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Bank and Capital Markets New Issue Review
25 Aug – 29 Aug 2014, week 34
Capital & Debt Advisory
Contents Section 1 Market backdrop 2
Section 2 Bank loan market 3
Section 3 USD public bond market 5
Section 4 GBP public bond market 6
Section 5 EUR public bond market 8
Section 6 US Private Placement market 9
Contacts United Kingdom Luke Reeve Tel: +44 20 7951 6548 Email: [email protected]
Chris Lowe Tel: +44 20 7951 0826 Email: [email protected]
Gary Davison Tel: +44 161 333 2767 Email: [email protected]
Europe Olivier Catonnet Tel: +33 1 5561 0535 Email: [email protected]
Jonathan H.M. Harfield Tel: +420 731 627 155 Email: [email protected]
Britta Becker Tel: +49 40 36132 20781 Email: [email protected]
Asia Gaurav Ahuja Tel: +65 6309 8276 Email: [email protected]
US & Canada K.C. Brechnitz Tel: +1 704 335 4211 Email: [email protected]
Tony Ianni Tel: +1 416 943 3476 Email: [email protected]
Australia Sebastian Paphitis Tel: +61 2 9248 4773 Email: [email protected]
Jason Lowe Tel: +61 3 8650 7600 Email: [email protected]
Section 7 Credit ratings 11
Section 8 Glossary 12
@EY_UKI
EY Capital and Debt Advisory - New Issue Review 2
Market backdrop UK economic data announcements highlight slow down
► UK manufacturing data released showed export orders turned negative for the first time since 2013. Although overall output and orders remained positive, these were down from the previous quarter and the sector continues to slow down. A number of reasons have been proposed for this decline, including the weak Eurozone economy, instability in Ukraine and the stronger sterling exchange rate. The survey, by the EEF manufacturers’ association and BDO, compiled analysis from 298 companies, and follows on from official data released that shows reduced hope of the manufacturing sector leading the way in the recovery. Manufacturing remains 7 per cent below its peak output compared to the service sector, the only area to have exceeded its pre-recession peak.
► House prices in the UK increased significantly over the summer however data released suggests this may begin to dampen. The Land Registry and Nationwide Building Society reported a 1.7 per cent monthly rise between July and August, the largest increase since 2004. This data contrasts with mortgage approvals which fell by nearly 20 per cent between January and May before recovering slightly in June. The Royal Institution of Chartered Surveyors (RICS), reports that buyer interest is declining and momentum and growth will reduce.
► The Bank of England announced that lending to UK businesses fell in the second quarter of the year by £3.9 billion. The predominant reason for this related to the commercial property sector as they reduce their bank borrowings. Net lending to small and medium sized enterprises fell by £453 million, with lending to larger businesses down by £3.5 billion. Analysts are highlighting that the Funding for Lending Scheme has not done enough to fill the gap of lending to SME’s.
► France’s borrowing costs continue to slide as the country is expected to assemble a pro-reform government, something popular with fixed income investors. Yields on 10-Year government bonds fell to 1.24 per cent on Thursday, down from 1.37 per cent at the end of the previous week.
Section 1: Market backdrop
Tenor 3yr 5yr 7yr 10yr 30yr
UK swap rate 1.52 1.87 2.16 2.41 2.77
Gilt rate 1.24 1.63 2.04 2.34 3.08
Tenor 3yr 5yr 7yr 10yr 30yr
US swap rate 1.15 1.78 2.15 2.50 3.07
UST rate 0.93 1.63 2.04 2.34 3.08
Source: Bloomberg
Source: Bloomberg Source: Bloomberg
Source: Bloomberg
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Yiel
d (%
)
10-year Benchmark yields
10yr UST 10yr Gilt 10yr Bund
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2014 2016 2018 2020 2022 2024
Rat
e (%
)
3 month UK LIBOR forward rates
Current forward 3m UK LIBOR (-1 wk) fwd 3m UK LIBOR
2yr 3yr
4yr 5yr
7yr
10yr (14)(12)(10)
(8)(6)(4)(2)
0
Rat
e (b
ps)
Weekly change in UK SWAP
Bank loan market
EUR / GBP completed transactions greater than US$250m
EY Capital and Debt Advisory - New Issue Review 3
► Loan markets in Russia and Eastern Europe continue to be rattled by the conflict in eastern Ukraine. Yet whilst August volumes were low, Russian borrower Gazprom Neft was in the market last week requesting bank proposals on 5-year money and Ukrainian soft commodities group Kernel secured a 1-year US$320 million export finance facility, proving that business can still be done.
► It was a quiet week in the European leveraged loan markets due to the summer break, however a slightly more positive macro backdrop in Russia / Ukraine, Iraq and the Middle East kick-started high yield fund inflows in Europe setting a more positive tone for when business resumes in September. Foncia, the French property management group, cut its pricing by 50bps on €597 million of existing LBO facilities and similarly German based retail conglomerate Douglas Holding is in the market to cut pricing on its €920 million LBO facilities by 50bps.
► Generale de Sante, the French private healthcare provider, allocated its €1.1 billion loan last week, cutting the margin by 25bps on its TLB. The book was reportedly still highly oversubscribed. The €1.1 billion facilities have been used to support the buyout of Generale de Sante by Australian private hospital operator Ramsay Healthcare.
Section 2: EUR/GBP bank loan market
Source: Loan Connector Source: Loan Connector
0
50
100
150
200
250
0
50
100
150
200
250
300
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
Num
ber
of d
eals
Vol
ume
(US$
bn)
Western Europe Loan Volumes
Lev - Vol. ($Bils.) IG - Vol. ($Bils.)Lev - No. of Deals IG - No. of Deals
0
20
40
60
80
100
120
140
Mar
gin
(bps
)
European pricing grid - multiyear drawn
AA A BBB
Signing date Issuer Tranche
rating Form Ccy Amount Maturity Margin (+bps) Sector Ctry Leads
28-Aug Fuller Smith & Turner NR, NR OTH GBP 180 2019 - Restaurants UK -
28-Aug GHD GesundHeits B2, NR RCF EUR 45 2020 E+375 Healthcare DE GS, JPM
28-Aug GHD GesundHeits B2, NR TL EUR 310 2021 E+375 Healthcare DE GS, JPM
27-Aug S-ryhman NR, NR OTH EUR 565 2019 - Retail FI Nordea, Pohjola
26-Aug HGHI Leipziger Platz NR, NR TL EUR 600 2024 - Real Estate DE BVK, BNP, DB
26-Aug Regus Group NR, NR OTH EUR 165 2017 - Business Services UK -
26-Aug Regus Group NR, NR OTH EUR 45 2019 - Business Services UK -
Bank loan market
EY Capital and Debt Advisory - New Issue Review 4
Section 2: Bank loan market
USD completed transactions greater than US$250m
Signing date Issuer Tranche
rating Form Ccy Amount Maturity Margin (+bps) Sector Ctry Leads
30-Aug Hitachi Metals NR, NR TL USD 1,300 - - Manufacturing JP -
29-Aug Trafigura Beheer NR, NR RCF USD 400 2015 L+90 Transport NL ANZ, DBS, ICBC, OCBC, SCB, SUM, UOB, Westpac
29-Aug Trafigura Beheer NR, NR TL CNY 300 2015 H+130 Transport NL CTBC, ICBC
29-Aug Trafigura Beheer NR, NR TL USD 300 2017 L+130 Transport NL ANZ, DBS, ICBC, OCBC, SCB, SUM, UOB, Westpac
28-Aug Kernel Holding NR, NR RCF USD 320 2015 - Agriculture UA -
28-Aug Nielsen & Bainbridge NR, NR RCF USD 25 2019 - Construction US GE, Jefferies
28-Aug Nielsen & Bainbridge NR, NR TL USD 200 2020 L+500 Construction US GE, Jefferies
28-Aug Nielsen & Bainbridge NR, NR TL USD 90 2021 L+925 Construction US GE, Jefferies
25-Aug 7 Days Group NR, NR TL USD 300 2019 L+375 Hotels CN Various
25-Aug Archipelago NR, NR OTH USD 350 2015 L+500 Metal & Mining SG CS
25-Aug TCC International NR, NR RCF USD 350 2019 L+135 Construction TW ANZ, BNP, DBS, MICB
25-Aug TCC International NR, NR RCF USD 350 2019 L+135 Construction TW ANZ, BNP, DBS, MICB
25-Aug TCC International NR, NR TL USD 300 2019 L+135 Construction TW ANZ, BNP, DBS, MICB
25-Aug Vietnam Oil & Gas NR, NR TL USD 1,800 2021 - Oil & Gas VN -
25-Aug Vietnam Oil & Gas NR, NR TL USD 200 - - Oil & Gas VN DBS, SUM
USD public bond market
EY Capital and Debt Advisory - New Issue Review 5
► No significant issuance in the US dollar public bond market during the week.
► Issuance volumes in August were down 22% compared to the same period in 2013, making it the slowest August since 2008.
Domestic
Section 3: USD public bond market
Source: Reuters Source: Reuters
Cross-border
Signing date Issuer Tranche rating
(M,S&P,F) Form Amount (GBPm) Coupon Maturity Spread
(T+bps) Sector Ctry Leads
No significant issuance in the week
0
50
100
150
200
250
Spre
ad (b
ps)
USD secondary public bond spread 10-year
Avg. AA USD 10yr spreads Avg. A USD 10yr spreads
Avg. BBB USD 10yr spreads
0
50
100
150
0
20
40
60
80
100
Num
ber
issu
ed
Vol
ume
(US$
bn)
Monthy US$ bond volumes
Domestic volume (US$) Cross-border volume (US$)Cross-border number issued Domestic number issued
Signing date Issuer Tranche rating
(M,S&P,F) Form Amount (GBPm) Coupon Maturity Spread
(T+bps) Sector Ctry Leads
No significant issuance in the week
GBP public bond market
EY Capital and Debt Advisory - New Issue Review 6
► No significant issuance in the sterling public bond market during the week.
Section 4: GBP public bond market
Source: Reuters Source: Reuters
Domestic
Cross-border Signing date Issuer Tranche rating
(M,S&P,F) Form Amount (GBPm) Coupon Maturity Spread
(G+bps) Sector Ctry Leads
No significant issuance in the week
Signing date Issuer Tranche rating
(M,S&P,F) Form Amount (GBPm) Coupon Maturity Spread
(G+bps) Sector Ctry Leads
No significant issuance in the week
0
1
2
3
4
5
6
7
01122334455
Num
ber
issu
ed
Vol
ume
(GBP
m)
Monthy GBP bond volumes
Volume (GBP) Number issued
0
50
100
150
200
Spre
ad (b
ps)
GBP secondary public bond spread 10-year
Avg. AA GBP 10yr spreads Avg. A GBP 10yr spreads
Avg. BBB GBP 10yr spreads
ORB retail bond market
EY Capital and Debt Advisory - New Issue Review 7
In the market
Recent Issues
Date Issuer Ratings (M,S&P,F) Form Amount (GBPm) Coupon Maturity Sector Country
20-Aug Burford Capital NR, NR, NR SN 90 6.50% 2022 Finance UK
15-Jul Golden Lane Charity NR, NR, NR SN 11 4.47% 2021 Real Estate UK
9-Jun Ladbrokes NR, BB, BB SN 100 5.13% 2022 Leisure UK
30-Jan Paragon NR, NR, NR SN 125 6.13% 2022 Finance UK
6-Dec Premier Oil NR, NR, NR SN 150 5.00% 2020 Oil & Gas UK
21-Oct A2Dominion NR, NR, AA- SN 150 4.75% 2022 Real Estate UK
25-Jul Bruntwood NR, NR, NR SSN 50 6.00% 2020 Real Estate UK
25-Jun Helical Bar NR, NR, NR SN 80 6.00% 2020 Real Estate UK
8-May International Personal Finance NR, NR, BB+ SN 70 6.13% 2020 Finance UK
21-Mar Provident NR, NR, BBB SN 65 6.00% 2021 Finance UK
05-Mar Paragon NR, NR, NR SN 60 6.00% 2020 Finance UK
15-Feb EnQuest NR, NR, NR SN 145 5.50% 2022 Oil & Gas UK
19-Dec Alpha Plus NR, NR, NR SSN 49 5.75% 2019 Education UK
12-Dec UNITE NR, NR, NR SN 90 6.13% 2020 Real Estate UK
Date Issuer Ratings (M,S&P,F) Form Amount (GBPm) Coupon Maturity Sector Country
No significant issuance in the week
Section 4: ORB retail bond market
EUR public bond market
EY Capital and Debt Advisory - New Issue Review 8
► No significant issuance in the euro public bond market during the week.
Section 5: EUR public bond market
Source: Reuters Source: Reuters
Domestic
Cross-border Signing date Issuer Tranche rating
(M,S&P,F) Form Amount (GBPm) Coupon Maturity Spread
(+bps) Sector Ctry Leads
No significant issuance in the week
Signing date Issuer Tranche rating
(M,S&P,F) Form Amount (GBPm) Coupon Maturity Spread
(+bps) Sector Ctry Leads
No significant issuance in the week
0
50
100
150
200
Spre
ad (b
ps)
EUR secondary public bond spread 10-year
Avg. AA EUR 10yr spreads Avg. A EUR 10yr spreads
Avg. BBB EUR 10yr spreads
0
10
20
30
40
50
60
70
0
5
10
15
20
25
Num
ber
issu
ed
Vol
ume
(EU
Rm
)
Monthy EUR bond volumes
Volume (EUR) Number issued
Private Placement market
EY Capital and Debt Advisory - New Issue Review 9
► In the private placement market, with the pipeline for September growing, a number of issuers are preparing for issuance post the Labour Day weekend.
► AMETEK Inc (NAIC-2, BBB+), the global manufacturer of electronic instruments and electric motors, is currently in the market for a US$300 million deal that is being targeted at 10-, 12- and 15-year maturities.
► SourceGas Holdings (NAIC-2), which through its subsidiary provides natural gas transmission and distribution services, is looking to raise US$95 million of senior secured notes in 5- and 7-year maturities.
Section 6: US Private Placement market
Source: Private Placement Monitor Source: Bloomberg
Source: Private Placement Monitor Source: Private Placement Monitor
050
100150200250300350400450500
Spre
ad t
o U
S Tr
easu
ry/b
ps
NAIC-1 US Private Placement spreads (bps)
10yr High 10yr Low
050
100150200250300350400450500
Spre
ad t
o U
S Tr
easu
ry/b
ps
NAIC-2 US Private Placement spreads (bps)
10yr High 10yr Low
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Am
ount
(US$
b)
US Private Placement volumes
2011 2012 2013 2014
0.00.51.01.52.02.53.03.54.04.5
Yiel
d (%
) US Treasury benchmark yields
5yr UST 7yr UST 10yr UST 30yr UST
Date Issuer Ratings Form Amount (US$m) Coupon Maturity Spread
(T+bps) Sector Ctry
Aug-14 AMETEK NAIC-2 (BBB+) SN 300 - 10yr, 12yr, 15yr - Manufacturing US
Aug-14 GSA NAIC-1 CTL 30 - 20f/11avg +250/intp Government US
Aug-14 Home Depot NAIC-1 (A2/ A) CTL 29 - 23f/14.5avg +120-130 Retail US
Aug-14 NHL - - 250 - 7yr, 10yr, 12yr - Sport & Leisure US
Aug-14 SourceGas NAIC-2 SSN 95 - 5yr, 7yr - Utilities US
Aug-14 Tri-State Generation NAIC-1 (Baa1/A) - - - - - Utilities US
Date Issuer Ratings Form Amount (US$m) Coupon Maturity Spread
(T+bps) Sector Ctry
Aug-14 DEXUS NAIC-2 - - - - - Real Estate AU
Aug-14 Boral NAIC-2 - - - - - Construction AU
Aug-14 Powercor NAIC-1 - 150 - - - Utilities AU
Date Issuer Ratings Form Amount (US$m) Coupon Maturity Spread
(T+bps) Sector Ctry
Aug-14 Pernix Therapeutics - SSN 220 12% 6yr - Pharma US
Aug-14 Blue Cross & Blue Shield NAIC-1 (A+) CTL 166 4.09%
(mthly) 30f/18avg +140 Real Estate US
Aug-14 Cabot Oil & Gas NAIC-2 SN 100 575 250
- 7yr
10yr 12yr
+115 +125 +135
Oil & Gas US
Aug-14 Midcoast Energy NAIC-2 SN 75
175 150
3.56% 4.04% 4.42%
5yr 7yr
10yr
+190 +195 +200
Energy & Power US
Private Placement market Domestic: In the market
EY Capital and Debt Advisory - New Issue Review 10
Domestic: Issued
Section 6: US Private Placement market
Cross Border: In the market
Cross Border: Issued Date Issuer Ratings Form Amount
(US$m) Coupon Maturity Spread (T+bps) Sector Ctry
Aug-14 Sydney Airport NAIC-2 (Baa2/ BBB) SSN A$100
A$280 - 14yr 14yr - Transport AU
Aug-14 Fonterra Cooperative NAIC-1 SN 250 250
3.40% 3.55%
12yr 15yr
+100/10yr +115/10yr Food & Beverage NZ
Aug-14 RPS Group - - 30 34
3.98% 3.84%
7yr 7yr - Business Services UK
Aug-14 CGI Group NAIC-2 -
45 350 300 €85
-
5yr 7yr
10yr 10yr
+135 +150 +150
-
Business Services CA
Credit ratings New and Notable from Ratings Agencies
EY Capital and Debt Advisory - New Issue Review 11
Issuer Actions Agency
HP Pelzer Germany-based automotive supplier assigned B2 rating/ outlook stable Moody's
Aigues de Barcelona Spanish water supplier assigned Baa1 rating/ outlook stable Moody's
New ratings Nyrstar Belgium-based integrated zinc producer assigned preliminary B- rating/ outlook stable S&P
Travis Perkins UK-based building materials distributor assigned BB+ rating/ outlook stable S&P
Moy Park UK-based poultry producer assigned B rating/ outlook positive S&P
Issuer Actions / Comment Agency
Rating actions
SGL Carbon SE Germany-based manufacturer rating downgraded to B2 from B1/ outlook negtive Moody's
Standard Bank Plc UK-based bank rating downgraded to Baa2 from Baa1/ on review with direction uncertain Moody's
Ideal Standard Luxembourg-based manufacturer rating upgraded to CCC from RD (Restricted Default) following the successful debt exchange Fitch
VOLKSWOHL BUND LEBENSVERSICHERUNG (VBL) Germany-based life insurer rating downgraded to A+ from AA-/ outlook stable Fitch
Britax Group UK-based manufacturer rating downgraded to B- from B following significant drop in operating performance/ outlook stable S&P
Georgian Oil and Gas Corporation JSC
Georgia-based oil and gas supplier rating upgraded to B+ from B on sound operating performance/ outlook stable S&P
Global Blue Netherlands-based VAT refund operator rating upgraded to BB- from B+/ outlook stable S&P
Truvo Belgium-based digital directories publisher rating downgraded to CCC- from CCC on debt restructuring and liquidity risk S&P
Theme Comment Agency
Finance and market trends High-Yield Outstanding High-Yield volumes in Europe contrast favourably with US Fitch
Theme Comment Agency
Industry comment
EU EU has little chance of cutting reliance on Russian gas Fitch
Global reinsurers Global reinsurers' underwriting results profitable, but pressured as capital remains strong Fitch
European structured finance Seven years on, the cumulative default rate for European structured finance is only 1.6% Fitch
Russian structured finance Russia's new securitization laws could boost structured finance issuance S&P
Theme Comment Agency
Methodologies n.a
The above list highlights ratings developments that we believe are interesting or noteworthy. This list is not exhaustive.
Section 7: Credit ratings
Asset-backed securitization ABS Not rated NR
Commercial mortgage-backed securitization CMBS Other loan OTH
Credit tenant lease CTL Project bond (non-recourse) PB
Deep discount bond DDB Revolving credit facility RCF
Energy savings performance contract ESPC Senior note SN
First mortgage bonds FMB Senior secured note SSN
London interbank offered rate LIBOR Subordinated note SUB
Medium-term note MTN Term loan TL
ABN Amro ABN JP Morgan JPM
Bank of America Merrill Lynch BASML KBC Capital Markets KBC
Bank of Tokyo Mitsubishi UFJ BOTM Landesbank Baden-Wuerttemberg LBBW
Banco Santander SA SANT Lloyds Capital Services Ltd LCS
Bank of New York BNY Lloyds Banking Group LBG
Bank of Nova Scotia BNS Banca March MAR
Barclays Bank BAR Mitsubishi UFJ Financial MIS
Barclays Capital Barcap Mizuho Financial Group Inc MIZ
BayernLB BLB Morgan Stanley MS
BMO Capital Markets BMO Natixis NAT
BNP Paribas Group BNP Norddeutsche Landesbank GZ NLB
Calyon CAL Nomura NOM
Citi Citi PNC Capital Markets PNC
Commonwealth Bank of Australia CBA Rabobank RAB
Commerzbank AG CZB RBC Capital Markets RBC
Crédit Agricole CA RBS RBS
Credit Suisse CS Société Générale SG
Deutsche Bank DB Scotia Capital Inc SCA
DnB NORD DnB Standard Bank Plc SB
European Investment Group EIG Standard Chartered Bank STA
Fortis Securities Inc FOR SRM Robinson Humphrey SRH
Goldman Sachs & Co GS Sumitomo SUM
HSBC HSBC UBS UBS
ING Groep NV ING UniCredit Group UNI
Intesa Sanpaolo SA ISP U.S. Bancorp USB
Incapital LLC INC Wells Fargo Wells
Banca IMI IMI WestLB WLB
Glossary Technical abbreviations
Financial institution abbreviations
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