENTSûFORûAûFEWûMONTHSûSINCEûTHEû#OVID
19 outbreak.
The new offering, SNVA 2020-A, features two Bigger reserve funds on the recent wave &URTHERMOREûSOMEûOFûTHEMûLIKEû&ORDû
CLASSESûOFûDEBTûWITHûlVE
YEARûMATURITIESû of auto deals bolstered the appeal of the have temporarily suspended repossession of
53MûINû#LASSû!ûNOTEûANDû hottest sector in the ABS market, said lNANCEDûVEHICLES
53MûINû#LASSû"ûTRANCHE analysts and investors. All these programmes, together with the
Kroll assigned a preliminary A– rating on Higher reserve levels mean there is more GOVERNMENTSûlNANCIALûSUPPORTûWILLû
THEû!ûNOTEûANDûAû""
ûRATINGûONûTHEû"ûNOTEû cash available to ensure timely interest probably keep delinquencies relatively low
and proceeds are slated to repay some of payments to ABS holders. into the summer.
3%)SûRECENTûlNANCINGS “You are seeing more credit But investors worry if businesses have to
Sunnova hired Credit Suisse as the sole ENHANCEMENTSvûSAIDû-ERGANSERû#APITALû shut down again due to a wave of virus
BOOKûMANAGERûFORû3.6!û
!ûWHICHûISû portfolio manager Peter Kaplan. “You have outbreak later this year, delinquencies
expected to price this week. more cash on hand to make interest AMONGûSUB
PRIMEûBORROWERSûINûPARTICULARû
4HEûDEALûISûEXPECTEDûTOûSETTLEûONû*UNEû PAYMENTSv would shoot higher.
On May 14, SEI said it had closed a private 4HESEûHEAVIERûCASH
LINEDûOFFERINGSûCOMEû h)ûTHINKûSUB
PRIMEûBORROWERSûAREûGOINGûTOû
placement of convertible debt for up to as the number of securitised auto loans that be the most affected by another work
US$190m and an additional privately were extended – allowing borrowers to SHUTDOWNvû-ERGANSERSû+APLANûSAID
negotiated exchange of US$55m of its DEFERûPAYMENTSûnûROSEûTOûûINû!PRILûFROMû 4OTALûDELINQUENCIESûFORû7ESTLAKESûSUB

existing convertible debt for an equal ûINû-ARCHûDUEûTOûAûSURGEûINûJOBLESSNESSû PRIMEûLOANûPORTFOLIOûCAMEûINûûINû!PRILû
principal amount. Moody’s said in a report on Wednesday. COMPAREDûWITHûûAûYEARûEARLIERûWHILEûITSû
“This capital will provide the liquidity 4HEûUNEMPLOYMENTûRATEûHITûAûPOST
7ORLDû LOANûLOSSESûGREWûTOûûFROMûûDUEûTOû
Sunnova needs to continue our strong 7ARû4WOûHIGHûATûûINû!PRILûBEFOREû THEûPANDEMICû30ûSAIDûINûAûPRE
SALEûREPORTû
growth and to be fully prepared for any SLIPPINGûTOûûAûMONTHûLATERû)TûWASûONLYû on the Westlake deal.
future market disruptions as a result of this ATûûINû&EBRUARYûPRIORûTOûTHEû#OVID
û 4HEûûRESERVEûFUNDûLEVELûWOULDûCOVERû
CRISISvû3UNNOVAûCHIEFûEXECUTIVEûOFlCERû outbreak in the US. about two to three months of servicing fees
William Berger said in a statement on the “Levels of extensions in auto loan ABS and interest payment to ABS holders, the
COMPANYSûlRST
QUARTERûRESULTS spiked in April, heightening the risk of rating agency said.
slower payments to securitisation
LINGERING RISKS NOTEHOLDERSvû-OODYSûANALYSTSûWROTE
Indeed, the surge in US unemployment has &ORûNOWûDELINQUENCIESûHAVEûSTAYEDûLOWû ASIA-PACIFIC ABS
increased worries about rising defaults on ENOUGHûTHATûAUTOûISSUERSûEVENûSUB
PRIMEû
solar and other consumer loans, though ones, can lock in cheap funding costs and LIBERTY SOUNDS OUT INVESTORS
+ROLLûESTIMATEDûITSûBASE
CASEûLOSSûONûTHEû investors are snapping up new paper.
LATESTû3UNNOVAûDEALûTOûRANGEûFROMûûTOû SANTANDERûPRICEDûAû53MûSUB
PRIMEû .ON
BANKûLENDERûLIBERTY FINANCIAL is taking
ûAûBITûLOWERûTHANûTHEû
û auto loan deal on Wednesday with its senior indications of interest for the indicative
on its previous deal. tranches 10 times oversubscribed, two !Mû53M ûLIBERTY SERIES 2020-2
There also remains lingering concerns sources familiar with the deal said. RMBS offering that may launch this week.
about the unique challenges facing the solar Its DRIVE 2020-2 offering carries a reserve &ORûTHEûSENIORû!Mû#LASSû!Aû!Mû
industry, which competes with other energy LEVELûOFûûWHICHûWASûHIGHERûTHANûûFORûALLû #LASSû!BûANDû!Mû#LASSû!ûNOTESûWITHû
SOURCESûANDûITSûSUPPORTûFROMûTAXûBENElTSûTOû PREVIOUSûDEALSûGOINGûBACKûTOûûACCORDINGû RESPECTIVEûWEIGHTED
AVERAGEûLIVESûOFûûû
homeowners. to Moody’s. ANDûûYEARSûINITIALûGUIDANCEûISûONE
MONTHû
“We’ve had concerns regarding the Three upcoming auto deals have also BBSW plus 100bp area, 165bp–170bp and
costs borne to the borrower especially if increased their reserve funds in anticipation BPûAREAûRESPECTIVELY
other energy options become more OFûPICK
UPûOFûLATEûLOANûPAYMENTS NAB is arranger and joint lead manager
AFFORDABLEvûSAIDû)NCOMEûANDû2ESEARCHû MERCEDES-BENZûLIFTEDûITSûRESERVEûLEVELûTOûû with Bank of America, CBA, Deutsche Bank and
Management senior portfolio manager
Jake Remley said.
“Also we have concerns around the
PERMANENCEûOFûTHEûTAXûBENElTSûnûWEûlNDûITû
CURRENCYû!MûNON
DIFlCULTûTOûHANDICAPûTHATûPOLITICALûRISKûASûAû
FORûITSû53MûPRIMEûAUTOûDEALûMBART 2020-
1û4HISûWASûHIGHERûTHANûTHEûûFORûITSû
previous offering last year. WORLD OMNI made
the same move for its WOART 2020-B prime
auto deal. WESTLAKE increased its reserve
Westpac.
A regular issuer of RMBS, Liberty
PREVIOUSLYûACCESSEDûTHEûMARKETûONû-AYûû
WITHûTHEûDUAL
CONFORMINGû,IBERTYû3ERIESû
ûWHICHû
driver of borrower behaviour, especially in FUNDINGûLEVELûFORûITSûSUB
PRIMEûAUTOûDEALû INCLUDEDûAûRAREûYENûTRANCHEûOFûcBNû
THEûLARGEûSTATESûSUCHûASû#ALIFORNIAv WLAKE 2020-1ûTOûûFROMûûINûTHEû !M ûTHATûREPRESENTEDûûOFûTHEû
Against that backdrop, Sunnova is previous deals. transaction.
expected to pay higher yields than its issue FORD MOTOR will leave the reserve level on 4HEû!USTRALIANû/FlCEûOFû&INANCIALû
INû&EBRUARYûWHENûITSû$OUBLEû"nûPAPERû its forthcoming prime auto deal, FORDO 2020-B Management bought all of the A$64.5m
CLEAREDûATû ATûûAFTERûRAISINGûITûFORûANûOFFERINGûEARLIERû #LASSû!ûNOTESûUNDERûITSû!BNû3TRUCTUREDû
Two weeks earlier, for instance, Loanpal THISûYEARûFROMû &INANCEû3UPPORTû&UNDûSCHEMEûWHICHûDROVEû
PRICEDûITSû$OUBLEû"ûRATEDûNOTEûATûAû 2ATINGûAGENCIESûINûTHEIRûBASE
CASEû THEûPRICINGûMARGINûDOWNûTOûBPûOVERûONE

CONSIDERABLYûHIGHERûYIELDûOFû estimate projected only a modest rise in month BBSW.

International Financing Review June 13 2020 53

GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 12/6/2020
Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)

SSAR
US DOLLARS
Jun 9 2020 IADB US$4bn Jul 15 2025 0.625 99.97 MS+17 / T+22.4 0.631

Jun 9 2020 KBN US$1.5bn Jun 14 2030 1.125 99.539 MS+38 / T+36.38 1.174

Jun 9 2020 World Bank US$750m Jun 17 2024 Sofr+39 100 Sofr+39 -
Jun 12 2020 SEK US$500m Dec 12 2023 1.75 104.31 MS+21 / T+27.65 0.496
EUROS
Jun 9 2020 Greece €3bn Jun 18 2030 1.5 99.375 MS+160 / B+187.8 1.568

Jun 9 2020 Ireland €6bn Oct 18 2030 0.2 99.135 MS+30 / B+59.7 0.285

Jun 9 2020 Lower Saxony €1bn Jun 16 2028 0.01 101.07 MS+1 / B+33.4 -0.12

Jun 9 2020 SNCF €1bn Apr 25 2040 1 97.884 OAT+60 1.119

Jun 9 2020 Spain €12bn Oct 31 2040 1.2 99.09 SPGB+28 1.251

Jun 10 2020 Finland €3bn Sep 15 2040 0.25 99.019 MS+10 / B+32.6 0.3

Jun 10 2020 Germany €6bn incr Aug 15 2050 0 94.51 B+2.5 0.187
(€14bn)

Jun 10 2020 NRW €500m incr Jun 12 2040 1.5 122.31 MS+14 / B+37.2 0.343
(€2.125bn)
Jun 10 2020 Unedic €4bn Nov 29 2029 0.25 99.851 OAT+25 0.266

STERLING
Jun 9 2020 UK DMO £9bn Oct 22 2050 0.625 96.343 G+0.5 0.76
Jun 10 2020 L-Bank £750m Dec 9 2024 0.375 99.786 G+42 0.423
Jun 11 2020 IADB £250m incr Sep 15 2026 0.5 100.73 G+40 0.381
(£525m)
Jun 12 2020 CPPIB £1bn Jul 25 2023 0.375 99.719 G+47 0.466
SWISS FRANCS
Jun 10 2020 Lausanne SFr100m Jul 6 2032 0.35 100.18 MS+47 / Eidg+52.9 0.335

Jun 10 2020 Lausanne SFr100m Jul 6 2050 0.6 101.1 MS+65 / Eidg+67.9 0.56

NON CORE
Jun 9 2020 BNG Bank A$20m incr Jul 17 2028 3.3 114.85 ASW+63, 1.355
(A$1.485bn) ACGB+49.75
Jun 9 2020 NWB A$15m incr Dec 16 2030 1.67 100.19 ASW+64, 1.65
(A$65m) ACGB+54.2
Jun 9 2020 NWB A$50m Dec 16 2030 1.67 100 ASW+64, 1.67
ACGB+54
Jun 10 2020 BNG A$20m incr Nov 27 2030 1.6 99.809 ASW+64, 1.62
(A$190m) ACGB+60.4
Jun 9 2020 NIB SKr300m incr Mar 22 2022 0.125 100.25 MS-9 -0.02
(SKr4bn)
Jun 10 2020 Akademiska Hus SKr2bn Jun 12 2023 0.45 100 - 0.45
Jun 10 2020 World Bank SDB C$1.5bn Jul 2 2025 0.75 99.788 MS+3 / G+40.9 0.793

Jun 11 2020 SAFA A$1.2605bn Jun 16 2023 0 100 AONIA+34 -

Jun 12 2020 IFC A$120m incr Apr 15 2035 1.5 99.044 ASW+51, 1.573
(A$375m) ACGB+35.25
Jun 12 2020 Western Australia A$300m Jul 23 2041 2.25 99.624 EFP+139, 2.273
ACGB+63.5
Jun 12 2020 Munifin NZ$150m Jun 26 2023 0.625 99.71 MS_46, NZGB+39 0.723
CORPORATES
US DOLLARS
Jun 8 2020 Brixmor Operating US$500m Jul 1 2030 4.05 99.776 T+320 4.077
Partnership

54 International Financing Review June 13 2020

 BONDS SUMMARY DETAILS

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

MS+21 area, MS+19 -1 >US$5.75bn, 117acs Aaa/AAA BMO / GS / MS / Nomura Amers 42.2%, APAC 34.4%, EMEA
area 23.4%. CB/OI 50.2%, Bks 32.5%, AM
14.9%, Ins/PF/Corp 2.4%.
MS+40 area, MS+40 - US$2.6bn Aaa/AAA BofA / BMO / Citi / MS EMEA 58%, Amers 28%, Asia 14%. CB/
area OI 53%, FM/Ins 29%, Bks 18%
Sofr+40 area - US$825m Aaa/AAA BMO / WFS -
MS+22 area - >US$700m Aa1/AA+ TD / DB -

MS+170/175, 10 >€15.7bn B1/BB-/BB/BBL BNPP / BofA / DB / GS / HSBC / JPM UK 27.5%, Greece 15%, Fr 12.5%, Ger/Aus/
MS+160/+165 WPIR Switz 9%, It 7%, Nordics 7%, RoEur 6.5%,
N/Amer 15%, Other 0.5%. FM 59%, Bks/PB
21%, HF/FIs 14.5%, Ins/PF 5.5%.
MS+34 area, MS+32 3 >€69bn, >400acs A2/AA-/A+ Barc / BNPP / Danske / Davy / UK 24%, Fr/Benelux 13%, Ire 12%, Nordics
area NatWest / Nomura 11%, Ger 10%, It 7%, Sp/Port 7%, RoEur 8%,
US/Other 8%. AM 37%, Bks/Intermediaries
36%, CB/OI 11%, Ins/PF 9%, HF 7%.
MS+3 area, MS+2 - >€2bn -/-/AAA Barc / Deka / Natx / NordLB / Uni -
(+/-1)
OAT+62 area, - >€1.3bn Aa3/AA-/A+ BNPP / CA-CIB / Natx / NatWest / SG Ger/Aus/Switz 45%, Fr 28%, UK 9%, It
OAT+62 area 9%, Asia 5%, RoEur 4%. Ins/PF 48%, AM
28%, Bks/PB 17%, CB/OI 4%, Other 3%.
SPGB+low 30s, 4 >€78bn Baa1/A/A-/A BBVA / CA-CIB / Citi / GS / MS / Fr/It 25%, UK/Ire 18.8%, UK/Ire 18.8%,
SPGB+29 area NatWest Ger/Aus/Switz 16.8%, Sp 16.7%, RoEU
8.5%, US/Canada 4.8%, Nordics 4.2%,
Asia 2.6%, Other 2.6%. FM 33.8%, Tsy
27.7%, Ins/PF 18.1%, Bks 8.5%, HF 6.1%,
CB/OI 2.4%, Other 3.4%.
MS+14 area, MS+12 - >€25bn, 220acs Aa1/AA+/AA+ BNPP / CA-CIB / GS / NatWest / -
area Nomura
B+4.5 area 0 >€31.5bn, 120acs Aaa/AAA/AAA BNPP / Danske / DB / GS / JPM UK 31%, Ger 22%, Benelux 14%, Nordics
11%, It 4%, Fr 3%, RoEur 5%, RoW 10%.
AM 46%, HF 21%, Ins/PF 9%, Bks 8%,
CB/OI 2%, Other 14%.
MS+14 area - - Aa1/AA-/AAA BLB / BNPP / NordLB / Erste / LBBW -

OAT+29 area, - >€8.75bn Aa2/-/AA BofA / CA-CIB / HSBC / JPM / Natx -

OAT+26 area / NatWest

G+0.5/+1 - >£72.8bn, 192acs Aa2/AA/AA- Barc / GS / JPM / Nomura / Santan UK ~91%, Other ~9%.
G+42 - >£1.05bn Aaa/AAA/- BofA / BMO / NatWest / RBC -
G+40 area - >£250m Aaa/AAA/- Barc / BofA / HSBC -

G+47 area, G+47 (#) - >£1.7bn Aaa/AAA/AAA Barc / BofA / NatWest / TD -

MS+47 5 - -/A+/-/CS High A / CS / Raiff / ZKB -

ZKB A+
MS+65 25 - -/A+/-/CS High A / CS / Raiff / ZKB -
ZKB A+

ASW+63 - A$0 Aaa/AAA Miz -

ASW+64 - A$0 Aaa/AAA TD -

- - A$0 Aaa/AAA TD -

ASW+64 - A$0 Aaa/AAA/AAA Nomura -

- - - Aaa/AAA Danske -

- - - -/AA SEB -
- - >C$1.7bn Aaa/AAA BofA / RBC / Scotia / TD Amers 51%, EMEA 31%, Asia 18%. Bks/
Corp 35%, AM/Ins/PF 33%, CB/OI 31%
AONIA+34 - A$1.2605bn Aa1/AA+ - -
ASW+51 - - Aaa/AAA DB / TD -

- - - Aa1/AA+ Citi -

MS+46 - - Aa1/AA+ BNZ -

T+387.5 area, -16 US$3.3bn Baa3/BBB-/BBB- BofA/Citi/JPM/WFS -

T+330 (+/-5)

International Financing Review June 13 2020 55

GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 12/6/2020 (CONTINUED)
Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)

Jun 8 2020 Duke Energy Florida US$500m Jun 15 2030 1.75 99.863 T+90 1.765
Jun 8 2020 eBay US$300m Mar 11 2025 1.9 103.432 T+70 1.141

Jun 8 2020 eBay US$450m Mar 11 2030 2.7 103.176 T+145 2.325

Jun 8 2020 Equinix US$500m Jul 15 2025 1.25 99.77 T+85 1.297

Jun 8 2020 Equinix US$500m Jul 15 2027 1.8 99.749 T+115 1.838

Jun 8 2020 Equinix US$1.1bn Jul 15 2030 2.15 99.711 T+130 2.182

Jun 8 2020 Equinix US$500m Jul 15 2050 3 98.264 T+145 3.089

Jun 8 2020 General Electric US$1.5bn May 1 2050 4.35 100.176 T+270 4.339
Jun 8 2020 GE Capital Funding US$1.5bn May 15 2030 4.4 105.074 T+290 3.769
Jun 8 2020 Magna International US$750m Jun 15 2030 2.45 99.569 T+162.5 2.499

Jun 8 2020 Northern States Power US$700m Jun 1 2051 2.6 98.118 T+105 2.69

Jun 8 2020 Plains All American Pipeline US$750m Sep 15 2030 3.8 99.794 T+295 3.825
Jun 8 2020 Philips 66 US$150m Apr 9 2025 3.85 111.947 T+80 1.25

Jun 8 2020 Philips 66 US$850m Dec 15 2030 2.15 99.701 T+130 2.182

Jun 8 2020 Roper Technologies US$600m Jun 30 2030 2 98.877 T+125 2.125

Jun 9 2020 American Campus US$400m Jan 30 2031 3.875 99.142 T+315 3.974
Communities Operating
Partnership
Jun 9 2020 Fidelity National Financial US$650m Jun 15 2030 3.4 99.756 T+260 3.429

Jun 9 2020 Healthpeak Properties US$600m Jan 15 2031 2.875 99.125 T+215 2.972

Jun 9 2020 HP US$1.15bn Jun 17 2025 2.2 99.769 T+185 2.249

Jun 9 2020 HP US$1bn Jun 17 2027 3 99.718 T+240 3.045

Jun 9 2020 HP US$850m Jun 17 2030 3.4 99.7 T+260 3.425

Jun 9 2020 Westlake Chemical US$300m Jun 15 2030 3.375 99.588 T+260a 3.424
Jun 10 2020 Ares Finance US$400m Jun 15 2030 3.25 99.771 T+250 3.277
Jun 10 2020 Florida Gas Transmission US$500m Jul 1 2030 2.55 99.763 T+180 2.577
Jun 10 2020 Pinnacle West Capital US$500m Jun 15 2025 1.3 99.99 T+95 1.302

Jun 10 2020 Sempra Energy US$900m Oct 15 2025 4.875 100 4.875 4.875

EUROS
Jun 8 2020 ACS €750m Jun 17 2025 1.375 99.947 MS+165 / B+197.8 1.386

Jun 8 2020 Deutsche Boerse €600m Perpetual (Jun 2027) 1.25 100 MS+143.1 / B+176 1.25

Jun 8 2020 OMV €750m Jun 16 2023 0 99.584 MS+45 / B+76.1 0.139

Jun 8 2020 OMV €750m Jun 16 2030 0.75 99.493 MS+85 / B+112.3 0.803

Jun 8 2020 SATO Corp €50m Jun 12 2030 2.45 100 - 2.45
Jun 8 2020 Veolia Environnement €500m Jan 15 2032 0.8 100 MS+78 0.8

Jun 9 2020 GALP Energia €500m Jan 15 2026 2 99.754 MS+227 / B+260.6 2.048

Jun 9 2020 Klepierre €140m incr Dec 13 2032 1.625 97.54 MS+180 / B+217.8 1.847
(€640m)
Jun 9 2020 Mohawk Industries €500m Jun 12 2027 (Apr 2027) 1.75 99.889 MS+195 / B+227.7 1.949

Jun 9 2020 SEB €500m Jun 16 2025 1.375 99.169 MS+180 / B+211.6 / 1.549
OAT+196
Jun 10 2020 Edenred €600m Jun 18 2029 1.375 99.958 MS+145 / B+176.5 1.38

56 International Financing Review June 13 2020

 BONDS SUMMARY DETAILS

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

T+115 area 3 US$1.25bn A1/A Barc/BNPP/MUFG -

T+100 area, -4 US$1.25bn Baa1/BBB+/BBB+ CS/JPM/MS -
T+75 (+/-5)
T+175 area, -7 US$2.3bn Baa1/BBB+/BBB+ CS/JPM/MS -
T+150 (+/-5)
T+120 area, -8 US$2.3bn Baa3/BBB-/BBB- BofA/GS/JPM -
T+95 (+/-5)
T+150 area, -3 US$3.3bn Baa3/BBB-/BBB- BofA/GS/JPM -
T+120 (+/-5)
T+165 area, -7 US$3.9bn Baa3/BBB-/BBB- BofA/GS/JPM -
T+135 (+/-5)
T+185 area, -12 US$3.1bn Baa3/BBB-/BBB- BofA/GS/JPM -
T+155 (+/-5)
T+275 area 8 US$3.5bn Baa1/BBB MS -
T+295 area 6 US$3.5bn Baa1/BBB MS -
T+212.5/+225 -8.5 US$4.1bn A3/A- BofA/Citi/TD(a)/BNPP/RBC/ -
Scotia(p)
T+130 area, -4 US$2.bn Aa3/A/A+ MS/MUFG/USB/WFS -
T+110 (+/-5)
T+335 area -13 US$3.6bn Ba1/BBB-/BBB- Barc/BofA/JPM/RBC -
T+115 area, -9 US$550m A3/BBB+ BNPP/GS/MUFG/Scotia -
T+85 (+/-5)
T+170 area, -11 US$2.5bn A3/BBB+ BNPP/GS/MUFG/Scotia -
T+135 (+/-5)
T+170 area, -9 US$3.6bn Baa2/BBB+ BofA/JPM/WFS -
T+135 (+/-5)
T+365 area, -16 US$2.3bn Baa2/BBB DB/JPM -
T+325 (+/-5)

T+300 area, 19 - Baa2/BBB BofA/JPM(a)/USB(p) -

T+260 (the #)
T+250 area, 7 US$2.7bn Baa1/BBB+/BBB+ BofA/Barc/MS/WFS -
-
T+212.5 area, 37 US$2.8bn Baa2/BBB/BBB+ BNPP/GS/HSBC/JPM -
T+185 (the #)
T+255 area, 37 US$2.2bn Baa2/BBB/BBB+ BNPP/GS/HSBC/JPM -
T+240 (the #)
T+275 area, 41 US$1.9bn Baa2/BBB/BBB+ BNPP/GS/HSBC/JPM -
T+260 (the #)
T+325 area -18 US$1.75bn Baa2/BBB-/BBB Citi/JPM/WFS -
T+high 200s - US$865m BBB+/BBB+ BofA/Citi -
T+215 area -7 US$2.9bn Baa2/BBB+ JPM/PNC/RBC/USB -
T+115 area, - US$850m A3/BBB+ JPM/PNC/WFS -
T+100 (+/-5)
5.125%/5.25%, - US$1.5bn Ba1/BBB-/BBB- Barc/Citi/CS/GS/MS -
4.875% (the #)

MS+200 area, -5 >€1.75bn -/BBB- GS / SG / BNPP / Caixa / HSBC / ING Sp 38%, Ger/Aus/Switz 25%, UK 15%, Fr
MS+175 area / JPM / Santan / Uni 13%, Benelux 4%, Other 5%. FM 50%, CB/
OI 27%, Ins/PF 14%, Bks/PB 7%, Other 2%.
1.875%/2%, 1.5% -25 >€4.1bn -/A+ BNPP / Citi / DB / JPM / BofA / CMZ -
area / HSBC / SG
MS+85/90, MS+55 -5 >€2.3bn A3/-/A- Citi / CMZ / Erste / LBBW / Miz / RBI Fr 40%, Ger/Aus 21%, UK/Ire 12%,
area Nordics 11%, S.Eur 11%, Benelux 3%,
Switz 1%, Other 1%. FM 73%, Ins/PF
10%, Bks/PWM 7%, CB/OI 9%, Other 1%.
MS+130 area, -5 >€3.2bn A3/-/A- Citi / CMZ / Erste / LBBW / Miz / RBI Ger/Aus 31%, Fr 24%, Benelux 18%,
MS+95 area Nordics 13%, UK/Ire 5%, S.Eur 5%, Switz
3%, Other 1%. FM 65%, CB/OI 14%, Ins/
PF 14%, Bks/PWM 6%, Other 1%.
0 - - -/BBB SEB -
MS+120 area, -8 ~€3bn Baa1/BBB HSBC / Barc / NatWest / Santan / -
MS+90 area StCh
MS+260 area, - ~€1.1bn - BBVA / BNPP / CaixaBI / Miz / -
MS+235 area Santan / Uni
MS+190 area - - -/A- ABN / DB / Miz -

MS+250 area, - €4.6bn Baa1/BBB+/BBB+ BofA / JPM / BNPP -

MS+210 area
MS+215 area, - ~€1.6bn - BNPP / CA-CIB / Citi / HSBC / Natx -
MS+185 area
MS+165 area 15 >€1bn -/BBB+ Barc / CA-CIB / SG / BNPP / Citi / -
CMZ / HSBC / JPM

International Financing Review June 13 2020 57

GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 12/6/2020 (CONTINUED)
Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)

Jun 10 2020 Enexis green €500m Jun 17 2032 0.625 99.793 MS+60 / B+96.9 0.643

Jun 10 2020 Iliad €650m Jun 17 2026 2.375 98.547 MS+285 / B+319.1 2.64

Jun 10 2020 Snam €500m Jun 17 2030 0.75 99.856 MS+80 / B+108.8 0.765

Jun 10 2020 VW International Finance €1.5bn Perpetual (Jun 2025) 3.5 100 MS+374.6 / B+407 3.5

Jun 10 2020 VW International Finance €1.5bn Perpetual (Jun 2029) 3.875 100 MS+395.8 / 3.875
B+427.8
Jun 11 2020 Cibus Nordic Real Estate €135m Sep 18 2023 3mE+450 - - -
Jun 11 2020 SIG Combibloc €450m Jun 18 2023 1.875 100 B+255 1.875

Jun 11 2020 SIG Combibloc €550m Jun 18 2025 2.125 100 B+276 2.125

STERLING
Jun 8 2020 Wessex Water £50m Sep 17 2029 1.5 98.356 G+140 1.686
Jun 9 2020 Northern Powergrid £300m Jun 16 2062 1.875 98.793 G+130 1.908

SWISS FRANCS
Jun 8 2020 PSP Swiss Property SFr50m incr Feb 6 2025 1 104.05 MS+65 / Eidg+68 0.123
(SFr150m)
Jun 10 2020 Straumann Holding SFr200m Oct 3 2025 0.55 100.2 MS+100 / 0.512
Eidg+105
NON CORE
Jun 9 2020 Vasakronan NKr324m incr Jun 4 2025 3mN+131.5 100.52 3mN+131.5 -
(NKr500m)
Jun 8 2020 Specialfastigheter SKr500m Jun 15 2023 0.38 100 - 0.38
Jun 8 2020 Specialfastigheter SKr300m Jun 15 2023 3mS+75 101.57 - -
Jun 11 2020 Fastighets AB Stenvalvet SKr300m Jun 16 2023 1.75 99.957 - -
Jun 11 2020 Fastighets AB Stenvalvet SKr500m Jun 16 2023 3mS+165 100 3mS+165 -
Jun 11 2020 Kungsleden SKr300m Jun 18 2025 3mS+195 100 3mS+195 -
FINANCIALS
US DOLLARS
Jun 8 2020 Lloyds Banking Group US$1bn Jun 15 2023 1.326 100 T+110 1.326

Jun 9 2020 Credit Agricole US$1.5bn Jun 16 2026 1.907 100 T+150 1.907
(Jun 2025)
Jun 9 2020 Principal Financial Group US$500m Jun 15 2030 2.125 99.517 T+135 2.179

Jun 10 2020 Toronto-Dominion Bank US$1.75bn Jun 12 2023 0.75 99.926 T+58 0.775

Jun 10 2020 Toronto-Dominion Bank US$1.bn Jun 12 2025 1.15 99.995 T+83 1.151

Jun 11 2020 Fidelis Insurance US$300m Jun 30 2030 4.875 99.021 T+433.8 5

EUROS
Jun 8 2020 ABN Amro Bank AT1 €1bn Perpetual (Sep 2025) 4.375 100 MS+467.4 4.376

Jun 8 2020 Commerzbank AT1 €1.25bn Perpetual (Apr 2026) 6.125 100 MS+636.3 6.131

Jun 8 2020 La Banque Postale SNP €750m Jun 17 2026 (Jun 2025) 0.5 99.421 MS+88 / B+118.9 0.618

Jun 8 2020 Societe Generale €1bn Jun 12 2030 1.25 99.478 MS+135 / B+161.3 1.306

Jun 9 2020 KBC Group €500m Jun 16 2027 (Jun 2026) 0.375 99.281 MS+72 / B+105.1 0.497

Jun 9 2020 Metropolitan Life €500m Jul 16 2027 0.55 99.89 MS+75 / B+107.8 0.566
Jun 9 2020 RBI T2 €500m Jun 18 2032 (Jun 2027) 2.875 99.432 MS+315 / B+347.8 2.966

58 International Financing Review June 13 2020

 BONDS SUMMARY DETAILS

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

MS+95 area, MS+65 -10 ~€2.8bn Aa3 ABN / BNPP / CMZ / ING Fr 28%, Ger/Aus 31%, Benelux 15%, UK/
area Ire 12%, Asia 6%, S.Eur 3%, Switz 3%,
Other 2%. FM 68%, Ins/PF 20%, OI/
Agcy 10%, Bks/PWM 1%, Other 1%.
MS+320 area, - >€1.9bn - BNPP / CA-CIB / Natx / Uni / BofA / -
MS+290 area CIC / Helaba / HSBC / ING / SMBC
Nikko / SG
MS+115 area, -2 ~€1bn Baa2/BBB+/BBB+/ BcaIMI / BBVA / BNPP / BofA / GS / Fr 26%, Ger/Aus 22%, Benelux 16%,
MS+85/+90 DNV GL 2nd opinion JPM / MUFG / SG / Uni UK/Ire 10%, It 9%, Switz 5%, Iberia 4%,
Other 4%. AM/FM 80%, Bks/PB 12%,
Ins/PF 6%, Other 2%.
3.875% area, - €2.9bn Baa2/BBB- Barc / BNPP / BofA / DB / RBC -
3.625% area
4.375% area, - €2.55bn Baa2/BBB- Barc / BNPP / BofA / DB / RBC -
3.875%/4%
- - - - Danske / Nordea -
2% area, 1.875%/2% - €2.9bn combined Ba2/BBB-/-/MSCI GS / UBS / Uni / CS -
AA / Sustainalytics
18.8 - Low Risk /
EcoVadis Platinum
2.25% area, - €2.9bn combined Ba2/BBB-/-/MSCI GS / UBS / Uni / CS -
2.125%/2.25% AA / Sustainalytics
18.8 - Low Risk /
EcoVadis Platinum

G+140/+145, - ~£75m Baa1/-/BBB+ Barc / HSBC / NatWest -

G+150 area, G+135 - >£930bn A3/A/A- NatWest / Lloyds / Santan -
area

MS+41/43 - 10acs -/-/A- KBBS / UBS Switz 100%. Tsy 61%, AM 20%, Bks/PB
12%, PF 6%.
MS+115/+125, -10 108acs UBS BBB+/ ZKB ZKB / UBS Switz 100%. PB 45.5%, AM 31%, Ins
MS+100/+115 BBB+ 10.5%, PF 8%, Tsy 5%.

- - - CICERO SEB -

- - - -/AA+ Danske -
- - - -/AA+ Danske -
- - - - SEB -
- - - - SEB -
- - - Baa3 HCM -

T+140 area, -1 US$4.35bn A3/BBB+/A+ GS/Lloyds/MS -

T+115 (+/-5)
T+185 area, 3 US$4.3bn Baa1/A+/A- BofA/Citi/DB/TD -
T+155 (+/-5)
T+150 area, 1 US$650m Baa1/A-/A- Citi/CS/WFS -
T+135 (the #)
T+80 area, 3 US$2.6bn Aa3/A GS/JPM/SMBC/TD/WFS -
T+60 (+/-2)
T+100 area, 2 US$1.5bn Aa3/A GS/JPM/SMBC/TD/WFS -
T+85 (+/-2)
- - - -/BBB WFS -
- - -

5.25%/5.5%, 4.75% - >€8bn -/-/BBB- ABN / CS / HSBC / GS / MS -

area cpn
7% area, 6.375% -25 ~€8.5bn Ba2/BB- Barc / BNPP / CMZ / DB / UBS -
area
MS+120 area, 8 >€2.5bn -/BBB/BBB+ BNPP / Citi / CMZ / LBP / UBS / Uni -
MS+90/+95
MS+160 area, 7 €2.5bn Baa2/BBB/A- SG Fr 30%, UK/Ire 22%, Ger/Aus/Switz 16%,
MS+135 It 9%, Asia 8%, Nordics 7%, Iberia 4%,
Benelux 3%, Other 1%. AM 53%, Ins/PF
29%, Bks/PB 7%, CB/OI 7%, HF 4%.
MS+100 area, 7 >€1.75bn Baa1/A-/A BofA / CA-CIB / CMZ / ING / KBC Fr 23%, Benelux 20%, Ger/Aus/Switz 19%,
MS+75 area / Natx UK 17%, Iberia 10%, It 7%, Nordics 4%. AM
83%, Ins/PF 11%, Bks 5%, Other 1%.
MS+85/+90, - >€700m Aa3/AA-/AA- Barc / CS / DB / JPM -
MS+350 area, 5 >€1.3bn, >100acs Baa3 BNPP / BofA / MS / RBI / SG UK 33%, Ger/Aus/Switz 27%, Fr 19%, It 11%,
MS+320 area Nordics 3%, Neth 3%, Other 4%. FM 69%,
Ins/PF 16%, Bks/PB 9%, HF 5%, Other 1%.

International Financing Review June 13 2020 59

GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 12/6/2020 (CONTINUED)
Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)
Jun 9 2020 UniCredit €1.25bn Jun 16 2026 (Jun 2025) 1.25 99.563 MS+160 / B+191.7 1.341

Jun 9 2020 Zurich Finance (Ireland) T2 €750m Jun 17 2050 (Jun 2030) 1.875 99.699 MS+195 / B+223.5 1.908

Jun 10 2020 BPER Banca €500m Jul 7 2025 1.875 99.57 MS+220 / B+252.5 1.965

STERLING
Jun 10 2020 Nationwide £750m Perpetual (Dec 2027) 5.75 100 G+562.5 5.75

SWISS FRANCS
Jun 11 2020 Credit Agricole SFr175m Oct 1 2026 0.5 100.07 MS+95 / 0.488
Eidg+96.4
Jun 11 2020 Raiffeisen Schweiz SFr175m Jun 22 2021 0 100.2 - -0.2
COVERED BONDS
EUROS
Jun 8 2020 LBBW €500m Jun 17 2026 0.01 101.2 MS+3 / B+35.2 -0.19
Jun 9 2020 Achmea Bank €500m Jun 16 2025 0.01 100.13 MS+24 / B+55.4 -0.01

SWISS FRANCS
Jun 10 2020 Credit Suisse SFr200m Dec 17 2024 0 100 MS+51.6 / 0
Eidg+52.8
Jun 10 2020 Credit Suisse SFr400m Jun 16 2028 0.25 100.18 MS+54 / Eidg+61.7 0.227

HIGH YIELD
US DOLLARS
Jun 5 2020 NMI Holdings US$400m Jun 1 2025 7.375 100 T+691 7.375

Jun 8 2020 Griffon US$150m Mar 1 2028 5.75 100.25 T+399 5.696
(Mar 2023)
Jun 8 2020 International Game US$750m Jan 15 2029 5.25 100 T+447 5.249
Technology (Jan 2023)
Jun 8 2020 Sirius XM Radio US$1.5bn Jul 1 2030 4.125 100 T+325 4.125
(Jul 2025)

Jun 8 2020 Virgin Media US$250m Jul 15 2030 5 101 T+400 4.873
(Jul 2025)
Jun 9 2020 American Axle & US$400m Jul 1 2028 6.875 100 T+620 6.875
Manufacturing (Jul 2023)
Jun 9 2020 BWX Technologies US$400m Jun 30 2025 4.125 100 T+344 4.125
Jun 9 2020 HTA US$750m Dec 18 2025 7 99.439 T+663 7.125
(Dec 2022)
Jun 9 2020 Hillebrand US$400m Jun 15 2025 5.75 100 T+532 5.75
(Jun 2022)
Jun 9 2020 Realogy US$550m Jun 15 2025 7.625 100 T+722 7.625
(Jun 2022)

Jun 10 2020 Acadia Healthcare US$450m Jul 1 2028 5.5 100 T+485 5.5
(Jul 2023)

Jun 10 2020 Delta Air US$1.25bn Jan 15 2026 7.375 99.986 - 7.375

Jun 10 2020 Level3 Financing US$1.2bn Jul 1 2028 4.25 100 T+369 4.25
(Jul 2023)

Jun 10 2020 New Gold US$400m Jul 15 2027 7.5 100 T+695 7.5
(Jul 2023)
Jun 10 2020 Virgin Media US$500m Jul 15 2028 5 100 T+436 5

Jun 11 2020 Varsity Brands US$150m Dec 22 2024 L+800 97 - 9.833

(Dec 2022)
Jun 11 2020 Watco US$500m Jun 15 2027 6.5 100 T+601 6.5
EUROS
Jun 10 2020 Iqvia €711m Jun 15 2028 (Jun 2023) 2.875 100 B+330 2.875
STERLING
Jun 10 2020 Virgin Media £400m incr Jul 15 2028 (Jul 2023) 4.875 99.5 G+482 4.95
(£900m)

60 International Financing Review June 13 2020

 BONDS SUMMARY DETAILS

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

MS+185 area, - >€2.3bn Baa1/BBB/BBB- Uni -
MS+160
MS+215 area, - >€1.5bn A2/A CA-CIB / DB / HSBC / JPM -
MS+200 area
MS+250 area, - >€1bn Ba3/-/BB Barc / BNPP / Citi / Medio / Santan -
MS+220/+225

6.25% area, 5.75% - >£4.4bn Ba1/BB+/BBB- BofA / Citi / JPM / MS -

cpn

MS+95 area 2 32acs Baa1/A-/A+ CS Switz 100%. AM 82.4%, Ins 10.86%, PF

5.14%, PB 1.6%.
-0.2% yld 0 7acs A3 Raiff Switz 100%. Tsy 80%, AM 10%, PF 10%.

MS+7 area 0 >€1.7bn Aaa ABN / CA-CIB / CMZ / LBBW / UBS -

MS+30 area, MS+25 0 >€2.8bn, >100acs Aaa/-/AAA ABN / DZ / ING / Rabo / SG / Uni Ger/Aus 40%, Benelux 28%, Nordics 13%, Fr
(+/-1) 4%, UK 4%, S.Eur 3%, Switz 3%, Other 5%.
AM 45%, Bks 43%, Ins/PF 7%, CB/OI 5%.

0%/0.05%, 0% area 10 SFr188m, 26acs -/-/AAA CS Switz 100%. Bks/Tsy 46%, AM 29%, Ins
yld, 0% yld 15%, PF 10%, Retail/PB 1%.
MS+55/+60, MS+55 13 SFr388m, 37acs -/-/AAA CS Switz 100%. Bks/Tsy 49%, AM 29%, PF
area 12%, Ins 8%, Retail/PB 1%.

7.75%/8% area, - - - JPM/RBC/SunTrust -

7.625% area,
7.375%
99.5%/100% - - B2/B+ BofA/DB/BNP -

5.5% area, - - Ba3/BB Barc/Bofa/BNPP/FIFTB/JPM/ -

5.25% at par MEDIO/Scotia/USI/WFS/KEY
4.25%/5% area - - B3/BB JPM/Barc/Citi/GS/MS/BofA/BNPP/ -
BMO/CA/Miz/RBC/Scotia/STRH/
USB/WFS
101% - - B2/B JPM/BofA/GS/Barc/BNPP/Citi/ -
HSBC/MS/Natwest/Scotia/SocGen
7% area - - B2/B- BofA/Barc/Citi/JPM/RBC. Sr Co- -
Mgrs: BMO/PNC/USB
- - - Ba3/BB MS/WFS/JPM/PNC/TD/USB -
7.375% area, - - B2/B BofA/JPM/STNDRD/ABSA/Barc -
7.125%
6% area, - - Ba1/BB+ HSBC/Citizens/JPM/PNC -
5.75%
8%/8.25% area - - - JPM/Barc/BofA/CapOne/Citizens/ -
CrAg/GS/STRH/BMO/Scotia/TD/
SANT/CS
5.625% area - - Caa1/B BofA/Citi/GS/BMO/CapOne/CA- -
CIB/53/Wells/DB/JPM/MUFG/
Regions
8% area, - - Baa3/BB/BB+ GS/MS -
7.50% (+/- 12.5)
4.25% area, - - Ba3/BB/BB Citi/BofA/Barc/CS/GS/JPM/MS/ -
4.25% RBC/WFS/FITB/Miz/STRH/TD/
Citizens/MUFG/Regions/DB
7.5%/7.75% area - - Caa1/B BofA/JPM/RBC -

5.00% area - - B1/B/B+ DB/CS/ING/RBC/ABN/BofA/IMI/ -

CA-CIB/Lloyds
L+825-850 @96 - - - Jeff/Barc/GS -
w/1% floor
6.5% area - - Caa1/B- JPM/BMO/Citi/STRH/USB/WFS -

3% area - - Ba3/BB GS / BofA / HSBC / JPM / PNC -

99.5 - - B1/B/B+ DB / CS / ABN / CA-CIB / ING / -

BcaIMI / Lloyds / BofA / RBC

International Financing Review June 13 2020 61

GLOBAL DEBT: SOVEREIGN FOREIGN CURRENCY LONG-TERM RATINGS (12/6/2020)
Moody’s S&P Fitch Moody’s S&P Fitch
Sovereign 1 2 3 4 5 6 Sovereign 1 2 3 4 5 6
Abu Dhabi Aa2 – AA AA+ AA AA+ Laos – – – – B– n BBB+
Albania B1 Ba2 B+ BB – – Latvia A3 Aaa A AAA A– AAA
Andorra – Ba2 BBB AAA BBB+ A+ Lebanon Caa2 Caa1 CCC n CCC CC CCC
Angola B3 B2 B– n B– Bn B Lesotho – – – – B B+
Argentina Caa2 Caa1 CC n B- RD CCC Liechtenstein – Aaa AAA AAA – –
Armenia Ba3 Ba1 – – BB– BB Lithuania A3 p Aaa A AAA A– p AAA
Aruba – – BBB+ n BBB+ BBB– n BBB Luxembourg Aaa Aaa AAA AAA AAA AAA
Australia Aaa Aaa AAA AAA AAA n AAA Macau Aa3 Aa2 – – AA n AAA
Austria Aa1 Aaa AA+ AAA AA+ AAA Macedonia (FYR) – – BB– BB BB+ n BBB–
Azerbaijan Ba2 Ba2 BBn BB+ BB+ BB+ Malaysia A3 A1 A– A+ A– A
Bahamas Baa3 Baa1 BB+ BBB- – – Maldives B2 n Ba3 – – Bn B
Bahrain B2 Ba3 B+ p BB– BB– BBB– Malta A2 Aaa A– p AAA A+ AAA
Bangladesh Ba3 Ba2 BB– BB– BB– BB- Mauritius Baa1 A2 – – – –
Barbados Caa1 B2 B– B- – – Mexico Baa1 n A1 BBB+ n A+ BBB– BBB+
Belarus B3 B3 B B B B Moldova B3 B2 – – – –
Belgium Aa3 Aaa AA AAA AA– AAA Mongolia B3 n B1 B B+ B B+
Belize Caa1 n B1 CCC n CCC+ – – Montenegro B1 p Ba1 B+ n AAA – –
Bermuda A2 Aa3 A+ AA+ – – Montserrat – – BBB– BBB– – –
Bolivia Ba3 Ba2 B+ B+ B+ B+ Morocco Ba1 Baa2 BBB– BBB+ BBB– n BBB
Bosnia Herzegovina B3 B3 B BB– – – Mozambique Caa2 Caa1 CCC+ CCC+ CCC B–
Botswana A2 n Aa3 A– A+ – – Namibia Ba2 n Baa3 – – BB BB+
Brazil Ba2 Ba1 BB– BB+ BB – n BB Netherlands Aaa Aaa AAA AAA AAA AAA
Bulgaria Baa2 A3 BBB A BBB p A– New Zealand Aaa Aaa AA p AAA AA AAA
Cambodia B2 B1 – – – – Nicaragua B2n B1 B- B- B- B-
Cameroon B2 Ba2 Bn BBB– Bn BB+ Nigeria B2 n B1 B B+ B+ n B+
Canada Aaa Aaa AAA AAA AAA AAA Norway Aaa Aaa AAA AAA AAA AAA
Cape Verde – – B BB– B– B Oman Ba1 n Baa3 BB n BB+ BB+ BBB-
Cayman Islands Aa3 Aa2 – – – – Pakistan B3 B2 B– B– B– B–
Chile A1 Aa2 A+ AA A AA Panama Baa1 A2 BBB+ n AAA BBB A
China A1 Aa3 A+ A+ A+ A+ Papua New Guinea B2 B1 B– B– – –
Colombia Baa2 A3 BBB– BBB+ BBB n BBB+ Paraguay Ba1 Baa3 BB BB+ BB+ BB+
Congo (DR) B3 n B3 CCC+ CCC+ – – Peru A3 A1 BBB+ A BBB+ d A–
Congo (Rep) Caa2 n B2 B- BBB- CCC B+ Philippines Baa2 A3 BBB+ A- BBB p BBB+
Cook Islands – – B+ AAA – – Poland A2 Aa3 A– A A– AA–
Costa Rica B2 n Ba2 B nd BB– d Bn B+ n Portugal Baa3 p Aa3 BBB AAA BBB AA
Cote d’Ivoire Ba3 Baa3 – – B+ p BBB– Qatar Aa3 Aa3 AA– AA AA– AA
Croatia Ba2 p Baa3 BBB BBB+ BBB- p BBB+ Ras al–Khaimah A AA+ A AA+
Cuba Caa2 Caa2 – – – – Romania Baa3 n A3 BBB– A– BBB– n BBB+
Curacao – – BBB+ BBB+ – – Russia Baa3 Baa2 BBB- BBB BBB BBB
Cyprus Ba2 p A2 BBB- AAA BBB– p A Rwanda B2 B1 B+ B B+ B+
Czech Rep Aa3 Aa1 AA– AA+ AA- AAA St Vincent & Gren B3 Ba3 – – – –
Denmark Aaa Aaa AAA AAA AAA AAA San Marino – – – – BBB- n BBB+
Dominican Rep Ba3 Ba1 BB– n BB+ BB– BB– Saudi Arabia A1 n A1 A– A A A+
Ecuador B3 n B2 B– B– RD CCC Senegal Ba3 Baa1 B+ BBB– – –
Egypt B2 B1 B B B+ B+ Serbia Ba3 Ba1 BB+ BBB– BB+ BBB–
El Salvador B3 B1 B- AAA B– n B Seychelles – – – – B+ BB
Estonia A1 Aaa AA– AAA AA- AAA Singapore Aaa Aaa AAA AAA AAA AAA
Ethiopia B2 B1 B B Bn B Slovakia A2 Aaa A+ AAA A AAA
Fiji Ba3 Ba3 BB– BB– – – Slovenia Baa1 p Aa1 AA– AAA A AAA
Finland Aa1 Aaa AA+ AAA AA+ p AAA Solomon Islands B3 B2 – – – –
France Aa2 p Aaa AA AAA AA n AAA South Africa Baa3 n A3 BB– BB+ BB+ n BBB–
Gabon Caa1 p B1 B BB+ South Korea Aa2 Aa1 AA AAA AA– AA+
Georgia Ba2 Baa3 BB BBB– BB n BBB– Spain Baa1 Aa1 A AAA A– AAA
Germany Aaa Aaa AAA AAA AAA AAA Sri Lanka B2 Ba3 B– B– B– n B–
Ghana B3 n B1 Bn B+ B B Suriname B2 Ba3 B B+ CCC B-
Greece B1 Baa1 BB– AAA BB BBB+ Sweden Aaa Aaa AAA AAA AAA AAA
Guatemala Ba1 Baa3 BB– BB+ BB n BB+ Switzerland Aaa Aaa AAA AAA AAA AAA
Honduras B1 Ba2 BB– BB – – Tanzania B1n Ba3 – – – –
Hong Kong Aa2 n Aaa AA+ AAA AA– AAA Taiwan Aa3 Aa2 AA– AA+ AA– AA+
Hungary Baa3 Baa1 BBB A– BBB A Thailand Baa1 A2 BBB+ A BBB+ p A–
Iceland A3 p A3 A A An A+ Trinidad & Tobago Ba1 n Baa3 BBB BBB+ – –
India Baa3 n Baa1 BBB– BBB+ BBB– BBB– Tunisia B2 n Ba3 – – B B+
Indonesia Baa2 A3 BBB n BBB+ BBB BBB Turkey B1n B1 B+ BB– BB– BB–
Iraq Caa1 B3 B– AAA B– n B– Turks & Caicos – – BBB+ AAA – –
Ireland A2 Aaa AA– AAA A+ AAA Uganda B2 Ba3 BB A– B+ B+
Israel A1 Aa3 AA- AA+ A+ AA Ukraine Caa1p B3 B B Bp B
Italy Baa3 Aa3 BBB n AAA BBB– AA– UAE Aa2 Aa2 – – – –
Jamaica B2 Ba3 B+ n BB– B+ BB– UK Aa2 Aaa AA + AAA AA n AAA
Japan A1 p Aaa A+* AA+ A AAA USA Aaa Aaa AA+ AAA AAA AAA
Jordan B1 Ba1 B+ BB BB– n BB Uruguay Baa2 A2 BBB A– BBB– n BBB+
Kazakhstan Baa3 p Baa2 BBB– BBB BBB BBB+ Uzbekistan – – BB– n d BB–
Kenya B2 n Ba3 B+ BB– B+ BB– Venezuela C Ca SD CC – –
Kuwait Aa2 Aa2 AA AA+ AA AA+ Vietnam Ba3 Ba1 BB BB BB p BB
Kyrgyzstan B2 Ba3 – – – – Zambia Caa2 n B3 CCC+ CCC+ CCC B–

1 Moody’s Government Bonds
2 Moody’s Country Ceilings
3 S&P Government Bonds
4 S&P Transfer and
Convertibility Assessments
5 Fitch Government Bonds
6 Fitch Country Ceilings
p Positive outlook/on watch
for upgrade
n Negative outlook/on watch
for downgrade
N New rating
W Rating withdrawn
SD Selective default
* Taken off positive watch/ c Improvement in ratings,
outlook outlook or watch status
** Taken off negative watch/ d Deterioration in ratings,
outlook outlook or watch status

62 International Financing Review June 13 2020

 EMERGING MARKETS
China 64 Hong Kong 64 India 65 Indonesia 65 Macau 67 Philippines 67 Thailand 67 Albania 70
Croatia 70 Russia 71 Bahrain 71 Argentina 72 Ecuador 73

„ FRONT STORY AFRICA

African issuers make their presence felt

Continent sees first supply in months
Helios treated to significant interest
Two African issuers injected life back into
the region’s bond market on Tuesday,
proving the existence of deep reserves of
interest for deals at different ends of the
rating spectrum.
African credits have been among the
worst hit by the global spread of coronavirus
and several governments are seeking debt
relief as a result.
But with credit markets on a tear thanks
orders to purchase up to US$60m and
US$25m, respectively.
Such was the interest from other accounts
that the deal was upsized from the US$425m
Helios said it was originally targeting, while
it also cancelled a tender offer on its
US$600m 9.125% senior notes due 2022.
“Given the strength of feedback and IoIs,
the tender has been cancelled and a full call
announced,” said a lead. “So this is now a
is disturbing and there were questions on
my part if the company was able to extract
cash from the DRC to the holdco even before
the coronavirus,” said Budovnits.
“So I decided to stay away. The premium
to a similar deal from IHS is just not that
enticing to jump in.”
“We were not in a super rush
to huge stimulus measures by central banks FULLûRElNANCINGûNOTûPARTIALvû4HEûû to refi. Our strategy was to do
and governments, interest is growing in bonds can be called next month. what was in our control, have
riskier areas of the market.
Some investors are uncomfortable with
the strength of the rally.
“That is something that I struggle to get
my head around daily,” said one EM
portfolio manager, given the global
economic outlook.
But while others may agree with that
0RICINGûTIGHTENEDûSIGNIlCANTLYûWITHû)(3û
Towers, the largest mobile
telecommunications infrastructure provider
in Africa, Europe and the Middle East by
tower count, the most obvious comparable.
IHS has a March 2021 bond bid at 7.15%,
ACCORDINGûTOû2ElNITIVûDATA
“I’m assuming [Helios] lands in the low 7s,
the docs and everything ready
and press go at the drop of a
hat. We are the first African
corporate to do a bond since
Covid and we’re proud of that as
well as the deal”
view, the fear of missing out is driving
investment decisions.
“It looks like the yield hunt has reached
its illogically logical height,” said Olga
YEARûBONDûWEREû
Budovnits, a portfolio manager at Main
Partners.
WHICHûISûBASICALLYûmATûTOûTHROUGHû)(3û
although bid-offers in secondary are fairly
wide, so you can’t actually pick up IHS
bonds at those levels,” said the banker away.
Helios landed the note at 7.125% and
eventually took US$750m on a book of
AFRICA FINANCE CORPORATION (A3, negative), a
pan-regional multilateral based in Nigeria, was
also in the market, raising US$700m. Initial
PRICEûTHOUGHTSûFORûAûlVE
released at 3.625% area, but a book in excess of
US$2bn saw pricing tightened to 3.25%.
One borrower taking advantage was
HELIOS TOWERS (B2/B), an independent
telecommunications company in Africa
with an extensive portfolio of around 7,000
TOWERSûACROSSûlVEûCOUNTRIES
“The market had been very poor and took
a big dip with Covid,” said Tom Greenwood,
CFO of Helios Towers.
h7EûWEREûNOTûINûAûSUPERûRUSHûTOûRElû/URû
strategy was to do what was in our control,
have the docs and everything ready and
PRESSûGOûATûTHEûDROPûOFûAûHATû7EûAREûTHEûlRSTû
African corporate to do a bond since Covid
and we’re proud of that as well as the deal.”
After a day of calls with investors, leads
opened books on an expected US$700m 5.5-
year non-call two guaranteed bond at 7.75%
US$3bn.
Greenwood said conversations with
investors have changed in their nature from
the issuer’s debut over three years ago,
when the questions were focused on
country risk.
“This time round it was much more about
the business strategy and M&A
opportunities,” he said. “Investors have
been comforted to some extent by our great
business performance. Q1 2020 was our 21st
consecutive quarter of Ebitda growth, which
is really strong.”
Greenwood said the main buyers of the
bond were large institutional accounts
through their EM desks.
Not every investor is comfortable with
h!&#ûISûDElNITELYûCHEAPûFORûTHEûRATINGvû
said Budovnits after IPTs were announced.
“It’s a supra bank sitting on a lot of
unutilised capital and liquidity, so that’s
what keeps the rating high despite what
might be happening in the invested part of
its balance sheet.”
One banker away from the deal reckoned
it was starting with a premium of 40bp, but
that was more or less wiped out during the
execution process.
“You look at the African credits which in
the downdraft were trading at very
distressed levels. Now you see someone like
AFC looking to get a record-low coupon for
them,” said an EM trader.
Bankers cautioned, however, against
area.
“Smart timing. The market is very strong
and it looks like they are going to get a good
outcome,” said one banker away from the
deal.
The transaction had anchor investment
through Emerging Africa Infrastructure
taking on the risk, though, especially given
the devastating economic impact of health
emergencies in a country such as the
Democratic Republic of Congo, which has
had to tackle Ebola and now Covid-19.
“Helios is in part a derivative risk on a
relatively stable telecom business. But on
EXPECTINGûAûSTEADYûmOWûOFû!FRICANûISSUANCEû
emphasising that Helios in particular drew
INTERESTûFORûSPECIlCûCREDITûANDûSECTORûREASONS
“The towers sector is not cyclical and not oil
and gas. It doesn’t necessarily mean you would
see a similar response to other Single B issuers,”
said a second banker away from the deal.
Fund and DEG. They committed to place THEûOTHERûHANDûTHEûNEWSmOWûFROMûTHEû$2#û Sudip Roy, Robert Hogg

International Financing Review June 13 2020 63


ASIA-PACIFIC
CHINA
INVESTORS LAP UP MENGNIU DAIRY
DUAL-TRANCHER
CHINA MENGNIU DAIRYûDREWûlNALûORDERSûOFûMOREû
than US$5.7bn for a tightly priced US$800m
Reg S dual-tranche senior unsecured bond
issue that extended its curve to 10 years.
!û53MûûlVE
YEARûTRANCHEûWASû joint responsibility for developing a quality
priced at 99.526 to yield 1.975%, or
Treasuries plus 160bp. A US$300m 2.5% 10-
year tranche was priced at 99.587 to yield
2.547%, or Treasuries plus 175bp.
This is the Hong Kong-listed Chinese
DAIRYûPRODUCTSûCOMPANYSûlRSTû
YEARû Moody’s and Fitch downgraded HILONG
bond issue since its US dollar debut in
û)TSûTHREEûPREVIOUSûDEALSûALLûHADûlVE
RElNANCINGûRISKSûAFTERûTHEû#HINESEûOILû
year tenors.
Final pricing for both tranches came 80bp
inside initial guidance of 240bp area and
255bp area, and was about 40bp inside
Mengniu’s pre-transaction curve, according
to a banker on the deal. The 80bp revision is
one of the biggest on an investment-grade
offering from China this year.
At reoffer spreads of Treasuries plus
160bp and 175bp, the two tranches also
undercut fair value estimates of 180bp and
185bp/182bp over Treasuries last Thursday
morning.
Moody’s said Mengniu’s strong liquidity
POSITIONûANDûPOSITIVEûFREEûCASHmOWûWILLû
continue to provide a buffer against
potential market volatility. It expects
adjusted debt/Ebitda to stay below 2.8x in
the coming 12–18 months, as Ebitda growth
will outpace an increase in debt.
Moody’s said Mengniu’s Baa1 rating is
supported by its three strategic
shareholders: Cofco, Danone and Arla Foods.
In particular, it has factored in strong
support from Cofco because the two “share
the exchange offer in order to attract more
dairy business in China”.
HILONG DOWNGRADED AFTER EXCHANGE
OFFER STALLS
an upfront consideration plus US$5 in cash
HOLDING on June 9, citing heightened
US$1,000 of principal.
services company warned it may default if
investors continue to reject an exchange
offer for its US dollar bonds maturing this
month.
Moody’s lowered Hilong’s issuer and
senior unsecured bond ratings to B3 from B2
and placed them on review for further
downgrades.
Fitch cut Hilong’s issuer and senior unsecured
bond ratings to CC from B and removed the
ratings from negative rating watch.
existing notes upon maturity” if the
exchange offer is not completed.
Moody’s said that Hilong’s liquidity
SOURCESûANDûEXPECTEDûOPERATINGûCASHmOWSû
OVERûTHEûNEXTûûMONTHSûAREûINSUFlCIENTûTOû
cover Rmb1.7bn (US$240m) of short-term
debt.
&ITCHûCITEDûTHEûHIGHûRElNANCINGûRISKû
associated with Hilong’s exchange offer,
given that so far it “has not met the
minimum acceptance amount and there has
been limited progress in moving funds
offshore”.
Hilong on May 29 added a cash portion to
bondholders.
Under the revised terms, eligible holders
of the 2020s will receive US$900 in principal
amount of new 1.75-year US dollar senior
Reg S notes due 2022 and US$100 in cash as
as an early incentive for exchanging each
Before the revision, there was no upfront
cash consideration, with holders set to
receive the new 2022s on a par-to-par basis.
The new 2022s will have a minimum yield
to maturity of 9.75%.
As well as adding the upfront cash
consideration and extending the deadline,
Hilong increased the threshold for
proceeding with the exchange offer to at
least 80% in principal amount of the 2020s
being tendered and accepted, up from 75%.
192bp (ANZ) and 185bp–190bp and 200bp– )NûAû*UNEûûlLINGû(ONGû+ONG
LISTEDû(ILONGûSAIDû Admiralty Harbour, CLSA, HSBC and SPDB
205bp (Nomura). it had again extended the deadline for an International are dealer-managers on the
“Investors like the name. This is not a exchange offer on US$165.114m of 7.25% senior exchange offer and DF King is the
frequent issuer and there is not much unsecured notes due June 22. It also dropped a information and exchange agent.
supply. Its results were also better than the plan for a concurrent new money issue.
market expected,” said the banker. Hilong has extended the deadline by 10
Mengniu (Baa1/BBB+) last Tuesday days to June 15, having already sweetened HONG KONG
PREDICTEDûlRST
HALFûPROlTûWOULDûFALLûn the terms of the exchange and pushed the
60% year-on-year as a result of the Covid-19 deadline to June 5 from June 3. Settlement is CHAMPION TRIUMPHS ON PRICING
disruption, but said revenues in April and now expected on June 22.
May were up more than 10% on 2019 as )NûTHEûlLINGûTHEûCOMPANYûWARNEDûTHATûITû Hong Kong real estate investment trust
operations returned to normal, sending the hMAYûNOTûHAVEûSUFlCIENTûFUNDSûTOûREPAYûTHEû CHAMPION REIT last Monday sold a US$300m
stock up 5.5%.
Excess demand spilled over into ALL INTL EMERGING MARKETS BONDS ALL INTL EMERGING MARKETS BONDS
Mengniu’s 3% 2024s, which tightened by BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE
40bp last Wednesday, the pricing day, to Asia-Pacific Managing No of Total Share
around 160bp over Treasuries. Managing No of Total Share bank or group issues US$(m) (%)
However, there was considerable order bank or group issues US$(m) (%)
1 Citigroup 122 33,401.14 9.1
ATTRITIONûATûlNALûGUIDANCEûWITHûTHEûBOOKû 1 HSBC 125 15,022.82 9.0
2 JP Morgan 117 28,016.51 7.6
shrinking from a peak of more than 2 Citigroup 73 11,326.06 6.8
3 HSBC 159 26,917.19 7.3
US$14.5bn. 3 Standard Chartered 69 8,348.35 5.0
4 Standard Chartered 93 21,227.15 5.8
The banker said some fast money 4 BofA Securities 32 6,703.72 4.0
5 Deutsche Bank 59 20,516.79 5.6
accounts, such as proprietary trading desks, 5 UBS 56 6,634.18 4.0
6 Goldman Sachs 63 18,678.26 5.1
had withdrawn their orders as they saw 6 Bank of China 76 6,573.10 4.0
7 BNP Paribas 74 17,089.42 4.6
little upside after the aggressive tightening. 7 Credit Suisse 55 6,213.38 3.7
8 BofA Securities 63 16,812.25 4.6
But real money accounts remained in the 8 JP Morgan 50 5,738.37 3.5
9 Barclays 65 11,722.57 3.2
book. 9 Goldman Sachs 33 5,604.76 3.4
10 Morgan Stanley 41 9,906.69 2.7
The newly priced notes traded weak in 10 DBS Group 54 5,047.05 3.0
Total 537 367,695.81
THEûAFTERMARKETûWITHûTHEûlVE
YEARûABOUTû Total 352 166,125.13
Excluding equity-related debt.
3bp wider and the 10-year about 8bp wider, Excluding equity-related debt.
respectively at 164bp/162bp and Source: Refinitiv SDC code: L4 Source: Refinitiv SDC code: L1

64 International Financing Review June 13 2020


China developers seize window
„ ASIA Busiest week for new high-yield issues since January
Chinese high-yield developers are rushing to the
dollar bond market as spreads have continued to
tighten since Zhenro Properties Group reopened
the market for the sector in mid-May.
Seven property companies raised a combined
US$2.16bn last week, a return to the levels of
activity last seen before the Covid-19 pandemic
closed high-yield primary in early March. It was
the busiest week since January 12–18, which
also featured seven deals, but still lagged the
January 5–11 peak for the year, when 14 property
deals were priced, according to IFR data.
“We’ve seen the strong recovery from the
March sell-offs with bond yields for many of the
property names coming back to the 2019 year-
end level, although still wider than January’s
tightest levels,” said a banker from a Chinese
brokerage. “Developers are opportunistic, they’re
monitoring the market and waiting for the right
window.”
Five frequent issuers with an established
curve tapped the market last week – GREENLAND
HOLDING GROUP, CENTRAL CHINA REAL ESTATE,
CHINA FORTUNE LAND DEVELOPMENT, RONSHINE
CHINA HOLDINGS and POWERLONG REAL ESTATE
HOLDINGS. There were also two relatively new
names with a short offshore track record,
RADIANCE GROUP and SINIC HOLDINGS (GROUP).
All transactions were oversubscribed, and
most of the issuers priced the new bonds inside
10-year Reg S bond in an offering that was
six times subscribed.
The 2.95% bond was priced at 98.6 to yield
3.114%, or Treasuries plus 220bp, inside
initial guidance of the 260bp area.
The Hong Kong-listed issuer previously
visited the international bond market in
2013 with a debut US$400m 10-year bond.
That bond is fairly illiquid, but Nomura
saw fair value for the new issue at
Treasuries plus 225bp, based on bonds
from other Hong Kong landlords such as
Swire Properties and Hysan Development.
A source close to the deal estimated that
Champion REIT had priced inside fair value, as
or flat to their curves with final pricing tightening
50bp–60bp from initial guidance. The exception
was Radiance’s US$250m deal, which only
tightened 25bp from IPG.
Some of the deals were more than six times
subscribed, including Greenland’s offering,
which despite a relatively large issue size of
US$500m was eight times covered, and CCRE’s
US$400m issue, which was nearly nine times
subscribed. Both were priced on June 8.
SOLID DEMAND
“Most of the deals that priced in the week
didn’t see considerable order attrition despite
the significant tightening from IPGs, although
we saw a bigger drop [in orders] on Tuesday’s
deals because of weaker market sentiment on
the day,” said the banker. “The market overall
remains stable and supportive and we don’t see
the window for developers closing soon.”
The new issues all had two or three-year
tenors to meet investor preferences. “Investors
are more comfortable with the short-end of
the curve. If risk appetite further improves,
developers will try longer-dated bonds,” said a
banker from a Chinese investment bank.
He said high-yield bond supply will continue
to come mainly from China’s property sector as it
has the lowest default risk among the country’s
high-yield issuers. “The business of developers
managers booked 78%, banks 13%, and
private banks, corporates and others 9%.
The senior unsecured notes have an
expected rating of Baa1 by Moody’s, in line
with the issuer’s parent company Champion
REIT.
Mizuho Securities, SMBC Nikko, UBS, BNP
Paribas, Citigroup, HSBC, JP Morgan, Standard
Chartered, DBS Bank, ICBC International and
CMB International were global coordinators
and bookrunners. CommerzBank was a joint
lead manager.
The company owns and manages Three
Garden Road and Langham Place in Hong
Kong.
EMERGING MARKETS ASIA-PACIFIC
is more transparent and their assets are more
transferrable in the event of a liquidity crunch,”
he said.
In a report dated June 8, Nomura said it
expected the solid demand in the dollar market
to persist as the spread differential between
offshore and onshore property bonds has
become more attractive.
It also expects solid Single B names to
gradually catch up with Double B names
as risk appetite returns, but there will be a
divergence among Single B credits as small
developers with tight liquidity could face
refinancing pressure.
Nomura has raised its estimate for the gross
supply of offshore bonds from China’s property
sector this year to US$50bn–$55bn, from a
prediction of US$45bn earlier.
“The need for a liquidity buffer on delayed
pre-sales should drive more aggressive bond
issuance,” Nomura wrote. Chinese property sales
ground to a halt for much of the first quarter as
showrooms were forced to close at the height of
the Covid-19 outbreak.
Some developers may use their offshore debt
issuance quotas to refinance 2021 maturities,
while others may issue bonds with a tenor of less
than one year, for which they do not need to use
their quotas.
Carol Chan
Spreads for Indian investment-grade
issuers have tightened after an initial knee-
jerk reaction to Moody’s downgrade this
month of the sovereign to Baa3 from Baa2,
with an unchanged negative outlook.
PFC is rated Baa3/BBB–/BBB–, according to
2ElNITIVûDATA
“Although growth concerns remain for
India for the next few months because of
the lockdown, some investment-grade
issuers may come back to the dollar bond
market because of lack of supply and
tightening of spreads,” said a DCM banker.
The spread on PFC’s 3.95% April 2030
bonds have tightened by 44bp to 367bp
2027 and 2029 bonds from Hysan, which is SINCEû*UNEûûACCORDINGûTOû2ElNITIVûDATA
rated a notch higher at A3/BBB+/A–, were seen In the domestic market, PFC raised
at G spreads of 225bp and 231bp, respectively. INDIA Rs55.24bn (US$731m) from two-tranche
Some key accounts were initially deterred
by the tight price guidance, but came in
later, said the source.
Final orders were over US$1.8bn from 124
accounts, including US$130m from the
leads. The issue size was capped at
US$300m.
Asia took 96% of the Reg S bonds and
EMEA 4%. Asset managers and fund
PFC SENDS RFP FOR DOLLAR BONDS
POWER FINANCE CORP has sent banks a request
for proposals for a potential Reg S/144A US
dollar bond issue, according to market
sources.
The tenor and size will be decided after
the appointment of banks.
International Financing Review June 13 2020
BONDSûACCORDINGûTOûAû"3%ûlLING
INDONESIA
GEO ENERGY STRIKES IT LUCKY
GEO ENERGY RESOURCES said that holders of its
US dollar bonds had not consented to a
65
 Kepco shakes off coal shadow
„ SOUTH KOREA Green bond issue succeeds despite investor doubts over transition strategy
KOREA ELECTRIC POWER CORPORATION garnered
strong investor demand for a five-year green
bond issue despite mounting pressure from
global investors over its involvement in overseas
coal projects.
The state-backed utility, rated Aa2/AA/AA–,
priced US$500m of 1.125% senior unsecured
notes at 99.695 to yield 1.188%, or Treasuries
plus 75bp, inside initial guidance of 120bp area.
Final pricing came flat to Korea Development
Bank’s five-year bonds, priced in late May at
plus 90bp, and tighter than other comparable
credits, including Korea East-West Power and
Kepco’s other genco subsidiaries, according to
an investor note.
Despite the tight pricing, the deal was over
10 times subscribed, drawing final orders of
more than US$5.2bn from 270 accounts. There
was virtually no attrition from the peak book of
US$5.3bn at final guidance.
“Generally, around 150–200 accounts buy
[South] Korean paper so the bonds were well
received thanks to good market conditions,
strong credit and the ESG factor,” said a banker
on the deal.
Investor demand was also seen in the US,
which took 22% of the notes. Asian investors
bought 66% and the rest went to EMEA. Asset
managers and fund managers took 62%,
insurers and pension funds 15%, banks 13%,
central banks and sovereign wealth funds 9%
proposal intended to remove a put option,
but that a new discovery might mean it does
not need to redeem the bonds early anyway.
The coal miner had offered holders of its
US$154.017m 8% bonds due 2022 a cash
payment of US$10 per US$1,000 of principal
amount if they consented to amend the
terms.
The proposed amendments would have
allowed Geo to take on new debt and
removed a clause that gives investors the
option to redeem the bonds in April 2021.
The company needed holders of 75% of the
bonds to give their consent in order to make
the changes.
The consent solicitation ran alongside a
tender offer for the bonds, which expires on
June 18. Geo offered US$430 per US$1,000 of
face value for holders that tendered by June
4, and U$$400 for those that tendered after
that date but by June 18.
Holders of US$20.86m of the bonds had
tendered them by the early-bird deadline of
June 4.
Deutsche Bank was dealer-manager for the
consent solicitation and holds the same role
66
and private banks and others 1%.
The bonds held up with the tight pricing in the
aftermarket on their first few days of trading, but
spreads widened to around 85bp over Treasuries
last Friday, according to Tradeweb, broadly in
line with a wider market sell-off.
The near-monopoly operator of South Korea’s
electricity grid is under pressure from global
investors over its climate policy.
Kepco said it has received a letter from
Blackrock asking for fuller disclosure on
its overseas coal projects, while a group of
international investors, including APG Asset
Management, Church Commissioners of
England and UBS Asset Management, urged it
in late March to reconsider its plans to finance
new overseas coal-fired power plants.
APG shunned the new green bond, saying
it wanted to see a climate transition strategy
from Kepco, as with all energy companies it
invests in.
The Dutch pension fund, which managed
€538bn in assets last year, has already sold a
€60m equity stake in Kepco over lack of progress
to lower carbon emissions. This left APG with a
minimal position in Kepco, with less than €1m
held in a passive strategy.
Kepco plans to invest in new coal mines
and power stations including Jawa 9 and
10 in Indonesia and Vung Ang 2 in Vietnam,
pending final board approval. Before that,
for the tender offer. Morrow Sodali is
information and tender agent.
When the company issued the dollar
bonds, it had agreed to acquire two mines
from Titan Global Energy, but the
transaction was terminated on April 1 after
being on hold for months.
Geo Energy needs to have 80 million tons
of coal reserves by April 4 2021, as well as a
production operations permit that expires
no earlier than October 4 2025, otherwise
bondholders have the right to trigger a put
option. If its reserves reach 120 million tons,
the put option will be removed.
The company would have met these targets
if it had completed the Titan Global Energy
acquisition, but the collapse of the agreement
left it looking to either make another
acquisition or change the terms of the notes.
Geo Energy had 74.5 million tons of
reserves at the end of March, and the leases
on its two biggest mines, run by subsidiaries
Sungai Danau Jaya and Tanah Bumbu
Resources, expire in 2022.
Fortuitously, the company said in an
announcement on June 5 that preliminary
International Financing Review June 13 2020
the projects need to be approved by the
government, which under the current
administration has been calling for a shift to
renewables and cutback in the dependence
on coal and nuclear power.
The Indonesian projects recently received the
green light in the South Korean government’s
preliminary feasibility test after being deemed to
have “insufficient business value” last year.
Kepco has acknowledged investors’ ESG
concerns and said it will focus on low-carbon
and environmentally friendly projects in the
future, while participating in coal projects only
under strict standards, according to a letter to
investors early last month.
In a statement, Kepco said its new bond
offering demonstrated investor demand for
sustainable investments and highlighted that
it was the first South Korean company to issue
green bonds for two straight years.
Kepco previously visited the international
bond market in June last year with a debut green
bond offering, which was its first offshore deal
for nearly nine years.
The government holds a 51% stake in the firm.
Proceeds will be allocated to green eligible
categories, in accordance with Kepco’s
sustainable finance framework.
Citigroup, HSBC and JP Morgan were
bookrunners.
Jihye Hwang
exploration carried out in May by SMG
Consultants at one of its mines in
Kalimantan had revealed reserves of a
further 29 million tons. It is also in talks
with the Indonesian authorities to extend its
PERMITSûFORûTHEû3$*ûANDû4"2ûMINESûBYûlVEû
and six years, respectively.
As a result, Geo said the put option on the
bonds may fall away whether or not it
makes another acquisition by April 2021.
GARUDA EXTENSION APPROVED
GARUDA INDONESIA said holders of 90.88% of its
US$500m 5.95% sukuk issue due on June 3
have agreed to amend the terms, giving it
breathing room as travel restrictions weigh
on the airline industry.
Following the approval, the carrier will
extend the maturity by three years and
waive covenants until operations return to
normal.
Holders of 89% of the sukuk had approved the
proposal as of the early-bird deadline of June 1.
The airline offered to pay 1.25% of
principal amount to sukuk holders that gave

their consent to the proposal by June 1. This
payment dropped to 0.5% for those that gave
their approval after June 1 but by June 8.
Garuda, which is 60% state-owned, is in
discussions with the government about a
possible bridge loan, but nothing has been
US$107.6m in the same period in 2019. It
had cash of US$265m and US$676m of
undrawn loans at the end of March.
Proceeds from the offering will be used to
repay part of its revolving credit facility and
for general corporate purposes.
EMERGING MARKETS ASIA-PACIFIC
The investor demand came despite the
deal being unrated and the negative
headlines about port operators in
connection with virus containment
measures.
Unctad, the United Nations organisation
OFlCIALLYûCONlRMED
PJT PartnersûWASûlNANCIALûADVISERûTOû
Garuda and Allen & Overy was legal adviser.
Clifford Chance was legal adviser to an ad
hoc committee of investors that holds 28%
of the sukuk.
The measures required approval by 75% of
those present at a meeting comprising
holders of at least 75% of the sukuk.
MACAU
MGM ADDS TO CASINO COMEBACK
MGM CHINA on Thursday priced a US$500m
lVE
YEARûNON
CALLûTWOûBONDûISSUEûATûPARûTOû US$400m 4.75% 10-year bond that was more
yield 5.25%, inside initial guidance of 5.625%
area, just as a rival casino operator
Bank of America was sole global coordinator
for the MGM China trade.
The new bonds were quoted at a cash
price of 100.1 on Friday, according to
MarketAxess.
Deutsche Bank is sole global coordinator
and lead left bookrunner for the Wynn
Macau deal.
PHILIPPINES
ICTSI SHRUGS OFF TRADE SLUMP
Philippine port operator INTERNATIONAL
CONTAINER TERMINAL SERVICES has printed a
corporate sector.
than 4.5 times covered, shrugging off
forecasts of a slump in global trade due to
THATûTRACKSûTRADEûmOWSûEXPECTSûWORLDûTRADEû
to fall by 27% in the second quarter from the
lRSTûBECAUSEûOFûTHEûPANDEMICûTHATûHADû
ALREADYûLEDûTOûAûûDROPûINûTHEûlRSTûTHREEû
months of this year.
Nomura saw fair value for the new 2030s
at 4.75%, calling the issuer a cross-over
candidate if rated, for example, between
BBB– and BB+.
It added that the bonds should trade about
mATûTOûTHEûSûOFû!DANIû0ORTSûANDû3PECIALû
Economic Zone, rated Baa3 by Moody’s,
BECAUSEûOFû)#43)SûDIVERSIlEDûPORTû
operations and lower reliance on the coal
supply chain. Nomura also cited strong
domestic technicals in the Philippine
4HEû0HILIPPINESûCREDITûPROlLEûHASûBEENû
characterised by a robust economic
announced a new deal. the coronavirus outbreak. PERFORMANCEûSTRENGTHENINGûlSCALûPOSITIONû
The 144A/Reg S deal has expected ratings The senior unsecured notes issue was and limited vulnerability to external shocks
of Ba3/BB– (Moody’s/S&P), in line with the priced at 99.607 to yield 4.8%, which was at in recent years, according to a Moody’s
ISSUERûMAKINGûITûTHEûlRSTûHIGH
YIELDûDEALûOFû THEûTIGHTûENDûOFûlNALûGUIDANCEûANDûWELLû
the year from the Macau casino sector.
Nomura put fair value at around 5%,
based on the MGM China 2024 and 2026
bonds, which were quoted at yields of 4.76%
and 5.26% mid.
Final guidance had already been set when
peer WYNN MACAU, rated B1/B+ (Moody’s/
Fitch), announced price talk of 5.5% area for
a US$750m 5.5-year non-call two offering,
which was set to be priced in New York
YEARûANDû
YEARû pensions 14%.
hours on Friday.
Triple B rated SANDS CHINA had reopened
report in May, although the virus outbreak
inside initial guidance in the 5.25% area.
4HEû2EGû3ûDEALûDREWûlNALûORDERSûOFûMOREû
than US$1.85bn from 111 accounts. It also
paid a negative new issue concession of
5bp–10bp compared with similar credits
from the Philippines, although there was a
new issue premium of 10bp–15bp compared
with its own curve.
This was calculated by looking at the 40bp
DIFFERENCEûBETWEENûlVE
Treasury yields, then applying this to ICTSI’s
2025 bonds and adding 10bp for the extra
presents near-term challenges.
Proceeds of the new bonds will be used to
RElNANCEûANDûEXTENDûTHEûMATURITYûOFûTHEû
group’s liabilities, and for general corporate
purposes.
Asia bought 80%, EMEA 19% and offshore
US accounts 1%. Fund managers and asset
managers took 65% of the notes, private
banks and banks 21% and insurers and
ICTSI develops, manages and operates
PORTSûINû!SIA
0ACIlCûTHEû!MERICASû%UROPEû
the US dollar market for Macau casino
credits with a US$1.5bn dual-tranche
Yankee trade on June 2 that repriced its
curve.
SOVEREIGNû
MGM China owns and operates the MGM
Macau and MGM Cotai casino, hotel and
entertainment resorts in Macau. New York-
listed MGM Resorts International holds a
majority stake in MGM China, and investors
can put the bonds at a cash price of 101 if
there is a change of control. There is also a
put option at par if MGM China loses its
gaming licence.
credit risk, according to a banker on the
deal.
“The bond offered an attractive headline
SPREADûANDûITûWASûTHEûlRSTûNON
Philippines dollar credit post Covid-19,” said
the banker.
While the new bonds were also priced
amid an overall credit rally, a ICTSI funding
OFlCIALûSAIDûTHEûCOMPANYSûHEALTHYûBALANCEû
sheet and defensive business structure
contributed to the strong demand.
“There was a reduction in trade volumes
from the lockdown but we were able to
the Middle East and Africa.
Citigroup, Credit Suisse and JP Morgan were
bookrunners.
THAILAND
THAI OIL DUAL-TRANCHER PRICES
INSIDE CURVE
THAI OIL has raised US$1bn from a two-
tranche bond offering that priced inside its
secondary curve after tightening twice from
Macau closed casinos for a 15-day period RETAINûOURûMARGINvûTHEûOFlCIALûSAID initial guidance just before a sell-off in US
in February to prevent the spread of ICTSI’s Ebitda was US$830m in FY19 and markets on Thursday.
coronavirus. MGM China’s casinos resumed
full operations on March 20 with additional
safety measures such as fewer seats at
gaming tables and greater distances
between slot machines.
In the two months ended May 31, MGM
China lost an average of US$61.2m per
month, measured in property Ebitda terms,
COMPAREDûWITHûANûAVERAGEûMONTHLYûPROlTûOFû
53MûINûTHEûlRSTûQUARTERûOFûTHISûYEARû
with a relatively stable margin at 53%–57%,
thanks to continued cost improvements,
according to a note from Nomura analysts.
The new bonds were quoted 15bp tighter
INûTHEûAFTERMARKETûONûTHEIRûlRSTûTRADINGûDAYû
last Thursday at 4.65% but were trading
weaker at 4.71% last Friday, according to
Tradeweb.
International Financing Review June 13 2020
A US$400m 10-year 2.5% note priced at
99.859 to yield 2.516% or Treasuries plus
185bp. Initial guidance had been set at plus
245bp area and was later revised to the
210bp area.
A US$600m 30-year tranche was priced at
par to yield 3.75%, inside initial guidance
that began at the 4.3% area and was revised
to the 3.95% area.
67
GLOBAL EMERGING MARKETS BOND DETAILS: WEEK ENDING 12/6/2020
Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)

ASIA
Jun 8 2020 Central China Real Estate US$400m Aug 27 2023 7.65 99.543 - 7.8

Jun 8 2020 Champion REIT US$300m Jun 15 2030 2.95 98.6 T+220 3.114

Jun 8 2020 Greenland Holding US$500m Dec 16 2022 6.25 99.718 6.45%(YTP) 6.45

Jun 8 2020 Kepco US$500m Jun 15 2025 1.125 99.695 T+75 1.188

Jun 9 2020 China Fortune Land US$300m Jun 16 2022 6.92 100 - 6.92
Development

Jun 9 2020 Ronshine China US$250m Dec 15 2023 (Dec 2022) 7.35 100 - 7.35

Jun 9 2020 Shanghai Construction US$600m Jun 16 2025 2.25 99.456 T+195 2.366

Jun 9 2020 UPL US$500m Jun 16 2030 4.625 99.565 T+385 4.68

Jun 10 2020 China Mengniu Dairy US$500m Jun 17 2025 1.875 99.526 T+160 1.975

Jun 10 2020 China Mengniu Dairy US$300m Jun 17 2030 2.5 99.587 T+175 2.547

Jun 10 2020 Credicorp US$500m Jun 17 2025 2.75 99.459 T+250 2.867

Jun 10 2020 International Container US$400m Jun 17 2030 4.75 99.607 - 4.8
Terminal Services

Jun 10 2020 Powerlong Real Estate US$250m incr Jul 23 2023 6.95 99.853 - 7
(US$420m)

Jun 10 2020 Radiance US$250m Sep 17 2023 (Jun 2022) 8.8 99.195 - 9.25

Jun 10 2020 Zhengzhou Airport Economy US$300m Jun 17 2023 3.4 100 - 3.4
Zone Xinggang Investment
Group

Jun 11 2020 MGM China US$500m Perpetual 5.25 100 - 5.25

Jun 11 2020 Sinic Holdings US$210m Jun 18 2022 10.5 98.473 - 11.38

Jun 11 2020 ThaiOil Treasury Center US$400m Jun 18 2030 2.5 99.859 T+185 2.516
Company Ltd

Jun 11 2020 ThaiOil Treasury Center US$600m Jun 18 2050 3.75 100 T+233.8 3.75
Company Ltd

EMEA
Jun 9 2020 Albania €650m Jun 16 2027 3.5 99.239 MS+378.4 / 3.625
B+412.3
Jun 9 2020 AFC US$700m Jun 16 2025 3.125 99.427 MS+279.8 / 3.25
T+284.1
Jun 9 2020 Dubai Islamic Bank US$1bn Jan 16 2026 2.95 99.988 MS+245 / T+254.3 2.952

Jun 9 2020 Helios Towers US$750m Dec 18 2025 (Jun 2022) 7 99.439 - 7.125

Jun 9 2020 PPF Telecom €100m incr May 20 2024 3.5 102.6 MS+303.8 / 2.75
(€600m) B+336.1
Jun 10 2020 Croatia €2bn Jun 17 2031 1.5 98.572 MS+165 / B+197.4 1.643

Jun 11 2020 VEON Rbs20bn Jun 18 2025 6.3 100 - 6.3

LATAM
Jun 10 2020 Credicorp Capital US$500m Jun 17 2025 2.75 99.459 T+250 2.867

68 International Financing Review June 13 2020

 EMERGING MARKETS ASIA-PACIFIC

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

8.35% area - US$3.5bn, 259acs -/-/BB- BNPP/BofA/Citi/CNCBI/CS/Haitong/ APAC 93%, EMEA 6%, US O/S 1%. FM/
MS/StCh AM/HF 77%, BKs/FI 11% , PB 7%, Ins/
Corp 5%.
T+260 area, T+220 - US$1.8bn, 124acs Baa1 Miz/SMBCNikko/UBS/BNPP/Citi/ Asia 96%, EMEA 4%. AM/FM 78%, Bks
HSBC/JPM/StCh/DBS/ICBCI/CMBI/ 13%, PB/Corp/Other 9%.
CMZ
7% area, 6.45% - US$4bn, 188acs Ba2 BOCI/Haitong/ShenwanHongyuan/ Asia 90%, Eur 10%. FM/AM 85%, FI 11%,
(YTP) CLSA/GuotaiJunan PB 4%.
T+120 area, T+75 7 US$5.2bn, 270acs Aa2/AA HSBC/Citi/JPM Asia 66%, US 22%, EMEA 12%. AM/FM
62%, Ins/PF 15%, Bks 13%, CB/SWF 9%,
PB/Other 1%.
7.5% area, 6.92% - - Ba3 BOCI/CNCBI/CMBI/GuotaiJunan/ -
Haitong/JPM/CCBI/CLSA/CS/HSBC/
Orient/UBS
7.95% area - US$1.3bn, 83acs -/BB-/BB+ (China CS/CNCBI/Citi/Haitong/HSBC/ Asia 81%, Eur 19%. FM/AM 87%, FI/Bks
Chengxin) Orient/UBS 7%, PB 6%.
T+245 area - US$5.1bn, 203acs Baa2 Haitong/HSBC/ANZ/BoC/BoCom/ Asia 96%, Eur 4%. AM/FM 49%, Bks/FI
BNPP 39%, Sov/Ins 11%, PB/Other 1%.
T+435 area, T+385 -15 US$2bn, 146acs Baa3/BBB-/BBB- BofA/JPM/MUFG/Citi/Rabo/SG/UBS APAC 64%, EMEA 36%. AM/FM 72%, Ins
# 13%, Bks 7%, PB 4%, Other 4%.
T+240a - US$3.7bn, 147acs Baa1 BOCHK/Barc/Citi/DBS/GS/JPM/Miz/ Asia 91%, EMEA 9%. AM/FM 70%, Bks
SG/StCh 26%, PB/Corp/Other 4%.
T+255a - US$2bn, 102acs Baa1 BOCHK/Barc/Citi/DBS/GS/JPM/Miz/ Asia 85%, EMEA 15%. AM/FM 69%, Bks
SG/StCh 23%, Ins 5%, PB/Corp/Other 3%.
Low 300s area, - - -/BBB/BBB+ BofA/GS/JPM -
T+262.5/+275
5.25% aare, 4.85% - US$1.85bn, 111acs - Citi/CS/JPM Asia 80%, EMEA 19%, US O/S 1%.
(+/-5) AM/FM 65%, PB/Bks 21%, Ins/PF
14%.
7.5% area - US$1.6bn, 73acs B2 BofA/CS/DB/GuotaiJunan/ ASIA 99%, EMEA 1%. FM/AM 88%, PB
Haitong/JPM/UBS/HSBC/ 7%, Bks/FI 5%.
CNCBI/BOCI/BEA
9.5% area YTP, - US$1.1bn, 47acs -/B-/B/BB- (Lianhe GuotaiJunan/Haitong/CICC/ABCI/ APAC 96%, EMEA 4%. FM/AM/Ins 77%,
9.25% YTP Global) AMTD/BNPP/Central/CMBI/ PB/Corp 15%, Bks/FI 8%.
CMBCCap/CRIC/DBS/Dongxing/
GFSec/Heungkong/UBS/Vision/
Zhongtai
4% area - - -/-/BBB+ CICC/Industrial/BoCom/SPDB/ -
CEBIntl/StCh/CSI/BOCI/
WingLungBank/CNCBI/Dongxing/
GuotaiJunan/CMBC
5.625% area, 5.25% - US$4.3bn Ba3/BB- BofA/BoCom/BoC/Barc/ -
BNPP/JPM/SMBCNikko/
UBSICBCMacau
11.875% area - US$1.5bn, 76acs -/-/B+ GuotaiJunan/BOCI/UBS/CS/BNPP/ ASIA 98%, EUROPE 2% | AM/FM/HF
BofA/CCBI/CMBCHK/CMBI/Haitong/ 85%, PB 9%, BANK 6%
HSBC/Tianda
T+245 area, T+210 0 - Baa2/BBB+ ANZ/BofA/BNPP/Citi/DB/StCh -
area,
T+185 (the #)
4.3% area, 3.95% 0 - Baa2/BBB+ ANZ/BofA/BNPP/Citi/DB/StCh -
area,
3.75% (the #)

4.125% area, - €3bn B1/B+ BcaIMI/Citi/JPM/RBI -

3.625%/3.75%
3.625% area, - US$2bn A3 BofA/JPM/MUFG/1ADB/GS -
3.25%/3.3.75%
MS+280 area, - US$4.5bn A3/-/A ABC/DIB MENA 51%, Asia 28%, Eur 21%. Bks/PB
MS+250/+255 /ENBD/1ADB/HSBC/ICBC/KFH 39%, FM 52%, Supra/Other 9%.
/Sharjah/StCh/ICDPS
7.75% area, 7.375% - US$3bn B2/B BofA/JPM/StBk/Absa -
area /Barc
2.875% area, 0.0275 - €160m Ba1/BB+/BBB- BNPP/HSBC/CS -

MS+210 area, - €9bn Ba2/BBB-/BBB- BcaIMI/Barc/DB/JPM -

MS+180 area
6.375% area - Rbs25bn -/BB+/BBB- Alfa/Citi/Sber/VTB -

T+low 300s, - US$4.25bn BBB/BBB+ BofA/GS/JPM -

T+262.5/+275

International Financing Review June 13 2020 69

 The South-East Asian oil supplier’s dollar
bonds due 2028 were quoted at a G-spread of
205bp and its 2049s at 3.85%, so leads
ESTIMATEDûTHATûTHEûlNALûPRICINGûLEVELSûOFûTHEû
new senior unsecured bonds were 10bp–
20bp inside the issuer’s secondary curve.
The guidance was revised twice on the
back of strong orders, which exceeded
53BNûWITHINûTHEûlRSTûûMINUTESûANDû
peaked at more than US$7bn.
The sovereign (B1/B+) began marketing
the June 2027 note at 4.125% area. It was
competing for space on a busy day which
included jumbo euro trades from Ireland,
Spain and Greece.
“The fact that Albania issued in 144A
format allowed US accounts to come in,
which makes a huge difference,” said a lead.
“A few weeks ago you would have said that
investors were looking for yield, but the
over €9bn. Although interest fell away
towards €8bn after some sweeping pricing
revisions, it meant Croatia had the scope to
take out more than its initial €1.5bn target.
“Croatia generated the largest order book
from any CEE sovereign tranche of debt this
year as well as their second lowest coupon
in history,” said Matt Doherty, head of
CEEMEA syndicate at Deutsche Bank, which
was one of the leads.
(OWEVERûlNALûCOMBINEDûORDERSûDROPPEDû
drastically to over US$2.4bn from 115
accounts as the market backdrop suddenly
worsened in late Asian hours and US
equities took a tumble, according to bankers
on the deal. The S&P 500 fell almost 6% on
Thursday, the biggest drop in 12 weeks.
lFTHûOFûTHEû2EGû3ûONLYû
The new 10-year and 30-year notes traded
wider in the aftermarket last Friday, in line
with the overall market trading 5bp–10bp
wider. The 2030s were trading at Treasuries
yield Albania achieved is not that high from
an EM perspective.”
North Macedonia (BB–/BB+), for example,
sold a €700m six-year in late May at 3.95%.
“Perhaps one of the concerns was markets
have moved so far so quickly,” said a second
lead.
“North Macedonia is now close to 3% and
has had a huge run. But the bond market is
dynamic and the last thing a bond trader
needs is a memory – just because the price
“This is a remarkable achievement by the
country given we remain in a challenging
market environment due to the Covid
crisis,” said Doherty.
European accounts drove demand,
although US offshore accounts were
ALLOCATEDûNEARLYûONE
notes.
Croatia’s initial focus had been on price. It
began marketing the notes at swaps plus
210bp area, but managed to tighten to 165bp.
plus 192bp and the 2050s at 3.82%.
Subsidiary ThaiOil Treasury Center will
issue the bonds with a guarantee from Thai
Oil. Issuing bonds through treasury centres
gives Thai companies an exemption on
withholding tax on interest payments.
The 144A/Reg S bonds have expected
ratings of Baa2/BBB+ (Moody’s/S&P). Both
ratings agencies have a negative outlook,
due to reduced demand for oil as the global
economy slows because of the coronavirus
pandemic.
However, one of the leads said there was
strong investor demand because oil price
volatility has decreased since the end of
April. In addition, there is limited supply
from Thai issuers which appealed to asset
MANAGERSûLOOKINGûFORûDIVERSIlCATION
Demand was also seen for longer tenors
than the seven-year bond which Thailand’s
PTT Exploration and Production priced
recently.
PTT, in which the Thai government holds
a 51% stake, owns around 48% of Thai Oil. In
the event of a change of control, the coupon
on the bonds will increase by 125bp.
Bank of America, Citigroup, Standard
Chartered, ANZ, BNP Paribas and Deutsche Bank
were bookrunners.
EUROPE/AFRICA
ALBANIA
was different yesterday doesn’t mean the ,EADSûSAWûTHATûASûmATûTOûFAIRûVALUEûWHILEûAû
new price is wrong.” SECONDûBANKERûAWAYûPUTûTHEûlNALû.)0ûATûBP
Albania was able to tighten pricing by One of the attractions of Croatia is that it
50bp to 3.625%. is investment-grade like regional neighbours
The books peaked at more than €3.3bn, but Hungary (Baa3/BBB/BBB) and Romania (Baa3/
FELLûAWAYûAûTOUCHûTOûlNISHûATûMOREûTHANûõBN BBB–/BBB–).
“The orders were a bit barbell in nature, But Hungary trades very tight and
with anchor orders at one end then smaller Romania is on a negative rating trajectory,
price-taker types at the other. That’s what trades wide and has a large number of bonds
you want as it enables you to wrestle some outstanding. Croatia offers enough spread to
of the power away from the anchor orders,” pique the interest of investors and is on a
the second lead said. positive outlook with Moody’s.
Albania’s return to the international In a report published in April, ING
capital markets had been long mooted. In economists said that Croatia’s economy
&EBRUARYûlNANCEûMINISTERû!NILAû$ENAJûSAIDû could shrink by more than 7% this year,
the sovereign was planning to issue a though that could be followed by 4.5%
Eurobond of up to €600m in May rather growth in 2021.
than November as originally planned. “The government measures aimed at
The country had budgeted to borrow supporting the business environment
€500m before it was hit by a quake late last (mainly tax/loan payments deferrals and
year that killed 51 people and left around minimum wage subsidies) will act more as a
17,000 people homeless. backstop rather than pure economic
Banca IMI, Citigroup, JP Morgan and Raiffeisen stimulus, although we are mildly optimistic
Bank International were lead managers. that public investments will not succumb to
cost-optimisation pressures,” they said.
CROATIA ALL INTL EMERGING MARKETS BONDS
BOOKRUNNERS: 1/1/2020 TO DATE
CROATIA SWEEPS THROUGH PRIMARY Europe/Africa
Managing No of Total Share
CROATIA breezed through the primary on bank or group issues US$(m) (%)
Wednesday with a €2bn June 2031 offering
1 JP Morgan 27 9,674.56 16.0
that was more than four times subscribed.
The sovereign, rated Ba2/BBB–/BBB–, was
2 Citigroup
3 BNP Paribas
17
13
7,777.06 12.8
5,535.96 9.1
following successful recent efforts from two 4 Deutsche Bank 8 3,972.67 6.6
ends of the credit range in Estonia (A1/AA–/ 5 SG 8 3,414.43 5.6
AA–) and Albania (B1/B+). 6 Barclays 8 2,959.96 4.9
h)ûEXPECTûITûWILLûmYvûSAIDûAûBANKERûAWAYû 7 HSBC 10 2,905.94 4.8
SOVEREIGN FINDS WAY THROUGH “No reason why, having seen all these 8 UniCredit 7 2,874.87 4.7
BUSY TRAFFIC transactions go well, that Croatia wouldn’t 9 ING 5 2,174.78 3.6
do the same. Expect a huge book, and for it 10 Standard Chartered 4 1,759.25 2.9
ALBANIAnavigated a hectic primary market to go through a lot of price tightening.” Total 49 60,625.31
on Tuesday, emerging with a €650m seven- Croatia carried IoIs of nearly €1bn into Excluding equity-related debt.
YEARûBONDûTHATûPRICEDûmATûTOûFAIRûVALUE the 11-year trade and saw demand swell to Source: Refinitiv SDC code: L2

70 International Financing Review June 13 2020

 EMERGING MARKETS EUROPE/AFRICA

The government’s balance sheet will also on the rouble in the next 12 months, with The 7.50% January 2025 note was placed
weaken. additional pressure expected in the coming at the beginning of this year, with GFH
“From a quasi-balanced budget, we now months from recovered demand for imports, unable to move pricing. However, the
EXPECTûTHEûlSCALûDElCITûTOûREACHûTHEûû including imported services. "AHRAINIûlNANCIALûINSTITUTIONû"
" ûWHICHû
area this year, with a lot of uncertainty Donets estimates the downside at 5%–7% has a chequered history, was able to set a
coming from revenues behaviour. This will from the current level of near to 69 versus new benchmark in the international
push the debt-to-GDP above 80% (from 71% the US dollar. markets.
in 2019), virtually erasing most of the
PAINFULLYûDIFlCULTûIMPROVEMENTSûACHIEVEDû
over the last years,” said ING analysts.
Banca IMI/Privredna banka Zagreb, Barclays
Bank and JP Morgan were the other leads.
RUSSIA
VEON EXPLORES ROUBLE ANGLE
Telecoms VEON sold a Rbs20bn (US$287m)
lVE
h!TûTHEûSAMEûTIMEûSIGNIlCANTû&8ûSALESûBYûTHEû
Ministry of Finance (via the Central Bank of
Russia) in recent weeks have been supporting
the rouble, and the Ministry of Finance has
stated that it will continue to do so, not only to
offset lower oil prices, but also production cuts
due to the OPEC+ agreement,” said Donets.
“This is likely to translate into a more
stable rouble performance even amid low
oil prices as compared with 1Q20. We
estimate that the FY20 exchange rate will
average 73.5 versus the US dollar.”
The details of the increase were not
disclosed in an announcement published on
the Dubai Financial Market.
S&P downgraded GFH by one notch in
March. The ratings agency said that GFH’s
earnings materially depend on its
investment banking revenue, which it
expected to be under pressure over the
following quarters.
“We also consider that GFH is more
exposed to the deteriorated liquidity
situation than commercial banks due to its
YEARû%UROROUBLEûONû4HURSDAYûATûû
using roubles as a way to hedge against
exposures in the currency.
The offering came 20bp inside initial
guidance of the 6.50% area.
Andrey Solovyev, global head of debt
capital markets at VTB Capital, which was
one of the bookrunners, said that given part
of the company’s revenues are in roubles,
raising money in the currency offered a
natural hedge for the issuer.
The other bookrunners were Alfa-Bank,
Citigroup and Sberbank CIB.
The settlement currency for the new
bond is roubles, but there is an optional FX
election on any coupon payments and
principal at maturity in US dollars, on
request.
Books for VEON’s issue at one point
reached over Rbs30bn, but fell away to
Rbs25bn when the yield was set.
“International investors actively
participated in the deal, most of the
international demand came from UK and
Continental European investors,” said
Solovyev.
Earlier in June, VEON announced it had
entered into a Rbs100bn term loan
agreement with Sberbank.
“We expect VEON’s leverage to remain
moderate, at around 2x in the medium
term,” said Fitch in assigning a BBB– rating
to the new issue.
û)TûDElNESû6%/.SûNETûDEBTûTOû%BITDAûWITHû
the Algerian operations deconsolidated, but
REmECTINGûDIVIDENDSûFROMûTHISûSUBSIDIARYû
h$ELEVERAGINGûmEXIBILITYûISûDRIVENûBYû
FUNDINGûPROlLEvû30ûWROTEûATûTHEûTIME
REGIONAL
PPF RETURNS TO FOUR-YEAR SEAM
PPF TELECOM returned to the market on
Tuesday with a €100m tap of a note it sold in
mid-May.
The issuer (Ba1/BB+/BBB-), which was
previously known as PPF Arena 1, is a CEE
telecoms provider, and is the holding company
of O2 Czech Republic, CETIN and Telenor CEE.
It had started marketing the tap of its
€500m 3.50% May 2024 senior secured notes
around 20bp back of secondary levels with
guidance of 2.875% area. The yield was then
set at 2.75% off books of more than €160m.
“We maintain our “Buy”
recommendation on the notes, which we
believe represent good relative value within
the European high-yield telecoms universe,”
wrote Lucror Analytics.
“We also note that the company’s PPF
2.125% January 2025 notes trade expensive
relative to both the 2024s and the PPF
3.125% March 2026 notes, and suggest
current holders of the 2025s consider
switching into the 2026s or 2024s.”
BNP Paribas, Credit Suisse and HSBC were
global coordinators and bookrunners for the
reopening.
MIDDLE EAST
“GFH relies more on short-term (3-12
months) wholesale funding than
commercial banks. In addition, as a
wholesale bank it has no direct access to
central bank funding, and cannot directly
borrow from its commercial banking
subsidiary.”
S&P said that GFH’s treasury portfolio
remains relatively liquid and, absent new
credit events, it should be able to meet its
liquidity requirements for the next quarters,
even if new funding may be more limited.
The issuer said the proceeds of the sukuk
will be used to further strengthen GFH’s
balance sheet and diversify its income.
LEBANON
EUROBOND HOLDERS COULD HAVE
HAD OIL TANKER SEIZED
LEBANON could have recently had an oil tanker
seized by Eurobond holders because of its
stinging debt crisis and the government was
taking steps to avoid such risks in future, the
energy minister said on Thursday.
Lebanon plunged into a US$31bn
sovereign default in March, saying it needed
to preserve dwindling dollars for vital
imports, and has since entered talks with
the International Monetary Fund.
Speaking at the presidential palace about
a fuel oil shortage, Energy Minister
Raymond Ghajar listed the potential seizure
of an oil tanker off its shore by bondholders
MODESTûPOSITIVEûFREEûCASHmOWûGENERATIONû as among the issues complicating the
but also low single-digit revenue growth and country’s supplies.
SLIGHTLYûIMPROVINGûPROlTABILITYûFROMûvû
said Fitch.
S&P assigned an expected BB+ rating to
the deal.
Sofya Donets, Russia & CIS economist at
Renaissance Capital, says that unprecedented
lSCALûSTIMULUSûATûûOFû'$0ûISûLIKELYûTOûWEIGHû
BAHRAIN
GFH INCREASES SUKUK
GFH tapped its sukuk on Tuesday, increasing
the amount by US$200m and taking the
issue up to US$500m.
International Financing Review June 13 2020
“We have been exposed on this issue to
several setbacks, including what happened
about two weeks ago because we weren’t
able to open credit at the central bank in the
required time, so there was a risk that the
oil tanker would be subject to seizure by the
Eurobond holders,” said Ghajar.
71
 “We are studying this issue in order to
YEARûISSUEûRATHERûTHANûAû CORDOBA, which like many of its counterparts
ultimately reach a result that enables the
Lebanese state to not be exposed on this
matter,” Ghajar added, according to a
presidency statement.
The minister did not mention who the
owner of the tanker was and could not
immediately be reached for further comment.
An economic rescue plan put forward by
"EIRUTûMAPSûOUTûABOUTû53BNûINûlNANCIALû
ITûCHOSEûTOûDOûAûLONGûlVE
seven-year that it was also exploring in February.
But while spreads are wider than they
were before the pandemic, DIB (A3/-/A) was
able to price the sukuk 10bp inside fair
value at 245bp over swaps, 35bp tighter
than initial guidance. The sukuk were
quoted 6bp tighter in the aftermarket.
Another striking aspect of the deal was
that 49% was allocated to Asian and
in Argentina, plans to restructure its debt.
The group, which comprises large
institutional holders of the province’s
international bonds, retained BroadSpan
Capital and Mens Sana Advisors ASûlNANCIALû
advisers.
Between 2016 and 2017, the province
raised US$1.685bn in the international bond
market, leaving it with several maturities in
SECTORûLOSSESûBUTûTHEûlGURESûAREûSUBJECTûTOû
change depending on the discount taken by
foreign and local bondholders.
Beirut is hoping an IMF reform
programme can secure billions of dollars in
lNANCINGûANDûRESTOREûECONOMICûGROWTH
UAE
DIB PROVES WORTH THE WAIT
DUBAI ISLAMIC BANK revived a sukuk offering on
Tuesday it had originally planned to issue in
late February but was delayed by the
coronavirus outbreak.
With only Sharjah and Bahrain printing
sukuk since the pandemic, DIB was able to
take advantage of the supply-demand
imbalance.
h4HEûSUKUKûMARKETûISûABSOLUTELYûlNEûFROMû
a liquidity perspective. In fact, it’s even
better than last year,” said a lead.
The mandate was announced on Monday,
allowing DIB to conduct a global call and
give time for Islamic investors to get their
sharia approvals in place.
The bank then printed US$1bn January
2026 sukuk at a lower yield than the
US$750m February 2025 sukuk priced in
November. The 2026 note priced at 2.952%
compared with 3.002% achieved last year.
“It demonstrates how far the market has
rallied,” said the lead.
European accounts.
“Asian accounts are comfortable with
sukuk, and for European investors DIB is a
well-known credit,” said the lead.
Bank ABC, Dubai Islamic Bank, Emirates NBD
Capital, First Abu Dhabi Bank, HSBC, ICBC, the
Islamic Corporation for the Development of the
Private Sector, KFH Capital, Sharjah Islamic Bank
and Standard Chartered were the leads.
SHARJAH ISLAMIC BANK has hired banks to
arrange the sale of benchmark dollar sukuk,
three people with knowledge of the matter said.
The sukuk issuance was likely to be soon,
two of the people said on Wednesday,
adding that the banks appointed were
Sharjah Islamic Bank’s relationship lenders.
The size was likely be US$500m, but it
could be more if demand is strong, one
person said.
Sharjah Islamic Bank, which had US$500m
sukuk that matured in March, did not
immediately respond to a request for comment.
AMERICAS
ARGENTINA
GROUP FORMS FOR PROVINCE OF
CORDOBA DEBT TALKS
coming years.
Its next big maturity is on June 10 2021
when the US$750m 7.125% notes come due.
But unlike the sovereign and other
provinces, such as Buenos Aires, Cordoba
has yet to use the grace period to delay
interest payments.
The province’s governor Juan Schiaretti
has reportedly said he would cover about
US$25m of interest, which was due on the
2021 bond on June 10.
Those bonds have seen little price action,
but traded at a dollar price of 57.30 on June
5, up from the 43.10 seen on May 11,
according to MarketAxess data.
“Members of the Committee plan to
conduct any interactions with the
authorities in a manner that is consistent
with the G20-endorsed Principles for Stable
Capital Flows and Fair Debt Restructuring,”
the group said in a statement last week.
BRAZIL
IRON ORE RALLY BOLSTERS CSN,
VALE BONDS
Rising iron ore prices are making bonds
issued by Brazilian miner VALE and steel
company CSN outperformers within the
recent rally in emerging market assets.
Increased demand from China, one of the
world’s largest importers of iron ore, paired
3TILLûASûAûlNANCIALûINSTITUTIONûSPREADûISûMOREû A group of bondholders have formed a with potential shortages in the commodity
important to DIB than yield. That was the reason committee to start talks with the PROVINCE OF following mine closures is bolstering sales

ALL INTL EMERGING MARKETS BONDS ALL INTL EMERGING MARKETS BONDS INTERNATIONAL ISLAMIC FINANCE DEBT
BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE BOOKRUNNERS: 1/1/2020 TO DATE

Middle East Latin America Managing No of Total Share

Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%)
bank or group issues US$(m) (%) bank or group issues US$(m) (%)
1 Standard Chartered 10 2,294.11 23.9
1 Standard Chartered 20 11,119.56 15.4 1 JP Morgan 26 8,207.24 13.0 2 HSBC 7 1,018.70 10.6
2 Citigroup 14 8,914.83 12.4 2 Deutsche Bank 9 6,669.76 10.6 3 Dubai Islamic Bank 5 628.19 6.5
3 Goldman Sachs 5 7,224.37 10.0 3 BofA Securities 22 5,421.47 8.6 4 Natixis 2 618.86 6.4
4 HSBC 14 6,309.82 8.8 4 Goldman Sachs 19 4,788.17 7.6 5 First Abu Dhabi 4 538.81 5.6
5 Deutsche Bank 7 5,435.40 7.5 5 BNP Paribas 10 4,588.02 7.3 6 Islamic Dev Bank 4 524.52 5.5
6 JP Morgan 12 3,731.06 5.2 6 Citigroup 12 4,530.65 7.2 7 Citigroup 3 412.44 4.3
7 BofA Securities 4 3,659.54 5.1 7 Scotiabank 12 4,046.06 6.4 8 Kuwait Finance 4 321.39 3.3
8 Credit Agricole 8 3,289.04 4.6 8 Itau Unibanco 13 3,881.82 6.1 9 JP Morgan 1 300.00 3.1
9 First Abu Dhabi 9 3,116.23 4.3 9 BBVA 8 2,660.24 4.2 10 Riyadh Bank 1 300.00 3.1
10 Barclays 5 2,474.03 3.4 10 HSBC 9 2,596.66 4.1 Total 13 9,599.42
Total 61 72,106.69 Total 67 63,160.47
Excluding equity-related debt.
Excluding equity-related debt. Excluding equity-related debt.
Source: Refinitiv SDC code: L5 Source: Refinitiv SDC code: L3 Source: Refinitiv SDC code: J27

72 International Financing Review June 13 2020


contracts and in turn bond prices for both
credits.
Vale’s 6.250% 2026s were trading at a
dollar price of 118.568 to yield 2.933% on
Wednesday, up more than eight points since
May 11, according to MarketAxess data.
And as the second largest exporter of iron
ROLLEDûSTEELûBUSINESSû 0ERUVIANûlNANCIALûSERVICESûCOMPANYûCREDICORP
ore in Brazil, steel maker CSN has also
received a boost, with its 6.75% 2028s
changing hands at 87.10 to yield 9.132%, up
more than 20 points since May 5, just when
iron prices started to climb.
“The bullish sentiment around iron ore is
YEARûSENIORûNOTEûATûûTOû
due to China’s recovery and supply
disruptions,” said Omotunde Lawal, head of
the emerging markets corporate debt group
down 8%,” said Sebastian Lema, an analyst
with asset manager Noctua Partners.
That rally in iron ore appears to have
made all the difference to investor
sentiment toward CSN, which still faces
SUBSTANTIALûRElNANCINGûRISKSûAMIDûAûPOORERû
OUTLOOKûFORûITSûmAT
This month Moody’s moved its outlook on
its B2 rating to negative, citing weakening
credit metrics amid an expected decline in
steel demand.
Despite several liability management
exercises, CSN still faces some R$9bn (US$1.8bn)
in debt maturities between 2021-2022, mostly in
the form of bank debt, said Moody’s.
EMERGING MARKETS AMERICAS
PERU
CREDICORP DRAWS BIG CROWD IN DEBUT
DOLLAR BOND
sold a heavily subscribed debut bond in the
primary market on Wednesday, drawing eight-
and-a-half times in demand from investors.
The company, which owns Peru’s largest
bank BANCO DE CREDITO DEL PERU, sold a
53MûlVE
yield 2.867% or 250bp over Treasuries.
Pricing came inside initial price thoughts of
low 300bp and guidance of 262.5bp-275bp.
at Barings.
“I think Vale’s mine closure, announced a
couple of days ago, is giving a bit more
tailwind to iron ore prices.”
Earlier this month, the Brazilian
government ordered the closure of Vale’s
Itabira mines after a cluster of employees
were infected with the coronavirus.
Vale is one of the world’s largest iron ore
companies, and the closure of its Itabira
operation equates to about a 10% shortage in
production.
“The reality is that these things are still
quite immaterial in terms of Vale’s scale. So
one mine closure a year for a couple of
weeks doesn’t really move the needle very
much,” said Lawal.
Ratings agency Moody’s took a similar
view, noting in a report that “the setback on
production supports iron ore prices, which
ECUADOR
HOLDERS OF ECUADOR 2024s
FORM GROUP
Another group of investors have come
together to prepare for talks with ECUADOR
over its upcoming restructuring of some
US$17bn of external bonds.
Holders of Ecuador’s 2024 bonds
announced last week that they had formed a
group and had retained Quinn Emanuel
Urquhart & Sullivan to advocate for their
unique interests in talks with the sovereign.
“Ecuador 2024 notes are governed by an
indenture dated June 20 2014, the material
terms of which are unique in Ecuador’s
capital structure and distinguish Ecuador
2024 notes from Ecuador’s other external
%VENûSOûTHEûlNALûSPREADûOFFEREDûAûDECENTû
pick-up to its banking subsidiary BCP, which
issued a 2.70% 2025 note last year that closed
at a G-spread of 203bp on Tuesday,
according to MarketAxess data.
It also came with a nice spread over the
sovereign curve, where Peru’s 7.35% 2025 was
trading at around 123.370 to yield 1.731%.
“This bond is representative of Peru’s
economy and is trading wide to the
sovereign. It’s essentially Peru risk,” said a
market source close to the deal.
Books swelled to peak at around US$4.25bn
after 199 accounts participated in the deal,
which was executed at a rapid pace with
launch taking place during morning hours.
Credicorp, rated BBB/BBB+ by S&P and
Fitch, was given a similar rating to its BCP
subsidiary, which is rated BBB+/BBB+.
Low leverage, strong liquidity
are trading near or above US$100/ton, and
better positions the company to withstand
the operating environment challenges”.
While most commodities have been
under pressure, iron ore prices have been on
a tear recently breaking through the
53TONûMARKûFORûTHEûlRSTûTIMEûSINCEû
August.
“Year-to-date, iron ore and gold are the
only commodities with gains, whereas you
still have Brent down 38%, copper down
6.5%, and soft commodities such as soybeans
indebtedness,” the group said in a
statement.
They join another group of institutional
investors, represented by BroadSpan Capital
LLC and UBS Investment Bank, that announced
last week that they had formed a creditor
committee.
Earlier this month, Ecuador set down the
path towards a broad restructuring as it
races to complete debt talks before mid-
August when the grace period on deferred
coupon payments ends.
MANAGEMENTûANDûSTRONGûDIVIDENDûmOWSû
were drivers for its BBB+ rating, Fitch said in
a report.
Credicorp has consolidated return of
average equity and return on average assets
of 17.1% and 2.4%, respectively, as of
December 2019, said Fitch.
Proceeds will be used to strengthen the
lNANCIALûlRMSûRESERVEûFUNDûANDûOTHERû
general corporate purposes.
The deal was led by Bank of America,
Goldman Sachs, and JP Morgan.

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BEFORE THE
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 LOANS
Australia  China  Hong Kong  Singapore  Denmark  Egypt  France 
Sweden û UAE û UK  United States  Leveraged Loans û Restructuring 

„ FRONT STORY EUROPEAN INVESTMENT-GRADE MARKET

Loan market adjusts to new landscape

Borrowers face shorter tenors, more expensive bank debt
More attractive terms on offer in bond market
The European investment-grade loan “It’s alright having a great structure and CRUDE CONTROL
market is getting to grips with the new
normal after a manic three months during
which companies hurriedly put in place
expensive liquidity facilities and drew down
on revolving credit facilities amid the
uncertainty of the coronavirus crisis.
PRICINGûBUTûSOMEûBANKSûSTILLûMIGHTûNOTûDOû
the deal. Some have decided to support
clients in their home markets and retreated.
/THERSûHAVEûNOTvû
Lenders will be taking a more cautious
approach over the next few months but
Oil and gas companies BP and ROYAL DUTCH
SHELL also tapped bond markets after putting
billions of dollars of additional liquidity
facilities in place as they battled not only the
impact of the pandemic but also a sharp
drop in oil prices.
Banks are now turning their attention to UNLIKEûTHEûlNANCIALûCRISISûOFûûTHEREûISû -EANWHILEû&RENCHûOILûANDûGASûGROUPû
THEûREQUIREDûRElNANCINGûOFûCREDITûFACILITIESû no liquidity problem at banks and capital TOTALûISSUEDûõBNûOFûBONDSûINû!PRILûMATURINGû
traditionally one of the main drivers of remains available at the right price. INûûANDûûFOLLOWINGûITûUPûINû-AYû
lending in Europe. But borrowers and
lenders face a much-changed landscape.
“We are done with the public aid
YEARûBONDSûINûLATEû-AY
packages and liquidity facilities. What you
)NûTHEûlNANCIALûCRISISûITûWASûVERYûDIFFERENTû WITHûõBNûOFûISSUANCEûMATURINGûINûû
with banks’ own funding lines being cut. ANDûû&INANCINGûARMû4OTALû#APITALûRAISEDû
53BNûOFû
TENOR SEARCH The company had previously drawn
are seeing now is banks focusing on dealing -EANWHILEûTHEûBONDûMARKETSûBOOSTEDûBYû US$6bn of its credit lines to strengthen its
WITHûTHEûUSUALûmOWûOFûRElNANCINGû"UTû CENTRALûBANKSûCONTINUEûTOûPROVIDEûAû LIQUIDITYûANDûARRANGEDûAû53BNûSHORT

companies want longer maturities and welcome source of long-term funded debt to TERMû!,&ûINû!PRIL
TIGHTERûPRICINGûTHANûAREûCURRENTLYûAVAILABLEvû
MONTHû
a senior banker said.
“We’re asking where banks are
willing to allocate capital and
for how long; and where they
HIGHLYûRATEDûCORPORATESûHELPINGûTOûTAKEûTHEû
strain of banks by replacing drawings on
credit facilities and reducing the need for
the additional liquidity facilities put in place
in response to the crisis.
Some bond desks have been busier in the
lRSTûSIXûMONTHSûOFûTHEûYEARûTHANûTHEYûWEREû
4HATûlNANCINGûHADûANûINITIALû
maturity with two six-month extension
options.
“It’s alright having a great
structure and pricing, but some
are backing relationships and INûTHEûWHOLEûOFûûBANKINGûSOURCESûSAID banks still might not do the
h!TûTHEûBEGINNINGûBORROWERSûREQUIREDûAû
where they are not” deal. Some have decided to
QUICKûlXûTOûCOVERûTHEûIMMEDIATEûUNCERTAINTYû
and turned to the loan market to secure support clients in their home
SHORT
TERMûLIQUIDITYvûTHEûSECONDûBANKERûSAID markets and retreated”
h"UTûNOWûTHEYûAREûSAYINGû@)VEûGOTûAû

0RE
CRISISûHIGH
GRADEû%UROPEANû month liquidity facility but I’m not sure
companies would typically expect to be able how long this crisis will last so I’ll go to the
TOûRElNANCEûCREDITûFACILITIESûFORûlVEûYEARSû bond market for longer-term issuance’. It 4HEû!,&ûWASûUNDERWRITTENûBYû".0û0ARIBASû
PLUSûTWOûONE
YEARûEXTENSIONûOPTIONSûOFTENû MAKESûSENSEv ANDû#REDITû!GRICOLEû#)"ûASûBOOKRUNNINGû
on wafer-thin margins. French construction materials company mandated lead arrangers.
h,OANûPRICINGûISûSTILLûFAIRLYûHIGHûANDû SAINT-GOBAINûWASûANûEARLYûMOVERûISSUINGûAû 4HEû3CHULDSCHEINûMARKETûWHICHûHASû
borrowers are looking for a cheaper õBNûBONDûINû-ARCHûTOûREINFORCEûITSû REOPENEDûAFTERûAûBRIEFûHIATUSûALSOûOFFERSû
ALTERNATIVEûTOûAûFULLûRElNANCINGû!DDINGû lNANCINGûDAYSûAFTERûAGREEINGûAûõBNûSHORT
companies another route to longer-term
extension options or extending existing term RCF. Proceeds from the bond were lNANCINGûTHANûISûAVAILABLEûINûTHEûLOANû
credit facilities on a short-term basis is the USEDûTOûREDUCEûTHEû2#&ûBYûõMûGIVINGûTHEû market.
preferred choice until pricing and company a combined additional liquidity of Recent issues have been well-received by
MATURITIESûRETURNûTOûMOREûNORMALûLEVELSvû õBNû investors who are able to commit to
the senior banker said. 3INCEûTHENûHIGH
PROlLEû%UROPEANûNAMESû MATURITIESûOFûUPûTOûlVEûYEARSûANDûBEYONDû
The main challenge facing lenders is to such as AIRBUSûDAIMLERûBASFûSAFRANûSIEMENS more easily because they are relatively small
IDENTIFYûTHEûRElNANCINGûLOANSûTHATûNEEDû and THALES have tapped the bond market for commitments.
prioritising and discovering how the new long-term funding after raising substantial 'ERMANûSAVINGSûANDûCOOPERATIVEûBANKSû
world looks. short-term liquidity facilities as the crisis which do not invest in the wider bond
“We’re asking where banks are willing to unfolded. MARKETûCONTINUEûTOûSTRONGLYûSUPPORTûTHEû
allocate capital and for how long; and where “The bond market is able to function and ASSETûCLASSûWHILEû!SIANûINVESTORSûHAVEûTAKENû
they are backing relationships and where REMAINSûOPENûATûAûPRICEû!LLûSORTSûOFûISSUERSû a more cautious approach during the crisis.
THEYûAREûNOTvûAûSECONDûBANKERûSAID CANûTAPûITvûTHEûSECONDûBANKERûSAID Alasdair Reilly

International Financing Review June 13 2020 75

 BPûEARLIERûWHILEûFACILITIESû"ûANDû#ûOFFERû borrowing which was completed in
BPûCOMPAREDûWITHûBPûPREVIOUSLYû4HEû 3EPTEMBERûLASTûYEARûWITHûûLENDERSû#ATHAYû
ASIA-PACIFIC margins are based on a net debt-to-Ebitda United Bank and Taishin International Bank
RATIOûOFûBETWEENûûTIMESûANDûûTIMES WEREûTHEû-,!"SûONûTHATûlNANCINGûWHICHû
WASûSPLITûINTOûTRANCHESûOFû53MûANDû
AUSTRALIA FAR EAST VISITS MELBOURNE 53M
EQUIVALENTûINû#AMBODIANûRIELSû
Cathay United (Cambodia) provided the riel
THIRTEEN COMMIT TO VODAFONE-TPG Hong Kong developer FAR EAST CONSORTIUM TRANCHEûWHICHûWASûNOTûSYNDICATED
INTERNATIONALûHASûOBTAINEDûAû!MûLOANû )NûGENERALûSYNDICATIONûTHEû53ûDOLLARû
Thirteen lenders have committed to a for a mixed-use property construction tranche offered a top-level all-in pricing of
JUMBOû!BNûLOANûSUPPORTINGûTHEû project in Melbourne. BPûBASEDûONûAûMARGINûOFûBPûOVERû
proposed merger of VODAFONE HUTCHISON ANZ was the mandated lead arranger and ,IBORûANDûANûAVERAGEûLIFEûOFûûYEARS
AUSTRALIA and TPG TELECOM after pricing was BOOKRUNNERûFORûTHEûLOANûWHICHûOFFERSûANû The borrower – Cambodia’s largest
sweetened. INTERESTûMARGINûOFû""39ûPLUSûBPûAûLINEû MICROlNANCEûINSTITUTIONûnûEVOLVEDûFROMûAû
&IVEûBANKSûFROMûAû!BNûLOANû FEEûOFûBPûANDûANûESTABLISHMENTûFEEûOFû project sponsored by the European Union
CANCELLEDûINûûHAVEûDROPPEDûOUTûWHILEû BP and three ministries of the country’s
MOSTûOFûTHEûREMAININGûûBANKSûSCALEDûUPû Bank of East Asia Singapore and Labuan GOVERNMENTûINûû)TSûSHAREHOLDERSûAREû
their commitments. OCBC Bank and China BRANCHESûChina Minsheng BankûFubon Bank "ANKûOFû%ASTû!SIAû+OOKMINû"ANKû,ANKAû
Construction Bank joined as new lenders. Hong KongûHang Seng BankûHSBCûIndustrial Orix Leasing and Prasac Staff.
4HEûOTHERûûLENDERSûAREûSMBCûANZû and Commercial Bank of ChinaûPing An Bankû
WestpacûBank of AmericaûBank of ChinaûMizuho Taipei Fubon Commercial Bank and United
BankûMUFGûDBS BankûDeutsche BankûCredit Overseas Bank have joined in syndication. CHINA
Agricole CIB and ING. FEC MAY22 is the borrower.
6ODAFONEû(UTCHISONû!USTRALIAûINTENDSûTOû The borrowing is Far East Consortium’s YANLORD LAUNCHES US$1bn REFI
DRAWûDOWNû!BNûFOLLOWINGûAûCOURTû second syndicated loan for the West Side
MEETINGûSCHEDULEDûONû*UNEûûPRIORûTOûTHEû Place property in Melbourne. Property developer YANLORD LAND GROUP has
implementation of the scheme in relation to )NûûITûRAISEDûANû!MûCONSTRUCTIONû LAUNCHEDûAûROUGHLYû53BN
EQUIVALENTû
the merger. LOANûFORûTHEûPROJECTûCOMPRISINGûOVERûû 
YEARûLOANûFORûRElNANCING
0ROCEEDSûFROMûTHEûlRSTûDRAWDOWNûWILLû APARTMENTSûAû
ROOMû2ITZû#ARLTONû(OTELû CMB Wing Lung BankûDBS BankûHang Seng
help repay outstanding amounts of a Dorsett Hotel and extension of new BankûHSBCûShanghai Pudong Development Bank
Vodafone Hutchison Finance’s syndicated laneway connecting Lonsdale Street and and Standard Chartered are the mandated
LOANSûOFû53BNûANDû!BNûWHICHûWASû Little Londsdale Street with an array of lead arrangers and bookrunners of the
SIGNEDûINûûANDûûRESPECTIVELY
The company intends to follow up with a
SECONDûDRAWDOWNûOFû!BNûFOLLOWINGûTHEû
scheme implementation to repay TPG
Telecom’s existing debt.
The borrowing for the merged group
COMPRISESûAû!BNûTHREE
restaurants and retail sites.
CAMBODIA
PRASAC LIFTS LOAN TO US$95m
TRANSACTIONûWHICHûOFFERSûANûINTERESTûMARGINû
OFûBPûOVERû,IBOR(IBOR
The facility comprises a term loan with an
AVERAGEûLIFEûOFûûYEARSûANDûAûREVOLVINGû
credit facility.
Banks can choose to participate in either
YEARûTERMûLOANû 53ûORû(ONGû+ONGûDOLLARSûANDûEITHERûINûTHEû
TRANCHEû!ûAû!BNûlVE
YEARû4ERMû,OANû
4RANCHEû"ûANDûAû!MûlVE
YEARûREVOLVINGû
TRANCHEûLOANûTOû53MûFROMû
credit facility Tranche C.
EQUIVALENTûORû
PRASAC MICROFINANCE INSTITUTION has increased TERMûLOANûORûTHEûREVOLVERûORûAûCOMBINATIONû
AûDUAL
of both tranches.
53MûAFTERûATTRACTINGûEIGHTûBANKSûINû -,!SûCOMMITTINGû53M
)Nû!PRILûTHEûINTERESTûMARGINSûONûTHEûSELF
general syndication. more will earn top-level all-in pricing of
arranged club facility were increased by Taishin International Bank was the original BPûBASEDûONûUPFRONTûFEESûOFûBPûANDû
BPûONûEACHûOFûTHEûTHREEûTRANCHES mandated lead arranger and bookrunner of BPûRESPECTIVELYûFORûTHEûTERMûLOANûANDû
&ACILITYû!ûNOWûPAYSûBPûOVERû""39ûFROMû THEûlNANCINGûWHILEûBank SinoPac joined with the revolver.
the same title. ,EADûARRANGERSûTAKINGû53MnMû
ASIA-PACIFIC LOANS BOOKRUNNERS – FULLY Mandated lead arranger is Bank of Taiwan. EARNûBPûALL
INûBASEDûONûUPFRONTûFEESûOFû
SYNDICATED VOLUME (INCLUDING JAPAN) Participants are Land Bank of Taiwan, KGI Bank, BPûANDûBPûFORûTHEûTWOûTRANCHESû
BOOKRUNNERS: 1/1/2020 TO DATE Mega International Commercial Bank, Hua Nan WHILEûARRANGERSûTAKINGû53MnMû
Managing No of Total Share Commercial Bank, Shanghai Commercial & RECEIVEûALL
INûPRICINGûOFûBPûBASEDûONûFEESû
bank or group issues US$(m) (%) Savings Bank and Sunny Bank. OFûBPûANDûBP
1 Mizuho 210 38,276.72 19.4 4HEûDEALûCOMPRISESûAû53MûTHREE
YEARû )Nû!PRILûû9ANLORDûOBTAINEDûAû
2 MUFG 373 33,444.20 17.0 4RANCHEû!ûANDûAû53MûlVE
YEARû4RANCHEû"û 53M
EQUIVALENTû
YEARûCLUBûLOANûFROMû
3 Bank of China 151 24,886.26 12.6 WITHûRESPECTIVEûAVERAGEûLIVESûOFûûYEARSû SIXûBANKSûACCORDINGûTOû2ElNITIVû,0#ûDATAû
4 Sumitomo Mitsui 231 20,727.39 10.5 ANDûûYEARS Proceeds were for general corporate
5 DBS Group 21 5,067.30 2.6 Lenders were offered top-level all-in purposes.
6 China Merchants Bk 10 4,876.61 2.5 PRICINGûOFûBPûORûBPûVIAûINTERESTû The borrower’s previous syndicated
7 ANZ 23 4,673.53 2.4 MARGINSûOFûBPûANDûBPûOVERû,IBORûANDû FACILITYûWASûAû53BN
EQUIVALENTû

8 HSBC 30 4,018.01 2.0 AûPARTICIPATIONûFEEûOFûBPûFORû4RANCHESû!û YEARûLOANûOBTAINEDûINû!PRILûûFROMûû
9 Ag Bank of China 11 3,456.88 1.8 ANDû"ûRESPECTIVELY LENDERSûINCLUDINGû#-"û7INGû,UNGû"ANKû
10 Credit Agricole 10 2,955.14 1.5 Funds will be used as general working $"3û(ANGû3ENGû"ANKû(3"#ûANDû3TAN#HARTû
Total 1,206 197,006.03 capital for business expansion. ASûTHEû-,!"S
Proportional credit Pricing on the loan is tighter than Prasac That facility offered top-level all-in pricing
Source: Refinitiv SDC code: S3a -ICROlNANCESû53MûTHREE
YEARû OFûBPûANDûBPûRESPECTIVELYûFORûTHEû

76 International Financing Review June 13 2020

 LOANS ASIA-PACIFIC

term loan and revolver based on the same

INTERESTûMARGINûOFûBPûOVERû,IBOR(IBOR

JINJIANG SEEKS LOAN AND WAIVER

Indonesia Inc eyes offshore debt
„ ASIA South-East Asia’s largest economy provides spark amid pandemic woes
Singapore-listed ZHENENG JINJIANG ENVIRONMENT
HOLDINGûFORMERLYûNAMEDû#HINAû*INJIANGû Indonesia is emerging as the lone bright spot in its return to the syndicated loan markets after a
%NVIRONMENTû(OLDINGûISûRAISINGûAûLOANûOFû South-East Asia’s syndicated loan market with four-year hiatus.
ABOUTû53MûTOûREPAYûAû53ûDOLLARûBONDû a pipeline of around US$6bn of offshore loans Meanwhile, Freeport Indonesia is going back
ISSUEûDUEûINû*ULYûEVENûASûITûSEEKSûAûWAIVERû primed for launch in the coming months. to the drawing board with a US$2.8bn loan it
for a covenant breach on an existing Instant noodles manufacturer INDOFOOD was preparing to launch in April after mandating
borrowing. SUKSES MAKMUR, state-owned electricity utility nine banks in late February. A smaller loan size
Standard Chartered is the mandated lead PERUSAHAAN LISTRIK NEGARA, gold and copper of around US$1.2bn–$1.5bn is being discussed,
ARRANGERûANDûBOOKRUNNERûOFûTHEûLATESTûLOANû miner FREEPORT INDONESIA and BANK RAKYAT but it could be another two months before the
WHICHûPAYSûALL
INûPRICINGûOFûABOUTûBP INDONESIA are among a number of top-tier borrower makes a decision on the fundraising for
The loan has been launched into limited borrowers that are eyeing offshore borrowings. the construction of a new copper smelter.
syndication. The deals will provide a boost for lenders in Adding to the jitters, telecommunications
0ROCEEDSûWILLûBEûUSEDûTOûREPAYûAû53Mû the region, who have been starved of action company TIPHONE MOBILE INDONESIA fell victim to
6% senior unsecured note issue maturing on since the Covid-19 outbreak upended economic the pandemic, having defaulted on a US$181m-
*ULYû activity globally. Year-to-date loan volume from equivalent three-year loan signed in June
-EANWHILEûTHEûCOMPANYûISûSTILLûSEEKINGûAû Indonesia stood at US$4.87bn as of June 11, 2018. The company, which missed an interest
WAIVERûFORûBREACHESûOFûAûlNANCIALûCOVENANTû nearly a third lower than US$6.97bn raised in the payment in March, has hired a financial adviser
ONûAû53M
EQUIVALENTûSYNDICATEDûLOANû first six months of 2019, according to Refinitiv to restructure its debt.
SIGNEDûINû*UNEû LPC data.
Jinjiang’s interest coverage ratio had “Indonesia seems to be the brighter spot in PAYING UP?
fallen below the minimum requirement of 3 South and South-East Asia with a few deals Given the circumstances, some borrowers might
TIMESûFORûTHEû
MONTHûPERIODSûENDEDû*UNEû cooking, although traction is very slow,” said a need to pay up in order to attract bank liquidity,
ûûANDû$ECEMBERûû Singapore-based syndicated loans banker. “That especially as participating banks have become
4HEûCOMPANYûSAIDûONû-AYûûITûHADûNOTû said, transactions are coming in and will boost more risk-averse and funding costs are rising.
received any notice for accelerated volumes a lot in the second half.” “For widely syndicated deals, I expect pricing to
prepayment of the facility. Indofood is expected to shortlist around half be wider to take into account the funding costs of
3TAN#HARTûWASûALSOûTHEûSOLEû-,!"ûOFûTHEû a dozen banks for a US$2bn loan backing the a wider pool of participating banks,” said the first
*UNEûûBORROWINGûWHICHûWASû*INJIANGSû proposed US$3bn acquisition of its manufacturer loans banker. “We have seen the cost of funds for
debut offshore syndicated loan and attracted partner Pinehill. banks has gone up by 50bp–100bp on average.”
ûOTHERûLENDERS The deal is expected to be well received given Borrowers with strong financials or rarity
,ASTû!UGUSTû*INJIANGû%NVIRONMENTû
obtained a waiver from majority lenders for
mandatory pre-payment regarding a change
in the controlling shareholder of the
company. This followed the sale of a
COMBINEDûûSTAKEûINûTHEûCOMPANYûHELDû
it is an acquisition financing and marks the
borrower’s return to the loan market for the first
time in more than a decade.
PLN is seeking a US$500m multi-tranche
loan, adding to another US$1bn borrowing it was
sounding out a couple of months ago.
value, such as PLN and Indofood, are likely to
achieve tighter pricing, he said.
Pricing on BRI’s new financing, comprising a
US$500m one-year tranche, a US$200m two-
year piece, and a US$300m five-year portion
is only marginally higher than for its previous
BYûSHAREHOLDERSû$OUû:HENGGANGûHISûWIFEû Borrowers that initially opted for club loans multi-tranche facility in March 2019.
7EIû8UEFENGûANDûDAUGHTERû*ENNIFERû7EIûTOû are now mulling the option of syndication. BRI’s That US$700m loan paid top-level all-in
state-owned Zhejiang Provincial Energy US$1bn multi-tranche financing and INDOMOBIL pricing of 60bp, 91bp and 103bp based on
Group. FINANCE INDONESIA‘s US$240m three-year facility interest margins of 40bp, 74bp and 84bp over
)NûITSûANNUALûREPORTûRELEASEDûONû*UNEûû were initially intended as club loans. Libor and remaining lives of 0.75, 2.75 and 3.75
the company said it will continue to actively However, the financings are now expected years for its three tranches.
seek the support of the largest controlling to be syndicated. Along with agricultural Despite what was considered tight pricing
SHAREHOLDERûSTATE
OWNEDû:HEJIANGû commodities firm FKS FOOD AND AGRI‘s US$250m then, BRI tasted success with a US$700m three-
0ROVINCIALû%NERGYû'ROUPûTOûIMPROVEûTHEû five-year refinancing, they will be among the first tranche loan, which attracted participation from
GROUPSûlNANCINGûCHANNELSûANDûREDUCEû few to test sentiment. 27 lenders, including 15 that joined in general
lNANCINGûCOSTSûSOûASûTOûSTRENGTHENûTHEû
working capital of the group.
MIDEA OBTAINS US$168m LOAN
3HENZHEN
LISTEDûHOMEûAPPLIANCEûMAKERû banker.
-IDEAû'ROUPûHASûRAISEDûAû53MûlVE
YEARû
term loan from eight lenders.
Credit Agricole CIB was the mandated lead
arranger and bookrunner of the transaction.
MLAs are Bank of China, China Construction Bank,
Postal Savings Bank of China, Bank of
Communications, ICBC, Agricultural Bank of
China and ICBC Luxembourg.
“No deals from Indonesia have launched post- syndication.
Covid. It’s a chicken-and-egg situation, where Fifteen months later, sentiment among
lenders are waiting for new deals to launch in lenders has turned cautious largely because of
order to gauge market appetite and pricing the impact from the pandemic.
levels,” said a second Singapore-based loans “We will be very selective in lending to
borrowers from Indonesia’s banking sector as
Moody’s has downgraded Indonesia’s banking
PANDEMIC JITTERS industry outlook to negative from stable in
For some Indonesian borrowers, the future looks early April over concerns of rising credit costs
more uncertain. Financial services company and declining profitability as the pandemic is
SARANA MULTI INFRASTRUKTUR is still undecided disrupting the global economy,” said a senior
on the launch of a US$500m five-year loan after loans banker from a Taiwanese bank.
mandating five banks in April. The deal marks Chien Mi Wong
International Financing Review June 13 2020 77
 LEI SHING HONG REFI LAUNCHES

Chailease units on borrowing spree Hong Kong-based LEI SHING HONG CREDIT has
LAUNCHEDûAû53M
EQUIVALENTûTHREE
YEARû
„ ASIA Cambodian, Singaporean, Thai subsidiaries follow affiliates term loan into general syndication after
attracting four Taiwanese lenders in the
Taiwan-listed CHAILEASE HOLDING is on a Lead arrangers taking US$20m–$29m senior syndication phase.
borrowing spree across South-East Asia with its will receive all-in pricing of 130bp and 135bp Far Eastern International Bank is the original
Cambodian and Thai subsidiaries becoming the via a 30bp fee. Arrangers joining with mandated lead arranger and bookrunner of
latest to tap the loan markets. US$10m–$19m earn all-in pricing of THEûFACILITYûWHICHûCANûBEûINCREASEDûTOûUPûTOû
Mizuho Bank is the coordinator for a loan of 126.67bp and 131.67bp via a 20bp fee. 53M
EQUIVALENT
around US$100m for Chailease Thailand and is Newly established CHAILEASE INTERNATIONAL KGI BankûMega International Commercial
reaching out to relationship banks. FINANCIAL SERVICES (SINGAPORE) is the borrower. BankûTaishin International Bank and Yuanta
Chailease’s Cambodian unit is also sounding Chailease Holding’s Vietnam-based Commercial Bank joined in senior syndication
the market for a US dollar loan. unit CHAILEASE INTERNATIONAL LEASING has with the same title.
The terms of the two borrowings are yet to also launched a three-year loan of up to 4HEûDEALûWHICHûCANûBEûDRAWNûINû(ONGû
be determined, but they follow close on the US$70m the week before last. Bank SinoPac +ONGûORû53ûDOLLARSûOFFERSûIDENTICALûPRICINGû
heels of two other loans totalling US$150m for is the sole MLAB of the transaction, which ASûTHEûCOMPANYSûPREVIOUSûLOANûPAYINGûANû
Chailease’s Singaporean and Vietnamese units. has an initial size of US$50m and a US$20m INTERESTûMARGINûOFûBPûOVERû,IBORûORû
Mizuho is also the sole mandated lead arranger
YEARûAVERAGEûLIFE
and bookrunner of a US$100m three-year bullet
loan for the Singaporean unit, which comprises a
US$100m Tranche A and a US$100m Tranche B. The
two tranches cannot exceed a combined US$100m.
Tranches A and B offer interest margins of
LEVELûALL
INû
120bp and 125bp over Libor, respectively. The
borrower will pay any excess interest rate beyond
greenshoe.
The deal offers a top-level all-in pricing of
149.05bp based on an interest margin of 130bp
over Libor and an upfront fee of 50bp.
Earlier this month, Chailease International
Finance Corp, another unit of Chailease
Holding, obtained an increased Rmb3.79bn
(US$413m) three-year term loan.
(IBORûANDûHASûAû
The borrower will pay any excess interest
RATEûBEYONDûAûBPûDIFFERENCEûBETWEENû
4!)&8ûANDû,IBOR
Banks are invited to join at three ticket
LEVELSû-,!"SûRECEIVEûAûTOP
PRICINGûOFûBPûFORûCOMMITMENTSûOFû
53MûORûMOREûVIAûAûBPûMANAGEMENTû
a 35bp difference between TAIFX and Libor. Mizuho Bank (China) was the sole MLAB of FEEû-,!SûEARNûANûALL
INûPRICINGûOFûBPû
MLAs joining with US$30m or above earn a
top-level all-in pricing of 133.33bp and 138.33bp
based on an upfront fee of 40bp for tranches A
and B, respectively.
that loan, which pays a margin of 85bp over
the one-year loan prime rate. Banks were
offered a top-level participation fee of 30bp.
Evelynn Lin
FORûTICKETSûOFû53MnMûVIAûAûBPûFEEû
while lead arrangers get an all-in pricing of
BPûFORû53MnMûVIAûAûBPûFEE
The guarantor is parent company Lei
Shing Hong. Funds are for working capital
ANDûRElNANCINGûPURPOSES
&UNDSûWILLûBEûUSEDûTOûRElNANCEûDEBTûANDû "ANKû#4"#û"ANKû(ANGû3ENGû"ANKû-5&'û The borrower last tapped the loan market
for general corporate purposes. ANDû7ESTPACû"ANKINGû#ORPûASû-,!"S FORûAû53M
EQUIVALENTûBORROWINGûINû
-IDEAû'ROUPûISûTHEûGUARANTORûWHILEûITSû The facility paid a top-level all-in pricing of $ECEMBERû
subsidiary MIDEA INTERNATIONAL is the BPûBASEDûONûTHEûMARGINûOFûBPûOVERû Far Eastern International Bank also led
borrower. ,IBORûORû(IBORûANDûANûAVERAGEûLIFEûOFûûYEARS THATûDEALûWHICHûOFFEREDûAûTOP
LEVELûALL
INû
)Nû-AYûLASTûYEARûTHEûBORROWERûRAISEDûAû )Nû!PRILûTHISûYEARû&ITCHûDOWNGRADEDû&ARû PRICINGûOFûBPûVIAûAûMARGINûOFûBPûOVERû
53MûlVE
YEARûBULLETûTERMûLOANû#!#)"û %ASTû(ORIZONûTOû""ûFROMû"""¦ûWITHûAû ,IBORûORû(IBORûANDûAûBPûFEE
ALSOûLEDûTHATûDEALûWHICHûOFFEREDûAûTOP
LEVELû NEGATIVEûOUTLOOKûOVERûEXPECTATIONSûTHATûTHEû The borrower provides mortgage loans
ALL
INûPRICINGûOFûBPûBASEDûONûANûINTERESTû COMPANYSûASSETûQUALITYûANDûPROlTABILITYû against various collateral bases including
MARGINûOFûBPûOVERû,IBOR WILLûDETERIORATEûWHICHûWILLûLEADûTOûHIGHERû
leverage as the operating environment has
SIGNIlCANTLYûWEAKENED
HONG KONG 4HEûNEGATIVEûOUTLOOKûREmECTSûTHEû
potential for further pressure on Far East
HOMESûSHOPSûINDUSTRIALûFACILITIESûCARûPARKSû
advertisement spaces and marine vessels.
LINK REIT BANKS ON SUSTAINABILITY
FAR EAST HORIZON RETURNS (ORIZONSûCREDITûPROlLEûFROMûTHEûSIGNIlCANTû LINK FINANCEûAûWHOLLYûOWNEDûSPECIALûPURPOSEû
slowdown in economic activity if the Covid- VEHICLEûOFû(ONGû+ONG
LISTEDû,INKû2%)4ûHASû
FAR EAST HORIZON has approached relationship ûPANDEMICûLASTSûLONGERûTHANûEXPECTED SIGNEDûAû(+BNûlVE
YEARûSUSTAINABILITY

BANKSûFORûAû53BNûTHREE
YEARûRElNANCINGû &ITCHûADDEDûTHATûh&ARû%ASTû(ORIZONSû linked loan with OCBC Bank.
larger than the borrowing it completed a FUNDINGûANDûLIQUIDITYûPROlLEûREMAINSû Proceeds will be used for general working
year ago. ADEQUATEûSUPPORTEDûBYûITSûESTABLISHEDû capital and corporate funding purposes.
4HEû(ONGû+ONG
LISTEDûlNANCIALûSERVICESû FRANCHISEûANDûMARKETûPOSITIONûALTHOUGHû The interest margin on the facility will be
company is offering an interest margin of funding conditions could become more reduced on a tiered basis subject to Link
BPûOVERû,IBORûFORûTHEûLATESTûFACILITYûnûTHEû challenging for the sector as a whole. The 2%)4SûENVIRONMENTALûSOCIALûANDû
SAMEûASûTHATûONûITSû53BN
EQUIVALENTûTHREE
company also has a high level of governance performance.
year loan signed which was in May last year. UNENCUMBEREDûASSETSûWHICHûCOULDûBEûUSEDû Link REIT’s ESG metrics will be measured
Relationship banks are working on credit FORûASSET
BACKEDûSECURITISATIONûANDûAûLARGEû by its continued inclusion in leading global
approvals to form the arranger group. amount of unused credit lines to support its sustainability indices as well as
4HEû53BN
EQUIVALENTûTHREE
YEARûLOANû funding needs and reduce short-term improvements in its Global Real Estate
CLOSEDûINû-AYûLASTûYEARûHADûûLENDERSû RElNANCINGûRISKSv Sustainability Benchmark score.
PARTICIPATINGûINCLUDINGû#HINAû%VERBRIGHTû 3INOCHEMû'ROUPûOWNSûABOUTûûOFûTHEû ,INKû2%)4ûRAISEDûAûDEBUTû!Mû
"ANKû(ONGû+ONGûBRANCHû#-"û7INGû,UNGû borrower. 53M ûSUSTAINABILITY
LINKEDûLOANûINû

78 International Financing Review June 13 2020

 LOANS EMEA

March from DBS Bank. The facility was used 4HEûLOANûSPLITûINTOûAû!MûPIECEûANDûAû &+3û&OODûû!GRIûSOURCESûAGRICULTURALû
for general corporate funding purposes !M
EQUIVALENTûPORTIONûWASûLAUNCHEDûINû COMMODITIESûINCLUDINGûSOYBEANSûSOYBEANû
including sustainability initiatives. -ARCHûOFFERINGûANûINTERESTûMARGINûOFûBPû MEALûWHEATûCORNûANDûSUGARûFROMûAROUNDû
)Nû!PRILûTHEûCOMPANYûOBTAINEDûAû OVERû""39û)TûCANûBEûDRAWNûINû!USTRALIANûANDû THEûWORLDûANDûSHIPSûTHEMûTOû3OUTH
%ASTû
!MûlVE
YEARûBILATERALûLOANûFROMû!.:û .EWû:EALANDûDOLLARS !SIA
THATûBACKEDûITSûACQUISITIONûOFûAû
STOREYû )Nû-ARCHûTHEûCOMPANYûALSOûAMENDEDûANDû It is engaged in a diverse range of
OFlCEûTOWERûINû3YDNEYSûCENTRALûBUSINESSû increased existing revolving credit facilities business in Indonesia and across the
district. TOTALLINGû!MûANDû.:BNû53BN û REGIONûINCLUDINGûGRAINûIMPORTINGûANDû
MATURINGûFROMû*ANUARYûûTOû!PRILû SALESûPORTûFACILITYûOPERATIONSûSUGARûANDû
JAPAN
ARCLAND SAKAMOTO TO BRIDGE
ARCLAND SAKAMOTO is set to raise a one-year
BRIDGEûLOANûOFûUPûTOûcBNû53BN ûTOû
back its planned acquisition of Lixil Viva.
FLETCHER WINS COV HEADROOM
FLETCHER BUILDING‘s lenders have agreed to
AMENDûlNANCIALûCOVENANTSûTHROUGHûTOûTHEû
ENDûOFûûIFûNEEDEDûASûTHEûCOMPANYû
experiences an uncertain trading
environment as a result of the coronavirus
mOURûMANUFACTURINGûANDûTHEûSTARCHû
business.
SEMBCORP MARINE UNIT BAGS
US$500m
!ûSUBSIDIARYûOFûOFFSHOREûENGINEERINGû
company Sembcorp Marine has entered
SMBCûISûTHEûSOLEûLENDERûOFûTHEûLOANûWHICHû pandemic. into a bilateral revolving facility for up to
is secured with Lixil Viva shares. 5NDERûTHEûAGREEMENTSû&LETCHERû"UILDINGû 53M
4HEûBORROWINGûISûSPITûINTOûAûcBNû may opt to rely on more favourable levels Sembcorp Marine is providing a
TERMûLOANûFORûTHEûACQUISITIONûANDûAûcBNû FORûITSûlNANCIALûCOVENANTSûFROMû*UNEûûTOû guarantee for the loan for ESTALEIRO JURONG
4ERMû,OANû"ûFORûRElNANCINGûEXISTINGûDEBTûATû $ECEMBERûûACCORDINGûTOûlLINGSûTOûTHEû ARACRUZûWHICHûOWNSûANûINTEGRATEDû
the target. .EWû:EALANDû%XCHANGEûANDûTHEû!USTRALIANû SHIPYARDûINû"RAZIL
Home improvement store operator Securities Exchange on Wednesday. Standard CharteredûISûTHEûSOLEûLENDERû
!RCLANDû3AKAMOTOûLAUNCHEDûAûcûPERû Total interest cover ratio may be lowered arranger and agent.
share offer for Lixil Viva on Wednesday. The TOûûTIMESûFROMûTHEûNORMALûLEVELûOFûTWOû 5NDERûTHEûFACILITYûAGREEMENTûAû
OFFERûENDSûONû*ULYû TIMESûANDûSENIORûINTERESTûCOVERûRATIOûTOûXû pre-payment will be triggered if Sembcorp
Luxury toilet maker LIXIL Group has FROMûXûWITHûEARNINGSûBEFOREûINTERESTûANDû Industries’ ownership in Sembcorp Marine
AGREEDûTOûSELLûITSûENTIREûûINTERESTûINûITSû TAXESûINû1ûûSETûATû.:Mû53M û DROPSûBELOWû
Saitama-based home improvement store for testing these ratios. )FûTHISûHAPPENSûLOANSûANDûTRADEûFACILITIESû
unit. The company expects to be in compliance TOTALLINGûAPPROXIMATELYû3BNû
,ASTûMONTHû,IXILû'ROUPûSAIDûITûWOULDûSELLû with its normal covenant levels at June. 53BN ûASûOFû*UNEûûMAYûBEûAFFECTED
)TALIANûMAKERûOFûCURTAINûWALLSû0ERMASTEELISAû Should Fletcher Building need to rely on Singapore-listed Sembcorp Industries
WHICHûITûBOUGHTûFORûABOUTûcBNûINûûTOû
53ûCONSTRUCTIONûGROUPû!TLASû(OLDINGSûFORûANû
undisclosed amount.
JAL LANDS ¥88bn FINANCING
JAPAN AIRLINESûHASûSIGNEDûAûcBNû
THEûMOREûFAVOURABLEûCOVENANTûLEVELSûITûWILLû OWNEDûûOFû3EMBCORPû-ARINEûASûATû
not pay a dividend until it is in compliance $ECEMBERûû
with and agrees to be tested at normal
levels.
4HEûCOMPANYûHASûAROUNDû.:BNûINû
available liquidity and a leverage ratio of
YEARû ABOUTûXûBELOWûITSûTARGETûOFûnûTIMES EUROPE/MIDDLE
AIRCRAFTûlNANCINGûITSûSECONDûOFûTHEûYEAR EAST/AFRICA
Japan Bank for International Cooperation
ISûPROVIDINGûAûGUARANTEEûFORûTHEûBORROWINGû SINGAPORE
WHICHûlNANCESû*!,SûPURCHASEûOFûEIGHTû DENMARK
AIRCRAFTûFROMû!IRBUS FKS FOOD & AGRI TO LAUNCH
MUFG and Mizuho Bank were the mandated CHR HANSEN TAPS BRIDGE LOAN
LEADûARRANGERSûWHILEûBank of Kyoto and SMBC
joined in syndication.
YEARûBORROWINGûINTOûGENERALûSYNDICATIONû
*!,SûPREVIOUSûAIRCRAFTûlNANCINGûWASûAû
BASEDû
FKS FOOD & AGRIûPLANSûTOûLAUNCHûAû53Mû
lVE
Bioscience group CHR HANSEN is backing its
this month with two banks at the top. 53MûACQUISITIONûOFû53
cBNûBORROWINGûALSOûWITHûAû*")#û The agricultural commodities supplier PROBIOTICSûCOMPANYû5!3û,ABSûWITHûAûBRIDGEû
GUARANTEEûINû&EBRUARY has appointed BNP Paribas and Rabobank as loan.
the mandated lead arrangers and The low interest bridge loan is being
BOOKRUNNERSûOFûTHEûLOANûWHICHûWILLûBEûUSEDû
NEW ZEALAND for capital expenditure and general
CORPORATEûANDûRElNANCINGûPURPOSES
YEARû
RYMAN CLOSES A$200m LOAN 4HEûTWOûBANKSûWEREûALSOû-,!"SûONûTHEû
COMPANYSûPREVIOUSûOFFSHOREûLOANûINûû
.EWû:EALAND
provided by Chr Hansen’s core banks.
Chr Hansen tapped the loan market in
!UGUSTûûFORûAûõMûlVE
revolving credit facility.
4HATûlNANCINGûWASûCOORDINATEDûBYû3%"û
LISTEDûAGEûCAREûANDûRETIREMENTû 4HEûFACILITYûSIZEûWASûINCREASEDûTOû53Mû ALONGûWITHû$ANSKEû"ANKû.ORDEAû"ANKû
village operator RYMAN HEALTHCARE has closed FROMû53MûWITHûFOURûBANKSûJOININGûINû .YKREDITû"ANKûANDû3VENSKAû
Aû!Mû53M ûlVE
YEARûDUAL
TRANCHEû syndication. Handelsbanken as bookrunners and
loan.
Sole mandated lead arranger and
bookrunner Commonwealth Bank of Australia
ENDEDûUPûWITHû!MûAFTERûBank of Baroda
JOINEDûWITHûAû!MûCOMMITMENT
)Nû*ULYûû*APANSû-ITSUIûû#OûANDûTHEû
Development Bank of Japan jointly acquired
SHARESûINû&+3û&OODûû!GRIûWITHûAûTOTALû
INVESTMENTûOFûAPPROXIMATELYû53MûFORû
ANûEQUITYûSTAKEûOFû
International Financing Review June 13 2020
MANDATEDûLEADûARRANGERSû".0û0ARIBASûANDû
HSBC were mandated lead arrangers.
#HRû(ANSENûISûACQUIRINGû5!3û,ABSûFROMû
private equity fund Lakeview Equity
Partners.
79
 FRANCE
Oman borrowers resume NEXANS AGREES STATE-BACKED LOAN

talks with lenders Cable systems company NEXANS has agreed a

õMûSTATE
BACKEDûTERMûLOANûTOûSTRENGTHENûTHEû
„ MIDDLE EAST Discussions with sovereign and oil company OQ stalled earlier this year company’s liquidity during the coronavirus crisis.
4HEû&RENCHûSTATEûISûGUARANTEEINGûûOFû
International and regional lenders have However, burdened by high levels of debt and THEûlNANCING
reopened talks with Omani borrowers for a deficit that Fitch said could climb to around In line with other French state-guaranteed
new syndicated loans just weeks after initial US$12bn in 2020 – 18% of GDP – Oman is more lNANCINGSûTHEûLOANûHASûANûINITIALû
MONTHû
discussions stalled over a sovereign rating vulnerable to oil price swings than most of its maturity with extension options for up to a
downgrade, the coronavirus pandemic and wealthier Gulf neighbours and some bankers FURTHERûlVEûYEARS
plummeting oil prices. are more cautious about how quickly Oman can BNP Paribas ISûCOORDINATORûWHILEûCredit
Lenders are considering a sovereign loan for return to the loan market. Agricole CIB is facility agent. CICûCredit
the sultanate and a loan for OQ, formerly known “Oman (the sovereign) is always looking for Agricole Ile de FranceûNatixis and Societe
as Oman Oil. funds. It’s not easy to lend to Oman, I think it is Generale also participated.
In March, the sultanate was forced to put too early to determine,” a second banker said. !TûTHEûENDûOFû-ARCHûBEFOREûTHEûLOANûWASû
a US$2bn sovereign loan on hold after it was Oil company OQ has also reopened financing AGREEDû.EXANSûHADûAROUNDûõBNûOFûLIQUIDITYû
downgraded by Fitch further into junk territory, talks. INCLUDINGûANûUNDRAWNûõMûREVOLVINGû
to BB from BB+. The impact of Covid-19 and a
crash in oil prices were also contributing factors.
However, lenders are now willing to resume
talks as the initial panic in the market begins to
ease and oil prices have risen after OPEC agreed
to extend oil output cuts until the end of July.
“There has been a seismic shift. A month ago
it would not have been possible for Oman to
raise a loan. But within the last few weeks there
has been a marked improvement,” said one
banker.
“The market is now open again, even for
Oman. Banks that had virtually stopped lending
in the region are coming back and pricing is
7ESTPHALIA
coming down.”
BACKEDûlNANCINGûMATURESû
OMAN could now get as much as US$3bn for
its sovereign loan, the banker said, depending on
what it is willing to pay.
“OQ was struggling at the end of April to put
together a deal. It got to the point no-one was
looking at it, but now it is back on the table. I
think US$1.5bn is what they wish for but they will
settle for smaller,” the first banker said.
A deal for OQ is likely to be priced at around
300bp over Libor, he said, which could attract
interest from smaller regional banks that
are priced out of deals for stronger rated oil
companies, such as Abu Dhabi’s ADNOC, which
pays around 100bp. These banks might also fill
a gap left by some of the larger lenders with too
much oil and gas exposure.
“Some of the bigger UAE banks plus the
international banks might already have too much
oil sector exposure at this stage, but smaller
regional banks are keen,” he said.
Sandrine Bradley
amount would depend on how the bond
CREDITûFACILITYû)NûEARLYû!PRILûTHEûCOMPANYû
DREWûõMûFROMûTHEû2#&ûTOûREPAYû
commercial papers at maturity.
GERMANY
TOM TAILOR FALLS SHORT
Fashion company TOM TAILOR HOLDING SEûWILLûlLEû
for insolvency despite its eponymous clothing
BRANDûSUBSIDIARYûSECURINGûAûõMûLOANû
guaranteed by the federal government and the
STATESûOFû(AMBURGûANDû.ORTHû2HINE
4HEûGUARANTEE
ATûTHEûENDûOFû3EPTEMBERû
4HEûCOMPANYûWILLûALSOûEXTENDûõMûOFû
ITSûCREDITûLINESûTOûTHEûENDûOFû3EPTEMBERû
4HEûlNANCINGûPACKAGEûWILLûALLOWû4OMû
Tailor GmbH to continue operating its
business unchanged.
EGYPT WENTûnû)ûTHINKûAROUNDû53BNûWOULDûBEûAû (OWEVERûTHEûGUARANTEEDûFUNDINGûFALLSû
SUFlCIENTûNOWvû short of the amount requested by the
SOVEREIGN BEGINS TALKS Banks on the loan are likely to be the COMPANYûFORûTHEûENTIREûGROUPûINCLUDINGû
SAMEûASûTHOSEûINVOLVEDûINûTHEûBONDûWHICHû WOMENSWEARûSUBSIDIARYû"ONITAûWHICHûDOESû
EGYPT is in preliminary discussions with CLOSEDûFOURûTIMESûSUBSCRIBEDûONû-AYûû not qualify for further funding or guarantees.
banks for a multi-billion dollar syndicated ANDûWASûLEDûBYûLEADûMANAGERSû".0û0ARIBASû "ONITAûHASûINSUFlCIENTûLIQUIDITYûTOûCOVERû
LOANûFOLLOWINGûTHEûCOUNTRYSû53BNûBONDû #ITIGROUPû(3"#û*0û-ORGANûANDû3TANDARDû THEûOUTmOWSûOFûFUNDSûRELATEDûTOûTHEû#OVID
û
issuance in May. #HARTEREDû)TûCOMPRISEDûAû53BNû-AYû PANDEMICûANDûWILLûAPPLYûFORû#HAPTERû

!ûREQUESTûFORûPROPOSALSûHASûNOTûBEENûSENTû ûNOTEûAû53BNû-AYûûNOTEûANDû style protective shield proceedings under its
TOûBANKSûYETûBUTûLENDERSûEXPECTûTHATûTHEû Aû53BNû-AYûûNOTE own administration procedure.
NORTHû!FRICANûCOUNTRYûWILLûBEûLOOKINGûFORûAû !PPETITEûFORû%GYPTûRATEDû"""ûHASû The group said that because of intragroup
LOANûOFûAROUNDû53BN BEENûHELPEDûBYûAûONE
YEARû53BNû OBLIGATIONSûTOû"ONITAû4OMû4AILORû(OLDINGû
"EFOREûTHEûBONDûWASûRAISEDû%GYPTûHADû Rapid Financing Instrument package 3%SûINSOLVENCYûISûNOWûINEVITABLEûANDûTHEû
indicated that it would try and tap the loan agreed with the IMF to help with any COMPANYûWILLûlLEûFORûINSOLVENCYûWITHûTHEû
market for around US$3bn. Following the payment gaps businesses face as a result of Hamburg local court.
SUCCESSûOFûTHEûBONDûHOWEVERûTHEûSIZEûOFûTHEû the coronavirus pandemic that was
loan request is expected to be lower. approved in May.
“The bond issuance was very successful. It Before the bond issuance the sovereign NETHERLANDS
attracted great liquidity and there is HADû53BNûLEFTûTOûFUNDûDURINGûTHEûlSCALû
DElNITELYûFURTHERûINTERESTûFROMûTHEûLOANû YEARûWHICHûRUNSûUNTILûTHEûENDûOFû*UNEû4HEû DSM LINES UP BRIDGE
MARKETvûSAIDûONEûBANKERûh"EFOREûTHEûBONDû additional proceeds will go towards the
they indicated they might look for a loan of REQUIREMENTSûFORûTHEûNEXTûlSCALûYEARû Life sciences and materials science company DSM
up to US$3bn but they said the exact EXPECTEDûTOûTOTALû53BN
BN HASûLINEDûUPûAûCOMMITTEDûBRIDGEûLOANûTOûlNANCEû

80 International Financing Review June 13 2020

 LOANS EMEA

ITSûõMûACQUISITIONûOFû!USTRIA
BASEDûANIMALû
nutrition and health business Erber Group.
DSM has a strong balance sheet and is
committed to maintaining an investment-
Sovereign loan delayed
GRADEûCREDITûPROlLE „ UGANDA Deal has an end of June deadline for completion
The company’s liquidity is supported by
õBNûOFûUNDRAWNûREVOLVINGûCREDITû UGANDA‘s sovereign loan has been delayed by The other €300m portion of the financing
FACILITIESûINCLUDINGûAûõBNûSUSTAINABILITY
the impact of the coronavirus, low oil prices and
LINKEDû2#&ûORIGINALLYûAGREEDûINû-AYûû
THATûMATURESûINû
4HEûCOMPANYûAGREEDûANûADDITIONALûõMû
2#&ûINû!PRIL
4HEû2#&SûAREûNOTûSUBJECTûTOûlNANCIALû
covenants or material adverse change
clauses.
SPAIN
GESTAMP GETS €200m EIB LOAN
Car parts maker GESTAMPûHASûAGREEDûAûõMû
loan from the European Investment Bank for
research and development to make cars
safer and lighter.
4HEûCOMPANYûEXPECTSûTOûAGREEûAûõMû
loan from another multilateral lender for
the same purpose.
The company has agreed a covenant
WAIVERûUNTILûTHEûSECONDûQUARTERûOFûûONû
ITSûõBNûSYNDICATEDûLOANûTOûREINFORCEûITSû
lNANCIALûmEXIBILITYûDURINGûTHEûCORONAVIRUSû
crisis.
was arranged and underwritten by TDB Bank as
South Africa’s recent sovereign downgrade.
The €300m loan, underwritten by
Standard Bank, will be used to fund Ugandan
infrastructure projects. It forms part of a bigger
€600m seven-year loan, which is the country’s
first ever sovereign loan.
The deal, which the Ugandan government
brought to market in November, pays 445bp over
Libor.
Standard Bank has been hit by the increased
cost of funds following South Africa’s latest
downgrade at the end of April when S&P
downgraded its long-term foreign-currency
credit rating to BB- from BB, which has slowed
the progress of the deal.
“The deal has been caught in the headwinds
of Covid-19 and its impact, including the South
African downgrade and a general contraction in
liquidity,” said one banker. “It will get done but
things are just slower.”
Banks looking to come into the deal, which
will be a small club loan, are also struggling with
the increased cost of funds
“Other lenders are also getting delayed.
Everything is far more under the microscope than
underwriter and initial mandated lead arranger
and closed on April 14, with Societe Generale
taking a €130m portion. It is a separate facility to
Standard Bank’s €300m loan and backs similar
but different infrastructure projects.
Both €300m facilities have the same pricing
and tenors and were agreed by the Ugandan
parliament, meaning it is not possible to
renegotiate pricing.
In addition, the deal has an end of June
deadline for completion when the Ugandan
government’s budget process for the current
fiscal year ends.
“Pricing can’t go up, as parliament approved it
at that level,” said the second banker. “Getting it
done by the end of June is key.”
Uganda is, however, seen as a good risk. The
East African economy is growing faster than 6%
and is rated B2 by Moody’s and B+ by Fitch with
a stable outlook.
“Uganda’s stable macroeconomic context, low
liquidity and debt distress risks, and manageable
public debt stock were conducive to the
transaction,” TDB said when it closed its €300m
facility.
û)Nû*ANUARYû'ESTAMPûEXTENDEDûTHEû before,” a second banker said. Sandrine Bradley
MATURITIESûONûITSûSYNDICATEDûLOANûTOû
4HEûlNANCINGûCOMPRISESûAROUNDûõMû
OFûTERMûLOANSûANDûAûõMûSUSTAINABILITY
4HEûlNANCINGûHASûAûPRICINGûMECHANISMû MEDICOVER AMENDS RCF COVENANT
LINKEDûREVOLVINGûCREDITûFACILITYûWHICHûHASû designed to incentivise portfolio
been fully drawn. companies to improve their ESG Healthcare and diagnostic company MEDICOVER
4HEûlNANCINGûWASûCOORDINATEDûBYû""6!û PERFORMANCEûSPECIlCALLYûINûTERMSûOFû HASûAMENDEDûTHEûCOVENANTûONûITSûõMû
ALONGSIDEû3ANTANDERû"ANKûOFû!MERICAû gender equality on the board of directors; revolving credit facility to provide additional
"ANKIAû#AIXA"ANKûANDû$EUTSCHEû"ANKûASû
bookrunning mandated lead arrangers.
SWEDEN
EQT LINKS BRIDGE TO ESG
Investment group EQT has signed a fund
bridge facility with pricing linked to the
renewable energy transition; and
sustainability governance.
The mechanism is directly tied to EQT’s
higher level targets on diversity and climate
as well as its governance model.
4HEûlNANCINGûISûBEINGûPROVIDEDûBYû
syndicate including BNP Paribas and SEB as
SUSTAINABILITYûCOORDINATORSûANDû".0û0ARIBASû
as facility agent and sustainability agent.
EQT and future portfolio companies will
mEXIBILITYûDURINGûTHEûCORONAVIRUSûPANDEMIC
Medicover has seen revenue impacted by
the crisis after governments placed
restrictions on movement and health
services in the markets where it operates.
EMEA LOANS BOOKRUNNERS – FULLY
SYNDICATED VOLUME
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
ENVIRONMENTALûSOCIALûANDûGOVERNANCEû work with advisers to develop customised bank or group issues US$(m) (%)
performance of its private equity portfolio and measurable key performance indicators 1 BNP Paribas 86 57,362.70 18.4
companies. FORûTHEûINDIVIDUALûCOMPANIESûWHICHûWILLûBEû 2 Credit Agricole 59 24,569.60 7.9
The fund level subscription credit facility reported quarterly and audited annually. 3 Santander 57 20,483.90 6.6
TOTALSûõBNûANDûHASûANûUPPERûLIMITûOFû This approach will contribute to an 4 HSBC 51 16,653.17 5.3
AROUNDûõBNû)TûISûTHEûlRSTû%3'
LINKEDûFUNDû increase of reliable and comparable ESG 5 SG 42 15,380.77 4.9
BRIDGEûFACILITYûOFûTHISûSIZEûINûTHEûGLOBALûFUNDû data. 6 UniCredit 56 15,125.75 4.9
lNANCINGûMARKETSû%14ûSAID The aggregated results from the portfolio 7 JP Morgan 35 14,993.19 4.8
“This is a game-changing moment for companies’ ESG efforts will be compared 8 Deutsche Bank 37 14,330.76 4.6
%14ûBUTûALSOûTHEûPRIVATEûEQUITYûINDUSTRYû with the pre-set KPI targets. The portfolio’s 9 Citigroup 31 12,631.06 4.1
further evidencing how our industry also AVERAGEDûFULlLMENTûRATEûWILLûIMPACTûTHEû%3'û 10 Natixis 24 8,559.75 2.7
CANûBENElTûFROMûSUSTAINABLEûlNANCINGvû BRIDGEûFACILITYSûINTERESTûRATEûWITHûANû Total 313 311,720.25
SAIDû0ERû&RANZENûPARTNERûANDûCO
HEADûOFûTHEû improved ESG performance meaning lower Proportional credit
%14û0RIVATEû%QUITYû!DVISORYû4EAM pricing. Source: Refinitiv SDC code: R17

International Financing Review June 13 2020 81

 3)'ûALSOûPRICEDûAûõMûSENIORûUNSECUREDû

Banks pile into Liberty- BONDûDUEûûATûAûCOUPONûOFûûANDûAû

õMûSENIORûUNSECUREDûBONDûDUEûûATûAû
COUPONûOFûûPERûANNUM

Telefonica loan 4HEûRElNANCINGûFULLYûREPLACESû3)'Sû

EXISTINGûõBNû4ERMû,OANû!ûõMû4ERMû
,OANû"ûANDûõMû2#&
„ EUROPE Commitments scaled back to half the initial ask SIG has corporate and bond ratings of
"""nûFROMû30ûANDû"AûFROMû-OODYSû)Tû
More than 30 banks have piled into a £4bn
loan to back a US$38bn merger of the UK
businesses of LIBERTY GLOBAL and TELEFONICA
after the borrowers tapped their large banking
relationships to secure the deal within a 10-day
period.
JP Morgan and Citigroup underwrote the £4bn
2.5-year term loan in May to back the merger
of Liberty’s Virgin Media with Telefonica’s O2.
Syndication of the loan was launched shortly
afterwards and closed at the end of May when
another 30 banks were bought into the deal.
Some 36 banks were initially approached
with 32 able to commit to the loan, which pays a
banks and a larger ticket to get paid bigger fees.
“This is just Europe for you, there are too many
banks. In this deal there are the regional Spanish
banks, the pan-European banks and the US
banks,” a second senior banker said. “It is a good
quality asset and a pretty straightforward deal so
banks piled in.”
LEVERAGE UP
The loan will be used to initially de-risk the
transaction. It is then expected to be refinanced
next year and increased to in excess of £6bn
through a combination of multi-currency
leveraged loans and high-yield bonds, sitting
ALSOûHASûANû!!û%3'ûRATINGûFROMû-3#)ûANû
ûLOWûRISK ûSCOREûFROMû3USTAINALYTICSûANDû
a Platinum CSR rating from EcoVadis.
UAE
DP WORLD OFFERED IN SECONDARY
0IECESûOFûAû53BNûlNANCINGûBACKINGûTHEû
privatisation of global port operator DP
WORLDûAREûBEINGûOFFEREDûINûSECONDARYûINû!SIA
The deal comprises three acquisition
lNANCEûFACILITIESûWITHûTENORSûOFûUPûTOûTHREEû
margin of 150bp over Libor with a 40bp upfront
YEARûTERMû
fee, within the tight 10-day deadline.
The banks were initially asked to commit to at
least £250m, but were then scaled back by 50%
to £125m.
“That is a pretty big scale-back. It is not
unprecedented in investment-grade lending but
across both balance sheets. Leverage at that
point will be between four and five times.
“Liberty and Telefonica is going to be one of
the most active issuers on the street and so while
this is an I-grade transaction for now, Liberty
will be doing more deals and significant debt
issuance, and as a result makes it one of the
YEARSûASûWELLûASûAû53BNûlVE
LOANûTHATûPAYSûANûINTERESTûMARGINûOFûBPû
over Libor.
PORTS AND FREE ZONE WORLD FZE is the
borrower.
0ROCEEDSûRAISEDûWILLûlNANCEûTHEû
ACQUISITIONûOFûAûûSTAKEûOFû$0û7ORLDûBYû
it is not typical either,” a senior banker said. “It most attractive borrowers in the market,” the first 0ORTûANDû&REEû:ONEû7ORLDûPROVIDEûAûONE

is an indication of the strength of Liberty and
Telefonica as corporate borrowers.”
The 32 banks are Citigroup, JP Morgan, ABN
AMRO, BBVA, Banca Sabadell, Bank of America,
Bankia, Bankinter, Barclays, BNP Paribas,
senior banker said.
The take-out next year is expected to draw
significant attention from leveraged loan and
high-yield bond investors, attracted by its size
and the fact that the TMT sector has been strong
TIMEûDIVIDENDûDISTRIBUTIONûTOû$UBAIû7ORLDû
ANDûRElNANCEûDEBTûATûTHEû0&:7ûANDû$0û
World level.
Citigroup and Deutsche Bank fully
underwrote the facility.
CaixaBank, Commerzbank, Credit Agricole CIB, and performed well despite the coronavirus. )NûSENIORûSYNDICATIONûEmirates NBD and
Credit Suisse, Deutsche Bank, Goldman Sachs, The combined company will have the largest First Abu Dhabi Bank joined as active
HSBC, ING, Intesa Sanpaolo, Lloyds, Mediobanca, non-investment-grade balance sheet in Europe, BOOKRUNNERSûANDûMANDATEDûLEADûARRANGERSû
Mizuho, Morgan Stanley, MUFG, NatWest, bankers said. while Abu Dhabi Islamic BankûBank of Nova
Natixis, RBC, Santander, Societe Generale, SMBC, The parent companies, which expect to ScotiaûCredit Agricole CIBûDubai Islamic Bankû
Scotiabank and UniCredit. achieve £6.2bn of synergies on an annual basis HSBCûEmirates Islamic BankûJP MorganûSamba
The large bank group reflects the vast amount by the fifth full year after closing, will have equal and Standard Chartered CAMEûINûASû-,!"S
of relationships both entities have. However, a ownership of the combined entity. ,ASTûMONTHûTHEûLOANûWASûLAUNCHEDûINTOûAû
number of lenders would have preferred fewer Claire Ruckin targeted general syndication involving less
THANûûRELATIONSHIPûBANKS
General syndication closed at the end of
4HEû2#&ûWASûORIGINALLYûAGREEDûFORûõMû laboratories. The company’s largest markets LASTûWEEKûWITHûlNALûALLOCATIONSûANDûSIGNINGû
ASûPARTûOFûTHEûCOMPANYSû)0/ûINûûVIAû are Poland and Germany. expected by the end of this week. Banks in
.ORDEAûASûBOOKRUNNERûANDûMANDATEDûLEADû senior syndication were given the go ahead
ARRANGERûWITHû).'û"ANKû:ACHODNIû7"+û to sell the deal down in the secondary loan
and SEB as mandated lead arrangers. SWITZERLAND market.
)Nû*ANUARYûûTHEû2#&ûWASûINCREASEDûBYû h/NCEûGENERALû;SYNDICATION=ûCLOSEDûTHEû
õMûTOûõMûONûTHEûSAMEûTERMSûWITHû SIG LINKS TO SUSTAINABILITY BANKSûWEREûFREEûTOûTRADEûINûSECONDARYvûSAIDû
the existing group of lenders. The facility ONEûBANKERûh4HISûISûNORMALûPROCESSûYOUûSEEû
MATURESûINû*UNEû Packaging company SIG COMBIBLOC has it a lot in Turkish bank deals. They have just
)Nû.OVEMBERûõMûOFûTHEû2#&ûWASû AGREEDûõMûOFûSUSTAINABILITY
LINKEDû STARTEDûTALKSûINûSECONDARYûTHOSEûTRADESû
CANCELLEDûASûTHEûCOMPANYûRAISEDûAûõMû
LOANSûASûPARTûOFûITSûWIDERûõBNûDEBTû COULDûTAKEûUPûTOûAûMONTHûTOûHAPPENv
year Schuldscheindarlehen on top of its RElNANCING )TûISûUNCLEARûWHYûTHEû!SIANûSECONDARYûLOANû
DEBUTûõMûlVEûANDûSEVEN
YEARû33$ûPLACEDû 4HEûLOANSûCOMPRISEûAûõMûTERMûLOANû market is being targeted in particular. It
in October. ANDûAûõMûREVOLVINGûCREDITûFACILITYûPAYINGû could be because the dividend being paid to
(ELABAû).'ûANDû3%"ûWEREûLEADûARRANGERSû MARGINSûOFûBPûOVERû%URIBOR $UBAIû7ORLDûFROMûTHEû53BNûlNANCINGû
on the SSD. The loan was preplaced with a broad will in part be used to repay some of its bank
-EDICOVERûOPERATESûAMBULATORYûCLINICSû group of relationship and investment banks DEBTûFREEINGûUPûTHESEûLENDERSûLIMITSûTOûTHEû
HOSPITALSûSPECIALITYûCAREûFACILITIESûANDû INû-ARCHû REGIONûTHEûBANKERûSAID

82 International Financing Review June 13 2020

 LOANS NORTH AMERICA

h!TûTHEû$UBAIû7ORLDûLEVELûAûNUMBERûOFû 4HEûLOANûINCLUDESûAû53MûlVE YEARû compliance with its debt covenants during

!SIANûBANKSûWILLûGETûPAIDûOUTûSOûTHEYûMIGHTû term loan that will be used to replace an the crisis.
BEûINTERESTEDûINûINVESTINGûINûTHISûDEALvûTHEû EXISTINGû53MûTERMûLOANûTHATûWILLûBEû !ûMAXIMUMûLEVERAGEûCOVENANTûHASûBEENû
banker said. cancelled on completion of the bond. The INCREASEDûTOûûTIMESûFROMûûTIMESûWHILEûAû
)Nû&EBRUARYû$UBAIûANNOUNCEDûTHATû0ORTû TERMûLOANûMAYûBEûINCREASEDûTOû53M MINIMUMûlXEDûCHARGEûHASûBEENûREDUCEDûTOû
ANDû&REEû:ONEû7ORLDûAûWHOLLYûOWNEDû There is also a revolving credit facility of ûTIMESûFROMûûTIMES
subsidiary of state investment vehicle Dubai UPûTOû53MûFORûGENERALûCORPORATEûANDû The amended debt includes Tiffany’s
7ORLDûWILLûBUYûPUBLICLYûLISTEDûSHARESûOFû$0û working capital purposes. 53MûREVOLVINGûCREDITûFACILITYûWHICHû
7ORLDûINûAûDEALûWITHûAû53BNûVALUATION Drawings under the new term loan and MATURESûINû/CTOBERû
RCF are conditional on the closing of the 4HEûCOMPANYûDREWû53MûOFûTHEû2#&û
new bond. INûTHEûlRSTûQUARTERûTOûINCREASEûITSûCASHû
UK (ELIOSûOPERATESûINû'HANAû#ONGO
POSITIONûANDûMAINTAINûlNANCIALûmEXIBILITYû
"RAZZAVILLEû$2#û4ANZANIAûANDû3OUTHû!FRICA during the crisis.
M&B ADDS LIQUIDITY The drawdown was permitted under the
terms of the acquisition.
Pub and restaurant group MITCHELLS & BUTLERS
has agreed increased credit facilities and MOLINA HEALTHCARE NETS US$1bn
AMENDEDûITSûDEBTûPROVIDINGûADDITIONALû
lNANCIALûmEXIBILITYûTOûMEETûTHEûCHALLENGEûOFû
THEû#OVID
ûCRISIS
-"ûHASûAGREEDûaMûOFûUNSECUREDû
NORTH AMERICA
MOLINA HEALTHCAREûHASûSIGNEDûAû53BNûlVE
year revolving credit facility via
UNITED STATES administrative agent Truist Bank that
LIQUIDITYûFACILITIESûUNTILûTHEûENDûOFûû REPLACESûAûLOANûSIGNEDûINû*UNEû
comprising the extension of the maturity DANAHER SIGNS US$2.5bn RCF 4HEû2#&ûISûDOUBLEûTHEûSIZEûOFûTHEûPREVIOUSû
OFûITSûEXISTINGûaMûREVOLVINGûCREDITû facility. Several provisions were added to the
FACILITYûANDûaMûOFûNEWûADDITIONALû Medical technology company DANAHER has AGREEMENTûINCLUDINGûANûINCREASEûINûTHEû
FACILITIESûWHICHûAREûSTRUCTUREDûUNDERûTHEû SIGNEDûAû53BNû
DAYûREVOLVINGûCREDITû aggregate principal amount of incremental
government-backed Coronavirus Large facility. term loans established under the credit
Business Interruption Loan Scheme. Bank of America is the administrative agent AGREEMENTûTOû53MûFROMû53MûPLUSû
4HEûUNSECUREDûlNANCINGûHASûAûNEWû on the loan. Citigroup is the syndication an unlimited amount as long as the
COVENANTûSTRUCTUREûTOûREmECTûTHEûCOMPANYSû agent. Wells FargoûMUFGûBNP ParibasûUS consolidated net leverage ratio is not greater
REVISEDûTRADINGûPROlLEûTHROUGHûTHEûRECOVERYû
of its business following reopening.
The company has agreed further waivers
facility is based on the company’s
ANDûAMENDMENTSûTOûITSûaBNûOFûSECUREDû
debt to avoid technical breaches during
the enforced closure of its sites due to the
ûTIMESûITû
crisis.
ûTIMESûITûISû
4HEûSECUREDûlNANCINGûAMENDMENTSû
ûTIMESûITûISûBPû
include waivers on debt service coverage
BankûHSBCûJP MorganûBarclays and Mizuho are
documentation agents.
4HEûLOANûREPLACESûANûEXISTINGû53BNû
DAYû2#&ûTHATûTHEûCOMPANYûSIGNEDûONû!UGUSTû
û
There were no amounts outstanding
UNDERûTHEûPRIORû53BNûFACILITY
The company may choose to convert any
loans outstanding on the maturity date
than three times.
The applicable margin for the credit
CONSOLIDATEDûNETûLEVERAGEûRATIOû&ORûûTIMESû
ORûMOREûTHEûMARGINûISûBPûOVERû,IBORûWITHû
AûBPûCOMMITMENTûFEEûFORû
ISûBPûANDûBPûFORû
BPûANDûBPûFORû
ANDûBPûANDûFORûLESSûTHANûûTIMESûITûISû
RATIOûTESTSûMINIMUMûCAPITALûEXPENDITUREû under the new RCF into term loans that BPûANDûBP
spend and a waiver to allow drawings of up
TOûaMûUNDERûTHEûSECUREDûlNANCINGûFORû
the repayment principal and interest. The
drawings are to be repaid in full by the end
OFû-ARCHû
would mature one year later. Danaher
WOULDûHAVEûTOûPAYûAûFEEûEQUALûTOûûOFûTHEû
principal amount of the loans outstanding
and satisfy certain conditions if it wishes to
make this conversion.
/Nû*UNEûû-OLINAûRAISEDû53MûINû
ûSENIORûNOTESûDUEû
The company used approximately
53MûOFûTHEûNETûPROCEEDSûTOûREPAYûITSû
53MûTERMûLOANûFACILITY
-"ûHASûCASHûBALANCESûOFûaMûAFTERû 4HEû2#&ûCARRIESûAûMARGINûOFûBPnBPû -OLINAûISûRATEDû""
ûBYû30
FULLYûDRAWINGûTHEûEXISTINGûFACILITIESûaMû over Libor depending on the company’s debt
2#&û$URINGûCLOSUREûTHEû%BITDAûLOSSûINûAû RATINGû)TûHASûAûFACILITYûFEEûOFûBPnBP AMERICAS LOANS BOOKRUNNERS – FULLY
four-week period has stabilised to around The credit facility requires Danaher to SYNDICATED VOLUME
aMûINCLUDINGûRENTûTHEûCOMPANYûSAID KEEPûITSûCONSOLIDATEDûLEVERAGEûRATIOûATûû BOOKRUNNERS: 1/1/2020 TO DATE
Cash burn before debt service is at times or less. Managing No of Total Share
BETWEENûaMûANDûaMûPERûFOUR
WEEKû 4HEûCOMPANYûISûRATEDû"""ûBYû30 bank or group issues US$(m) (%)
period as the company pays down supplier 1 BofA Securities 504 133,345.50 13.4
balances. TIFFANY AMENDS COVENANTS 2 JP Morgan 421 125,334.45 12.6
-"ûEXPECTSûTOûSTARTûREOPENINGûITSûPUBSû 3 Citigroup 249 82,384.48 8.3
and restaurants from early July. Jewellery chain TIFFANY & CO has amended its 4 Wells Fargo 321 77,045.83 7.8
DEBTûCOVENANTSûAFTERûSALESûSLUMPEDûûINû 5 Goldman Sachs 140 31,410.93 3.2
HELIOS TOWERS LINES UP REFI THEûlRSTûQUARTERûDURINGûTHEûCORONAVIRUSû 6 Morgan Stanley 80 31,223.61 3.1
crisis. 7 Barclays 145 29,791.13 3.0
,ONDON
LISTEDû!FRICANûTELECOMMUNICATIONSû The move comes as the company works to 8 RBC 141 29,733.04 3.0
towers operator HELIOS TOWERS has lined up a COMPLETEûITSû53BNûSALEûTOû&RENCHû 9 Credit Suisse 91 26,490.15 2.7
53MûLOANûASûPARTûOFûAûWIDERûRElNANCINGû luxury goods group LVMH. 10 US Bancorp 175 25,896.73 2.6
EXERCISEûINCLUDINGûAû53MûBONDûANDûANû 4HEûPRECAUTIONARYûAMENDMENTûWHICHûISû Total 1,571 993,898.45
UPûTOû53MûTENDERûOFFERûONûANûEXISTINGû EFFECTIVEûUNTILûTHEûlRSTûQUARTERûOFûûWILLû Proportional credit
bond. give Tiffany headroom to remain in Source: Refinitiv SDC code: R7

International Financing Review June 13 2020 83

 TRANE TECH BAGS RCF

Banks balance appetite for Heating and cooling technology company

TRANE TECHNOLOGIESûHASûSIGNEDûAû53BNû

high-quality loans with risk month revolving credit facility.

JP Morgan is administrative agent on the
LOANûWHILEûCitigroup is syndication agent.
„ US Market for five-year tenors has dropped for the first time since 2008 Proceeds will be used for working capital
As immediate requests for liquidity due to
the coronavirus crisis start to flatten, banks
lending to highly rated companies are looking
YEARû2#&ûTHATûWASûDUEûTOûEXPIREû
at how they can keep up business momentum
and simultaneously protect themselves
from potentially higher costs of funding and
BASEDûGRIDû&ORû!!
ûORûHIGHERûTHEû
deteriorating credit risk.
The approach is a delicate balancing act of
developing new business and addressing client
needs while mitigating the effects of another
ûITûISûBPûANDûBPûANDûFORû
economic downturn if the pandemic has a
ûITûISûBPûANDûBP
second wave.
The bank market has been relieved of some
pressure on lending capacity in the last month.
Several investment-grade companies are
paying down some of their pandemic-related
liquidity facilities with proceeds from corporate
bond issuances, such as SOUTHWEST AIRLINES
and PAYPAL, which both issued bonds in May
and committed part of the proceeds to paying
down credit facilities.
Still, lenders are aware that despite pay
companies through the next few months,”
said Dan Chapman, managing director of loan
syndicate and sales at US Bancorp. “Lenders
remain focused on providing credit to key
relationships.”
In May, companies including FORTUNE
BRANDS, HP, PEPSICO and GENERAL MOTORS
signed 364-day revolving credit agreements.
Even companies that had multi-year
agreements decided to refinance with short-
term loans rather than five-year loans.
In April, GM refinanced approximately
US$6bn in short-term loans, including a
US$1.95bn 364-day loan and a US$4bn three-
year loan. A US$10.5bn five-year facility was
not refinanced.
“Today, while many borrowers are busy
refinancing revolver draws in the bond market,
I-grade lenders are reluctant to go beyond 364
days due to Covid-19 uncertainties,” Chapman
said.
In April, the market for five-year tenors
PURPOSESûTOûSUPPORTûTHEûCOMMERCIALûPAPERû
programmes and for general corporate purposes.
The company terminated a previous
53BNûlVE
INû
Pricing for the new RCF is linked to a debt
RATINGS
MARGINûISûBPûOVERû,IBORûWITHûAûBPû
COMMITMENTûFEEûFORû"AA"""ûITûISûBPû
ANDûBPûFORû"AA"""ûITûISûBPûANDûBPû
FORû"AA"""
LOWERûTHANû"AA"""
4HEûCOMPANYûISûRATEDû"""ûBYû30
THERMO FISHER SIGNS €3bn LOAN
THERMO FISHER SCIENTIFIC signed a €3bn one-
year unsecured term loan to replace part of
THEûõBNûBRIDGEûLOANûBACKINGûITSû
53BNûACQUISITIONûOFû'ERMANûGENETICû
testing company Qiagen.
4HEûlNANCINGûPAYSûAûMARGINûSTARTINGûATû
BPûOVERû%URIBORûFORûAûRATINGûOFû""""AAû
downs, outstanding loans still exceed pre- dropped for the first time since 2008, making ORûBETTERûRISINGûTOûBPûFORûAûRATINGûOFû"""
pandemic levels. Despite their appetite for up a 6% market share. "AAûANDûTOûBPûFORûAûRATINGûLOWERûTHANû
new-money deals, banks are grappling with
how costly it is to hold large funded loans on
their balance sheets.
“We’re still funded much higher than we
were,” said a senior banker.
Chapman said the return to longer tenors
will be gradual, and pricing will remain
elevated.
“I’m hearing that three years is the new five
years, and even three-year deals are rare. The
""""AAû#OMMITMENTûFEESûAREûBPûBPû
ANDûBPûFORûTHEûRESPECTIVEûRATINGûLEVELS
4HEREûAREûTWOûlNANCIALûCOVENANTSûONûTHEû
lNANCINGûCOMPRISINGûMAXIMUMûNETûDEBTûTOû
%BITDAûOFûûTIMESûSUBSEQUENTLYûSTEPPINGû
In March and April, there was a deluge of
drawdowns in response to the pandemic’s
economic disruption. Then companies asked
for incremental short-term facilities and
amendments to agreements to get them
through the crisis.
Regardless of the uptick in short-term
liquidity requests and drawdowns, investment-
market is not ready to go back to the way it was
yet,” he said.
According to a Fitch report on June 1, the
risk for US corporate issuers becoming fallen
angels - losing their investment-grade rating -
remains high. So far, downgraded debt across
more than two dozen fallen angel issuers has
neared US$200bn, according to the report.
DOWNûTOûûTIMESûANDûTOûûTIMESû
depending on the timeline of the acquisition;
ANDûMINIMUMûINTERESTûCOVERûOFûûTIMES
Joint lead arrangers and joint
BOOKRUNNERSûONûTHEûlNANCINGûAREû
administrative agent JP Morgan and
syndication agent Morgan Stanley. Bank of
America is documentation agent.
grade lender capacity is robust amid a thinner Since the pandemic began, another 29 issuers HSBCûMizuho BankûDeutsche BankûUS Bankû
pipeline of event-driven financings. As of the have been downgraded to BBB-, just one notch BNP ParibasûCitigroupûCredit SuisseûMUFGû
end of April, investment-grade loan volume is above junk. SMBCûBank of Nova ScotiaûINGûKeyBankûWells
down 5% year-on-year. A second wave of downgrades due to Fargo and Nordea are lenders.
“I think the balancing factor for the market deteriorating economic conditions could Thermo Fisher also amended the
is that there isn’t much merger and acquisition
financing. In a normal market, you’d have
some bridge financing, so from a bank capacity
standpoint everything that has come to market
has been absorbed fine,” the banker said.
increase sub-investment-grade downgraded
debt to US$400bn, Fitch said.
Tighter terms including minimum liquidity
requirements for borrowers and higher pricing
are being implemented as a safeguard during
the uncertainty. Only time will tell if that
REMAININGûBRIDGEûLOANûINCREASINGû
MAXIMUMûLEVERAGEûTOûûTIMESûANDû
amended and extended its existing
53BNûUNSECUREDûREVOLVINGûCREDITûFACILITY
The existing RCF was extended by one
YEARûTOû*ULYûûANDûTHEûLEVERAGEûWASû
SHOWING RESTRAINT becomes the new reality for the investment- INCREASEDûTOûûTIMESûFROMû*UNEûû
While capacity has remained in place, lender grade market. SUBSEQUENTLYûSTEPPINGûDOWNûTOûûTIMESû
vigilance around credit risk and portfolio
quality is an ongoing priority.
“Many banks were supportive during
the initial pandemic wave, stepping in to
provide incremental liquidity and to help get
84
“Banks are going to continue to be cautious
and address the needs of their clients,” said the
senior banker. “Things have improved, but we
are not out of the woods by any means.”
Daniela Guzman
International Financing Review June 13 2020
ANDûTOûûTIMESûDEPENDINGûONûTHEûTIMELINEû
of the acquisition.
4HERMOû&ISHERûSIGNEDûTHEûõBNûBRIDGEû
LOANûINû!PRILûTHROUGHûADMINISTRATIVEûAGENTû
JP Morgan and Morgan Stanley as joint lead
arrangers and joint bookrunners.
 LEVERAGED LOANS

Credit SuisseûMacquarieûRBC Capital Hamilton is backed by investment fund

MarketsûSociete GeneraleûUBS and SunTrust EIG Management Co and private equity
LEVERAGED LOANS are arranging the deal. fund The Carlyle Group’s Carlyle Power
Proceeds will support the company’s Partners.
acquisition by private investors The )Nû*ANUARYûTHEûINVESTMENTûFUNDSûAGREEDû
UNITED STATES Chatterjee Group and Rhone Capital. to acquire the Liberty Energy Center and
Lummus develops technology that Patriot Energy Center from power
JETBLUE MARKETS US$500m LOAN SERVICESûTHEûPROCESSINGûANDûRElNINGûOFû developer Panda Power Funds.
Low-cost airline JETBLUE AIRWAYS is in the
0ATRIOTûENERGYûCENTRESûAREûGAS
lREDû
MARKETûWITHûAû53MûLOANûTHATûITûWILLû
crude oil. "ASEDûINû0ENNSYLVANIAûTHEû,IBERTYûANDû
#ORPORATEûRATINGSûAREû""ûANDûTHEûlRST
LIENûLOANûISûRATEDû"" combined-cycle gas power plants.
put towards general corporate purposes. /Nû-ARCHûûOILûANDûGASûCONSTRUCTIONû #ORPORATEûlNANCIALûADVISERûDUFF & PHELPS
4HEûFOUR
YEARûLOANûISûOFFEREDûATûBPn ANDûENGINEERINGûlRMûMCDERMOTT HASûAGREEDûAû53MûlRST
LIENû
BPûOVERû,IBORûWITHûAûûmOORûANDûAûû/)$ INTERNATIONAL advanced an agreement to incremental term loan.
4HEûLOANûISûNON
CALLABLEûFORûTHEûlRSTûYEARû sell Lummus to the pair of investors after The debt priced in line with guidance at
CALLABLEûATûûINûYEARûTWOûANDûCALLABLEûATû McDermott did not receive any higher bids BPûOVERû,IBORûWITHûAûûmOORû4HEû/)$û
PARûTHEREAFTERû)TûWILLûAMORTISEûATûûPERû for the assets during a solicitation period. WASûTIGHTENEDûTOûûFROMûûATûLAUNCH
year. /Nû*ANUARYûû-C$ERMOTTûSAIDûITûWASû 4HEûINCREMENTALûLOANûWHICHûINCLUDESû
BarclaysûBNP ParibasûGoldman Sachs and GOINGûTOûlLEûFORûBANKRUPTCYûANDûAGREEDûTOû ûSOFTûCALLûPROTECTIONûFORûûMONTHSûWILLû
Morgan Stanley AREûARRANGINGûTHEûlNANCING sell Lummus to Chatterjee and Rhone BEûFUNGIBLEûWITHû$UFFûû0HELPSûlRST
LIENû
The debt is secured by the airline’s slots #APITALûWHICHûWEREûSTALKINGûHORSEû FACILITYûMATURINGûINû!PRILû
ATû.EWû9ORKSû*&+ûANDû,A'UARDIAûAIRPORTSû BIDDERSûFORû53BN #ORPORATEûRATINGSûAREû""
ûANDûTHEûlRST

ANDûTHEû2ONALDû2EAGANû.ATIONALû!IRPORTûINû Proceeds from the sale of Lummus are LIENûLOANûISûRATEDû""

Washington DC. expected to repay McDermott’s debtor-in- Proceeds from the incremental facility
4HEûLOANûISûALSOûCOVEREDûBYûAûûTIMESû POSSESSIONûlNANCINGûFUNDûEMERGENCYû WILLûFUNDûTHEûACQUISITIONûOFû6IRTUEûAûDATA

minimum collateral coverage ratio that costs and provide cash to the company’s driven regulatory compliance service
will be tested twice a year. balance sheet. PROVIDERûREPAYûAûDRAWNûREVOLVINGûCREDITû
JetBlue must also maintain at least McDermott struck a deal with creditors facility and add cash to the company’s
53MûINûUNRESTRICTEDûLIQUIDITY in January to exchange more than US$3bn balance sheet.
)Nû!PRILûTHEûAIRLINEûDREWûDOWNûONûITSû OFûDEBTûFORûûEQUITYûINûTHEûREORGANISEDû Goldman SachsûStone Point Capital Marketsû
53MûREVOLVINGûCREDITûFACILITYûTOû company. UBSûBank of AmericaûMorgan StanleyûKKR
SUPPORTûLIQUIDITYûANDûOBTAINEDû53Mû 5NDERûTHEûRESTRUCTURINGû-C$ERMOTTû Capital Markets and Credit Suisse arranged
from the US Treasury to help navigate the RECEIVEDû53BNûINû$)0ûlNANCINGûFROMû the incremental loan.
lNANCIALûIMPACTSûOFûTHEûCORONAVIRUSû senior secured lenders. )Nû-ARCHû$UFFûû0HELPSûRAISEDûAû
pandemic. 4HEû$)0ûCOMPRISEDû53BNûINûSECUREDû 53BNûlRST
LIENûDEBTûPACKAGEûTHATû
)Nû-ARCHû*ET"LUEûBORROWEDû53BNûINû TERMûLOANSû53MûINûLETTERSûOFûCREDITû backed its acquisition by a global investor
THEûFORMûOFûAû
DAYûDELAYED
DRAWûTERMû and a roll up of pre-petition debt including consortium led by Stone Point Capital and
loan. 53MûINûSUPERPRIORITYûTERMûLOANSûANDû Further Global Capital Management.
IT operations management service 53MûINûSUPERPRIORITYûLETTERSûOFûCREDIT
provider HELP/SYSTEMS HOLDINGS has detailed INTERNET BRANDS GETS ADD-ON
Aû53MûADD
ONûLOAN HAMILTON TIGHTENS TERMS
4HEûLOANûISûOFFEREDûATûAûû/)$û#ALLû Online media company INTERNET BRANDS has
PROTECTIONûISûSETûATûûSOFTûCALLûFORûû HAMILTON PROJECTS ACQUIROR has tightened AGREEDûAû53MûTERMûLOAN
months. THEûMARGINûONûAû53BNûDEBTû The incremental loan priced at
4HEû53MûADD
ONûLOANûISûFUNGIBLEû lNANCING BPûOVERû,IBORûWITHûAûûmOORûAû
WITHûTHEûCOMPANYSûEXISTINGû53Mû 4HEûlNANCINGûCOMPRISESûAû53Mû û/)$ûANDûûSOFT
CALLûPROTECTIONûFORû
DEBTûFACILITYû)TûHASûAûûMATURITYûAû SEVEN
YEARûTERMûLOANû"ûANDûAû53Mû ûMONTHS
SPREADûOFûBPûOVERû,IBORûANDûAûûmOOR lVE
YEARûREVOLVINGûCREDITûFACILITY
Proceeds will be used to support two The term loan is now being offered at US LEVERAGED LOANS
ACQUISITIONSûBYûTHEûCOMPANYûBOLSTERûITSû BPûOVERû,IBORûWITHûAûûmOORûANDûAûû BOOKRUNNERS: 1/1/2020 TO DATE
balance sheet and cover related fees and OID. Managing No of Total Share
expenses pertaining to the buyouts. )NITIALLYûTHEûLOANûWASûPITCHEDûATûBPû bank or group issues US$(m) (%)
Jefferies is arranging the loan. OVERû,IBORûWITHûAûûmOORûANDûAû
û/)$ 1 BofA Securities 278 47,831.77 11.9
Call protection remains unchanged at a 2 JP Morgan 198 36,108.58 9.0
LUMMUS OUTLINES TERMS ûSOFTûCALLûFORûûMONTHS 3 Wells Fargo 164 33,395.04 8.3
Morgan StanleyûBNP Paribas and Credit 4 Citigroup 112 26,918.00 6.7
LUMMUS TECHNOLOGY outlined the terms of a Suisse arranged the deal. 5 Goldman Sachs 111 22,623.51 5.6
LOANûITûHASûUPSIZEDûTOû53BNûFROMû !NûEXCESSûCASHmOWûSWEEPûWILLûOPENûATû 6 Credit Suisse 76 20,478.00 5.1
53M ûANDûSTEPûDOWNûTOûûONCEû(AMILTONSû 7 Barclays 99 20,018.01 5.0
The seven-year loan is being offered at NETûDEBTûTOû%BITDAûISûATûûTIMES 8 Morgan Stanley 58 15,262.94 3.8
BP
BPûOVERû,IBORûWITHûAûûmOORûAûû 4HEûLOANûWILLûBEûGOVERNEDûBYûAûûTIMESû 9 RBC 68 12,875.31 3.2
/)$ûANDûûSOFTûCALLûPROTECTIONûFORûSIXûMONTHS debt service coverage ratio. 10 Jefferies 50 11,390.73 2.8
The debt package also comprises a 4HEûlRST
LIENûLOANûRATEDû""
ûBYû30û Total 755 400,673.24
53MûREVOLVINGûCREDITûFACILITYûANDûAû will support the purchase of two power Excluding Project Finance.
53MûLETTERûOFûCREDITûFACILITY plants. Source: Refinitiv SDC code: P2

International Financing Review June 13 2020 85

 The loan will mature alongside an 4HEûINVESTMENTûlRMSûWILLûACQUIREûAûû ûANDûINCLUDESûûSOFTûCALLûPROTECTIONû
EXISTINGûFACILITYûDUEûINû3EPTEMBERû stake in Univision from private equity FORûûMONTHS
Credit SuisseûKKR Capital MarketsûBank of SPONSORSû3ABANû#APITALû'ROUPû-ADISONû Both loans include a maintenance
America and Deutsche Bank arranged the $EARBORNû0ARTNERSû0ROVIDENCEû%QUITYû leverage covenant.
deal. 0ARTNERSû40'ûANDû4(,û0ARTNERS Credit SuisseûINGûABN AMROûRabobank
0ROCEEDSûWILLûRElNANCEûTHEûCOMPANYSû Mexican mass media company Televisa and BNP Paribas were physical bookrunners
revolving credit facility and go towards will retain its 36% stake in Univision. ANDûUNDERWRITERSûONûTHEûlNANCING
general corporate purposes. )Nû-ARCHûû$EUTSCHEû"ANKûLEDûAûDEALû 4HEûlRMûRELAUNCHEDûTHEûDEALûAFTERûITûWASû
#ORPORATEûRATINGSûAREû""ûANDûTHEûlRST
to extend the maturity of Univision’s term forced to postpone the transaction in
LIENûLOANûISûRATEDû"" LOANûBYûFOURûYEARSûTOû-ARCHû March due to the coronavirus outbreak.
)Nû!UGUSTûû)NTERNETû"RANDSû Food distributor CHEF’S WAREHOUSE has The deal was originally launched in
ARRANGEDûAû53BNûDEBTûlNANCINGûTOû secured consent from lenders to partly &EBRUARYûANDûCOMPRISEDûAûõBNû4,"û
support its acquisition of healthcare AMENDûANDûEXTENDûAû53Mû PAYINGûBP
BPûOVERû%URIBORûWITHûAû
website WebMD. OUTSTANDINGûlRST
LIENûTERMûLOAN ûmOORûATûû/)$
4HEûDEALûCOMPRISEDûAû53BNû /FûTHEûOUTSTANDINGûLOANûAMOUNTû On relaunch it converted part of the TLB
SEVEN
YEARûlRST
LIENûLOANûANDûAû53Mû 53MûWILLûCARRYûAûMARGINûOFûBPû TOûAû4,!ûTOûBEûHELDûBYûTHEûARRANGINGû
eight-year second-lien loan. OVERû,IBORûANDûTHEûMATURITYûWILLûBEû BANKSû4HEû4,!ûAMORTISESûATûûPERûYEAR
Internet Brands is backed by private EXTENDEDûTOû 0ROCEEDSûWILLûBACKûTHEûlRMSûõMû
EQUITYûlRMû++2
Mixed martial arts franchise ULTIMATE
FIGHTING CHAMPIONSHIPûHASûSEALEDûAû53Mû
add-on loan.
22ûWITHûAûNEGATIVEû
4HEûDEBTûPRICEûATûBPûOVERû,IBORûWITHû
4HEûREMAININGû53MûOUTSTANDINGû
WILLûMAINTAINûEXISTINGûPRICINGûATûBPû
OVERû,IBORûWITHûANûUNCHANGEDûû
maturity.
"OTHûTRANCHESûCARRYûAûûmOOR
ACQUISITIONûOFû&INLANDSû#RAMOûASûWELLûASû
RElNANCEûALLûOFû"OELSûANDû#RAMOSûDEBTû
and pay transaction costs.
30ûRATINGSûAREû""
outlook. Moody’s and Fitch ratings are at
AûûmOORûAûû/)$ûANDûûSOFT
CALLû Investors consenting to the amendment """
ûWITHûAûNEGATIVEûOUTLOOK
protection for six months. and extension of the loan will receive a
KKR Capital Markets and Goldman Sachs BPûFEEû#HEFSû7AREHOUSEûWILLûPAYûDOWNû NORD ANGLIA RAISES €200m ADD-ON
ARRANGEDûTHEûlNANCINGûWHICHûWILLûBEû ûOFûTHEûNEWLYûAMENDEDûLOANûAMOUNT
attached to an existing loan maturing in #HEFSû7AREHOUSEûHASûADDEDûAû53Mû International schools operator NORD ANGLIA
!PRILû minimum liquidity covenant to the sum of HASûRAISEDûAûõMûADD
ONûTHATûWASû
Proceeds will repay a drawn revolving aggregate cash and asset-based loan INCREASEDûFROMûõM
credit facility. availability to the amended facility. The fungible term loan priced in line
#ORPORATEûANDûlRST
LIENûRATINGSûAREû"" The amended loan is non-callable for the WITHûGUIDANCEûATûBPûOVERû%URIBORûWITHû
)Nû3EPTEMBERûûTHEû--!ûFRANCHISEû lRSTûYEARûFOLLOWEDûBYûHARDûCALLûPROTECTIONû AûûmOORûANDûWILLûMATUREûINû3EPTEMBERû
RAISEDûAû53MûADD
ONûLOANûTIEDûTOûTHEû ATûûINûTHEûSECONDûYEAR ûINûLINEûWITHûTHEûEXISTINGûTERMûLOANû"
SAMEûFACILITYûATûBPûOVERû,IBORûWITHûAûû Both the corporate family rating and the 4HEûDEALûWASûISSUEDûWITHûAûû/)$
mOOR lRST
LIENûFACILITYûISûRATEDû""ûWITHûAû 4HEûLOANûARRANGEDûBYûDeutsche Bankû
RECOVERYûRATINGûOFû HSBC and JP MorganûWILLûBEûUSEDûFORû
UNIVISION EYES EXTENSION Jefferies arranged the loan. general corporate purposes.
.ORDû!NGLIAûRATEDûATû""
ûLASTûTAPPEDû
Media company UNIVISION COMMUNICATIONS THEûLOANûMARKETûINû$ECEMBERûûWHENûITû
WASûSCHEDULEDûTOûCLOSEûONû&RIDAYûAû53BNû EUROPE/MIDDLE EAST/ SECUREDûAûõMûADD
ONûTERMûLOANûTOû
loan that it aims to extend by two years to AFRICA back an acquisition. That loan priced at
 BPûOVERû%URIBORûWITHûAûûmOOR
4HEûlRST
LIENûLOANûWASûOFFEREDûATû BOELS UPS TLB .ORDû!NGLIAûALLOCATEDûAû53BN

BPûOVERû,IBORûWITHûAûûmOORûAû equivalent euro-denominated term loan B

û/)$ûANDûûSOFT
CALLûPROTECTIONû $UTCHûEQUIPMENTûRENTALûlRMûBOELS INû*UNEûûBACKINGûITSû53BNûTAKEû
FORûûMONTHS increased the term loan B of its acquisition private by Canada Pension Plan
%XISTINGûPRICINGûWASûBPûOVERû,IBORû LOANûFORûAûSECONDûTIMEûTOûõBNûFROMû Investment Board and Baring Private
WITHûAûûmOOR õBNûHAVINGûALREADYûUPPEDûTHEûLOANû %QUITYû!SIA
Goldman Sachs and Deutsche Bank were FROMûõMûATûLAUNCH 4HATûlNANCINGûCOMPRISEDûAû53Mû
arranging the transaction. !SûAûRESULTûOFûTHEûINCREASEûTHEûlRMûREDUCEDû PRE
PLACEDûlRST
LIENûTERMûLOANûANDûAû
#ORPORATEûANDûlRST
LIENûRATINGSûAREû"" Aû4ERMû,OANû!ûTRANCHEûTOûõMûFROMû 53MûPRE
PLACEDûSECOND
LIENûTERMû
!NûEXCESSûCASHmOWûSWEEPûWILLûALSOûBEû õMû4HEûORIGINALûSIZEûOFû4,!ûWASûõMû LOANûASûWELLûASûANûAPPROXIMATEû53Mû
AMENDEDûTOûOPENûATûûWITHûAûSTEPûDOWNû ANDûTHEûTOTALûLOANûSIZEûOFûTHEûACQUISITIONûLOANû revolving credit facility.
TOûûONCEûTHEûNETûLEVERAGEûRATIOûREACHESû REMAINSûTHEûSAMEûATûõBN .ORDû!NGLIAûHASûûSCHOOLSûINûû
ûTIMESûANDûûONCEûNETûLEVERAGEûISû /NûTHEû4,"ûTHEû/)$ûlRMEDûATûûTHEû COUNTRIESûACROSSûTHEû!MERICASû%UROPEû
LOWEREDûTOûûTIMES TIGHTûENDûOFûREVISEDûGUIDANCEûOFû
û #HINAû3OUTHEASTû!SIAû)NDIAûANDûTHEû
#URRENTLYûTHEû%#&ûSWEEPûOPENSûATûû ANDûFROMû
ûATûLAUNCHû4HEûMARGINûWASû Middle East.
ANDûSTEPSûDOWNûTOûûONCEûNETûLEVERAGEûISû UNCHANGEDûATûBPûOVERû%URIBORûWITHûAû
ûTIMESûANDûûONCEûNETûLEVERAGEûISûû ûmOOR HURTIGRUTEN SECURES TLC
times. 4HEûPRICINGûFORûTHEû4,!ûREMAINSû
)Nû&EBRUARYû5NIVISIONûANNOUNCEDûITûHADû UNCHANGEDûATûBPûOVERû%URIBORûWITHûAû .ORWEGIANûCRUISEûCOMPANYûHURTIGRUTEN
been acquired by private investors ûmOOR HASûSECUREDûAûõMûTHREE
YEARû4ERMû,OANû
Searchlight Capital Partners and 4HEû4,!ûWILLûMATUREûINû!UGUSTûû #ûPRICEDûATûBPûOVERû%URIBORûWITHûAûû
Forgelight. while the TLB will mature in February mOORû

86 International Financing Review June 13 2020

 LEVERAGED LOANS

4HEûDEALûFORûGENERALûCORPORATEû !ûCONSORTIUMûCOMPRISINGûPRIVATEûEQUITYû Credit SuisseûJP MorganûFifth Third Bankû
PURPOSESûISûNON
CALLûFORûTHEûlRSTûYEARûANDû lRMSû7ARBURGû0INCUSû!SIAû'ENERALû!TLANTICû MUFGûPNC and Wells Fargo were also lead
callable at a premium of two points in the 3INGAPOREû&UNDû/CEANû,INKû0ARTNERSûANDû ARRANGERSûONûTHEû!",
SECONDûYEARûANDûATûPARûTHEREAFTER *INBOû9AOûCHAIRMANûANDû#%/ûOFûCOMûISû -ACYSû53BNû2#&ûWHICHûITûDREWûDOWNû
JP Morgan and Goldman Sachs were global in talks with some relationship Chinese INû-ARCHûTOûPRESERVEûlNANCIALûmEXIBILITYûINû
coordinators. JP Morgan was admin agent. banks for the debt funding. LIGHTûOFûTHEûCORONAVIRUSûHASûBEENûREDUCEDû
Hurtigruten last tapped the loan market /Nû!PRILûûCOMûANNOUNCEDûTHATûTHEû and amended to provide the retailer with up
INû.OVEMBERûûWHENûITûPRICEDûANûõMû consortium proposed to acquire all of its TOû53MûINûUNSECUREDû2#&
ADD
ONûATûBPûOVERû%URIBORûWITHûAûû OUTSTANDINGûORDINARYûSHARESûFORû53ûINû "ANKûOFû!MERICAûISûTHEûADMINISTRATIVEû
mOORûANDûATûPARû4HATûLOANûWASûUSEDûTOû CASHûPERûORDINARYûSHAREûORû53ûINûCASHû agent on that RCF.
REPAYûTHEûlRMSû.ORWEGIANûKRONEûBONDû PERû!$3 /Nû4UESDAYû-ACYSûDISCLOSEDû
facility. The offer values the business at about PRELIMINARYûEARNINGSûFORûTHEûlRSTûQUARTERû
Moody’s downgraded Hurtigruten to B3 53BNûTHEû#HINESEûlRMûSAID ENDINGû-AYû
FROMû"ûINû-ARCHûCITINGûEXPECTATIONSûTHATû )Nû*ULYûûCOMûOBTAINEDûAû53Mû 4HEûRETAILERûREPORTEDû53BNûINûlRST

decline in bookings and increase in lVE
MONTHûSENIORûLOANûFROMû/HIOû2IVERû QUARTERûSALESûAûûDECLINEûFROMû53BNû
cancellations for Hurtigruten’s cruises Investment. a year earlier. It also reported an adjusted
caused by coronavirus fears and travel %BITDAûLOSSûOFû53MûINûTHEûlRSTûQUARTERû
restrictions will lead to weakening credit FROMûADJUSTEDû%BITDAûOFû53MûINû
metrics and pressure on its liquidity. CEO Jeff Gennette attributed the decline in
30ûALSOûDOWNGRADEDûTHEûlRMûINû-ARCHû sales to the government-mandated store
TOû###ûFROMû"
 RESTRUCTURING closures resulting from the coronavirus spread.
TDR Capital bought the business h4HEûPANDEMICûSIGNIlCANTLYûIMPACTEDû
alongside Periscopus and Home Capital in OURûlRST
QUARTERûSALESûANDûEARNINGSûRESULTSû
LATEû UNITED STATES but I am proud of the way our team
Hurtigruten operates cruises along the NAVIGATEDûTHISûDIFlCULTûPERIODûANDû
.ORWEGIANû#OAST MACY’S CLOSES FINANCING maintained the business while our stores
WEREûCLOSEDvûHEûSAID
GARRETT MOTION GETS COVENANT Department store chain MACY’S has closed a -ACYSûWILLûRELEASEûITSûFULLûlRST
QUARTERû
RELIEF
US auto technology business GARRETT
MOTION has completed an amendment to its
DEBTûTOûALLOWûCOVENANTûRELIEFûONûAûõMû
BASEDûLENDINGûFACILITYûANDû53BNû
53BNûDEBTûlNANCINGûPACKAGEûWHICHû EARNINGSûONû*ULYû
will go toward funding business
operations. SERTA SIMMONS SIGNS AGREEMENT
4HEûlNANCINGûCOMPRISESûAû53BNû
ASSET
Mattress manufacturer SERTA SIMMONS
REVOLVERûDUEûûAûõMû4ERMû,OANû!û in senior secured notes. BEDDING has signed a transaction support
DUEûûAûõMûTERMûLOANû"ûDUEûû 4HEû!",ûCOMPRISESûAû53BNû AGREEMENTûWITHûAûMAJORITYûOFûITSûlRSTûANDû
ANDûAû53Mû4,"ûDUEû REVOLVINGûCREDITûFACILITYûWHICHûINCLUDESûAû second-lien term loan lenders to slash
4HEûlRMûOFFEREDûLENDERSûAûBPû swingline sub-facility and a letter of credit 53MûOFûDEBT
CONSENTûFEEûANDûAûBPûSPREADûINCREASEûONû SUB
FACILITYûINûADDITIONûTOûAû53Mû 5NDERûTHEûTERMSûOFûTHEû43!ûTHEû
THEûREVOLVERûANDû4,!ûANDûAûBPûINCREASEû bridge facility. Macy’s will be allowed to COMPANYûWILLûRECEIVEû53MûOFûlRST
OUTû
on the TLB during the covenant relief REQUESTûINCREASESûUPûTOû53MûINû NEWûMONEYûDEBTûANDû53MûOFûSECOND

period. additional capacity under the revolving OUTûDEBTûWHICHûWILLûBEûSWAPPEDûFORûAû
4HEREûWILLûBEûANûADDITIONALûBPûSPREADû credit facility. PORTIONûOFûlRSTûANDûSECOND
LIENûDEBT
increase if both credit agencies downgrade Bank of America is a lead arranger and The second-out debt will be exchanged
THEûlRM ADMINISTRATIVEûAGENTûONûTHEû!",û)TûISûALSOû INûAûRATIOûOFû53ûFORûEVERYû53ûOFû
JP Morgan led the amendment. the issuer of the swingline and letter of lRST
LIENûLOANSûANDû53ûFORûEVERYû
'ARRETTû-OTIONûRATEDûATû"""
ûWASûLASTû credit facilities. 53ûOFûSECOND
LIENûLOANS
INûTHEûLOANûMARKETûINû3EPTEMBERûû
when it secured a seven-year TLB that EUROPEAN LEVERAGED LOANS EMEA SPONSORED LOAN BOOKRUNNERS
COMPRISEDûAûõMûFACILITYûANDûAû53Mû BOOKRUNNERS: 1/1/2020 TO DATE BY VOLUME: 1/1/2020 TO DATE
facility. Managing No of Total Share Europe, Middle East, Africa
4HEûEUROûTRANCHEûPRICEDûATûBPûOVERû bank or group issues US$(m) (%) Managing No of Total Share
%URIBORûANDûTHEûDOLLARûLOANûPRICEDûATûBPû 1 HSBC 17 4,890.43 7.6 bank or group issues US$(m) (%)
OVERû,IBORû4HATûDEBTûlNANCINGûWASûTOû 2 BNP Paribas 24 4,484.16 7.0 1 HSBC 9 2,403.18 7.1
support its spin-off from aero parts maker 3 Goldman Sachs 19 4,403.23 6.9 2 BNP Paribas 12 2,092.56 6.2
Honeywell. 4 Credit Agricole 16 4,195.10 6.5 3 Morgan Stanley 9 2,059.59 6.1
5 Barclays 19 4,134.55 6.5 4 SG 7 1,955.99 5.8
6 JP Morgan 21 3,730.02 5.8 5 Deutsche Bank 12 1,836.03 5.5
ASIA-PACIFIC 7 Deutsche Bank 20 3,444.46 5.4 6 Credit Agricole 9 1,797.03 5.3
8 Citigroup 9 3,114.58 4.9 7 Barclays 11 1,722.40 5.1
BANKS VIE FOR 58.COM MANDATE 9 Natixis 8 3,029.11 4.7 8 BofA Securities 8 1,635.26 4.9
10 UniCredit 12 2,780.58 4.3 9 UniCredit 7 1,590.84 4.7
Banks are bidding for the mandate to lead a Total 87 64,072.20 10 Credit Suisse 14 1,554.12 4.6
debt package of about US$3bn to back the Excluding project finance. Western Europe only included. Total 48 33,614.62
PROPOSEDûTAKE
PRIVATEûOFû.ASDAQ
LISTEDû Excluding project finance.
ONLINEûCLASSIlEDSûMARKETPLACEû58.COM. Source: Refinitiv SDC code: P10 Source: Refinitiv SDC code: P13

International Financing Review June 13 2020 87

 /FlCIALSûFROMû1UEBECûHAVEûALSOûOFFEREDû

Murray Energy bankruptcy
exit delayed
„ US DIP loan in question
MURRAY ENERGY‘s exit from Chapter 11 bankruptcy
protection has been delayed indefinitely by the
bankruptcy court until the coal supplier files a
complete plan of reorganisation.
The court will only decide on new dates for the
plan confirmation once the company files all the
BASEDûOFFSHOREûCONTRACTORûGULF
requested supplements to the proposed plan.
Murray has yet to file, among other things,
bar Murray or other lenders from interfering with
its ability to preserve the DIP FILO collateral.
GACP said that Murray defaulted on a
financial covenant under its US$90m DIP FILO
loan by inflating the assets securing the loan.
According to previous negotiations between
the company and GACP, the current assets
report was only to comprise coal receivables
53MûINûAIDûTOû#IRQUEûDUû3OLEILûWHICHû
started as a group of street performers in
Canada.
0RIVATEûEQUITYûlRMû40'ûACQUIREDûAû
MAJORITYûSTAKEûINûTHEûCOMPANYûINûûINûAû
53BNûDEAL
EUROPE/MIDDLE EAST/
AFRICA
GMS IMPLEMENTS RESTRUCTURING
!BUû$HABI
MARINE SERVICESûHASûlNALISEDûANDû
implemented a debt restructuring that it
term sheets for a proposed takeback debt
agreement and an exit facility loan agreement.
The company’s US$440m debtor-in-
possession loan comprises US$350m in new
money and a US$90m first in, last out loan
and inventory but Murray included non-coal
receivables in the statement.
In addition to the alleged default, GACP
said that assets securing the FILO loan are
deteriorating, which could affect its recovery
AGREEDûWITHûITSûBANKSûINû-ARCHûWHICHû
includes the extension of term loan
facilities and a new working capital
facility.
'-3ûHASûRENEWEDûITSû53MûTERMû
facility that rolled up the company’s pre-petition
FILO facility.
Murray has about US$1.9bn in pre-petition
secured loan debt, comprising US$150.7m
under an asset-based loan facility due 2021, a
US$1.72bn superpriority term loan due 2022,
and a US$51m term loan that matures this year,
according to an October court filing. It also has
US$788m in pre-petition secured bond debt, and
US$45m in unsecured debt.
Murray’s next court hearing, scheduled for
June 15, has also been adjourned. The hearing
was to address a request from one of the
company’s DIP lenders to protect its collateral.
On May 13, DIP FILO lender Great American
Capital Partners filed a court order requesting to
value. It said that the value of the coal
receivables and inventory are already “far below”
the US$160m floor set in the financial covenant.
GACP also said that in the event of default, it
is entitled to “block or limit withdrawals from any
bank accounts that are a part of the collateral”
for its DIP FILO loan, and it is therefore seeking
court permission to enforce this.
Murray responded to GACP’s court request,
calling it an attempt to upend its exit from
bankruptcy and “obtain rights and remedies
GACP does not have” under the DIP credit
agreement.
Murray filed for bankruptcy in October, driven
by the decline in demand for coal.
Sasha Padbidri
LOANûEXTENDINGûTHEûMATURITYûTOû*UNEûû
û4HEûRENEWEDûFACILITIESûHAVEûAû
CHANGEDûAMORTISATIONûPROlLEûWITHûAû
53MûREDUCTIONûINûlXEDûAMORTISATIONû
PAYMENTSûUNTILû
The cash interest margin is the same as
previous facilities and is indexed to the net
leverage of the company.
)TûHASûALSOûAGREEDûAû53MûWORKINGû
CAPITALûFACILITYûTHATûALSOûMATURESûONû*UNEûû

GMS will now seek shareholder approval
for a share capital increase before the end
OFûû)TûISûAIMINGûTOûRAISEûNETûPROCEEDSû
OFûATûLEASTû53MûTOûSTRENGTHENûITSû
balance sheet and to avoid the issuance of
warrants and incurrence of PIK interest
payable to the banks.
The company will also receive an ASSETûMANAGERSû"LUE-OUNTAINû#APITALû The company was last in the syndicated
ADDITIONALûBASKETûFORûTHIRD
OUTûDEBTûWHICHû Sound Point Capital Management and LOANûMARKETûINû*ANUARYûûWHENûITû
CANûBEûUSEDûFORûFUTUREûEXCHANGESûOFûlRSTû OTHERSûHOLDSûNEARLYûTHREE
QUARTERSûOFû extended the maturity of a loan that was
and second-lien loans. Cirque du Soleil’s debt. ORIGINALLYûARRANGEDûINû.OVEMBERû
Serta was acquired by private equity Cirque du Soleil started exploring debt 4HEûMATURITYûOFûTHEûlNANCINGûWASû
lRMû!DVENTû)NTERNATIONALûINû/CTOBERû RESTRUCTURINGûOPTIONSûINCLUDINGûAûPOSSIBLEû EXTENDEDûBYûTWOûYEARSûTOûûWITHû
The acquisition package included a BANKRUPTCYûINû-ARCHûAFTERûITûWASûFORCEDûTOû scheduled loan repayments reduced by
53BNûlRST
LIENûTERMûLOANûPRICEDû cancel shows because of the coronavirus TWO
THIRDSûINûûANDû
ATûBPûOVERû,IBORûANDûAû53Mû outbreak. 4HEûSIX
YEARûLOANûSIGNEDûINû.OVEMBERû
SECOND
LIENûTERMûLOANûPRICEDûATûBPû 4HEûCOMPANYûFAMOUSûFORûITSûSHOWSûINû ûCOMBINEDû)SLAMICûANDûCONVENTIONALû
over Libor. ,ASû6EGASûANDûGLOBALûTOURSûHADûTOû lNANCINGûCOMPRISINGûAû53MûTERMû
4HEûlRST
LIENûDEBTûWASûLATERûREPRICEDûINû temporarily lay off most of its staff after LOANûAû53MûCOMMITTEDûCAPITALû
!PRILû nationwide coronavirus shutdowns nixed EXPENDITUREûFACILITYûANDû53MûFORû
its performances. GENERALûWORKINGûCAPITALûWITHûAûFURTHERû
CREDITORS VIE FOR CIRQUE DU SOLEIL Bids for Cirque du Soleil were due on 53MûUNCOMMITTEDûFACILITY
Monday. !BUû$HABIû)SLAMICû"ANKûCOORDINATEDûTHEû
Creditors of CIRQUE DU SOLEIL ENTERTAINMENT !NYûDEALûWILLûLIKELYûBEûCOMPLETEDû lNANCINGûASûBOOKRUNNERûANDûMANDATEDû
LEDûBYûPRIVATEûEQUITYûlRMû#ATALYSTû#APITALû through a court restructuring in Canada. LEADûARRANGERûALONGSIDEû.ATIONALû"ANKûOFû
Group made an offer on Monday to take
control of the circus company through a
debt restructuring in Canada.
The group of creditors is proposing to
INVESTû53MûINû-ONTREAL
The timing of any court restructuring !BUû$HABIû!BUû$HABIû#OMMERCIALû"ANKû
REMAINSûINûmUXûASû#IRQUEûDUû3OLEILû and HSBC Bank Middle East as mandated
prepares to review bids. lead arrangers.
It is unclear if the creditor group’s bid GMS is listed on the London Stock
BASEDû#IRQUEû will be accepted. But as Cirque du Soleil’s %XCHANGEû4HEûCOMPANYûSERVESûTHEûOILûGASû
ANDûREDUCEûITSû53BNûDEBTûBYû53Mû CREDITORSûTHEûGROUPûWILLûHAVEûAûSAYûOVERû and renewable energy industries from its
4HEûCREDITORûGROUPûWHICHûALSOûINCLUDESû the company’s restructuring. OFlCESûINûTHEû5!%û3AUDIû!RABIAûANDûTHEû5+

88 International Financing Review June 13 2020

 EQUITIES
Australia 90 China 90 India 93 New Zealand 93 Singapore 93 Belgium 94 Germany 95 Netherlands 96
Sweden 97 UK 97 United States 99 Structured Equity 104

„ FRONT STORY CHINA

Chinese listings draw crowds

JD.com draws strong demand while Burning Rock prices above range
JD.COM raised HK$30bn (US$3.88bn) from its
Hong Kong secondary listing last Thursday
INûTHEûWORLDSûSECOND
LARGESTûmOTATIONûSOûFARû times subscribed. In total, retail investors
this year, after the Rmb30.7bn (US$4.3bn)
Shanghai IPO of Beijing-Shanghai High
Speed Railway in January.
The deal, Hong Kong’s largest equity
offering in the year to-date, drew
overwhelming demand from both
institutional and retail investors despite the
Hang Seng Index dropping 2.27% on
Thursday, the day when JD.com closed the
retail portion of its offering.
The Nasdaq-listed Chinese e-commerce
GIANTûSOLDûMûSHARESûFORûAûûFREE
mOATûATû much as 10% before ending the day at HK$130,
HK$226 per share. The price represents a 3.9%
discount to last Wednesday’s US close, when
JD.com’s ADRs rose 3.2% to close at US$60.70.
One ADR represents two common shares.
“There is strong interest from Chinese
investors as well as global funds. There are
Chinese funds that want to trade the stock in
Asia hours, and global funds that already
own the stock and are looking to top up their
position in Asia,” said a banker on the deal.
Books were more than 10 times covered, with
more than 460 investors participating including
long-only funds, sovereign wealth funds and
hedge funds. Around 30% of orders were zeroed.
More than 390,000 investors participated
in the retail tranche, which was close to 180
through to 2022, which implied it may take
bet HK$282bn on the deal, making it the
most popular Hong Kong IPO this year
among retail investors in terms of total
subscriptions.
There is a 15% greenshoe and shares start
trading on June 18.
Bank of America, CLSA and UBS were
sponsors.
A stellar debut for NETEASE‘s shares in Hong
Kong last Thursday also helped drive
momentum for JD.com. The stock rose as
of the world,” said a banker on the deal.
still up 5.7% from the issue price of HK$123.
The Nasdaq-listed Chinese online gaming
and entertainment company raised
HK$21bn from the secondary listing.
CICC, Credit Suisse and JP Morgan were
sponsors.
MARKET SLUMP
In the US, BURNING ROCK BIOTECH last Thursday
priced a US$223m Nasdaq IPO above the
price range despite a 6.9% slide in the Dow
Jones Industrial Average.
The US stock market plummeted on
investor concerns about a resurgence of
coronavirus infections and the US Federal
Reserve’s pledge to keep rates steady
longer than previously expected for the
economy to recover.
Despite the sell-off, Burning Rock, which
specialises in cancer diagnostics, sold 13.5m
American depositary shares at US$16.50
each, above the US$13.50–$15.50 range.
“US investors have made good money
from recent biotech IPOs and they believe
Chinese companies would actually recover
faster than their Western peers given the
pandemic seems under control in this part
On June 4, China’s Legend Biotech raised
53MûFROMûANûUPSIZEDû.ASDAQûmOATû4HEû
stock fell 4.7% to close at US$36.25 last
Thursday, but still 58% above the IPO price.
Several existing shareholders and their
AFlLIATESûHAVEûINDICATEDûTHEIRûINTERESTûINûINVESTINGû
a total of US$79m in the Burning Rock IPO.
Alongside the IPO, the Lake Bleu Prime
Healthcare Master Fund has agreed to
purchase US$25m of the company’s shares
in a concurrent placement.
Morgan Stanley, Bank of America and Cowen
LEDûTHEûmOAT
Fiona Lau

D&B preps US$1bn NYSE IPO after sponsor overhaul

Commercial data provider eyes quick return to public markets
Seasoned dealmakers Bill Foley and Chinh Chu Goldman Sachs, Bank of America (which Cost-cutting measures have saved
are planning to bring DUN & BRADSTREET back to
the public markets via a US$1bn NYSE IPO less
than 18 months after they took the commercial
data and analytics provider private for US$6.9bn.
Only a month ago, Foley conceded that the
HELPEDûlNANCEûTHEûBUYOUT ûJP Morgan and
Barclays will lead the IPO.
The proceeds will be used to redeem Series
A preferred stock, delivering some quick
gains to the sponsor group led by Chu’s CC
US$200m, helping to boost D&B’s adjusted
%BITDAûMARGINSûTOûûINûTHEûlRSTûQUARTERû
from 23.3% a year ago.
&OLEYûWASûABLEûTOûCAPITALISEûONû$"SûlLINGû
in another way on Wednesday by
)0/ûlRSTûlLEDûCONlDENTIALLYûINû&EBRUARYûHADû Capital, Foley’s publicly traded CANNAE and opportunistically raising US$400m for
been delayed from its original May target PRIVATEûEQUITYûlRMû4HOMASû(û,EEû0ARTNERSû Cannae via an overnight stock sale.
and might have to wait until the end of the
year or early next year.
However, a string of strong debuts,
including by business intelligence rival
ZoomInfo Technologies (up 120% since its June
4 debut), has put D&B’s listing plans back on.
“Though they do compete, D&B is more of
a legacy player that isn’t growing as fast,”
one banker said.
They closed their take-private of D&B in
February last year, layering US$4bn of debt
onto the company in the process.
The sponsors have also collected
US$128.1m of dividends since taking control
and expect to get another US$32m dividend
later this month.
Under Anthony Jabbour, the former CEO
of Black Knight, D&B has cut 850 staff
&OLEYûHASûOTHERûIRONSûINûTHEûlREûHAVINGû
RAISEDû53MûTHROUGHûHISûlRSTû30!#û&OLEYû
Trasimene Acquisition) in May with a second
SPAC (Trebia Acquisition) raising US$375m
set to debut as early as this month too.
Foley has an enviable investing track
record, having brought several other
technology companies public in recent years,
among them Ceridian HCM and Black Knight.
"YûlLINGûPUBLICLYûONû4UESDAYû*UNEûû$"û representing 17% of its workforce, pushed Chu, a former senior managing director at
may even be able to price its IPO and debut customers to sign longer-term contracts and Blackstone, has also been active in the SPAC arena.
before the July 4 holiday. made several acquisitions. Anthony Hughes

International Financing Review June 13 2020 89

WEEK IN NUMBERS
25 times
„ ONLINE USED CAR SELLER
VROOM CHALKED UP A SERIES OF
NOTEWORTHY MOMENTS ON ITS IPO.
PRICING CAME AT US$22 FROM AN
INITIAL RANGE OF US$15–$17, UPPED
TO US$18–$20. THE BOOK CLOSED
TWO DAYS EARLY YET THE DEAL
WAS STILL 25 TIMES COVERED. ON
DEBUT SHARES CLOSED AT US$47.90,
UP 117.7%
ASIA-PACIFIC
AUSTRALIA
KOGAN.COM EYES EXPANSION
Online retailer KOGAN.COM has raised A$100m
(US$68m) through a share placement to
fund expansion opportunities.
It issued 8.7m new shares, or 9.2% of its
existing capital, at A$11.45 each, or a 7.5%
discount to the pre-deal close of A$12.38 on
June 9.
The deal received support from existing
4HEû#HINESEûLENDERûPOSTEDûAûNETûPROlTûOFû
Rmb6.5bn (US$920m) for the nine months
ended September 30, up 16% year-on-year.
Its total assets stood at Rmb1.1trn as of
September 30, while its non-performing
loan ratio and Core Tier 1 capital adequacy
ratio were 1.77% and 8.17%, respectively.
NEW ORIENTAL AND TAL WEIGH HK
LISTINGS
NYSE-listed NEW ORIENTAL EDUCATION &
TECHNOLOGY GROUP and TAL EDUCATION are
talking to banks about potential secondary
listings in Hong Kong, joining the queue of
US-listed Chinese companies seeking to list
closer to home amid rising US-China

HK$30bn
„ NASDAQ-LISTED JD.COM RAISED
HK$30bn (US$3.9bn) FROM ITS HONG
KONG SECONDARY LISTING, MAKING
IT THE SECOND-LARGEST FLOAT THIS
YEAR BEHIND BEIJING-SHANGHAI
HIGH SPEED RAILWAY’S Rmb30.7bn
(US4.3bn) SHANGHAI IPO
and new shareholders.
Kogan is also looking to raise up to A$15m
through a share purchase plan.
Proceeds will be used to offer more
products to more customers and to enhance
its operating model when opportunities arise.
Canaccord Genuity and Royal Bank of Canada
were the lead managers for the placement.
CHINA
tensions.
The two Chinese education companies
are discussing the possibility of selling
shares in Hong Kong with internal
stakeholders and external advisers, said
people familiar with the matter, adding that
no decision has yet been made.
The companies have not yet picked banks
for the transactions, which could come as
early as this year, said two of the people.
It is unclear how much the two
companies are looking to raise. At current

15 months
„ DUN & BRADSTREET FILED FOR
BOHAI BANK WINS IPO APPROVAL

CHINA BOHAI BANK won listing approval last

A US$1bn IPO LAST WEEK, JUST 15
MONTHS AFTER BILL FOLEY, CHINH
CHU AND THOMAS H LEE PARTNERS
TOOK IT PRIVATE IN A US$7bn BUYOUT
Tuesday for a Hong Kong IPO of about
US$2bn, people close to the deal said.
The national joint-stock commercial
bank, which counts Standard Chartered as
its second-largest shareholder, will start pre-
marketing in mid-June.
ABC International, CCB International, CLSA
VALUATIONSûAûûmOATûINû(ONGû+ONGûnûINûLINEû
with other secondary listing candidates –
would raise about US$1bn in each case.
As of last Tuesday, shares of TAL are up
36% this year at US$65.73, giving it a
market capitalisation of US$25bn. New
Oriental, meanwhile, has seen its shares
rise 7% this year. The stock closed at
US$129.66 last Tuesday with a market cap
of US$20bn.

US$10bn
„ APOLLO’S US$1.75bn CONVERTIBLE
PREFERRED INVESTMENT IN
ALBERTSONS VALUED THE GROCER
AT US$10bn, AND DOES NOT INCLUDE
AN IPO RATCHET, SETTING A CLEAR
BENCHMARK FOR THE FLOAT
EXPECTED IN JULY
and Haitong International are the joint
sponsors.
Founded in 2005, Bohai Bank also counts
Tianjin TEDA Investment, China Shipping
Investment and State Development &
Investment as shareholders. StanChart
owns a 19.99% stake, behind TEDA, which
holds 25%.
ASIA-PACIFIC EQUITIES
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of
New Oriental declined to comment while
TAL did not reply to requests for comment.
Investors have raised concerns over TAL’s
corporate governance standards after the
tutoring services provider said in early April
that it had caught one employee allegedly
FABRICATINGûSALESûlGURESûINûITSûNEWLYû
introduced “Light Class” business.
ASIA-PACIFIC EQUITIES (EX-JAPAN)
BOOKRUNNERS: 1/1/2020 TO DATE
Total Share Managing No of Total Share

Rmb8.65– bank or group

1 Morgan Stanley
issues
42
US$(m) (%)
10,419.25 9.9
bank or group

1 Morgan Stanley
issues

38
US$(m) (%)

10,207.62 10.2

Rmb8.95
„ SHANGHAI FUDAN-ZHANGJIANG
2 Goldman Sachs
3 JP Morgan
40
26
8,260.18
6,250.31
7.8
5.9
2 Goldman Sachs
3 JP Morgan
38
26
6,728.53
6,250.31
6.7
6.3
4 China Secs 18 5,410.81 5.1 4 China Secs 18 5,410.81 5.4
BIO-PHARMACEUTICAL BECAME THE 5 UBS 38 5,097.36 4.8 5 UBS 38 5,097.36 5.1
FIRST COMPANY TO PRICE AN IPO ON 6 CICC 32 5,095.07 4.8 6 CICC 32 5,095.07 5.1
THE SHANGHAI STAR BOARD USING 7 Credit Suisse 21 4,499.30 4.3 7 Citigroup 21 4,179.78 4.2
AN INDICATIVE PRICE RANGE. THE 8 Citigroup 21 4,179.78 4.0 8 Macquarie Group 20 3,770.62 3.8
Rmb1.07bn (US$151m) FLOAT PRICED 9 Macquarie Group 20 3,770.62 3.6 9 Citic 17 3,693.83 3.7
AT THE TOP OF THE Rmb8.65–Rmb8.95 10 Citic 17 3,693.83 3.5 10 HSBC 16 3,660.17 3.7
RANGE AND RETAIL DEMAND WAS AS Total 906 105,574.99 Total 848 99,829.06
STRONG AS EVER, WITH THE TRANCHE Including all domestic and international deals and rights issues Including all domestic and international deals and rights issues
3,100 TIMES COVERED Source: Refinitiv SDC code: C4a1 Source: Refinitiv SDC code: C4a2

90 International Financing Review June 13 2020


4HEûINCIDENTûBRIEmYûWEIGHEDûONûTHEû
stock, which bounced back on signs
the company is recovering from the
CORONAVIRUSûIMPACTû)TSûOFmINEûBUSINESSû
is expected to maintain high growth
while the online business is also
expanding.
New Oriental, a private education
provider, saw its net income increase 41%
year on year to US$138m in the three
months to February 29 2020.
SMOORE GETS READY TO IGNITE
SMOORE INTERNATIONAL, one of the world’s
largest e-cigarette makers, sought listing
approval last week for a Hong Kong IPO of
US$600m–$900m.
Pre-marketing will start this week once
approval is granted.
CLSA is the sponsor.
Boyu Capital was founded in 2010 and
counts as partners former TPG Capital
senior executive Mary Ma and Alvin Jiang,
also known by his Chinese name Jiang
Zhicheng, who is the grandson of former
Chinese president Jiang Zemin.
4HEûCOMPANYûPOSTEDûAûNETûPROlTûOFû
Rmb2.44bn in 2019, up from Rmb726m in
2018, on revenue of Rmb8.35bn.
GF Securities is the sponsor.
TRIO PRE-MARKET FLOATS
Three companies from the healthcare sector
started pre-marketing last Monday for Hong
Kong IPOs of a combined US$800m.
Chinese medical equipment maker KANGJI
MEDICAL is planning to raise about US$400m
FROMûITSûmOATûBank of America, CLSA and
Goldman Sachs are sponsors.
Kangji, which makes equipment for
EQUITIES ASIA-PACIFIC
as other working capital needs. Nio China
plans to invest in research and development,
manufacturing facilities, improve its supply
chain and enhance its sales and service
network.
Nio’s shares fell 5.7% on Wednesday and
6.2% on Thursday, to US$5.91, but are still
up 47% year-to-date.
SHENZEN, REDSUN AND ZHENRO SEEK
IPO APPROVALS
SHENZHEN HEPALINK PHARMACEUTICAL, Redsun
Services and Zhenro Services Group sought
listing approvals last week for their
respective US$300m–$400m, US$70m–$80m
and US$150m Hong Kong IPOs.
Pre-marketing of the deals will start this
week if approvals are granted.
Shenzhen-listed Hepalink has a portfolio of
drugs to treat blood clots and immune system
IFR reported last August the company minimally invasive surgery, posted a net DISORDERSû&ORûTHEûlRSTûNINEûMONTHSûOFûûITû
planned to raise about US$400m from the
mOATûINûTHEûlRSTûHALFûOFûû4HEûDEALûSIZEû
has since become much bigger as investors
have shown strong interest, said people
close to the deal.
PROlTûOFû2MBMû53M ûFORûûUPû
46% from 2018.
HYGEIA HEALTHCARE, a Warburg Pincus-
backed Chinese hospital operator and
radiotherapy equipment maker, intends to
POSTEDûAûPROlTûOFû2MBMû53M ûUPû
60% from the same period a year earlier.
Goldman Sachs and Morgan Stanley are the
joint sponsors.
Redsun, a Chinese property management
Smoore was listed on the China National
Equities Exchange and Quotations and
delisted from the over-the-counter
exchange in June last year.
3MOOREûPOSTEDûPROlTûANDûTOTALû
comprehensive income of Rmb921m
raise about US$300m from its listing.
Books are tentatively scheduled to open
on June 16 and close on June 19 ahead of the
listing on June 29.
The company posted an adjusted net
PROlTûOFû2MBMûFORûTHEûûMONTHSûENDEDû
COMPANYûPOSTEDûAûNETûPROlTûOFû2MBMûFORû
2019, up 73% from 2018.
The company is wholly owned by Zeng
Huansha, the chairman of Hong Kong-listed
Redsun Properties.
ABC International is the sponsor.
53M ûFORûTHEûlRSTûHALFûOFûûMOREû October 31 2019, up 82% from the same Zhenro Services, which provides property
THANûlVEûTIMESûTHEû2MBMûEARNEDûINû period in 2018. management services to Hong Kong-listed
the same period of 2018. Warburg Pincus owns a 17.2% stake in the :HENROû0ROPERTIESû'ROUPûPOSTEDûAûNETûPROlTû
Its clients include Japan Tobacco, company. of Rmb74m for the nine months to
2EYNOLDSû!SIA
0ACIlCû"RITISHû!MERICANû Haitong International and Morgan Stanley are September 30 2019, up 160% from the same
Tobacco, RELX and NJOY. joint sponsors. period of 2018.
IMMUNOTECH BIOPHARM is working with joint Zonrong Ou, the controlling shareholder
SICHUAN LANGJIU SAYS CHEERS TO IPO sponsors CCB International and Guosen of Zhenro Properties Group, owns 87.3% of
SecuritiesûONûAûmOATûOFûATûLEASTû53M Zhenro Services.
Clear spirits producer SICHUAN LANGJIU has Books are scheduled to open in the second CCB International is the sponsor.
lLEDûTOûTHEû#HINAû3ECURITIESû2EGULATORYû half of June and the deal will price in late
Commission for a Rmb7.45bn (US$1.05bn) June. TRINA SOLAR SOARS 136% ON DEBUT
Shenzhen IPO. The biopharmaceutical company has a
The company plans to offer up to 70m portfolio of 10 drug candidates focusing on TRINA SOLAR‘s A-shares soared as high as 136%
SHARESûFORûANûûFREE
mOAT cancer treatment. It posted a loss of above their IPO price when they made their
It will use Rmb6.32bn of the proceeds to Rmb109m for 2019, wider than a Rmb35m trading debut on June 10. The stock climbed
upgrade and build four production bases, loss for 2018. to Rmb19.26 from the Rmb8.16 issue price
and fund warehousing, packing and liquor before closing at Rmb17.21, up 110.9%.
fermentation bacteria projects. The rest of NIO UPSIZES FOLLOW-ON The photovoltaic equipment producer,
the proceeds will be used for IT services, to which was delisted in the US in 2017, raised
build an R&D centre, and for working Electric-vehicle maker NIO has upsized a Rmb2.53bn (US$357m) from its Star IPO of
capital.
mOATû)TûINITIALLYû
The company’s chairman, Wang Junlin,
holds a 76.7% stake directly and indirectly
through biggest shareholder, Sichuan
Langjiu Group.
Crystal Glitter, which was registered in
Hong Kong in 2016 and is 100% held by PE
primary follow-on to raise US$428m after
pricing the deal at US$5.95 per share.
The New York-listed company sold 72m
American depository shares, instead of 60m
at launch, at a 5.5% discount to last
Wednesday’s close of US$6.30.
There is a 15% greenshoe.
MûSHARESûORûAûûFREE
planned to issue 439m shares with a
fundraising target of Rmb3bn.
Proceeds will be used to fund a
photovoltaic power generation project, to
upgrade photovoltaic modules and a
research and development centre, and to
lRMû"OYUû#APITALûBOUGHTûAûSTRATEGICûSTAKEû Morgan Stanley, Credit Suisse and CICC are replenish working capital.
of 11.2% in 2017. the bookrunners. Sole sponsor Huatai United Securities is
The chairman’s brother, Wang Jungang, The company plans to use the proceeds to charging Rmb158m as a service fee and
holds a 5% stake. fund cash investments in Nio China, as well investing Rmb75.8m, or 3% of the offering.

International Financing Review June 13 2020 91

 GAN & LEE PHARMA KICKS OFF IPO
GAN & LEE PHARMACEUTICALS was due to price a
Rmb2.54bn (US$359m) Shanghai IPO on
June 12.
Books will open for a day on June 16.
The biopharmaceutical company plans to
PROlTûCOMPANYûPLANSûTOûOFFERû enlarged share capital at HK$32.55 each, near
offer 40.2m A-shares, or 10% of the enlarged
capital.
The insulin manufacturer will use the
proceeds for insulin mass production,
research, marketing, and working capital,
to register insulin products in the US and to
build an R&D centre.
)TûPOSTEDûAûNETûPROlTûOFû2MBBNûONû
PROlTûCANDIDATESûONû about 80% of the deal.
revenue of Rmb2.89bn in 2019.
Citic Securities is the sponsor and joint
bookrunner with Orient Securities.
SIMCERE FILES FOR HONG KONG IPO
SIMCERE PHARMACEUTICAL GROUP is looking to
raise around US$500m through a Hong
Kong IPO, according to people close to the
deal.
4HEûCOMPANYûlLEDûFORûTHEûPROPOSEDû
listing on June 10.
Simcere listed on the NYSE in 2007 and
delisted in 2013.
It has a range of 50 product candidates in
different stages of development to treat
cancer as well as central nervous system and
autoimmune-related diseases.
)TûPOSTEDûANûANNUALûPROlTûOFû2MBBNû
(US$141m) last year, up 37% from Rmb734m
a year earlier.
CICC and Morgan Stanley are the joint
sponsors.
ESR CAYMAN SHARE SALE TOTALS
HK$1.95bn
Three institutional shareholders have raised
a combined HK$1.95bn (US$251m) from a
sell-down in ESR CAYMAN.
The block was upsized to 116m shares,
from 80.7m shares at launch, and priced at
the bottom of the HK$16.80–$17 marketed
price range, or a 4.3% discount to the pre-
deal close of HK$17.56 on June 5.
The selling shareholders are WP OCIM
One, a Warburg Pincus unit, Montsoreau
Investment and Mercer Investments
(Singapore).
There is a 90-day lock-up for WP OCIM
One and Montsoreau Investment. Mercer
sold its entire stake.
SINOCELLTECH GROUP PRICES STAR IPO
SINOCELLTECH GROUP has set the issue price at
Rmb25.64 per share for a Shanghai Star
IPO of Rmb1.28bn (US$181m), downsized
from a proposed Rmb1.98bn.
4HEûPRE
50m shares, or 11.5% of the enlarged
capital. It is selling 4% of the shares to the
sponsor, with the remainder of the deal
split 80.2%/19.8% between institutional and
retail investors.
The implied market capitalisation of
Rmb11.2bn meets the minimum Rmb4bn
REQUIREMENTûFORûPRE
the Star market.
Companies in the pharmaceutical
industry must have at least one core
product at the Phase II clinical trial stage.
Sinocelltech, which manufactures
recombinant proteins, monoclonal
antibodies and vaccines, will use the
proceeds for clinical research and working
capital.
Its net loss widened to Rmb798m in
2019 from Rmb459m in 2018, on revenue
of Rmb2.6m and Rmb2.9m respectively.
CICC is the sponsor, and Citic Securities is
THEûlNANCIALûADVISER
YONGDA AUTO SELL SHARES VIA TOP-UP
CHINA YONGDA AUTOMOBILES SERVICES has raised
HK$995m (US$128m) through a top-up
placement at HK$8.29 per share, or a 7.5%
discount to the pre-deal close.
The company marketed 120m shares,
representing 6.1% of the enlarged share
capital, at an indicative range of HK$8.22–
$8.42 each.
Proceeds are for general corporate
purposes. There is a 90-day lock-up.
Goldman Sachs, HSBC and Morgan Stanley
were the bookrunners.
WEIGAO GROUP READIES STAR
SPIN-OFF
Hong Kong-listed Shangdong Weigao
Group Medical Polymer plans to spin off
subsidiary SHANDONG WEIGAO ORTHOPEDIC
DEVICE on the Shanghai Star market.
Weigao Ortho will sell 5%–20% of the
enlarged capital in the IPO.
The spin-off manufactures orthopaedic
medical implants including spinal, trauma
and joints products. It also produces
KAISA PROSPERITY BUILDS WAR CHEST
KAISA PROSPERITY HOLDINGS has raised HK$456m
(US$59m) from a top-up share placement.
The Chinese property management
company sold 14m shares or 9.09% of its
the bottom of a HK$32.50–$33.45 range. The
lNALûPRICEûREPRESENTSûAûDISCOUNTûOFûûTOûLASTû
Monday’s closing price of HK$36.15.
The books were well oversubscribed with
about 20 investors participating, including
long-only funds, sovereign wealth funds and
HEDGEûFUNDSû4HEûTOPûlVEûINVESTORSûTOOKû
The company plans to use the proceeds
for future M&A, strategic investments,
working capital and general corporate
purposes.
There is a 90-day lock-up period.
ABC International and Haitong International
were the bookrunners.
RUBYMAB LEADS ALPHAMAB SALE
Three shareholders have raised a combined
HK$440m (US$57m) through a sell-down in
ALPHAMAB ONCOLOGY.
The block trade of 26.7m shares, or 2.9%
of outstanding, was priced at the top of the
HK$16.28–$16.50 range, representing a 4.1%
discount to the pre-deal close of HK$17.20
on Thursday.
Controlling shareholder Rubymab sold
14.5m shares, according to a company
announcement and faces a 12-month
lock-up.
The other vendors are PAG Growth and
Classic Insight Project Company, which
have a 90-day lock-up.
Morgan Stanley was the bookrunner.
SHANXI SEC PRICES RIGHTS ISSUE
Shenzhen-listed SHANXI SECURITIES has set the
issue price at Rmb5.00 each for a Rmb4.24bn
(US$600m) rights issue, lower than the
proposed Rmb6bn sizing.
The brokerage will offer 849m shares on
June 16 on a 3-for-10 basis. Trading in its
shares will be halted from June 17–24.
Shanxi Financial Investment Holdings,
the biggest shareholder in the company
with a 30.6% stake and which is owned by
Shanxi Provincial Finance Department, has
committed to take up its full entitlement.
Proceeds will be used to expand the
Concurrently, certain ESR employees
exercised stock options and sold 8.7m
shares at the same price in an off-market
transaction.
WP OCIM One now owns about 16.1% of
ESR’s enlarged share capital.
CLSA, Goldman Sachs and Morgan Stanley
handled the sale.
92
surgical instruments and tools for
implant surgery.
The parent company holds around 80.5%
of Weigao Ortho. Its shares changed hands
at HK$16.36 in the morning of June 12,
up 2.3%.
The proposal still needs approval from
shareholders and regulators.
International Financing Review June 13 2020
BROKERSûINTERMEDIARYûCAPITALûlXEDûINCOMEû
and bill investment businesses and increase
the capital of a subsidiary.
The company posted revenue of
Rmb5.08bn in 2019, down 26%. It is the
biggest shareholder in the Zhong De
Securities JV with Deutsche Bank with a
66.7% stake.

Citic Securities is the sponsor and joint
bookrunner with Zhong De securities.
INDIA
MAHINDRA FINANCE HIRES BANKS
MAHINDRA & MAHINDRA FINANCIAL SERVICES has hired
Axis Bank, BNP Paribas, HDFC Securities, HSBC,
ICICI Securities, Kotak, Nomura and SBI Capital
Markets to work on an up to Rs35bn (US$463m)
rights issue targeted for next month.
Details on the record date, timing,
entitlement ratio and pricing will be
provided later.
It is raising capital to strengthen its
balance sheet as the Covid-19 pandemic is
likely to increase loan defaults by
customers.
Mahindra Finance shares are down 52%
year-to-date.
SHRIRAM TRANSPORT PLANS
RIGHTS ISSUE
#OMMERCIALûVEHICLEûlNANCIERûSHRIRAM
TRANSPORT FINANCE is planning a rights issue
of up to Rs20bn (US$264m) in the second
half of the year, people with knowledge of
the transaction said.
The company is raising funds to
strengthen its balance sheet amid the Covid-
19 pandemic and India’s nationwide
lockdown since March.
ICICI Securities is working on the
transaction and other banks are likely to
join.
The company last raised Rs5.84bn
THROUGHûAûQUALIlEDûINSTITUTIONALûPLACEMENTû
in 2010.
Shriram Transport shares are down 47%
year-to-date.
HAPPIEST MINDS SEEKS US$100m IPO
HAPPIEST MINDS TECHNOLOGIESûHASûlLEDûAûDRAFTû
prospectus for an IPO of around US$100m
and is targeting a launch in the fourth
quarter.
Primary shares totalling Rs1.1bn and
35.7m secondary shares will be sold in the
IPO. Controlling shareholder Ashok Soota
and JP Morgan Asset Management are the
sellers.
Institutional buyers will be allocated 75%
of the offer, high-net-worth investors 15%
and retail investors 10%.
ICICI Securities and Nomura are the lead
managers.
Happiest Minds provides information
technology services for clients in the retail,
consumer packaged goods, e-commerce,
banking, insurance, transportation and
hospitality sectors.
DCB BANK PLANS QIP SHARE SALE
DCB BANKûISûPLANNINGûAûQUALIlEDûINSTITUTIONALû
placement of up to Rs5bn (US$66m), subject
to shareholder approval.
Details on the timing and syndicate will
be disclosed later.
The private sector bank is raising the
funds to strengthen its balance sheet. DCB
"ANKSûNETûPROlTûFELLûTOû2SMûINûTHEû
quarter to March 31, down 29% from
Rs963m a year earlier.
The bank raised Rs3.78bn via a QIP in
2017.
DCB Bank shares are down 57% year-to-date.
MALAYSIA
IGB COMMERCIAL REIT PLANS LISTING
IGB COMMERCIAL REIT will list 1.23bn new
units on Bursa Malaysia at an illustrative
price of M$1 each to raise M$1.23bn
(US$289m), parent IGB said in a stock
EXCHANGEûlLING
The IPO will be completed by the fourth
quarter.
Up to 945m units will be reserved for
IGB shareholders and 282m will be sold to
institutional and retail investors.
Existing shareholders are entitled to two
shares of IGB Commercial REIT for every
lVEû)'"ûSHARES
4ENûOFlCEûBLOCKSûANDûRETAILûSPACEûWORTHû
M$3.15bn will be injected into the REIT.
Most of these properties are located in
Kuala Lumpur’s Mid Valley City.
Hong Leong is the adviser to the listing.
NEW ZEALAND
INFRATIL COMPLETES SHARE
PLACEMENT
INFRATIL has raised NZ$250m (US$161m)
from a share placement priced at NZ$4.76
per share.
The infrastructure investment company
sold 52.5m new shares, or 8% of existing
issued capital, at a discount of 8% to the
pre-deal close of NZ$5.175.
The placement was supported by existing
and new institutional investors in local and
offshore markets, as well as clients of
BROKERAGEûlRMS
Infratil is raising an extra NZ$50m from
retail investors through a share purchase
plan.
Proceeds will provide additional balance
SHEETûmEXIBILITYûTOûFUNDûGROWTHûINVESTMENTSû
across Infratil’s portfolio companies and
take advantage of new opportunities.
UBS is the bookrunner.
International Financing Review June 13 2020
EQUITIES ASIA-PACIFIC
SINGAPORE
SEMBCORP MARINE LAUNCHES
RIGHTS ISSUE
Loss-making Singaporean rig builder
SEMBCORP MARINE is launching a S$2.1bn
(US$1.5bn) rights issue backed by parent
company Sembcorp Industries and state-
OWNEDûINVESTMENTûlRMû4EMASEKû(OLDINGS
The 5-for-1 issue is priced at S$0.20 per
share, representing a 76% discount to the
pre-deal close of S$0.85 and a 35% discount
to the theoretical ex-rights price, based on
IFR calculations.
Sembcorp Industries will subscribe to its
S$1.27bn entitlement and an additional
S$230m in case of undersubscription.
Temasek is sub-underwriting S$600m of the
rights with no fee.
The issuer has seen its business hit by the
oil price crash and the Covid-19 pandemic.
This is the second time Temasek is
stepping up to back a local rights issue since
the coronavirus outbreak, following the
S$15bn rights issue of Singapore Airlines.
In order to subscribe to the rights,
Sembcorp Industries will convert a S$1.5bn
subordinated loan extended to Sembcorp
Marine in June 2019 into equity.
Subsequent to these transactions,
Sembcorp Industries proposes to demerge
Sembcorp Marine through a special share
distribution in order to focus on its energy
and urban development businesses.
Sembcorp Industries shareholders will
receive between 427 and 491 Sembcorp
Marine shares for every 100 Sembcorp
Industries shares held, with no cash outlay.
Following the rights and share dividend
issues, Temasek will hold over 29% of Sembcorp
Marine and 49.3% of Sembcorp Industries.
Both companies will convene shareholder
meetings in August or September to seek
approval.
DBS BankûISûTHEûSOLEûlNANCIALûADVISERûTOû
Sembcorp Marine for the rights issue and to
Sembcorp Industries for the proposed share
dividend distribution. Credit Suisse is sole
adviser to Temasek.
Sembcorp Marine shares closed at S$0.585 on
Thursday and Sembcorp Industries at S$1.98.
EAGLE HOSPITALITY TRUST FACES PROBE
Singapore’s central bank and police force
have opened a joint investigation into EAGLE
HOSPITALITY TRUST for alleged breaches of
disclosure requirements.
The embattled US-focused REIT said its
current directors had attended interviews
with the Monetary Authority of Singapore as
part of the joint investigation. It did not
provide further details.
93
 The MAS and the police force’s
Commercial Affairs Department announced
the probe on June 5 following a referral by
Singapore Exchange Regulation (SGX
RegCo). In April, MAS and SGX RegCo said
they were looking into possible breaches of
laws, regulations and listing rules by EHT.
EHT is a stapled trust comprising EH-Real
Estate Investment Trust and Eagle
Hospitality Business Trust, which was listed
on SGX on May 24 2019 following a
US$566m IPO at US$0.78 per unit. It last
traded at US$0.137 on March 19.
Trading of EHT units was voluntarily
suspended on March 24 after EH-REIT
defaulted on a loan of US$341m. US-based
Urban Commons, the master lessee of EHT’s
properties, failed to place security deposits
and make rental payments since December
2019, according to a statement from MAS.
Separately, EHT said MAS is reviewing a
proposal from Hong Kong-based Far East
Consortium International to take over as EH-
REIT’s manager.
Far East has also been planning a S$500m
(US$359m) hospitality REIT IPO on SGX,
comprising hospitality assets in Australia,
Singapore, Malaysia and the UK.
DBS, HSBC and JP Morgan are working on
that IPO.
SOUTH KOREA
SK PEPS UP SOUTH KOREAN IPOs
South Korea’s SK BIOPHARMACEUTICALS last
week launched the country’s largest IPO in
three years, seeking up to W959bn
(US$800m) and playing on the popularity of
the biotech and healthcare sectors with
investors amid the coronavirus pandemic.
The drugmaking unit of conglomerate SK
Group is selling 19.6m shares, comprising
68% primary and 32% secondary, for a 25%
FREE
mOATû4HEûINDICATIVEûPRICEûRANGEûOFû
W36,000–W49,000 gives the company a
potential market capitalisation of W2.8trn–
W3.8trn.
If it prices at the top of range, the deal
WOULDûBEûTHEûLARGESTûmOATûINû3OUTHû+OREAû
since biopharmaceutical distributor
Celltrion Healthcare’s W1trn KRX listing in
July 2017.
This long-awaited deal caused a 10% spike
in shares of its parent company SK Holdings
on May 20, the day after the listing plan was
OFlCIALLYûANNOUNCED
SK Holdings, a subsidiary of the
conglomerate that focuses on energy and
chemicals, telecommunications and
trading, is the selling shareholder in the
IPO.
The popularity of biotech stocks has
driven investor interest in the offering,
94
WHICHûWASûFULLYûSUBSCRIBEDûONûITSûlRSTûDAYûOFû
bookbuilding last Wednesday.
“Demand has been strong and way
exceeded the offer size,” said a person close
to the deal. “With some of its drug products
having received approvals from FDA,
investors are able to gauge some visibility of
the company’s prospects.”
SK Biopharm last year received regulatory
approval from the US Food and Drug
Administration for two drugs that treat
sleep disorders and epilepsy.
The development of anti-epileptic drugs is
a niche area with limited players, according
TOûTHEûPERSONû!NOTHERûPLAYERûINûTHEûlELDûISû
Belgian biopharma company UCB.
Another person close to deal said the offer
was expected to draw strong domestic
demand as investors are looking to a
potential rebound in the country’s
lacklustre capital markets following the
coronavirus crisis. South Korea’s benchmark
Kospi 200 stock index has regained more
than a third of its value since March.
!ûSUCCESSFULû)0/ûWILLûGIVEûCONlDENCEûTOû
other companies seeking to go public this
year, including Big Hit Entertainment, the
music label behind boy band BTS, and
Hyundai Card, the credit card unit of
Hyundai Motor Group.
The international bookbuild runs until
June 18, while the domestic offer will take
place on the last two days of a roadshow
from June 17–18.
About 60% of the deal will be allocated
to institutional investors, split between
international and domestic accounts,
while the rest will go to domestic retail
buyers and an employee stock ownership
plan.
Proceeds will be used to develop SK
Biopharm’s pipeline of products and for
drug discovery, hiring additional
personnel, funding future growth
initiatives and general corporate purposes.
The deal will price on June 19, and the balance underwritten by Citigroup and
shares are set to be listed on July 2.
Citigroup, Morgan Stanley and NH Investment
& Securities are the joint bookrunners.
EUROPE/MIDDLE
EAST/AFRICA
BELGIUM
COFINIMMO RAISES €63.6m IN ABB
Trading in real estate group COFINIMMO shares
was suspended last Wednesday while the
company tapped the market for new cash,
eventually raising €63.6m.
International Financing Review June 13 2020
A total of 526,000 shares were sold at €121
each, representing a 3.8% discount to last
Tuesday’s close of €125.80.
BNP Paribas was bookrunner.
The placing was launched alongside an
ANNOUNCEMENTûTHATû#OlNIMMOûHADûSIGNEDû
an agreement on Wednesday to acquire six
healthcare sites in Belgium through
contributions in kind.
3HARESûINû#OlNIMMOûCLOSEDûLASTû4HURSDAYû
down 3.65% at €121.40.
FINLAND
FINNAIR SETS TERMS FOR STATE-BACKED
RIGHTS ISSUE
FINNAIR set terms on Wednesday for its
€511.7m fully underwritten rights issue,
having received shareholder backing for
the cash call at the beginning of the
month.
The fundraise will be complemented by
amendments to its revolving credit facility
and hybrid notes, a €600m pension loan
agreement with Ilmarinen Mutual Pension
Insurance, and potential sale and
leaseback of aircraft. The state is
guaranteeing 90% of the pension loan,
with Nordea guaranteeing 10%.
The Finnish carrier said that the cash
would allow it to continue its long-term
growth strategy in a post-crisis environment,
but the reality is that the company is coping
with a collapse in income.
In May, Finnair carried 26,700 passengers,
97.9% fewer than in May 2019 though the
company said it was an improvement on
!PRILûWHENûTRAFlCûWASûDOWNûûFROMûAû
YEARûEARLIERû4HEûCOMPANYûDIDûNOTûmYûATûALLû
on Asian or North Atlantic routes in May.
The capital increase is backed by the
Finnish state, which has irrevocably
committed for its 55.9% stake, with the
Nordea. The state got the go-ahead on June 9
from the EU to participate in the rights
issue.
The capital raise involves a near-doubling
of its €521m market cap, with 1.27bn new
shares offered on a heavy 10-for-1 basis at
€0.40, a 45.5% discount to TERP of €0.73
according to IFR calculations, based on the
€4.078 Tuesday close.
The record date is June 12, with
subscription running from June 17–July 1,
rights trading wrapping up on June 25, and a
result due on July 7.
Finnair shares closed down 4.4% on
Wednesday at €3.90.
Citigroup and Nordea are bookrunners,
with OP Corporate Bank, SEB and
Swedbank/Kepler Cheuvreux as co-lead
managers.

GERMANY
PHARMASGP COVERED AFTER FOUR DAYS
OF VIRTUAL IPO
"OOKSûWEREûOFlCIALLYûCOVEREDûONûTHEûBASEû
deal size for the €207.9m–€240.9m IPO of
Having closed on debut at €12.74 from
€9.50 pricing, the shares pushed up to a
closing high of €14 on the second day of
trading and closed at €13.20 before the
greenshoe was exercised, a near 39%
premium.
The shares had come off a little on
Monday, opening at €13.08 and closing at
EQUITIES EMEA
GVS is being compared to three main peer
groups.
4HEûlRSTûGROUPûINCLUDESûINDUSTRIALûlLTRATIONû
peers which trade at around 15.7–16.9 EV/Ebitda
for 2020, which includes the US’s Donaldson.
Life science companies such as Germany’s
Sartorius comprise the second group and
trade between 17.8 and 24 EV/Ebitda.
PHARMASGP last Thursday, four days into
bookbuilding.
Books opened last Monday following a
mOATûTOû trading around 13–15 EV/Ebitda.
pre-marketing process in which two
analysts virtually met more than 170
investors in just eight days.
PharmaSGP focuses on over-the-counter
pharmaceuticals based on natural active
ingredients and other healthcare products.
The chemical-free approach has attracted
ESG-focused investors, as well as healthcare,
consumer and generalist names.
A price range was published on Monday
morning, and books opened in the afternoon
once the prospectus was approved.
PharmaSGP has been able to keep to its
aim of an early summer IPO, with the IPO
market quickly reopening following the
coronavirus shutdown and the company
still on track to achieve projected
õûlNISHINGûLASTûWEEKûATûõ
On full exercise of the greenshoe, the deal
SIZEûRISESûTOûõMûANDûTHEûFREE
41.3%.
Hauck & Aufhauser was bookrunner.
ITALY
GVS LAUNCHES SPEEDY BOOKBUILD WITH
CORNERSTONE-BACKING
Filter company GVS opened books on its IPO
last Thursday after gaining approval from
the Italian regulator following publication
of a price range last Monday.
The Milan IPO is set to raise between €427m
and €506.3m and follows the pattern of other
European IPOs during the coronavirus
pandemic of including cornerstones and a
The third group includes Italian
corporates such as Interpump and Carel,
Investor feedback was positive on Tuesday
with investors said to be particularly
INTERESTEDûINûTHEûCOMPANYSûGROWTHûPROlLEû
and the long history of its management team.
The expectation is that UK investors will
dominate the book for GVS followed by US
accounts, with domestic investors expected
to be around a sixth of demand.
MONACO
SCORPIO BULKS UP
Stretched by Covid-19, SCORPIO BULKERS
sapped some of the momentum out of its
recent stock rebound by raising US$75.7m
PERFORMANCEûlGURESûFORûTHEûYEARûAûBANKERû
involved said.
The range of €31.50–€36.50 per share
comes at an around 20% discount at the
bottom to main peer Dermapharm, which
Berenberg brought to market in a 2018 IPO,
on an Ebit 2021 basis.
The base deal of 6.6m shares will raise up
to €240.9m and an upsize option of 1.8m
shares could take it to €306.6m at the top of
the range. There is also a maximum 15%
greenshoe. All of the offering is secondary.
speedy bookbuild of just four days.
Capital Research and Management has
committed to buy 9.3% of the offering,
corresponding to 3.26% of GVS post-money.
In the past month most European listings
included cornerstone tranches, including
those by JDE Peet’s, Nanoform and Pexip.
Bookbuilding for GVS will run until June
16, with eliminated travel time allowing
bankers to shorten the process. General
consensus that volatility remains high also
contributed to the shortened timetable.
from an overnight stock sale.
The owner of 55 vessels used to ship
commodities such as grain, coal and
fertiliser was able to increase the size of the
offering from US$60m at launch.
A syndicate led by Bank of America, BTIG
and Clarksons Platou found takers for 4.1m
NEWûSHARESûINûTHEûSHIPPERûATûAûlXEDû
marketing price of US$18.46, a 10% discount
to the previous close for the equivalent of
57% of outstanding.
The stock held above the offering price to
4HEûSELLERSûAREûTHEûlRMSûTWOûFOUNDERSû Goldman Sachs and Mediobanca are joint close at US$18.67 in Wednesday’s
Clemens Fischer and Madlena Hohlefelder, bookrunners. Lazard is advising. aftermarket but slumped to US$17.77
who own 90% and 10% of the company, A price range of €7.00–€8.30 has been set. during Thursday’s broader market sell-off.
respectively. The base deal comprises 10m primary While up 40% in the past three weeks
If the upsize option and greenshoe are shares and 51m from GVS Group. There is ahead of pricing, shares of Scorpio Bulkers
exercised in full, their combined holding also a 15% secondary greenshoe. are still down 70% this year as Covid-19 has
will be reduced to 19.5%. Keeping their 4HEûFREE
mOATûWILLûBEûûIFûTHEûGREENSHOEû hurt global trade and the dry bulk market.
respective positions as head and deputy is fully exercised.
head of PharmaSGP’s supervisory board, '63ûMANUFACTURESûlLTERSûFORûTHEû EMEA EQUITIES
THEYûWILLûRETAINûSIGNIlCANTûINmUENCEûOVERû healthcare and life sciences, energy and BOOKRUNNERS: 1/1/2020 TO DATE
PharmaSGP. mobility and health and safety sectors. Managing No of Total Share
The company said that its CEO and the It has seen an uptick in its safety business bank or group issues US$(m) (%)
CFO would become shareholders following during the coronavirus pandemic, owing to 1 Goldman Sachs 33 5,903.94 9.2
completion of the IPO. The company and its product line of masks. GVS’s safety 2 Citigroup 28 5,877.95 9.2
existing shareholders are locked up for six business line kept the IPO on track while 3 Morgan Stanley 22 5,265.69 8.2
months. other planned Italian listings fell by the 4 BofA Securities 28 5,211.75 8.1
Berenberg is bookrunner. Total fees are up wayside due to the pandemic. 5 JP Morgan 38 5,061.88 7.9
to 3%, including a discretionary portion. GVS recorded adjusted Ebitda of €62m for 6 Credit Suisse 15 4,254.62 6.6
the year ending December 31 2019. The 7 Barclays 24 3,236.09 5.1
FULL EXERCISE FOR EXASOL company said it expected this to rise to 8 UBS 15 2,825.76 4.4
between €88.2m and €100.8m in 2020 based 9 HSBC 18 1,960.08 3.1
Database software business EXASOL has fully on estimated revenues. 10 BNP Paribas 18 1,697.98 2.7
exercised the 1.07m secondary greenshoe Pricing is based on EV/Ebitda at 12.8 at the Total 423 64,053.44
for its Frankfurt IPO, with the stock still bottom of the range for 2020 and 15 at the Including all domestic and international deals and rights issues
trading well above pricing. top of the range. Source: Refinitiv SDC code: C4cr

International Financing Review June 13 2020 95

 The company has taken several other
recent steps to bolster liquidity, including
the sale of about half of its stake in sister
stock Scorpio Tankers (2.25m shares for
proceeds of US$42.7m to leave it with
2.16m shares) and the deferral of capex.
As at May 8 or shortly before reporting
ITSûlRST
Once books opened on an offering of
5.33m new shares with reference to the POLAND
€25.35 Monday close, formal coverage came
inside of 15 minutes. LARGEST SHAREHOLDER IN
Co-founder and CEO Rene Moos, via his BUDIMEX SELLS 5%
AM Holding vehicle, committed at launch to
invest €5m for a post-money position of Ferrovial sold around 5% of construction
QUARTERûNUMBERSû3CORPIOû"ULKERSû 15.2%. The company, Moos and key
carried US$100.8m of cash.
It also sold several vessels in March and
conducted a one-for-10 reverse share split
in April, further highlighting its struggles.
The company is still paying dividends,
THEûLATESTûAûlVEûCENTSûAûSHAREûPAYOUTûFORû
the current quarter to shareholders of
record on June 15 (including investors in
the offering).
The offering was buttressed by a
engineering company BUDIMEX for Z255m
shareholder 3i with a 14.85% stake are
locked up for 90 days.
Pricing came at €25 for a tight 1.4%
discount. The stock had risen more than 11%
since the previous Monday’s close and was
up 133% since mid-March lows. In the year
to-date, the stock was down more than 25%
by Monday’s close.
A book of around 85 lines was several
times covered and all accounts seen during
(US$65m) last Tuesday evening, in an
unexpected sell-down that was mostly
snapped up by local investors.
Ferrovial remains the largest shareholder
with 50.14%.
Around 1.3m shares were sold at Z200
each, representing an 11.9% discount to
Tuesday’s close of Z227. The deal initially
launched with a Z200–Z210 range.
Strong domestic demand saw 75% of the
US$17.5m indication of interest (950,000
or nearly a quarter of the shares in the
offering) from Scorpio Services, a related
party and 20% shareholder. Scorpio
Services also purchased 50,000 shares at
US$17.15 last month.
NETHERLANDS
BASIC-FIT LOOKS TO EXPANSION AS
CLUBS REOPEN
Gym chain BASIC-FIT raised €133.3m in a
9.8% accelerated capital increase on
Monday, the day it reopened nearly 200 of
its clubs in Belgium and Spain.
The majority of its clubs are now open
and proceeds will fund its growth strategy
through the opening of new clubs and
acquisitions.
On Monday, all 188 gyms in Belgium
reopened and six in Spain, with the
remaining 32 in the country to open later
this month. All 10 clubs in Luxembourg
opened on May 29 and 316 in France on
June 2, with 74 more to open on June 22.
BREAKINGûmOATûAREûNOWû
As it stands over 60% of Basic-Fit clubs
are open and by the end of the month that
will rise to 75%, with only Dutch clubs still
closed.
The preliminary date for reopening all
the 202 clubs in the Netherlands is July 1,
but discussions are ongoing with the
Dutch government to open earlier.
the wall-cross came into the trade. There
was some new money, but the book was
dominated by shareholders putting in for
more than their pro rata sizing, with the top
10 orders securing more than 75% of
allocations.
Basic-Fit shares opened higher on Tuesday
but within a couple of hours had dropped
below the placing price and closed at €24.35.
4HEYûlNISHEDûLOWERûONû4HURSDAYûATûõ
ABN AMRO and Rabobank/Kepler Cheuvreux
were joint bookrunners, with Lazard
advising.
NORWAY
KAHOOT CARRIES OUT US$89M PRIMARY
AND SECONDARY ABB
Games platform KAHOOT raised NKr852m
(US$89m) in an ABB last Wednesday
evening, comprising a primary raise and
secondary offering.
Strong demand from local and
international names saw the deal upsized to
24m shares from an initial target of 21m.
Around NKr266m was raised through the
sale of 7.5m new shares to fund Kahoot’s
growth, including M&A opportunities.
A further 3.7m shares were sold
following the exercise of fully vested
employee options and the remaining
12.8m shares were sold by existing
shareholders.
DEALûGOINGûTOûLOCALûINVESTORSûREmECTINGûTHEû
COMPANYSûSHAREHOLDERûREGISTERû4HEûTOPûlVEû
orders took 70% of the transaction.
The heavy discount was attributed to the
bounce in shares since March lows, and
illiquidity.
Budimex shares had risen 32% in 2020 to
last Tuesday’s close and around 53% since
late March. The placing represented
approximately 56 days’ trading.
Societe Generale was bookrunner.
Ferrovial is locked up for 90 days.
The shares closed last Wednesday at
Z216.50, well above the placing price but
down 4.6% for the day.
By last Friday just before 3pm in London
shares were around Z217.5 each.
SAUDI ARABIA
RETAIL SECURES ARAMCO BONUS
SHARES
Retail shareholders that have held on to the
stock received in SAUDI ARAMCO‘s SR110.4bn
53BN ûRECORD
eligible for promised bonus shares.
Those who held shares for 180 days after
trading began will receive one bonus share
for every 10 held, up to a maximum of 100
bonus shares, as of June 7.
When shares began trading on the Saudi
Tadawul exchange in early December there
was an expectation that Aramco’s shares
Club reopenings and, perhaps more
importantly, reassurances that members
are returning, were a key part of a one-day
wall-crossing process that focused on
large, key shareholders and meant the
book was covered with indications at
launch.
“It was key for investors to see a way
beyond lockdown, that members are using
the gyms again and there is some sense of
coming back to normal,” said a banker
involved.
96
The shares were sold at NKr35.50 each, a
4.1% discount to last Wednesday’s close of
NKr37. Shares closed last Thursday below
the placing price at NKr34.50, a 6.8% fall
for the day.
By last Friday at 3pm they were back up
at NKr36.50 each.
The top 10 orders took 60% of the deal.
Kahoot is a web and app-based learning
tool that uses multiple-choice quizzes.
ABG Sundal Collier, Arctic Securities and
Goldman Sachs were joint bookrunners.
International Financing Review June 13 2020
WOULDûlNDûSUPPORTûNATURALûORûOTHERWISEûTOû
ensure they did not drop below the SR32 IPO
price.
The coronavirus pandemic and falling out
with Russia over crude production saw oil
prices collapse, though Aramco’s shares
have proven to be remarkably resilient, if
not untouched.
When shares around the world
plummeted in the month to mid-March,
!RAMCOSûDROPPEDûBYûLESSûTHANûAûlFTHûTOûAû
low close of SR27.80, while WTI oil prices

were down around 60% in the same period
to just over US$20 per barrel. Oil prices fell
further in April but have now recovered to
around US$40 per barrel for WTI and Brent
crude.
Having pushed above SR33 in late May,
the shares were down slightly at SR32.40
ONû3UNDAYûANDûlNISHEDûATû32ûONû
Monday. So while the aftermarket
performance has been disappointing,
retail investors can at least now mark a
10% return in six months.
By Thursday’s close, the stock was still at
SR32.35.
There was no indication as to how many
retail investors are eligible for the bonus
shares or how many bonus shares will be
issued.
SWEDEN
BURE EQUITY RAISES SKr1bn
Investment company BURE EQUITY raised
SKr1bn (US$108.5m) last Wednesday
evening, the upper end of the SKr800m–
SKr1bn target in an accelerated bookbuild
run by SEB.
A total of 5.175m shares were sold at
SKr193 each, representing a 6.1% discount
to last Wednesday’s close of SKr205.60.
A number of Swedish institutional
investors, including Ramsbury Invest,
Swedish national pension fund AP4, SEB-
stiftelsen, Formica Capital and Lottie Tham
and family, took part in the placing.
Bure said it saw good opportunities to
expand its investment portfolio and will
diversify and strengthen its shareholder
base through the ABB.
The Tigerschiold and Bjorkman families,
Bure’s two largest shareholders with
around 11.2% and 9%, respectively, said at
launch that they intended to remain long-
term shareholders.
Shares closed last Thursday at SKr200,
down 2.7% and above the fundraising level.
By Friday at 3pm in London shares had
risen to SKr202.60 each.
TRIO SELLS 4.7% OF PARADOX
INTERACTIVE
A trio of shareholders in game developer
PARADOX INTERACTIVE sold 4.7% of the
company last Wednesday evening, raising
SKr940.5m (US$101.7m) in a trade run by
Carnegie and Goldman Sachs.
A total of 4.95m secondary shares were
sold after the deal was upsized by 10% due
to a strategic long-term investor coming
into the book.
mOATû out of 67.27m offered on a 1-for-2 basis at
A wall-cross prior to launch led to demand
in excess of the full launch deal size.
Investment AB Spiltan, Lerit Forvaltning
and Dalex sold shares at SKr190 each. The
three sellers were pre-IPO investors in
Paradox.
Pricing was a 10.4% discount to last
Wednesday’s close of SKr212.
Spiltan retains 17.2% of Paradox while
Lerit and Dalex hold 8.6% and 2.9%,
respectively, locked up for 180 days.
The 70-line book was multiple times
oversubscribed with long only, wall-crossed
accounts dominating. Anchor orders came
from Nordic and international investors.
The top 10 orders took 70% of the
transaction.
Paradox shares were subdued last
Thursday only trading around the SKr190
PLACINGûPRICEûINûTHEûlRSTûHOURûBEFOREû
dropping off and closing down 15.3% at
SKr179.50, 5.5% below the ABB price.
By Friday just before 3pm shares were up
at around SKr186.30 each but still below
pricing.
SWITZERLAND
INA FLAT FOLLOWING US$122m SPIN-OFF
Swiss property spin-off INA INVEST debuted on
SIX Swiss Exchange on Friday more than 8%
above pricing on its SFr116m (US$122m) at-
market rights issue.
The IPO for Ina Invest was completed
through a rights issue directed to the
parent’s shareholders. As there was no
market price the pricing was determined by
demand gathered through a concurrent
bookbuild to institutions.
Pricing was set at SFr22.42 per share, the
maximum price given during bookbuilding
ANDûmATûTOûNETûASSETûVALUEû)NAû)NVESTûSHARESû
opened at SFr24.30 on Friday morning but
were trading around strike by around 11am
and was still at the same level a couple of
hours later.
The straight line on the chart at SFr22.42,
which ordinarily would be the seen as a
clear sign of active stabilisation, was entirely
natural as there is no greenshoe.
Shareholders of former parent Implenia
were offered up to 5.17m new shares on the
basis of seven new Ina shares for every 25
Implenia shares held.
Take-up from Implenia shareholders was
59.2%, with the concurrent bookbuild
closing on Thursday and pricing announced
ahead of the trading debut on Friday.
A banker involved said that the bookbuild
was very niche, and saw demand from mid-
cap investors.
Pricing at SFr22.42 represents a market
CAPITALISATIONûOFû3&RMûANDûTHEûFREE
is 58.33%.
Credit Suisse was bookrunner.
International Financing Review June 13 2020
EQUITIES EMEA
IMMOFONDS PLANS SFr100m
RIGHTS ISSUE
REIT IMMOFONDS IMMOBILIEN is planning a
SFr100m (US$105.7m) rights issue in
autumn for targeted investments, reducing
debt and acquiring new properties.
At last Wednesday’s close the fund’s
market cap was around SFr162.6m.
Shares in Immofonds Immobilien fell
2.13% last Wednesday to close at SFr505
each.
)TûWILLûBEûTHEûlRSTûFUNDRAISINGûBYûTHEû
company since 2013.
Immofonds Immobilien invests in
residential properties in urban centres
throughout Switzerland with a focus on
Zurich.
UAE
GMS TARGETS AT LEAST US$75m AFTER
DEBT RESTRUCTURING
UK-listed GULF MARINE SERVICES will seek
shareholder approval for an at least US$75m
capital increase before the end of 2020,
having agreed with banks to restructure its
debt facilities.
GMS has renewed term loans totalling
US$391m with an extended maturity to June
30 2025, replaced working capital facilities
with a US$50m facility also extended to June
30 2025, and increased headroom on
lNANCIALûCOVENANTS
The oil services company must raise at
least US$75m from an equity capital raise or
additional costs through PIK interest and
contingent warrants will become due.
A date for shareholders to vote on the
capital increase will be announced in due
course.
Bank of America and Investec are corporate
brokers to GMS, BofA having co-led the
£179m 2014 IPO.
GMS shares closed on Wednesday up
0.36% at £13.80.
UK
WHITBREAD STUMBLES FOLLOWING £1bn
FUNDRAISING
Hotel and restaurants group WHITBREAD
completed its capital increase of just over
£1bn last week, with 91.34% take-up of
rights and the rump placing of remaining
shares dealt with swiftly on Wednesday
morning.
There were acceptances for 61.45m shares
£15. The low 90s take-up was said to be in
line with expectations given retail
97
ownership was in the high teens pre-money,
with institutional take-up estimated to be
around 97%.
A rump of 5.82m shares, representing
2.9% of expanded share capital, closed
before 10am in London when shares were
trading at just above £26. Pricing of £25.50
was a 3.9% discount to Tuesday’s £26.53
close.
A book of more than 75 lines was multiple
times covered, with the top 20 accounts
taking 80% of the deal.
A banker involved said there had been
SIGNIlCANTûREVERSEûENQUIRYûAHEADûOFûTHEû
rump and the strong take-up from long-only
institutions in the rights issue gave room to
allocate that portion of the deal to
fundamental hedge funds.
7HITBREADûSHARESûSTRUGGLEDûTOûlNDûAûLEVELû
on Wednesday, bouncing around from a
£27.11 high to a £25.13 low. Having fallen
below rump pricing in late morning, shares
moved back to positive territory only to drop
back again and close at £25.01. The stock fell
further on Thursday, closing at £23.03.
JP Morgan and Morgan Stanley were global
coordinators.
SEGRO RAISES £680m IN UPSIZED ABB
Warehouse REIT SEGRO raised £680m in an
upsized accelerated bookbuild and retail
offering last Tuesday evening to fund its
expansion across the UK and Continental
Europe.
The company initially targeted £650m but
increased it to £680m on strong demand.
The offer represents a capital increase of
7.8% and was completed without pre-
emption for shareholders.
Its expansion includes investing in mostly
pre-let development projects and
acquisition of land.
Segro said it would invest more than £1bn
in 2020 and 2021.
In a trading update posted when the deal
launched, Segro said it expected demand for
warehouses to increase as technology and
e-commerce adoption has grown as a result
of the coronavirus pandemic and supply
chains have changed.
A total of 82.1m shares were placed at
820p each, a 4.5% discount to last Tuesday’s
close of 858.8p.
CROSSûANDûANûOFlCIALû
The deal was launched with reference to
market.
A banker involved said the book was
multiple times oversubscribed with
investors viewing the stock as a best-in-class
UK real-estate story with good exposure,
scale and liquidity.
Several orders were around £10m–£15m.
Individual retail investors subscribed for
865,435 shares through PrimaryBid.com for
an additional £7.1m.
98
Bank of America and UBS were bookrunners,
the same syndicate when Segro raised
£451m in fresh capital in February 2019,
selling shares at 635p each.
Segro shares closed down 0.5% last
Wednesday at 854.6p, well above pricing. By
Friday just before 3pm shares were up at
880.8p each.
LANCASHIRE HOLDINGS FUNDS
FOR GROWTH
Bermuda-based and UK-listed insurer
LANCASHIRE HOLDINGS raised £277m in a
heavily oversubscribed 19.5% capital
increase on Tuesday evening to fund organic
growth and take advantage of rate rises,
with the company expecting to deploy more
capital into a “hardening” market.
Lancashire took the decision at the
beginning of 2020 to retain most of its 2019
PROlTSûANDûNOTûPAYûAûSPECIALûDIVIDEND
The company said that notwithstanding
an expected provisional loss estimate of
US$35m for Covid-19, it is trading in line
with or better than expectations outlined in
ITSûTRADINGûUPDATEûFORûTHEûlRSTûQUARTER
A banker involved said the company was
“putting itself on the front foot”.
The deal was wall-crossed and covered on
indications of interest, with major
shareholders sounded out. All accounts in
the wall-cross came into the deal.
Formal coverage took around 20 minutes
and investors were guided to 700p per share
after two hours for a 3.6% discount to the
726p Tuesday close.
A book of more than 120 lines was more
THANûlVEûTIMESûCOVEREDûANDûHADûAûCOUPLEûOFû
anchor orders, with management playing a
SIGNIlCANTûROLEûINûALLOCATIONSûTHATûWEREû
heavily focused on existing shareholders.
Those holding disclosable stakes took about
80% of the transaction, rising to around 90%
when including shareholders with stakes
below the disclosable threshold.
The top 10 orders took around half of the
book and the top 20 around three-quarters.
Lancashire Holdings rose above 800p in
early trading on Wednesday before coming
off slightly to close at 789.5p.
Citigroup and Morgan Stanley were
bookrunners.
BIFFA RAISES £100m TO STRENGTHEN
BALANCE SHEET
UK waste management company BIFFA raised
£100m on Thursday evening through an
accelerated bookbuild, including a retail
tranche.
It increased the company’s share capital
by 19.99% and the fresh capital will
strengthen the company’s balance sheet to
allow it to continue growing.
International Financing Review June 13 2020
HSBC and Numis were bookrunners with
Rothschild advising.
A number of investors were wall-crossed,
WITHûTHEûlNALûTRANSACTIONûSHAREHOLDER
driven.
Management was keen to ensure informal
pre-emption, with shareholders prioritised
during allocations.
4HEûTOPûlVEûACCOUNTSûTOOKûMOREûTHANûû
and the top 10 accounts took around 75% of
the deal.
A total of 49.3m shares were sold to
institutions at 200p each, with a further
520,776 sold to retail investors via
PrimaryBid.com and 140,000 to the board
and management at the same price, a 5%
discount to Thursday’s close of 210.5p.
4HEûPOTENTIALûPLACINGûWASûmAGGEDûONû*UNEû
5 in Biffa’s full-year results for the year to
March 27, which showed Ebitda up 15.5% to
£174m.
Shares closed on Friday at 205p, splitting
the difference between Thursday’s close and
the placing price.
HELIOS TOWERS SHAREHOLDERS SELL AT
DEEP DISCOUNT
Millicom Holding and the World Bank’s IFC
sold a collective 4% of London-listed African
telecoms infrastructure company HELIOS
TOWERS for £60m on Thursday evening, the
lRSTûOFFERINGûINûTHEûSTOCKûSINCEûITSûaMû
IPO in October.
Millicom sold 3.3%, leaving it with 12.85% of
Helios, and IFC sold 0.7% to leave it with 2.75%.
Jefferies was global coordinator with
Standard Bank as bookrunner.
A total of 40m shares were sold at 150p
each, an 18.5% discount to Thursday’s 184p
close.
The deep discount can be viewed against
the 45% rise in Helios shares since the start
of May to Thursday’s close that left shares
up 30% for the year so far.
Investors were more focused on the
company’s fundamentals than pricing, with
the ABB price representing on consensus
11.5x Ebitda for 2020 against 8.5x Ebitda
pricing on the IPO, which priced at 115p.
The stock is also illiquid with the placing
representing around 90 days’ trading.
Nevertheless the deal was covered at
LAUNCHûFROMûAûWALL
covered message arrived just after 5pm,
with books closing at around 7pm.
Around 50% went to new investors and
there were three new investors in particular
WHOûPLACEDûSIGNIlCANTûORDERS
There was a good split between orders
from the US, the UK and Continental
Europe.
The top 10 orders took 75% of the deal.
Shares closed on Friday at 160p, heavily
down but comfortably clear of pricing.

HYVE POSTS 98.87% RIGHTS ISSUE
TAKE-UP
UK exhibitions and conference organiser
HYVE GROUP secured 98.87% take-up on Friday
for its £127m fully underwritten rights
issue.
The company received valid acceptances
for 181.5m shares during the subscription
period. A small rump of 2.1m shares was
then quickly sold in the market, with a
result following just after 10:30am.
Shares were offered on a 9-for-40 basis at
69p each, representing a 39% discount to
TERP of 113.1p.
The rump priced at 115p, a small discount
to Thursday’s 115.6p close.
The cash will strengthen Hyve’s balance
sheet amid event delays and cancellations
due to the coronavirus pandemic.
Barclays, HSBC and Numis were
underwriters.
Following a 10-to-1 share consolidation
that was approved at Hyve’s general
meeting on May 27, the rights issue
represented a 225% increase in Hyve’s share
capital.
Shares in Hyve closed Friday at 120.7p, up
4.4% on the day.
AMERICAS
UNITED STATES
ECM TO FORGE THROUGH VOLATILITY
Thursday’s market sell-off and the return of
elevated volatility contributed to some
unsatisfying ECM outcomes in the past
week, potentially slowing the hectic pace of
deal activity in the weeks ahead but far from
bringing capital raising to a halt.
The DJIA’s 6.9% fall was a reality check for
investors after an extraordinary 50% rally
from its March 23 lows, but bankers were
still able to rule off a week that saw
US$15.2bn raised from US IPOs, follow-on
sales and convertible offerings.
US ECM remains on track for a record
quarter of proceeds raised. Bankers say
there are also several large follow-ons that
ESG-friendly Azek raises
US$765m
„ US Outdoor decking maker prices US$2 above range but discount to Trex
AZEK staged a robust debut on Friday after
pricing an upsized US$765m IPO pitched at a
substantial discount to its direct comp.
Late on Thursday, the Ares Management-
backed maker of outdoor decking products made
from recyclable materials sold 33.3m shares
or about 23% of the company at US$23 each,
up from the launch terms of 31.3m shares at
US$19–$21.
Debuting on the NYSE on Friday, the shares
opened at US$27.50 for a 19.6% gain.
Barclays, Bank of America, Goldman Sachs and
Jefferies led a 14-firm syndicate that drew heavy
oversubscription.
The roadshow saw Azek emphasise its ESG
credentials both in terms of use of recycled
materials and in term of corporate governance.
“We make the world a better place by
converting an increasing amount of waste into
our products,” CEO Jesse Singh said in the online
roadshow presentation.
The company has a separate CEO and
chairman and 30% gender/ethnic diversity on its
board, though it is still in the process of ticking
the boxes to get third-party ESG accreditation.
VALUATION
The final terms valued Azek at about US$3.3bn,
or nearly US$4bn on an enterprise value basis
and a high-teen multiple to run-rate adjusted
Ebitda.
Azek benefited from having a very close comp
in the form of NYSE-listed Trex, a rival that is
slightly smaller revenue-wise, but has better
margins and recently traded at a lofty 2021
Ebitda multiple of 30, thanks in part to a 40%
stock price jump in 2020.
impressively in the aftermarket. Vroom was
a highlight, surging by 117.7% on its debut
on Tuesday despite being priced US$2 above
an upwardly revised pricing range.
Though the current window is closing,
speculation of a fresh wave of IPOs in the third
quarter is becoming frenetic. The past week
EQUITIES AMERICAS
Trex is one of the most richly valued building
products names in the market, though it sells its
products more through retail channels than Azek
currently does.
The two companies have similar growth
profiles.
Azek’s residential business (82% of net sales last
year) grew at a 12.5% CAGR in the past three years,
whereas Trex grew sales 12% in the first quarter.
Azek’s filing included audited numbers for the
Covid-affected two-month period ending May 31
showing sales fell only 5% and adjusted Ebitda
grew 10% because its costs are highly variable.
Like other sponsor-backed companies, Azek
took evasive action during Covid-19 by drawing
down on its revolver, in its case to take in
US$129m of proceeds.
It was also able to access debt markets to sell
US$350m of five-year bonds (at a 9.5% coupon)
to repay 8% bonds due next year.
The IPO proceeds will take out the new notes
and repay some term debt, leaving Azek with
about US$600m of net debt versus LTM adjusted
Ebitda of US$195m.
Ares and co-sponsor Ontario Teachers did not
sell in the offering, but are likely to look to start
monetising their stake once lock-ups roll off.
Though Azek’s four-day roadshow is becoming
a post-Covid-19 norm even for larger deals
outside biotech, investors have had some time to
become familiar with Azek.
The company was one of several sponsor-
backed IPOs that hoped to debut in February
and March before Covid-19 disrupted their plans.
Azek first filed confidentially in August last year
and publicly on February 7 this year.
Anthony Hughes
double in spectacular fashion on its Nasdaq
debut Tuesday.
In one of the strongest IPO outcomes in
recent times, the fast-growing used car
e-commerce platform’s discount to high-
mYINGûPEERû#ARVANAûANDûPOTENTIALûTOûGRABûAû
SIGNIlCANTûSLICEûOFûTHEû53BNûAûYEARûUSEDû
could be priced before June 30. SAWûlLINGSûBYû$UNûû"RADSTREETûANDû,EMONADEû car market enabled it to raise US$467.5m of
9ETûFORûTHEûlRSTûTIMEûINûMANYûWEEKSûSOMEû
FOLLOW
ONûISSUERSûTOOKûWIDEûlLE
TO
OFFERû Palantir Technologies and Quicken Loans
discounts and/or fared poorly in the
aftermarket, though the rebuilding IPO market
largely dodged those wider market gyrations
and continues to generate easy alpha.
In a week that saw US$2.5bn raised from
and talk that companies such as Albertsons, primary capital.
This was well up from its initial target of
continue to prepare for near-term IPOs. about US$300m.
The base deal was 25 times
VROOM REVS UP IPO MARKET oversubscribed.
Vroom priced 21.25m primary shares or
Heavy oversubscription allowed VROOM to about 18% of the company at US$22.00,
EIGHTû)0/SûMOSTûDREWûOVERmOWINGûDEMANDû accelerate and upsize its IPO as well as price above the US$18–$20 range earlier upped
were priced strongly and traded the deal above range before going on to from US$15–$17 at launch.

International Financing Review June 13 2020 99

 Two-thirds of the stock went to the top 25
accounts, an ECM banker said.
Tuesday’s debut saw the shares motor
ahead to US$47.90, a day-one gain of
117.7%. Vroom’s early gains meant it
joined the ranks of 10 other 2020 IPOs that
are trading at more than double their IPO
price.
“Even at the increased price, it was a still
a big discount to Carvana and these types
of deals have worked,” the banker said.
Unusually, leads Goldman Sachs, Bank of
America, Allen & Co and Wells Fargo
accelerated the offering by two days,
LIMITINGûTHEûROADSHOWûTOûlVEûDAYSûINSTEADû
of seven as planned.
Vroom’s day-one close attributed the
company a market cap of about US$5.5bn
versus run-rate sales of US$1.5bn (based on
The offering equated to 40 days’ trading
volume and just seven institutions own 70%
of Replimune.
Of the 4.35m shares sold, 1.5m came in
the form of pre-funded warrants, a common
tool to keep ownership below the 10%
threshold that imposes restrictions on
future purchases and sales of stock.
Replimune has been in focus since it
reported interim results from a Phase II trial
of its skin cancer drug as part of an investor
day on June 3.
Seven patients that took Replimune’s skin
cancer drug in combination with the FDA-
approved drug Opdivo are responding to the
combination therapy.
The drugs have been well tolerated and
four of the seven patients treated for
melanoma, the most common type of skin
Barclays and SVB Leerink placed 3.67m
shares at US$34, within the US$33–$35
marketing range and an 11.4% discount to
the US$38.38 last sale.
The offering puts US$225m of cash on
Cardiovascular Systems’ balance sheet for
general corporate purposes such as
expanding its sales and marketing efforts
and developing new products.
CAREDX, a maker of diagnostic tests for
measuring the risk of organ rejection in
transplant patients, raised US$125m from
a follow-on sale on Wednesday.
Goldman Sachs and Jefferies placed 3.9m
shares at US$32 apiece after a one-day
marketing effort.
Transplant patients have a suppressed
immune system and are at high risk of Covid-
19 infection. CareDx responded to the need
lRSTûQUARTERûNUMBERS ûWHILEû#ARVANAûSPORTSû
a US$19bn market cap versus north of
US$4bn in expected sales this year.
FATE TEMPTS INVESTORS
Cancer drug developer FATE THERAPEUTICS
responded to overwhelming investor demand
by massively upsizing an overnight stock sale
to US$175m from US$80m at launch.
TIMEûFOLLOW
ONû
Jefferies, SVB Leerink, Barclays and
Guggenheim Securities placed 6.18m shares
cancer, are in remission.
RETROPHIN dipped 2.5% on Tuesday to
US$15.10 on light trading volume after a
US$100m placing of 6.5m shares at US$15.50
Monday night.
Jefferies, Barclays and Bank of America were
targeting US$75m of proceeds from
OVERNIGHTûMARKETINGûATûAûlXEDûOFFERûPRICEû
when the deal launched.
Retrophin is using the proceeds to
complete Phase III trials of its treatment for
a rare kidney disease by early next year.
for at-home testing kits that allow doctors to
monitor their transplant patients remotely.
CareDx has US$150m to support the
sales and marketing of its new at-home
test as well as its existing products.
BILL.COM FOLLOW-ON FINDS
PENT-UP DEMAND
BILL.COM@Sû53MûlRST
offering delivered what was easily the
strongest pricing outcome of the week
OVERNIGHTûONû-ONDAYûATû53ûmATûTOû Retrophin’s management team thinks the among the procession of secondary sales.
the close. interim data it presented at the Jefferies event The fast-growing billing software
Fate’s shares soared 15.6% to US$32.72 on are enough to support early FDA-approval. PROVIDERûDREWûlVEûTIMESûOVERSUBSCRIPTIONû
Tuesday after touching a high of US$35.77 for the upsized sale of 7.2m shares or 9.5%
early in the session.
TO
Partner Johnson & Johnson invested
US$50m in a concurrent private placement.
Exercise of the 15% greenshoe will boost the
OVERALLûSIZEûOFûTHEûlNANCINGûTOûNORTHûOFû
US$250m.
As part of the collaborative agreement
inked in April, J&J invested US$100m
upfront for the rights to use Fate’s gene
editing technology to develop four new
cancer drugs.
Fate is developing four of its own drugs
outside of the collaboration, all of which are
in Phase I trials. It outlined progress on
those drugs at the Jefferies healthcare
conference this month.
BIOTECHS SINK ON UPSIZED OFFERINGS
MEDTECHS RAISE COVID CASH
The Covid-19 outbreak has created a backlog
of elective medical procedures at hospitals
and caused some biotechs to press pause on
their clinical trials.
Last week saw a trio of medical
technology specialists put some cash on
their balance sheets as the US healthcare
industry begins the process of getting back
to normal operations.
MESA LABORATORIES, a company that makes
monitoring and quality control devices for
drug developers, raised US$135m on
Tuesday from an upsized follow-on offering
that targeted US$100m at launch.
Mesa dipped 4% to US$235.99 after a day
of marketing on Tuesday. Jefferies, JP Morgan
OFûTHEûCOMPANYûATû53ûAûûlLE
offer premium.
After two days of marketing, a syndicate
led by Goldman Sachs, Bank of America,
Jefferies, KeyBanc Capital Markets and Wells
Fargo found no lack of interest in the sale
of 3.25m primary shares and 3.95m
secondary shares from early backers
including DCM and August Capital.
The offering was increased in size from
6m shares at launch with all of the upsize
coming from additional secondary selling.
The stock jumped on the marketing but
eased back to US$72.31 in Thursday’s
DIFlCULTûAFTERMARKET
)TûWASû"ILLCOMSûlRSTû%#-ûOUTINGûSINCEû
going public in December at US$22.00 in
one of last year’s hottest and most heavily
REPLIMUNE, a rare disease specialist, saw its
shares plunge 15.9% on Tuesday to
US$20.06, despite raising an upsized
US$100m on a stock sale that priced on
Monday night at the high end of the range
after overnight marketing.
JP Morgan, SVB Leerink and BMO Capital
Markets had placed 4.35m shares at
US$23.00, versus a US$22.50–$23.00
marketing range and boosting proceeds
from the US$80m launched.
100
and Evercore priced 600,000 shares at
US$225.00 each, taking the all-in discount
to 8.5% for 12% of Mesa shares outstanding.
Mesa now has US$208m of cash to plug
an estimated six-to-12 month lag in future
growth attributed to Covid-19, according
to a Jefferies research note to clients.
CARDIOVASCULAR SYSTEMS raised US$125m
overnight on Tuesday as surgeries
involving its stent treatments for clogged
arteries and other cardiovascular
blockages resumed at some US hospitals.
International Financing Review June 13 2020
OVERSUBSCRIBEDû)0/SûINûPARTûREmECTINGûTHEû
company’s high revenue growth rate (46% in
THEûlRSTûQUARTERûOFûTHISûYEAR 
“People have been looking for ways to get
INVOLVEDûINûTHISûONEûBUTûITûHASûBEENûDIFlCULTû
to build a position,” one banker said.
The marketing coincided with the six-
month anniversary of Bill.com’s IPO, though
lock-ups had already expired early because
of provisions allowing for early release if the
anniversary coincided with or was near an
earnings blackout period.

However, with the secondary sale, selling
shareholders are now subject to a fresh 90-
day selling restriction.
INSIGHT CUTS PLURALSIGHT STAKE
A US$228.4m insider sell-down at
technology learning software provider
PLURALSIGHT weighed heavily on the
company’s share price in what proved a
poor week to bring the deal.
After a day of marketing, active
bookrunner Morgan Stanley late Tuesday
priced the all-secondary sale of 11.7m
Pluralsight shares or 8.2% of outstanding at
Business as usual for
biotech IPOs
„ US Early-stage biotechs defy tough market conditions
AVIDITY BIOSCIENCES, GENERATION BIO and VAXCYTE
scored strong outcomes from their IPOs last week
as the sector’s key ETF slid 5.5% ahead of pricing.
Biotechs are in constant dialogue with
investors, even if there is not much to say. What
has changed with Covid-19 is that those investors
EQUITIES AMERICAS
Investments, the latter gaining a board seat as
part of the investment.
Eli Lilly, a collaborative partner, also
participated.
Generation Bio, a gene therapy specialist
focused on inherited liver and retinal diseases,
53ûANûûlLE
TO
OFFERûDISCOUNT are only a Zoom video-conference call away.
VC backer Insight Venture Partners sold
8.75m of the shares offered.
The sale was poorly received by investors,
who marked the stock down to US$17.99 by
Thursday’s close.
Taking advantage of a sharp rally from a
low of US$6.59 during March’s Covid-19 sell-
off, Insight sold at a premium to
Pluralsight’s US$15 IPO price set in May
2018 but below the US$29.25 price of the
COMPANYSûlRSTûSECONDARYûINû-ARCHû
Insight, which is now left with 10.4m
shares, was also the main seller on that
OCCASIONû4HEû6#ûlRMûlRSTûINVESTEDûINû
Pluralsight in late 2012.
Disappointing results for the second
quarter of 2019 weighed on Pluralsight
stock in the months after that earlier sale.
However, the company grew its top-line at a
ûPACEûINûTHEûlRSTûQUARTERûOFûTHISûYEARûANDûISû
AûPOTENTIALûBENElCIARYûFROMû#OVID
ûASû roughly US$680m.
people look to improve their technology skills.
TRIPLE-NET SPIRITS AWAY GAINS
Triple-net retail REIT SPIRIT REALTY CAPITAL was
able to take full advantage of a sharp
rebound in its stock price in the prior week
to raise nearly US$300m via an overnight
forward sale of equity late Monday.
In a highly opportunistic capital-raising, a
syndicate led by JP Morgan and SunTrust
Robinson Humphrey priced the sale of 8m
borrowed shares at US$37.35, the bottom of
the US$37.35–$39.25 range and a 6.5%
discount to last sale.
The forward sale allows Spirit to defer
dilution from the issuance of stock until it
physically settles the sale within the next 18
months (JP Morgan is the forward
purchaser).
Barely a week before the offering the
stock was trading as low as US$28.40.
This was before management told the
virtual Nareit REITweek conference it had
collected 65% of its May base rent as of May
28, and most of the balance was deferred
rather than abated as its tenants try to
manage their way through Covid-19.
followed a similar progression, raising US$111m
“Investors have grown accustomed to working from
home,” said the head of healthcare ECM at one US
bank. “It’s business as usual, without having to travel.”
As has become customary since the onset
of work-from-home at the beginning of March,
Avidity, Generation and Vaxcyte all marketed
their offerings through virtual meetings over four
days, and all executed on Thursday night.
Each is still more than a year away from
launching clinical trials of their experimental
drugs, giving the issuers incentive to raise as
much cash as possible from their IPOs.
Avidity, a developer of new muscular
dystrophy therapies, raised US$259m from a
twice upsized IPO.
Cowen, SVB Leerink, Credit Suisse and Wells
Fargo ultimately placed 14.4m shares at US$18.
This was after the biotech upped the offer
size to 12m shares, from 10m, and the asking
price from US$14–$16 to US$17–$18, valuing it at
Vaxcyte was formed in 2013 to develop
Of the US$160m targeted on the Monday
morning launch, US$100m was spoken for by a
single institution from earlier testing the waters.
In November, Avidity raised US$100m on a
Series C private financing at $9.03 per share
valuation supported by Cormorant Asset
Management, Perceptive Advisors and RTW
The stock struggled in the session after the
offering was priced, falling by 8.3% on Tuesday
and further to US$32.34 by Thursday’s close,
leaving the shares 13.4% below the offer price.
The REIT currently trades on a yield of
more than 7%, attractive in a zero interest-
rate world and some consolation for those
nursing losses from the offering.
BLACKSTONE MORTGAGE
RAISES US$282m
Commercial mortgage REIT BLACKSTONE
MORTGAGE TRUST was able to exploit a 22%
STOCKûPRICEûSURGEûINûTHEûPRIORûlVEûSESSIONSûTOû
raise US$282m from a well-timed overnight
stock sale last Monday.
Citigroup, Bank of America, Barclays, Morgan
Stanley and Wells Fargo led the sale of 10m
International Financing Review June 13 2020
on its Series C in January at US$14.22 per share
valuation, and extending that momentum into a
US$200m IPO.
JP Morgan, Jefferies and Cowen placed 10.53m
shares at US$19, valuing the preclinical stage
biotech above US$800m. The banks hiked
the range to US$18–$19 from US$16–$18 on
Thursday morning and upped the size from 7.4m.
Fidelity Investment and T Rowe Price, which
owned 14.8% and 8.9% stakes ahead of the
IPO, anchored the Series C round, providing
momentum for the IPO.
Vaxcyte, which is developing vaccines for
pneumonia, made an even quicker progression from
late-stage private to collecting US$250m from its IPO.
In March, Vaxcyte raised US$110m on a Series
D round at a US$13.38 per share valuation.
Bank of America, Jefferies and Evercore padded that
funding with an upsized placement of 15.6m shares at
US$16 apiece, nearly a US$900m valuation.
vaccines for infectious diseases using Sutro
Biopharma’s drug discovery engine.
The lead drug is still a year away from
launching Phase I trials of a potential rival to
Pfizer’s FDA-approved blockbuster pneumonia
vaccine Prevnar 13.
Robert Sherwood
shares or 6.8% of the expanded capital
at US$28.20, the bottom of a US$28.20–
$28.80 range and a 3.5% discount to
last sale.
The stock’s move from below US$24.00 a
week earlier to US$29.23 just prior to the
launch of the offering meant Blackstone
Mortgage was able to price the offering
above its reported March 31 book value
per share of US$26.92.
However, Blackstone Mortgage shares
slumped 7.6% to US$27.01 in Tuesday’s
after-market.
The REIT plans to use the net proceeds
of the offering for working capital and
other general corporate purposes,
including increasing its liquidity and
supporting origination of commercial
mortgage loans and other target assets.
101
ECM DEALS: WEEK ENDING 12/6/2020
Stock Country Date Amount Price Deal type Bookrunner(s)
Alliance Aviation Services Australia 06/11/2020 A$92m A$2.95 Follow-on (primary) Ord Minnett
Infratil Australia 06/10/2020 NZ$250m NZ$4.76 Follow-on (primary) UBS
Kogan.com Australia 06/11/2020 A$100m A$11.45 Follow-on (primary) Canaccord Genuity, RBC
Cofinimmo Belgium 06/10/2020 €63.6m €121 Accelerated bookbuild (primary) BNP Paribas
Alphamab Oncology China 06/11/2020 HK$440m HK$16.50 Follow-on (secondary) MS
Burning Rock Biotech China 06/11/2020 US$222.8m US$16.50 IPO (primary) MS, BofA, Cowen
China Yongda Automobiles Servs China 06/10/2020 HK$995m HK$8.29 Follow-on (primary) GS, HSBC, MS
CIFI Holdings (Group) Co China 06/08/2020 HK$1.16bn HK$6.28 Follow-on (primary) CS
ESR Cayman China 06/08/2020 HK$1.95bn HK$16.80 Follow-on (secondary) CLSA, GS, MS
JD.com China 06/11/2020 HK$30bn HK$226 IPO (primary) BofA, CLSA, UBS
Kaisa Prosperity Holdings China 06/09/2020 HK$456m HK$32.55 Follow-on (primary) ABC International, Haitong International
Nio China 06/10/2020 US$428.4m US$5.95 Follow-on (primary) MS, CS, CICC
Topsports International China 06/11/2020 HK$2.9bn HK$10.50 Follow-on (secondary) BofA
Cathay Pacific Airways Hong Kong 06/09/2020 HK$11.7bn HK$4.68 Follow-on (primary) MS, BNP Paribas, BOC International, HSBC
JM Financial India 06/09/2020 Rs7.7bn Rs70 Follow-on (primary) ICICI Secs, IDFC Secs
Aptiv Ireland 06/09/2020 US$1bn US$75.91 Follow-on (primary) GS, Citigroup, Barc, BofA, DB, JPM
Scorpio Bulkers Monaco 06/09/2020 US$75.7m US$18.46 Accelerated bookbuild (primary) BofA, BTIG, Clarksons Platou
Basic-Fit Netherlands 06/08/2020 €133.3m €25 Accelerated bookbuild (primary) ABN AMRO, Rabobank/Kepler Cheuvreux
Kahoot Norway 06/10/2020 NKr852m NKr35.50 Accelerated bookbuild (primary) ABG Sundal Collier, Arctic Secs, GS
Budimex Poland 06/09/2020 Z255m Z200 Accelerated bookbuild (secondary) Societe Generale
Paradox Interactive Sweden 06/10/2020 SKr940.5m SKr190 Accelerated bookbuild (secondary) Carnegie, GS
Ina Invest Switzerland 06/11/2020 SFr100m SFr22.42 Rights issue CS
Biffa UK 06/11/2020 £100m 200p Accelerated bookbuild (primary) HSBC, Numis
Bure Equity UK 06/10/2020 SKr1bn SKr193 Accelerated bookbuild (primary) SEB
Helios Towers UK 06/11/2020 £60m 150p Accelerated bookbuild (primary) Jefferies, Standard Bank
Hyve UK 06/11/2020 £127m 69p Rights issue Barc, HSBC, Numis
Lancashire Holdings UK 06/09/2020 £277m 700p Accelerated bookbuild (primary) Citigroup, MS
Ocado UK 06/10/2020 £650m £19.60 Accelerated bookbuild (primary) GS, JPM, Numis
Segro UK 06/09/2020 £680m 820p Accelerated bookbuild (primary) BofA, UBS
Whitbread UK 06/09/2020 £1bn £15 Rights issue JPM, MS
Avidity Biosciences US 06/11/2020 US$259.2m US$18 IPO (primary) Cowen, SVB Leerink, CS, Wells Fargo
Azek US 06/11/2020 US$764.8m US$23 IPO (primary) Barc, BofA, GS, Jefferies, Citigroup, CS, DB, RBC
Bill.com US 06/10/2020 US$534.6m US$74.25 Follow-on (primary, secondary) GS, BofA, Jefferies, KeyBanc CM, Wells Fargo
Blackstone Mortgage Trust US 06/08/2020 US$282m US$28.20 Accelerated bookbuild (primary) Citigroup, BofA, Barc, MS, Wells Fargo
Brigham Minerals US 06/09/2020 US$90.8m US$13.75 Block (secondary) CS
BrightView Holdings US 06/10/2020 US$134m US$13.40 Accelerated bookbuild (secondary) GS
Cannae Holdings US 06/10/2020 US$412.5m US$37.50 Follow-on (primary) BofA, Stephens
Cardiovascular Systems US 06/09/2020 US$125m US$34 Accelerated bookbuild (primary) Barc, SVB Leerink
CareDx US 06/10/2020 US$125m US$32 Follow-on (primary) GS, Jefferies
Catalent US 06/10/2020 US$550m US$71.25 Follow-on (primary) RBC CM
ChemoCentryx US 06/10/2020 US$301.6m US$58 Accelerated bookbuild (primary) SVB Leerink, Piper Sandler
Construction Partners US 06/10/2020 US$95m US$16.50 Accelerated bookbuild (secondary) Baird, Raymond James
Eversource Energy US 06/10/2020 US$517.6m US$86.26 Block (primary) GS, Barc, Citigroup
Fate Therapeutics US 06/08/2020 US$175m US$28.31 Accelerated bookbuild (primary) Jefferies, SVB Leerink, Barc, Guggenheim Secs
Generation Bio US 06/11/2020 US$200m US$19 IPO (primary) JPM, Jefferies, Cowen
Hudson Executive Investment US 06/08/2020 US$360m US$10 IPO (primary) Citigroup, JPM
Mesa Laboratories US 06/09/2020 US$135m US$225 Follow-on (primary) Jefferies, JPM, Evercore
Oneok US 06/11/2020 US$832m US$32 Follow-on (primary) Barc, JPM, Citigroup, BofA, CS, Wells Fargo
PluralSight US 06/09/2020 US$228.4m US$19.50 Follow-on (secondary) MS, Barc, BofA, SunTrust Robinson Humphrey
Replimune US 06/08/2020 US$100m US$23 Accelerated bookbuild (primary) JPM, SVB Leerink, BMO CM
SiTime US 06/11/2020 US$112m US$32 Follow-on (primary, secondary) Barc, Stifel
Spirit Realty Capital US 06/08/2020 US$298.8m US$37.35 Accelerated bookbuild (primary) JPM, SunTrust Robinson, Regions Sec,
Fifth Third Sec, MS, Wells Fargo
Vaxcyte US 06/11/2020 US$250m US$16 IPO (primary) BofA, Jefferies, Evercore
Vicor US 06/10/2020 US$100m US$65 Follow-on (primary) Needham
Vroom US 06/08/2020 US$467.5m US$22 IPO (primary) GS, BofA, Allen & Co, Wells Fargo

EVERSOURCE FUNDS GAS PURCHASE
EVERSOURCE ENERGY moved fast in Thursday’s
pre-open to raise US$517.6m to help fund its
US$1.1bn purchase of the Massachusetts
natural gas assets of Columbia Gas from
NiSource announced in February.
A syndicate led by Goldman Sachs, Barclays
and Citigroup reoffered 6m Eversource shares,
or less than 2% of the company, at US$86.26
each, the top of the US$85.85-$86.26 reoffer
range and no discount to last sale.
Though the deal was small relative to
Eversource’s US$29bn market cap, the shares fell
to $84.35 in Thursday’s broader market carnage.

102 International Financing Review June 13 2020


In February, when the stock was trading
at about US$90, Eversource said it would
fund the Columbia Gas purchase with a
balance of equity and debt to maintain its
credit ratings.
The utility has other capital needs and
plans to spend US$3bn this year to upgrade
its assets.
Eversource also raised US$1.2bn in the
lRSTûQUARTERûFROMûTHEûSALEûOFû
YEARûNOTESû ROYALTY PHARMA, the world’s largest purchaser of
and green bonds and by closing the forward
element of last year’s US$1.3bn block equity
deal that priced at US$71.48 a share.
KKR TOP-TICKS BRIGHTVIEW
KKR & Co cut its stake in landscaper
BRIGHTVIEW as the main seller in a US$134m
lRST
TIMEûFOLLOW
ONûSTOCKûSALEûPRICEDû at a range of US$25–$28 each for pricing post-close
overnight on Wednesday.
4HEûPRIVATEûEQUITYûlRMûSOLDûMûOFûTHEû
10m shares reoffered to investors at
US$13.40, the bottom of the US$13.40–
$13.70 marketing range and an 8.8%
discount to last sale.
Goldman Sachs was sole bookrunner on the
sale, which represented 9.5% of the
OUTSTANDINGûANDûWASû++2SûlRSTûSELL
DOWNû raise this month as this year’s largest US IPO.
since BrightView went public at the much
higher price of US$22.00 a share in June 2018.
The timing was opportunistic considering
BrightView shares slumped to a low of US$6.85
as recently as March, only to rebound to
US$14.70 ahead of the launch of the offering.
However, investors took a dim view of the
deal, not helped by poor aftermarket
EQUITIES AMERICAS
Royalty Pharma drawing a
crowd for Nasdaq IPO
„ UK Royalty Pharma is potentially the largest IPO of 2020
The IPO comprises 60m primary shares, while
royalties on future sales of leading prescription selling shareholders, including a Canadian pension
drugs, is quickly generating investor attention for fund, account for the remaining 10m shares.
a near US$2bn Nasdaq IPO. Pablo Legorreta, Royalty’s billionaire founder,
JP Morgan, Morgan Stanley, Bank of America, CEO and sole shareholder of the vehicle’s external
Goldman Sachs, Citigroup and UBS bullishly manager, is not listed among the sellers. Last
accelerated the expected pricing by one day after year he was paid US$28.5m reflecting fees (after
a few days of marketing. expenses) paid by Royalty to the manager.
The syndicate of 13 banks is marketing 70m shares Since then, the vehicle has deployed US$18bn
of cash to purchase royalties on 45 marketed
on Monday, June 15, after originally slotting the deal drugs and three in late-stage development.
for pricing on Tuesday, June 16. The terms attribute The portfolio includes seven blockbuster
Royalty an enterprise value of up to US$22bn. drugs, including Lyrica (Pfizer), Imbruvica
“Royalty Pharma operates completely behind (AbbVie/Johnson & Johnson) and Truvada
the scenes but it’s staggeringly big,” said an ECM (Gilead Sciences), with end-market sales of more
banker away from the deal. than $3bn annually.
If priced at the top of the range, the offering Royalty has a lot of debt, nearly US$6bn as of
will eclipse Warner Music Group’s US$1.93bn March 31, which probably explains the massive
syndicate.
Just as Warner collects royalties from users of Royalty realised US$1.6bn of free cashflow
its music library, Royalty gets royalties on sales from US$1.8bn of cash royalties it received last
of blockbuster drugs it helped finance. year. New investors will see a return of capital
The similarities end there because Royalty through a 15 cents quarterly distribution, a 2.1%–
is raising growth capital, not cashing out its 2.3% yield based on the IPO range.
billionaire owner like Warner Music did. Robert Sherwood
conditions as stocks slumped during
Thursday’s session.
BrightView shares plunged 18.8% to
US$11.94, implying big losses for buyers in
the offering.
KKR’s stake falls to 48.3% from 55.7%
The timing of the US$112m offering
alongside a market sell-off weighed on the
pricing outcome, though the stock
rebounded 10% in early trading on Friday as
the broader market recovered.
The offering enabled MegaChips to cut its
/Nû*UNEûû,EMONADEûPUBLICLYûlLEDûFORûAû
US$100m placeholder for a NYSE IPO, listing
Goldman Sachs, Morgan Stanley, Allen & Co and
Barclays as bookrunners.
4HEûlLINGûPUTSû,EMONADEûONûTRACKûTOûGOû
public just before July 4 if market conditions
previously, leaving it with 50.6m shares
now subject to a 90-day lock-up.
Co-sponsor MSD Partners sold 1.8m shares
in the offering to shave its stake to 11.3%.
BrightView’s commercial landscaping
stake to 46.7% from 66.4% previously,
leaving it with 7.5m shares. It can sell more
after 90 days.
SiTime makes silicon timing solutions for
companies such as Apple and Samsung.
ALLOWûPOTENTIALLYûBECOMINGûTHEûlRSTû
“unicorn” IPO since Casper Sleep’s
disappointing debut in February. On Thursday
Casper was down 37% from its offering price.
,EMONADEûlRSTûlLEDûTOûGOûPUBLICû
operations have in the main been deemed
essential services during Covid-19, helping
to limit earnings pressure.
SITIME REBOUNDS FROM STOCK SALE
SITIME overcame the onset of tougher market
CONDITIONSûTOûPRICEûITSûlRSTûFOLLOW
ONûSINCEû Needham acted as sole bookrunner. The
its highly successful debut late last year.
The US$112m follow-on was an
opportunity for major shareholder
MegaChips to pare its stake after the near
tripling of SiTime’s share price since it went
public at US$13.00 in November.
BACKEDûDIGITALûINSURANCEûlNTECHû
Barclays and Stifel took out two days of
marketing to sell 3.5m SiTime shares, including
1m primary shares and 2.5m from MegaChips,
ATû53ûORûAûûlLE
TO
OFFERûDISCOUNT awaited stockmarket debut.
VICOR, a maker of power systems for
specialised electronic devices, took out a day
of marketing on Wednesday before raising
US$100m from the follow-on sale of 1.54m
shares or about 5% of the company at US$65,
a 2.5% discount to last sale. Vicor plans to
use the funds to expand its factories.
criticism of its business model saw WeWork
shares closed at US$67.05 in Thursday’s
aftermarket.
LEMONADE A TEST OF UNICORN APPEAL
3OFT"ANK
successful SelectQuote IPO. The latter is
LEMONADE, whose bot named Maya can write
a home insurance policy in a matter of
minutes, could be about to make a long-
insurance.
International Financing Review June 13 2020
CONlDENTIALLYûLASTû*UNEûSINCEûLOBBINGûFOURû
amendments before showing its hand publicly.
4HEûORIGINALûCONlDENTIALûlLINGûPUTûITûONûAû
SIMILARûTRAJECTORYûTOûmEXIBLEûOFlCEûSPACEû
provider WeWork, another SoftBank-backed
IPO hopeful.
Valuation concerns and widespread
fail to go public, also a blow for the ambitions
of other unicorns or loss-making private tech
companies valued at more than US$1bn.
Lemonade is now looking to come to
market in the slipstream of last month’s
more of a healthcare insurance distribution
platform, whereas Lemonade exclusively
underwrites renters, homeowners and pet
103
 Launched in 2016, Lemonade grew ARYA SCIENCES ACQUISITION II, a life sciences- US$35.33, down 14.9%. As recently as
revenues (mainly net earned premium) by focused SPAC backed by Perceptive Monday, the stock fetched US$48.36.
ûTOû53MûINûTHEûlRSTûQUARTERûOFûû Advisors, closed its debut session on Friday “It’s really poor timing,” said one buy-
putting the company on track to break
DAYû sider. “They certainly weren’t helped by
US$100m of revenue this year.
Lemonade reported a net loss of
US$36.5m in the quarter, or more than its
revenue.
The insurer cut its loss ratio to 72%, but
spent more on sales and marketing than it
paid out in claims.
At the end of the quarter, Lemonade
carried US$304m of cash and short-term
investments, thanks in part to a US$300m
*UNEûûATû53ûTHEûBESTûlRST
performance ever by a SPAC, according to
SPAC specialist SPACInsider.
Private placements concurrent with an
IPO and forward purchase agreements to
help fund an acquisition contributed to the
outcomes of Hudson Executive and Arya
Sciences.
For Hudson Executive, Citigroup and JP
Morgan placed 36m units at US$10.00 apiece,
with each unit structured as one share, one-
the oil inventory report. But the messaging
was not good.”
The US Energy Information
Administration Wednesday reported that
US crude inventories rose by 5.7m barrels
to a record-high 538.1m barrels.
Barclays, JP Morgan and Citigroup placed
26m new Oneok shares, equating to 5.9%
of the enlarged company and four days’
trading volume, Thursday night at just
3ERIESû$ûlNANCINGûROUNDûCOMPLETEDûLASTû half warrant. 53ûAûûlLE
TO
OFFERûDISCOUNT
year. Hudson Executive Capital, the vehicle’s
3OFT"ANKûLEDûTHATûlNANCINGûWHICHû
reportedly valued Lemonade at US$2.1bn.
NO LET-UP FROM BIOTECH IPOS
ARCHERDX, a VC-backed developer of in vitro
sponsor, invested an additional US$9.2m
through the purchase of private placement
warrants. The value-oriented, event-driven
fund manager also committed to invest STRUCTURED EQUITY
US$50m through a forward purchase
agreement.
ANDûINûVIVOûDIAGNOSTICûSUBSTANCESûlLEDû
publicly on June 5 for a US$100m Nasdaq
IPO that could be priced later this month.
ArcherDX sells commercial research-use
only products and services that laboratories
use to conduct genomic analysis to optimise
therapy and monitor cancer.
JP Morgan, Bank of America, Stifel and
The Hudson Executive SPAC is chaired by
Douglas Braunstein, HEC’s founder and
former JP Morgan CFO (2010–2012), and
Douglas Bergeron, the former CEO of
Verifone, who joined HEC as a managing
partner in February 2020.
HEC’s CEO Network, a network of more
than 30 current and former public company
GERMANY
RAG-STIFTUNG RAISES €500m FROM
EVONIK EB
RAG-STIFTUNG raised €500m on Wednesday
from another zero percent coupon six-year
exchangeable bond into German speciality
Evercore ISI WILLûLEADûTHEû)0/ûWHICHûWASûlRSTû #%/SûINûlNTECHHEALTHCAREûISûTOUTEDûASûAû chemicals group EVONIK, as it did in
lLEDûCONlDENTIALLYûINû-ARCH differentiating factor in identifying an September 2018.
AKOUOS, a pre-clinical developer of gene acquisition. The previous paper came alongside
therapies with the potential to restore Recycling of capital from acquisitions is a 3.4% equity raise, but this trade was
HEARINGûLOSSûALSOûlLEDûPUBLICLYûONû*UNEûûFORû also factoring into the SPAC revival. solely equity-linked, with proceeds to be
a US$100m Nasdaq IPO. On Monday, HL ACQUISITIONS announced an used to buy back one of its three
Bank of America, Cowen, Piper Sandler and agreement to merge with FUSION WELCOME- outstanding EBs.
BTIG are listed as bookrunners. FUEL SA and OPES ACQUISITIONS signed an The bonds were launched at 100%-103%
!KOUOSûWHICHûlRSTûlLEDûCONlDENTIALLYûINû agreement to merge with fast-casual burger of principal, to be redeemed at 100%,
March, counts 5AM Ventures and New chain BURGERFI. making for a yield to maturity of negative
Enterprise Associates among its largest Bill Foley is preparing for the impending 0.49% to 0% and premium of 20%-25%, to be
shareholders. launch of the US$375m IPO of TREBIA set over the VWAP from launch to pricing.
Israel-based biotech POLYPIDûlLEDûONû*UNEûû
for a US$57.5m Nasdaq IPO.
PolyPid is a late-stage developer of
prolonged-release drugs designed to treat
localised medical conditions, including
surgical site infections, cancer,
INmAMMATIONûANDûPAIN
Barclays and BMO Capital Markets are listed
as joint bookrunners.
0OLY0IDûRE
lLEDûCONlDENTIALLYûINû&EBRUARYû last week in its attempt to walk the
this year after abandoning efforts to go
public in 2018–19.
HUDSON EXECUTIVE UPSIZES TO
US$360m ON SPAC REVIVAL
ACQUISITIONûWHICHûHASûBEENûCONlDENTIALLYû
marketing and will launch publicly this
week, according to bankers involved in that
process.
ONEOK US$832m EQUITY RAISE
PROVES COSTLY EXERCISE
ONEOK, a once habitual ECM issuer, stumbled
õûEXCHANGEûPRICEû4HEûBONDûmOORûWASû
tightrope between preserving credit ratings
and maintaining its stock dividend by
seeking a US$832m equity injection.
Oneok, which transports oil and natural
gas production out of all the major US
basins, did itself no favours by pulling
There is a call from four years subject to a
130% trigger.
Based on outstanding CBs, the credit
assumption was 150bp for a 17.5%-23%
implied vol.
The bonds were issued at 100.25% of
principal for a negative 0.04% yield-to-
maturity. The reference price was
€24.0494 and the premium 20% for a
92.5%.
The bulk of the bonds were bought by
very engaged long-only accounts drawn to
the high equity sensitivity.
There was a concurrent tender for 0%
EBs due 2021 at par. The tender closed
HUDSON EXECUTIVE INVESTMENTûAûlNTECH
healthcare-focused SPAC vehicle, on
Monday raised an upsized US$360m on its
IPO, far above the US$300m it was targeting.
Hudson Executive opened Tuesday trading
at US$10.19 and closed the session at US$10.25,
a solid debut relative to other recent deals.
104
second-quarter and full-year 2020 earnings
guidance alongside the launch of the deal in
the pre-open Thursday, unnerving investors
from the get-go.
Oneok plunged 12.7% at the open and
continued its descent throughout the
session before closing down 15.8% to
International Financing Review June 13 2020
with €363.8m repurchased, or 80.8% of the
€450m outstanding, leaving €86.2m.
Pricing came after the market close,
WHEREû%VONIKûSHARESûlNISHEDûTHEûDAYû
down 2.32% at €24.
Goldman Sachs, JP Morgan and UBS were
bookrunners.
 STRUCTURED EQUITY

EQUITY-LINKED DEALS WEEK ENDING: 12/6/2020

Issuer Country Date Amount Greenshoe Tenor Coupon/YTM % Premium (%) Bookrunner(s)
RAG-Stiftung/Evonik Germany 10/06/2020 €500m – 6y 0.000/–0.400 20.0 GS, JPM, UBS
Aptiv Ireland 09/06/2020 US$1.0bn US$15m 3y 5.500 22.5 GS, Citigroup, Barclays, BofA, DB, JPM
Jazz Pharmaceuticals Ireland 08/06/2020 US$85m US$15m 6y 2.000 40.0 JPM, BofA, GS
LivaNova UK 11/06/2020 US$25m US$37.5m 5.5y 3.000 30.0 Barclays, BofA, GS
Ocado UK 10/06/2020 £350m – 7y 0.750 35.0 GS, JPM
Coupa Software US 10/06/2020 US$1.2bn US$18m 6y 0.375 32.5 GS, Barclays, BofA, JPM
Eventbrite US 10/06/2020 US$13m US$2m 5y 5.000 18.0 Morgan Stanley
Glaukos US 08/06/2020 US$25m US$37.5m 7y 2.750 30.0 JPM
Okta US 09/06/2020 US$1.0bn US$15m 6y 0.375 32.5 GS, JPM, Morgan Stanley
TheRealReal US 10/06/2020 US$15m US$22.5m 5y 3.000 27.5 Morgan Stanley, Credit Suisse, BofA
WisdomTree Investments US 09/06/2020 US$15m US$22.5m 3y 4.250 60.0 Oppenheimer
Zendesk US 11/06/2020 US$1.0bn US$15m 5y 0.625 32.5 GS, Morgan Stanley

coupon to achieve a higher conversion

IRELAND
APTIV SKIDS ON TWO-PART,
US$2bn RAISE
Having drawn down on its credit facility and
with its credit ratings under pressure,
Dublin-headquartered auto parts company
APTIV followed through with a two-part,
US$2bn equity recapitalisation last Tuesday
to further shore up liquidity.
premium on a US$850m six-year CB it
issued on Monday.
JP Morgan, Bank of America and Goldman
Sachs priced the CB at a 2% coupon and 40%
conversion premium, after one day of
marketing that saw Jazz’s Nasdaq-listed
shares fall 7.8% to US$111.29. They had
marketed the CB at a 1.5%–2% coupon and
40%–45% premium.
For LivaNova, the CB was part of a larger
RElNANCINGûTOûPROVIDEûITûMOREûmEXIBILITY
UK
OCADO RAISES OVER £1bn FROM
EQUITY AND 2027 CB
With OCADO shares up nearly two-thirds
since the start of the year, there was little
surprise when the UK online supermarket
and technology company took advantage
with an equity raising.
In total, £1.007bn was raised on Wednesday
4HEûlNANCINGûMARKETEDûFORûONEûDAYûWASû
structured as evenly sized equity and
offer and a £350m convertible bond issue due
mandatory convertible preferred,
maximising equity content while partially
blunting earnings dilution.
Shares of Aptiv, the former Delphi
Automotive, tanked 13.2% to US$75.91 while
the deal was being marketed on Tuesday.
Goldman Sachs, Citigroup, Barclays, Bank of
America, Deutsche Bank and JP Morgan
managed to halt the bloodletting in placing
13.17m shares at the US$75.91 last sale for
US$1bn proceeds.
Using that same price as reference, they
priced the US$1bn three-year mandatory at
a 5.5% dividend and 22.5% conversion
premium, the latter the high end of the
17.5%–22.5% range marketed.
Aptiv, as a direct supplier to the auto industry,
has been hard hit by Covid-19, with plant
closures in US, China and EMEA prompting it to
YEARûNON
PUTûTWOû%"ûWASûPRICEDû those bonds are already in the money with a
eliminate its common stock dividend and fully
draw down on its US$2bn revolver.
,ASTûWEEKSûEQUITYûlNANCINGûALLOWSûITûTOû
fully repay borrowings on the revolver.
Aptiv, rated Baa3/BBB, on the cusp of
Ahead of the CB launch, the medical
DEVICEûMAKERûINKEDûAûNEWû53MûlVE
year covenant-lite loan that carries a rate of
L+650bp, with the combined proceeds used
to repay borrowings on certain credit
facilities – it had US$345.1m drawn on one
facility at March 31 that obligated
repayment semi-annually through March
2022.
Goldman Sachs acted as exclusive adviser
on the new loan facility.
THAILAND
CP FOODS EB RAISES US$275m
CP Foods Capital has raised US$275m from
the sale of a bond exchangeable into shares
of CHAROEN POKPHAND FOODS.
4HEûlVE
at investor-friendly terms. The coupon was
set at the top of the 0%–0.5% range, the yield-
to-maturity at the top of 1.5%–2.5% range
and the exchange premium at the bottom of
the 15%–25% range.
across an institutional equity offering, a retail
January 2027. The company’s market cap pre-
money was £14.61bn.
Remarkably, Ocado is one of the few
STOCKSûTOûHAVEûDElEDûTHEûCORONAVIRUSûGLOBALû
equity market collapse in March, with the
grocer’s shares surging more than 37% in a
week at the height of market dislocation.
The stock was up more than 65% in the year
to-date as of Wednesday’s £20.79 close, having
begun the year at £12.59 and hitting an all-time
closing high of £22.29 at the beginning of June.
“It’s quite extraordinary,” said a banker
INVOLVEDûh7EûHAVEûSEENûAûmIGHTûTOûQUALITYû
and Ocado is the perfect Covid-19 stock.”
Ocado issued convertibles just over six
months ago in early December, raising
£600m from an upsized six-year CB issue,
but that was of no concern considering
conversion price of £17.9308.
Wall-crossing for the £650m equity raising
and a £350m CB issue due January 2027 was
focused on large shareholders and existing
bondholders, as well as some new money.
INVESTMENTûGRADEûSAWûlRST
QUARTERûOPERATINGû There was a same-day upsize option of
income decline 26% year-over-year to US$219m
on a 9.8% drop in revenue to US$3.23bn. The
company has warned that operations will be
disrupted for the rest of 2020 and beyond.
JAZZ RAISES US$850m FROM SIX-YEAR CB
Irish-domiciled biotech JAZZ
PHARMACEUTICALS opted to pay a higher
Both processes were wrapped up with
US$25m, but it was not exercised.
The EB will be issued at par, with a put
price of 104.08 and a redemption price of
110.58.
Long-only investors took almost half of
the deal. There was also support from
existing shareholders and European
convertible bond funds.
UBS was the sole bookrunner.
International Financing Review June 13 2020
indications of interest in excess of the shares
and bonds on offer.
An offering of 33.16m shares,
representing 4.7% of the share capital, was
priced at £19.60, a 5.72% discount. Delta
placing of up to £100m was offered but just
£35m (1.7m shares) was used, highlighting
the participation of outright investors and
hedge funds operating on an outright basis.
105

Okta, Coupa, Zendesk lead
tech CB revival
„ US Software companies upgrade on new US$1bn-plus deals
The surging CB new-issue market is returning to
its roots as the preferred funding vehicle for high-
growth technology companies.
OKTA, COUPA SOFTWARE and ZENDESK, all
software-as-a-service providers and all familiar to
the market, last week funded in quick succession
with US$1bn-plus CBs printed at sub-1% coupons
and employing derivatives to offset dilution at a
premium to already sky-high valuations.
Okta sold its US$1bn six-year CB after the
close on Tuesday at 0.375%, up 32.5%; Coupa an
upsized US$1.2bn CB, also six years, on Wednesday
at 0.375%, up 32.5%; and Zendesk a US$1bn five-
year CB last Thursday at 0.625%, up 32.5%.
The three transactions are remarkably similar
in almost every way – all were marketed at
0.125%–0.625% coupons, both Okta and Zendesk
at 32.5%–37.5% conversion premiums (Coupa at
30%–35%), and all funded the repurchase of deep-
in-the-money CBs, and all used call spreads.
The deals attracted demand from crossover
credit and equity income funds, as well as
traditional long-only CB investors and arbs.
Okta’s CB, managed by joint bookrunners
Goldman Sachs, JP Morgan and Morgan Stanley,
is convertible into the underlying at prices above
US$238.59.
Okta’s 0.125% CB maturing in September
2025 is convertible at prices above US$188.71.
“There wasn’t a lot of overlap between the 25s
and the new CB,” said a banker involved. “It was
dedicated convert funds that no longer had exposure
to the name along with new, crossover investors.”
UPGRADE CYCLE
Okta, a provider of cloud identity management
software, repurchased US$70m principal of its
0.25% CB due 2023, which are convertible at
US$48.36, for roughly US$250m, almost entirely
in 1.4m shares issued to holders.
It also spent US$116.5m on a derivative to
offset dilution consideration to prices above
US$360.14, a 100% premium to reference.
The top 10 accounts took more than half the
equity from a book of more than 150 lines, with
the top 20 taking around 75%. Most of those
seen in the wall-cross came into a book that
was heavily supported by existing shareholders.
A second banker said the top 10 in the
book were almost exclusively US and UK
accounts, with several big orders coming
FROMûTHEû53û4HEû53ûINTERESTûREmECTSû/CADOSû
DILUTIONARYûBENElTûOFûTHEûCALLû
transformation from a low-margin online
retailer to a tech company, he said.
106
Coupa, whose software helps companies
manage expenses, also bought back a portion
of its US$134m principal 0.375% CB due 2023,
which is convertible at US$44.51, in conjunction
with its new US$1.2bn six-year CB.
Coupa’s underlying shares fell just 0.4% to
US$223.74 while the new deal was marketed on
Wednesday by Goldman Sachs, Barclays, Bank of
America and JP Morgan.
The new CB is convertible at US$296.45,
though Coupa also purchased a derivative to
offset dilution consideration to share prices up to
US$503.42, a 125% premium to reference.
Zendesk, a provider of software development
tools, repurchased US$425.8m principal of
US$440m of a 0.25% CB due 2023, convertible at
US$63.07, with a portion of the US$1bn it raised
from the sale of its new five-year CB last Thursday.
Zendesk spent US$617.6m, entirely in cash,
to cash out the 2023s, or about 145 of par, to
eliminate all dilution from the underlying shares.
Taken together with new deals on Wednesday
from online fashion retailer THEREALREAL
(US$150m) and event-planner EVENTBRITE
(US$130m), and CBs are growing as an asset
class.
“The market does seem to have taken a turn
toward more regular-way tech issuers,” said a
second equity-linked banker. “If you take a step
back, tech and healthcare have driven returns
historically.
“What’s different is that there is more money
coming into converts.”
Overall, 10 companies raised US$6bn from
CBs last week.
Year-to-date US CB issuance stands at
US$56.3bn, putting the asset class on pace this
year for US$154.5bn, which would be an all-time
high.
“You have to remember this is, what, a
US$330bn asset class,” said one of the EQL
bankers. “It is going to continue to be busy.”
Stephen Lacey
4HEûlRSTûBANKERûSAIDûTHATûTHEREûWASû
capacity to price the deal higher.
Another £7m was raised through a
PrimaryBid.com retail offer, with 362,000
shares sold at the same £19.60 price.
The bonds have a call from February 8 2025
at a 130% trigger and were offered at 0.5%–1%
on the coupon with a premium range of 30%–
35%. Pricing came towards the better end for
Ocado at a 0.75% coupon, up 35% from the
equity pricing for a £26.46 conversion price.
International Financing Review June 13 2020
Ocado is rated B2 (stable) by Moody’s and
B+ (negative) by Fitch. A credit assumption
of around 450bp was based in part on the
rating and December’s six-year paper.
Implied vol was in the low 30s on pricing
WITHûAûBONDûmOORûOFû
Realised vol for 30 and 90 days are both
above 50% and 47% over 200 days, while the
spread implied on the December 2025s, not
adjusted to the new tenor, is 260bp on
2ElNITIVSûMODEL
There were more than 100 lines in a book
heavily skewed to outrights, with good
European support.
Proceeds will be used to take advantage of
OPPORTUNITIESûRISINGûFROMûTHEûSIGNIlCANTû
acceleration of online adoption and to grow
faster over the medium term.
Ocado shares moved above and below
pricing during the day on Thursday, and
ENDEDûTHEûDAYûmATûTOûPRICINGûATûa
Goldman Sachs, JP Morgan and Numis were
bookrunners on the equity, with Goldman
Sachs and JP Morgan running the CB.
LIVANOVA ADAPTS CALL SPREAD
ON US$250m CB
LIVANOVA, a UK-domiciled medical device
maker, raised US$250m from a 5.5-year
convertible bond it sold last Thursday
through a US subsidiary, LivaNova USA.
Barclays, Bank of America and Goldman Sachs
placed the CB at a 3% coupon and 30%
conversion premium, the investor-friendly
ends of price talk, after marketing for one
day on Thursday, amid an extreme market
sell-off.
“High-quality orders came from several
long-only institutions that have conviction
in the name,” said a banker involved. “But,
honestly, a little less fundamental
orientation than we would have liked.”
LivaNova’s Nasdaq-listed shares on
Thursday fell 11.8% to US$46.91.
Buyers of LivaNova’s CB are able to
convert into the underlying at prices above
US$60.98.
The medical device maker purchased a
call spread to offset dilution to share prices
up to US$100.00, a 113.17% premium to
reference.
The CB and call spread are settleable
entirely in cash – typically, US CBs are net-
share settled, the principal settled in cash
and any residual value in stock. In the case
of LivaNova, it could fund any excess
payment from proceeds it would receive
from the call spread.
“They will receive some or all of the cash
settlement costs via the call spread,”
explained the banker.
4HEûANTI
spread kicks in at US$60.98 and extends up
to US$100.00.
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PHOTOCOPYINGûRECORDINGûORûOTHERWISEûWITHOUTûWRITTENûPERMISSIONûOFûTHEûPUBûLISHERSû!CTIONûWILLûBEûTAKENûAGAINSTûCOMPANIESûORûINDIVIDUALûPERSONSûWHOûIGNOREûTHISûWARNINGû4HEû
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International Financing Review June 13 2020 107

 INTERNATIONAL FINANCING REVIEW INDEX

58.com 87 Duke Energy Florida 35 Korea Electric Power 35, 66 Sands China 67
ABN AMRO 3, 39 Dun & Bradstreet 89 Korean Air Lines 13 Santander 10, 53
Achmea Bank 43 Eagle Hospitality Trust 93 La Banque Postale 41 Sarana Multi Infrastruktur 77
ACS 36 eBay 35 Lancashire Holdings 98 Saudi Aramco 96
Aditya Birla Fashion & Retail 13 Ecuador 73 L-Bank 32 Scorpio Bulkers 95
ADNOC 80 Edenred 37 LBBW 42 SEB 3, 38
Africa Finance Corp 3 Egypt 80 Lebanon 71 Segro 13, 98
Airbus 10, 75 Enexis 36 Lei Shing Hong Credit 78 Sembcorp Marine 13, 93
Akouos 104 EQT 81 Lemonade 103 Serta Simmons Bedding 87
Albania 70 Equinix 35 Liberty Financial 53 Shandong Weigao Orthopedic Device 92
Albertsons 13 ESR Cayman 92 Liberty Global 82 Shanxi Securities 92
Alphamab Oncology 92 Estaleiro Jurong Aracruz 79 Link Finance 78 Sharjah Islamic Bank 72
Alstom 10 Eventbrite 106 LivaNova 106 Shenzhen Hepalink Pharmaceutical, 91
American Axle & Manufacturing 44 Eversource Energy 102 Loanpal 52 Shriram Transport Finance 13, 93
Aptiv 105 Evonik 104 Lower Saxony 31, 32 Sichuan Langjiu 91
ArcherDX 104 Exasol 95 Lummus Technology 85 Siemens 75
Arcland Sakamoto 79 Fannie Mae 51 LVMH 83 SIG Combibloc 46, 82
Arya Sciences Acquisition II 104 Far East Consortium International 76 Macy’s 87 Simcere Pharmaceutical Group 92
Asian Infrastructure Investment Bank 33 Far East Horizon 78 Magna International 35 Sinclair Broadcast Group 45
Athene Global Funding 42 Fate Therapeutics 100 Mahindra and Mahindra Financial Services 13 Sinic Holdings (Group) 65
Avidity Biosciences 101 FEC May22 76 MasMovil 9 Sinocelltech Group 92
Aviva Investors 17 Finland 4, 30 McDermott International 85 SiTime 103
Azek 99 Finnair 94 Medicover 81 SK Biopharmaceuticals 94
Banco de Credito Del Peru 73 FKS Food & Agri 77, 79 Mercedes-Benz 53 Smoore International 91
Bank11 fur Privatkunden und Handel 50 Fletcher Building 79 Mesa Laboratories 100 Snam 36
Bank of Japan 39 Florida Gas Transmission 35 MetLife Global Funding 42 Societe Generale 41
Bank Rakyat Indonesia 77 Ford Motor 53 MGM China 67 Societe Nationale SNCF SA 31
BASF 75 Fortune Brands 84 Midea International 78 Solar Mosaic 52
Basic-Fit 96 Freddie Mac 51 Mitchells & Butlers 83 Southwest Airlines 84
BBVA 48 Freeport Indonesia 77 Mohawk Industries 37 Spain 4
Biffa 13, 98 Fusion Welcome-Fuel SA 104 Molina Healthcare 83 Spirit Realty Capital 101
Bill.com 100 Galp Energia 3, 38 Morgan Stanley Principal Funding 5 Standard Chartered 17
Blackstone 51 Gan & Lee Pharmaceuticals 92 Murray Energy 88 State Bank of India 11
Blackstone Mortgage Trust 51, 101 Garrett Motion 87 Nationwide Building Society 3, 27 Straumann Holding 39
Boels 86 Garuda Indonesia 66 NatWest Markets 21, 42 Sunnova Energy Corp 52
Bosch 10 GE 35 NetEase 89 Sweden 30
BP 10, 75 General Motors 52, 84 New Development Bank 29 TAL Education 90
BPER Banca 3, 41 Generation Bio 101 Nexans 80 Telefonica 82
BrightView 103 Geo Energy Resources 65 Nio 91 ThaiOil 2
Brixmor 35 Germany 4, 30 Nord Anglia 86 Thales 75
Budimex 96 Gestamp 81 Northern Powergrid 36 TheRealReal 106
Bure Equity 97 GFH 71 Northern States Power 35 Thermo Fisher Scientific 84
BurgerFi 104 Ginnie Mae 51 North Rhine-Westphalia 31 ThyssenKrupp 8
Burning Rock Biotech 89 Goldman Sachs 25 Ocado 13, 105 Tiffany & Co 83
Canada Pension Plan Investment Board 33 Greece 4 Okta 106 Tiphone Mobile Indonesia 77
Cannae 89 Greenland Holding Group 65 Oman 80 Tokyo Metro 39
Cardiovascular Systems 100 Grieg Seafood 47 OMV 35 Tom Tailor Holding SE 80
CareDx 100 Gulf Marine Services 88, 97 Oneok 104 Toronto-Dominion Bank 35
Cathay Pacific Airways 12 GVS 95 Opes Acquisitions 104 Total 75
CBL & Associates 50 Hamilton Projects Acquiror 85 OQ 80 TPG Telecom 76
Central China Real Estate 65 Happiest Minds Technologies 93 Pacific Investment Management Co 51 Trane Technologies 84
Cerberus 19 Helios Towers 3, 63, 83, 98 Paradox Interactive 97 Travelodge 25
Chailease Holding 78 Help/Systems Holdings 85 PayPal 84 Trebia Acquisition 104
Chailease International Leasing 78 Hertz Global 24 Pepper 52 Trina Solar 91
Champion REIT 64 Hilong Holding 64 PepsiCo 84 UBS 21
Charoen Pokphand Foods 105 HL Acquisitions 104 Perusahaan Listrik Negara 77 Uganda 81
Chef’s Warehouse 86 HP 35, 84 PG&E 15 UK 4
China Bohai Bank 90 HSBC 17 PharmaSGP 95 UK DMO 32
China Fortune Land Development 65 Hudson Executive Investment 104 Phillips 66 35 Ultimate Fighting Championship 86
China Mengniu Dairy 64 Hurtigruten 86 Plains All American 35 Unedic 30
China Yongda Automobiles Services 92 Hygeia Healthcare 91 Pluralsight 101 UniCredit 41
Chr Hansen 79 Hyve Group 99 PolyPid 104 Univision Communications 86
Cirque du Soleil Entertainment 88 Iceland Foods 47 Ports and Free Zone World FZE 82 UPL Corp 10
Cofinimmo 94 IGB Commercial REIT 93 Power Finance Corp 11, 65 UPM-Kymmene 10
Commerzbank 3, 19, 39 Iliad 3, 39 Powerlong Real Estate Holdings 65 Vale 72
Coty 9 Immofonds Immobilien 97 PPF Telecom 71 Vaxcyte 101
Coupa Software 106 Immunotech Biopharm 91 Prasac Microfinance Institution 76 Veolia 37
Credicorp 73 Ina Invest 97 Pretium Credit Management 51 VEON 71
Credit Agricole 42 Indofood Sukses Makmur 77 Prosil Acquisition 48 Vicor 103
Credit Suisse 25, 43 Indomobil Finance Indonesia 77 Province of Cordoba 72 Virgin Media 3, 45
Croatia 70 Infratil 93 Qander Consumer Finance 50 Vodafone Hutchison Australia 76
CSN 72 Inter-American Development Bank 29, 33 Radiance Group 65 Volkswagen 37
Daimler 10, 75 International Container Terminal Services 67 RAG-Stiftung 104 Vroom 99
Danaher 83 Internet Brands 85 Raiffeisen Bank International 41 VW 3
Danske Bank 42 Iqvia 46 Raiffeisen Schweiz Genossenschaft 42 Westlake 53
DCB Bank 93 Ireland 4 Replimune 100 Whitbread 97
Delta Air Lines 28 Japan Airlines 79 Retrophin 100 World Bank 29
Democratic People’s Republic of Korea 14 Jazz Pharmaceuticals 105 Ronshine China Holdings 65 World Omni 53
Deutsche Bank 25 JD.com 89 Roper Technologies 35 Wynn Macau 67
Deutsche Boerse 3, 37 JetBlue Airways 85 Roundstone Securities No. 1 48 Yanlord Land Group 76
Diamond Sports 45 Kahoot 96 Royal Bank of Scotland 21 Zendesk 106
Dilosk RMBS No.2 48 Kaisa Prosperity Holdings 92 Royal Dutch Shell 10, 75 Zheneng Jinjiang Environment Holding 77
DP World 82 Kangji Medical 91 Royalty Pharma 103 Z Holdings 39
DSM 80 KBC Group 41 Ryman Healthcare 79 Zurich Insurance Company 41
Dubai Islamic Bank 72 Kogan.com 90 Safran 75
Duff & Phelps 85 Kommunalbanken 29 Saint-Gobain 75

108 International Financing Review June 13 2020

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OUTLOOK FOR ESG CAPITAL MARKETS
Social bond issuance has flourished as a range of predominantly supranational,
sovereign and agency borrowers tap the market to raise critical funds for FORMAT
Covid-19 mitigation and relief. For the time being, labelled and unlabelled WEBCAST
Covid-19 bonds have overshadowed environmental issuance. But how will
ESG bond segmentation play out once economies get through the worst of the TIME
outbreak and start to ease lockdown measures? 13:00 BST
Moderated by Keith Mullin, Founder & Director of KM Capital Markets, this timely
DATE
webcast will bring together a panel of senior market participants to assess
current themes in the ESG bond market. TUESDAY
JUNE 23 2020
Speakers to date:
• Ralf Berninger, Head of Investor Relations and Sustainability, SFIL
• Dominika Rosolowska, Sustainability Funding Officer, European Investment Bank
• Sandrine Enguehard, Head of Impact Structuring, Societe Generale
• Frank Richter, Investor Relations, NRW.Bank
• Felix Grote, Senior Funding Officer, Council of Europe Development Bank
• Théo Kotula, ESG Analyst, Responsible Investment, AXA Investment Managers
Topics covered will include:
• An update on current ESG capital markets activity.
• Social finance themes have come to the fore as the Covid-19 crisis has deepened. How will the
interplay between the ‘E’ and the ‘S’ in ESG finance develop through the current health and
economic crisis?
• Reviewing Covid-19 response bonds
• Latest trends in green bonds
• How are investors influencing the behaviour and performance of issuers in the environmental/
sustainable capital markets?
• How are issuers rising to the challenges of disclosure, reporting and transparency? Are the
challenges greater for public sector issuers?
• Is there sufficient transparency and disclosure around social impact measurement in particular?
• Is the Green Bond market playing its part in helping move the needle on governments’
COP-21 commitments?
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