ifr 08 1 2020

AUGUST 1 2020 ISSUE 2344 www.ifre.com

EQUITIES

IAG seeks €2.75bn from rights issue as travel sell-off deepens03

PEOPLE & MARKETS

Synthetic CDO market grows despite rising defaults04

LOANS

Lenders eye £5bn debt deal as Asda sale resumes06

BONDS

A$15bn Aussie jumbo lures global funds down under08

Rocket begins countdown to US$3.3bn IPO: deal set to be largest corporate listing this year

China-to-US IPOs hit top gear: Li Auto raises US$1bn from Nasdaq float; others set to follow

Delek to exterminate maturities: energy outfit readies US$2.25bn deal to fund gas field

1 IFR Cover 2344.indd 1 31/07/2020 19:50:21

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International Financing Review August 1 2020 1

Upfront OPINION INTERNATIONAL FINANCING REVIEW

A cautionary tale

A multi-billion dollar settlement from Goldman Sachs and a 12-year prison sentence for Malaysia’s former prime minister provide just the latest dramatic developments in 1MDB’s capital markets misadventures.

Some readers of this magazine may remember early descriptions of 1MDB’s bond market activities. IFR’s June 1 2012 edition carried the headline “Mystery over jumbo 1MDB deal”, and a piece questioning why a Malaysian sovereign fund had overpaid for a US$1.75bn bond by perhaps as much as 240bp (a cool US$420m of unnecessary interest over the 10-year term).

Murky private placements and loans dressed as bonds were at the time sadly all too common in the Asian debt capital markets, where banks still compete tooth and nail to be top of the underwriting league table. A US$1.75bn sole mandate took that to the next level, but could, perhaps, be explained by Goldman’s role helping 1MDB purchase a portfolio of power assets at the time. The under-the-radar placement of another US$1.75bn bond issue in 2012, also arranged by Goldman, came with no such explanation.

When news of a US$3bn private placement leaked out in the run-up to the country’s general elections in May 2013 it was even clearer that something was seriously amiss. The deal was so mispriced that IFR’s Jonathan Rogers calculated

bonds to buyers at a market rate. (He wasn’t far off: the US Department of Justice calculated Goldman pocketed about US$600m from its work on 1MDB’s bonds.)

The fact that 1MDB was willing to offer those kinds of discounts to access the capital markets should have set alarm bells ringing immediately.

Explanations at the time were unconvincing. 1MDB needed money quickly, conventional bookbuilds weren’t possible, and the bonds came with some complex structuring. Even if all that was true, a genuine sovereign fund should never have been allowed to be so frivolous with taxpayers’ money, and in hindsight it’s clear the only “structuring” involved was making the proceeds disappear. Those explanations have not got any more convincing even if Goldman was still advancing them long after the scandal broke.

Goldman’s role in this debacle has now cost it at least US$2.5bn, perhaps with more to come. That settlement must now serve as a warning to others who may be tempted to bag

bond issue. Risk committees must ask why any client would be willing to pay so much for their services. If it looks too good to be true, it almost certainly is.

That lesson applies for the capital markets more broadly. The arrangers and other intermediaries that bring a deal to market have a duty to act with integrity, promote transparency and ensure fair pricing. They must act as gatekeepers, not look the other way when something doesn’t add up.

As for Goldman, there are still calls for the bank to face criminal charges in the US for its involvement in the scandal. As executives – and shareholders – count the immense cost of their Malaysian misadventure, there may be more painful lessons yet to come.

Listing in la-la land

Nine IPOs were completed in the US in the last week of July to raise proceeds of US$5bn. Four were SPACs, but there was

to list in the US since the coronavirus hit (“edutech” company Vasta Platform).

Away from the companies tapping into excitement around the cloud, medicine and electric vehicles was Vital Farms, an organic egg supplier. It was the sleeper success of the week with an upsized deal that priced above guidance that had already been revised up. The shares promptly traded up 63.5% on their debut.

And then came former Citigroup banker Michael Klein, who raised US$1.8bn in the most aggressively structured SPAC yet in the US – and his fourth to-date.

Far from slowing down for the summer, the next few weeks look similarly intense.

Rocket Companies is bookbuilding for what is likely to be the world’s largest non-SPAC IPO this year, with proceeds of up to US$3.3bn comfortably exceeding the US$2.9bn

Royalty Pharma in the US.Li Auto is also set to be overshadowed within weeks as

Chinese property listing service KE Holdings has started pre-marketing a US$1bn–$2bn NYSE listing.

And nine companies are again scheduled to price IPOs in the coming week, putting the US market well ahead of the rest of the world.

Given everything that is going on in the US and the rest of the world at the moment, some might think that all this is the clearest sign yet of utterly mad markets. And yet with US IPO

from a market awash with central bank-induced liquidity.At some point the market will turn, but as it stands the

biggest losers look set to be European and Asian exchanges trying to argue that anywhere other than the US is the best place to list.

2 IFR Upfront 2344 p1.indd 1 31/07/2020 19:42:13

International Financing Review August 1 20202

Top news Synthetic CDO market grows 04 Delek looks to exterminate maturities 04 Asda sale resumes 06

China-to-US IPOs hit top gear Equities Li Auto blockbuster shows deals accelerating despite bilateral tensions

BY FIONA LAU

Sizeable IPOs from Chinese companies are gathering pace in the US, with electric vehicle maker LI AUTO wrapping up the largest China-to-US listing since 2018 and property listing service KE HOLDINGS starting pre-marketing for a US$1bn–$2bn NYSE IPO.

The moves underline the continuing appeal of the American stock market despite the passage of legislation by the US Senate that could force Alibaba Group Holding, Baidu and other Chinese companies to delist from US exchanges if they do not comply with US regulatory and audit standards.

Li Auto, backed by Hong Kong-listed Meituan Dianping, last

Wednesday raised US$1.09bn from a Nasdaq IPO comprising 95m American depositary shares at US$11.50 each, above the US$8–$10 range.

The deal generated strong

of about US$9.9bn, more than double the US$4bn price tag the company achieved when it closed a US$550m pre-IPO round as recently as July 1.

The books were well covered with no price sensitivity, with large orders from global long-only funds and sovereign wealth funds, as well as hedge funds.

“US-listed EVs have traded well recently as investors expect a strong recovery in the global EV market. Li Auto’s valuation looks rich but it’s still way below

where its peers are trading,” said a banker on the deal.

Shares in Nio, another US-listed Chinese EV maker, hit a record US$16.44 on July 13. As of last Wednesday, the stock had risen 216% this year, valuing the company at US$15bn. Shares in US-listed EV giant Tesla were up 258% in the year to-date.

US investors are also keen to look at new issues.

“I’m sympathetic to how tired everyone is, but the buyside is still lagging their benchmarks,” said a senior ECM banker. “As long as that continues to be the case, they’re going to be forced to look at all the new issue product we put in front of them.”

Those who bet on Li Auto were instantly rewarded as the

stock rocketed 43% on its trading debut last Thursday.

Alongside the IPO, Li Auto will raise US$380m from a private placement to investors including Meituan and TikTok owner ByteDance.

Goldman Sachs, Morgan Stanley, UBS and CICC were the bookrunners.

THEY KEEP COMING

KE Holdings, which owns and operates realtor Lianjia and online service platform Beike, is the next big deal in the queue. The company, which counts Tencent Holdings and SoftBank among its investors, is pre-

XPENG MOTORS, another Chinese EV maker, is also planning to

Rocket begins countdown to IPO Equities Top mortgage lender in the US targets 25% of US$2trn market

BY STEPHEN LACEY

during the Covid-19 pandemic means mortgage originator ROCKET COMPANIES could be accused of top-ticking the market with its upcoming US$3.3bn IPO. Yet as something of a cash cow while interest rates are low and/or falling, investors are rushing to embrace the investment opportunity.

Rocket, the parent of Quicken Loans, plans to sell 150m shares at US$20–$22 for a valuation of up to US$44bn.

The offering represents just a 7.5% stake but would be the largest corporate IPO globally this year, topping both the US$2.9bn offering by JDE PEET’S on its Euronext Amsterdam listing in May and the US$2.5bn raise by ROYALTY PHARMA on its Nasdaq listing in June.

The largest mortgage lender in the US undertook an extensive pre-marketing exercise that enabled it to launch publicly on Tuesday morning with a “half-covered” message.

Goldman Sachs, Morgan Stanley, Credit Suisse, JP Morgan, RBC Capital Markets, the joint books leading a 20-bank underwriting syndicate, are following with a seven-day virtual roadshow ahead of pricing after the market close on August 5.

“We still have a long way to go,” one banker involved in the underwriting told IFR shortly after launch. “There were substantial indications at launch, but we didn’t ask for

SHOOTING FOR THE STARS

Rocket is riding a boom in mortgage originations, mainly

US$72.3bn of loans in the second quarter. New loans reached US$26bn in June to maintain sequential gains in every month this year.

These numbers leave with it a hefty 9.2% share of all US mortgage originations. PennyMac Financial Services, the second-largest private originator, has a 2.8% market share.

management said in the roadshow they believe they can eventually lift their share to 25% of what is a US$2trn market annually.

In the year ended June 30, Rocket pumped out net earnings and adjusted Ebitda of US$4.2bn and US$5.3bn on revenue of

progress, net earnings were US$3.5bn–$3.6bn on revenue of

months of 2020, based on preliminary results.

Everyone, including management, acknowledges the good times will not last forever.

To that end, Rocket management did not provide guidance to analysts at the underwriting banks, leading to a wide dispersion of forecasts on both the buy-side and sell-side.

“The tricky part is what mortgage originations are in any given year, and what is Rocket’s market share,” said a second banker involved in the deal. “Most investors agree that there will be a slowdown in 2021, before mortgage originations normalise in 2022.”

“Rocket has the potential to re-rate how mortgage originators are valued,” the second banker said.

PennyMac, which relies more on wholesale channels, trades at just 7.8-times 2022 earnings.

Rocket views itself more as a best-in-breed market share

3 IFR Top news 2344 p2-10.indd 2 31/07/2020 18:32:58


For daily news stories visit www.ifre.com@

Trafigura offers Covid premium 06 AT&T’s jumbo LM 07 Aussie benchmark lures investors 08

IAG seeks €2.75bn as sell-off deepens

Equities Travel stocks slump on virus fears

BY LUCY RAITANO

British Airways and Iberia owner IAG will launch a €2.75bn rights issue in September if shareholders approve the deal.

The airlines’ owner, which also has Vueling and Aer Lingus in its portfolio, has secured crucial backing from main shareholder Qatar Airways to cover its 25.1% pro-rata share while the rest has volume underwriting from Deutsche Bank, Goldman Sachs and Morgan Stanley. Rothschild is advising IAG. An EGM to approve the deal will be held on September 8.

IAG reported an operating loss

year on Friday, from a €1bn

over 98% in the second quarter.The news came in a tricky

week for European travel and aerospace stocks, with shares plummeting amid rising concerns of an upsurge in coronavirus cases and new quarantine measures imposed on Britons arriving from Spain.

DROP IN ALTITUDE

IAG shares were already down 14.5% since it was forced to

capital increase on July 24 after news of the deal leaked, and fell a further 7.3% by 2pm on Friday to trade around 167.7p each.

Although one banker involved in the IAG rights issue insisted that the leak was frustrating, a drop in

underwriting terms does help to de-risk the trade for the banks.

Yet all stocks in the sector have suffered heavy falls, with Easyjet down 13.5% over the same period, Lufthansa 10.6% and Air-France KLM 11.8%.

Rolls-Royce is down 11%, with the aerospace engineer suffering

a second downgrade to junk from Moody’s last week and reportedly planning a £1.5bn rights issue.

IN IT FOR THE LONG HAUL

In addition to rising coronavirus cases and quarantines hitting stocks in the short term, the International Air Transport Association predicted global passenger demand will not return to 2019 levels until 2023, making a wave of recapitalisations inevitable.

“There’s no question that the most expected primary raises are across the travel and leisure space,” said one banker. “People are looking out at least two years and for the worst-case scenario.”

IAG laid out its downside scenario as a 66% reduction in passengers for 2020, a slow recovery throughout 2021, as well as reduced revenue from cargo and an adverse near-term

“What’s happened here is an unprecedented event in aviation – worse than 9/11 and the

Furlong, transport and logistics analyst at Davy.

In light of where stock prices have gone, other options like a convertible bond or 20% accelerated capital increase didn’t provide the capital structure and liquidity for the downside scenario as this rights issue has done, said Furlong.

Bankers echoed the idea that investors are keen to see companies prepare for the (latest) worst-case scenario.

“Looking at Rolls-Royce or IAG, if you can put the bear case out there and get investors comfortable on the discounted rights issue there is potentially a meaningful upside,” said one European syndicate banker away from both companies.

pre-market a US$700m US IPO in August while Chinese online wealth management company LUFAX is looking to launch a US$2bn–$5bn US IPO later this year.

The surge in US listings comes even as heightened political tensions between China and the US have prompted some Chinese issuers to rethink their IPO plans, and as an increasing number of US-listed Chinese companies consider a secondary listing in Hong Kong as a back-up plan.

Some are taking things a step further with plans to delist from the US, potentially with a view to re-listing closer to home. Tencent Holdings last week offered to take search engine SOGOU private in a US$2.1bn buyout, while the founders of online travel giant TRIP.COM are seeking investors to support a possible delisting.

Despite all the negativity, the

many Chinese issuers, especially from the capital-intensive technology sector.

Li Auto – much like Tesla – is likely to need to raise capital regularly to develop new models, while KE needs continuous investment to upgrade its platforms.

months of 2020 dropped 12.7% year-on-year to Rmb7.1bn (US$1.01bn), due to slow demand for housing transactions amid the coronavirus pandemic.

Tencent owns a 12.3% stake in KE, SoftBank 10.2%, and Hillhouse Capital 5.3%. The company completed a US$2.4bn pre-IPO investment round in March that valued it about US$14bn.

As of June 30, it had more than 42,000 stores and 456,000 agents.

Goldman Sachs, Morgan Stanley, China Renaissance and JP Morgan are KE’s joint bookrunners.

consolidator along the lines of online broker Charles Schwab, insurer Progressive or Californian high net-worth bank First Republic, which trade at 15–18 times 2022 earnings.

Rocket is coming at a discount to these aspirational peers, but that still assumes further market share gains, according to both bankers.

LIQUID FUEL BOOSTER

Giving it some extra sex appeal, Rocket’s marketing effort positions the company as a disruptor of the mortgage-origination business.

“We think of speed as a weapon,” Rocket COO Robert Walters said in the online roadshow. “No-one gets a mortgage because it’s fun. They want to buy a home, or they want to lower their rate, or they want to take equity out of their home. The entities that can get there the fastest are going to win.”

Speed is achieved through

in processing mortgages, from

assessing consumer credit, property valuations and title – more than 100 steps in all. The analogy, Walters says from the company’s headquarters in Detroit, is the assembly line Henry Ford pioneered in 1913.

Rocket sells the bulk of originations into the secondary market through Fannie Mae/Freddie Mac and MBS securities, but has retained servicing on the majority of loans in an effort to retain customers. It held servicing rights to 1.8m mortgages with a US$343.6bn balance at March 31, and in 2019 had client retention of 63%, versus an industry average of 22%.

This is all a good thing for Rocket founder and chairman Daniel Gilbert.

In addition to the US$3.3bn he will harvest through the repurchase of stock from the proceeds of the IPO, 58-year-old Gilbert is being paid a US$3.9bn distribution. He will continue to own 1.8bn shares worth some US$36bn, crystallising his status among the richest of the rich.



Top news

Delek hopes to exterminate looming maturities with jumbo bond trade

Emerging Markets Israeli energy outfit poised to sell US$2.25bn of bonds to fund Leviathan gas field

BY ROBERT HOGG

In what is set to be one of the biggest non-investment-grade corporate deals of the year, Israel’s DELEK DRILLING plans to raise US$2.25bn this week for its Leviathan gas project as it faces up to a looming wall of maturities.

The transaction, split across

senior secured tranches, will

undertaken for the development

eastern Mediterranean.“It’s a big size at this time of

year,” said a banker away from the deal. “It will probably get done okay but I have a feeling they might have to throw a bit of value out there. They seem very

done.”The company faces over

US$2bn of maturities in the next six to 12 months, including a US$1.75bn four-year

from 2017 that matures in February 2021.

Delek, which has a 45.34%

has a US$300m secured term loan maturing in December 2020 and a US$400m unsecured bond maturing in December 2021.

These debts, combined with a fall in natural gas and oil prices this year, were weighing on the group. In March, Delek Group Ltd, the controlling shareholder of Delek Drilling, reported that it had breached certain loan covenants because of the falling

equity market value of Delek Group and Delek Drilling, according to Moody’s.

Delek Drilling’s shares slumped to NIS228 (US$66.80) by

from close to NIS960 in early January.

QUALITY ASSET

Its share price has since partially recovered to NIS410 after Chevron said in July that it planned to buy oil and gas producer Noble Energy in a US$5bn deal. Noble has a 39.66%

is the project’s operator.Chevron’s announcement was

welcomed by bondholders who are weighing up Delek’s new issue. “We believe this asset is high quality and the operator, Chevron, is best in class,” said

John McClain, portfolio manager at Diamond Hill Capital Management.

“Chevron’s acquisition of Noble was meaningfully driven by acquiring this asset. The quality is reasonably well understood and in terms of the operator they are one of the most technically sound in the world.”

The bonds, rated Ba3/BB–/BB, all have non-call life structures and none will be below US$500m.

Initial price thoughts are in the 5.875% area for the three-year, the 6.375% area for the

the seven-year and the 7.25% area for the 10-year note. Investor calls, which began on July 27, continue through to August 3.

Synthetic CDO market grows despite rising defaults

People & Markets Tranche trading rockets during market turmoil

BY CHRISTOPHER WHITTALL

Sharp market swings and rising bankruptcies have failed to dampen activity in a complex breed of credit derivatives that enable investors to take leveraged bets on company defaults.

The net size of the market for tranches of synthetic collateralised debt obligations linked to credit indices has increased to a four-year high of US$141bn, according to the

of trading, with volumes of tranched credit-default swap indices rising 45% annually in

US$96bn, according to IHS Markit.

Credit markets nose-dived in March amid fears that the spread of the novel coronavirus would trigger a wave of corporate bankruptcies. Those moves

including hedge fund CQS.

But that challenging backdrop, which has improved

notably since central banks intervened to prop up corporate bond markets, has done little to dent demand for this controversial breed of structured credit investment.

“We’ve seen people re-engage with the market and we’re seeing new people looking to get involved,” said Olivier Renart, global head of credit trading at BNP Paribas.

“When you have a bit of spread and a clear dispersion between sectors – the haves and the have-nots of the crisis – tranches become an interesting product.”

DARKENING OUTLOOK

Trading in synthetic CDOs plummeted after the 2008

because of the role some types of this product played in spreading sub-prime mortgage losses throughout the system.

But activity has surged in recent years in synthetic CDOs that carve up pools of credit-default swaps linked to corporate debt, as low interest rates have encouraged investors to consider more complex investments.

Investors in the riskiest tranches of these structures earn the highest returns, but are on

from any companies in the CDS portfolio going bust.

When a darkening default outlook in March wreaked havoc

“We’ve seen people re-engage with the market and we’re seeing new people looking to get involved”




“Feedback has been very constructive,” said a banker close to the deal. “Investors appreciate the transparency on the size and maturities so they can take their time to analyse them.”

The buyer base is expected to be made up of a mix of dedicated emerging markets and high-yield accounts.

The banker close to the deal said that before those calls began, Delek’s management had undertaken a more informal marketing process. “It wasn’t obvious that this deal would go well with investors so they did a non-deal roadshow,” he said.

DEPENDENTThe Leviathan project, which has an operating life of more than 30 years and which Delek values at US$10.5bn, started producing gas last year and supplies Israel (A1/AA–/A+), Egypt (B2/B/B+) and Jordan (B1/B+/BB–).

The biggest market is Egypt, which accounts for 35% of revenues. “Given the proposed bond structure is a project

service coverage will be completely dependent on Egypt making its gas purchases and paying them in a timely manner, at least in

when Israeli demand picks

routes to export gas,” said an investor.

He said the best pricing reference point was therefore the Egyptian sovereign. Egypt has June 2025 bonds bid at a yield of 5.65%, for example, which is 72.5bp inside where

Delek has begun offering its

Moody’s said Delek’s rating

agreements covering a substantial share of production until 2030, including minimum

prices that mitigate exposure to weak Brent oil prices.

“However, the value of these agreements is limited by the weak credit quality of the offtakers, the largest of which are the National Electric Power Company, owned by the government of Jordan and Dolphinus Holdings, a new entity formed to import gas to Egypt,” Moody’s said.

INTENSE COMPETITIONThe ratings agency also said Leviathan faced intense competition from other Israeli gas suppliers, including the

eastern Mediterranean in which Delek holds a stake.

McClain said that the concentration of Delek’s offering on a single asset and

potential geopolitical problems in the region, as well as higher leverage, could make some in the market pause.

“The growing supply in the region could introduce risk around Leviathan’s uncontracted volumes – around 20% – and maybe even gradually pressure the Egyptian contract.

“Leverage is going to look high relative to most traditional exploration and production [companies], but it’s a low decline asset that has minimal capex needs, so it is a lot easier to understand. You can put more leverage on it than a traditional E&P business.”

Delek Drilling has total

up 110% from a year earlier. Revenue jumped 97% to US$186.7m for the period, boosted by the start of production at Leviathan.

JP Morgan (left) and HSBC are the global coordinators.

Additional reporting by David Bell

in credit markets, those that had effectively sold insurance against rising defaults suffered heavy losses.

Fitch said in a July report

companies it rates defaulted

year. That is already more than 2019’s total and puts

defaults on track to surpass the yearly record set

crisis.“During the peak of the

[recent] crisis there was a lot of leverage that came into question across different pockets of the market,” said Jasdeep Singh Aneja, head of European macro credit trading at Goldman Sachs.

“In Europe, we’ve seen most of the stress go away given the rally – we didn’t really see any defaults. We saw more stress in US high-yield, where there were a lot of defaults that actually had an erosion of capital, some even after the rally.”

STRONG RALLYThe US Federal Reserve’s unprecedented commitment in March to buy corporate debt – along with increases in similar schemes from the European Central Bank and the Bank of

England – underpinned credit markets and helped fuel a strong rally. New debt issuance surged in the US along with corporate bond trading volumes.

Trading in the more complex CDS tranche market also

year, particularly at the height of the turmoil. Volumes in CDS index tranches increased 93% to

compared with the same period a year ago, according to IHS Markit.

Over US$16bn of tranches linked to an old version of

the iTraxx Europe Main index traded in one week alone at the height of the turmoil, according to the DTCC,

positions.The CDS index tranche

market has continued to expand in the second quarter, albeit at a slower pace.

Kokou Agbo-Bloua, head of

Societe Generale, said there is a divergence of views among investors over defaults, with central bank action encouraging some to take more risk, while others are concerned about a second wave of Covid-19

economy.“Investors are favouring

shorter-term products, as well as investment-grade over high-yield,” he said. “Clearly, people are looking more for super-senior [exposure] and less at the riskier tranches.”

0

100

200

300

400

500

NOTIONAL OUTSTANDING

Source: DTCCNote: quarterly data

US$bn

Jun

11

Jun

12

Jun

13

Jun

14

Jun

15

Jun

16

Jun

17

Jun

18

Jun

19

Jun

20

“During the peak of the [recent] crisis there was a lot of leverage that came into question across different pockets of the market”

“Investors appreciate the transparency on the size and maturities so they can take their time to analyse them”



Top news

Trafigura offers Covid-19 premium Loans Singapore company proposes one-off sweetener to limit long-term impact on funding costs

BY CHIEN MI WONG, EVELYNN LIN,

MIRZAAN JAMWAL

Commodities trader TRAFIGURA

BEHEER

Covid-19 premium on an Asian syndicated loan, paying up to an extra 20bp all-in on its latest

The novel pricing structure is

and could set a precedent for other price-sensitive borrowers looking to limit the long-term effects of the pandemic on their funding costs.

Without the Covid-19 premium, the terms of

changed from loans it signed in 2018 and 2019.

lenders for their liquidity as a

market environment that has resulted in increased costs of borrowing for everyone.

However, it is also mindful that the additional compensation does not set a new pricing benchmark for its own borrowings,” said one senior loans banker in Hong Kong.

Standard Chartered Bank and Sumitomo Mitsui Banking Corp are the mandated lead arrangers and bookrunners of a US dollar-denominated facility, while Agricultural Bank of China and China Construction Bank are the active bookrunners of a renminbi tranche.

365-day US dollar revolving credit facility (Tranche A), a one-year renminbi term loan (Tranche B) and a three-year US dollar term loan (Tranche C).

Tranches A and C pay interest margins of 65bp and 110bp over Libor, respectively, as well as a 10bp Covid-19 margin premium for both portions and fee premiums of 5bp and 30bp.

Excluding the premiums, the margins are similar to that on a US$1.505bn-equivalent loan

All participating lenders will receive the Covid-19 margin and fee premiums, regardless of their commitment levels.

LIQUIDITY TEST

Frequent high-grade European borrowers are sensitive about their pricing benchmarks and

banker, emphasising that the premium was a one-off compensation for lenders.

“The premium is not based on any pricing grid and does not fall away if Covid-19 has a resolution or if a vaccine is developed,” said the banker in Hong Kong.

Syndication will determine what lenders think of the attempt to draw liquidity with the Covid-19 premium. At least one lender is not participating.

“While the Covid-19 premium is an incentive for us to do the business, we are not actively looking at the deal as we are concerned about the market volatility in the energy sector due to the coronavirus pandemic,” said a senior banker from a Taiwanese bank.

Another banker in Singapore questioned the logic of tying pricing to Covid-19, given how governments worldwide are struggling to contain the disease.

administer and monitor Covid-19’s impact on the loan,” he said. “What criteria does one set – the country of origin of the borrower, its operations or the jurisdictions in which the participating lenders operate?”

“Moreover, the benchmark for a one-year revolver’s interest margin is reset monthly. Given the rapidly changing situation relating to the pandemic, any

Lenders’ joy as Asda sale resumes Loans Buyout firms set for £5bn of debt for supermarket giant

BY CLAIRE RUCKIN

Bankers are preparing up to £5bn of debt to back a potential sale of ASDA, after the world’s biggest retailer, WALMART, restarted talks with potential buyers for a stake in its British supermarket arm.

A large number of banks have been approached by potential buyers to give a view on the amount of debt that could be put on the asset. Figures vary from three-times leverage at the conservative end – equating to £3.6bn – and four times at the more aggressive end – £4.8bn – based on Asda’s approximate £1.2bn Ebitda.

The retail sector, currency and ratings all pose an issue for many bankers. Retail has been on a downward trajectory,

sterling debt is expensive and illiquid and investors are

B borrowers, as opposed to Single B, after existing portfolios were hit with rating downgrades.

However, there is still appetite for new deals, especially since banks have sold down pre-coronavirus underwrites and are in need of new business. The deal could be underwritten in euros or US dollars and swapped back into sterling.

The amount of debt that can be put on the asset will ultimately depend on how much of a stake Walmart retains.

“Walmart won’t want the business too highly levered,” a syndicate head said.

Rothschild is advising on the sale, which was put on hold in

April due to the impact of the Covid-19 crisis, but has since resumed.

“Walmart and Asda have restarted conversations with a small number of third-party

investors who are interested in acquiring a stake in Asda and partnering with Walmart, following renewed inbound interest,” a spokesman said.

Bids are expected in the second week of September and the stake could garner interest

Apollo and Lonestar. It is unclear whether TDR Capital, which had previously been interested in the asset, was still involved in the process, banking sources said.

Bankers are considering a traditional leveraged buyout

and high-yield bonds, as well as

and propco structure.“There is a vast portfolio and

they must own some of it, which

WESTERN EUROPE ANNUAL LBO VOLUME VOL (US$bn)

Source: Refinitiv LPC

0

50

100

150

200

1H20

2018

2016

2014

2012

2010

2008

2006

2004

2002

2000




AT&T leads market with jumbo LM exercise

Bonds Fifth-largest deal of the year

BY WILLIAM HOFFMAN

Telecoms giant AT&T came to market last Monday with its second jumbo deal of the year,

part bond issue that will be used to fund a US$9.3bn tender offer announced on the same day.

Despite mixed second-quarter earnings results the week before,

transaction of the year with US$27.4bn in the order book and continued buying in the secondary market, where spreads tightened by as much as 23bp over the following days.

Demand was in part spurred by the steep 61% decline in US investment-grade bond supply in July to US$66.77bn compared with US$172bn in June.

“We’ve had a handful of benchmark deals, but a lot of it is from Yankee and infrequent borrowers coming into the marketplace and smaller transactions that aren’t very liquid,” one co-manager on the deal said.

“The market is transitioning from a very heavy run rate to a much smaller one right now where there is a lot of pent-up demand, and AT&T tapped into that.”

The use of proceeds was also a major factor for investors, who are worried about the increase

and are showing a preference for companies such as AT&T that are terming out upcoming bond maturities.

AT&T (rated Baa2/BBB/A–) is tendering for any and all of 18 series of notes maturing between 2021 and 2025, with some US$9.3bn in principal outstanding. There is also a capped tender offer for three additional series of notes, the size of which hinges on the take-up of the other tender offer.

“There are companies that know they have debt coming due in the second half of 2020 or 2021 and are essentially pre-funding

those obligations ... because they want to lock in all-time low yields in the US high-grade market,” said Jon Duensing, director of investment-grade corporates at asset manager Amundi Pioneer.

Investors said the latest deal from AT&T is leverage-neutral, and the company’s previous

was also modestly credit-positive for bondholders as it was used to pay down an April term loan of US$5.5bn.

“The bulk of companies really focused responsibly on balance-sheet management, where they started thinking about near-term maturities and funding those 18 months to three years out and building up cash balances to be extra cautious,” one investor said.

“As a credit investor, that is not worrisome to me if the company takes another quarter turn of leverage and puts it toward cash.”

However, not all companies have made those commitments to repaying debt, the investor noted.

In March, Oracle priced a US$20bn six-part bond issue that included share buybacks and dividend increases in its use of proceeds. Likewise, Apple, IBM, Costco and Qualcomm have all

months while announcing an increase in dividend payments.

And yet it is not clear that companies that increase their dividend are punished by the market.

For example, energy infrastructure company KINDER

MORGAN increased its dividend by 5% in April but was still able to come to the market the same day as AT&T to price a US$1.25bn two-part bond issue inside its outstanding curve by 8bp–10bp via a US$4.25bn order book, according to IFR data.

Such deals, however, may remain exceptions to the rule, according to Duensing. “What you haven’t seen much of is the

M&A or share repurchase authorisations,” he said.

exercise to structure a pricing grid tied to it will be pointless.”

LENDING RELATIONSHIPS

Lenders committing an aggregate amount of US$100m or above to Tranches A or C will receive the MLA title and top-level all-in pricing of 95bp and 140bp respectively (not including the Covid premium), via participation fees of 30bp and 90bp.

Those joining with US$50m–$99m as lead arrangers earn all-ins of 92.50bp and 138.33bp for Tranches A and C, respectively, via fees of 27.50bp and 85bp. Banks taking US$10m–$49m as arrangers receive all-ins of 90bp and 136.67bp for Tranches A and C, respectively, via fees of 25bp and 80bp.

These all-in calculations do not include the fee premiums for tranches A and C.

Tranche B pays a margin of 100bp over CNH Hibor. MLAs taking US$45m-equivalent or above receive a top-level all-in pricing of 130bp via a participation fee of 30bp, while lead arrangers coming in for

tickets of US$30m–$44m earn an all-in of 127bp through fees of 27bp. Arrangers joining with US$10m–$29m are offered an all-in of 125bp via a 25bp fee.

The deadline for commitments is August 28.

the borrower and proceeds are

corporate purposes.

signed a US$4bn loan to renew its North American borrowing base credit facility.

The one-year facility was reduced from US$4.395bn

need in the lower priced commodity environment, the company said.

US$542m for the six months to

despite US$580m in impairments as its oil and metals trading divisions thrived in the extreme volatility caused by events in the Middle East and the coronavirus pandemic.

only answer and there could be other solutions for that deal such as property-type lending,” a senior banker said.

MARKET BOOST

The ability to sell down leveraged loan underwrites once the market reopened in May was a huge relief to arranging banks, encouraged by returning investor appetite.

“If you think about the near-death experience banks just had, holy cow. They are so lucky and how they got out of it is ridiculous. It is better for the market but, wow, they were looking at hundreds of millions of dollars of losses,” a second syndicate head said.

With many banks coming in at least 50% under budget in 2020 due to a lack of new issuance, lenders will be looking to the fourth quarter to claw back some of the lost earnings from the second and third quarters.

Asda is being held up as one such credit that could provide a much-needed boost to arranging banks and investors, given its size and the ability to put money to work.

“This is the deal that the fourth quarter has been desperate for. The assumption has always been that once the pre-Covid deals were cleared, sponsors would prepare themselves to reload. The market feels the conditions are in place to restart in earnest. Asda would not just be the starting gun, it would be the starting bazooka,” a third syndicate head said.

Asda entered into talks with possible buyers for a majority stake in the group after its attempt to combine with UK rival Sainsbury’s was blocked by the competition regulator last year. A stock market listing had also been considered.



Top news

Aussie jumbo lures global funds Bonds Offshore buyers lap up new Treasury bond benchmark

BY JOHN WEAVERS

The AUSTRALIAN OFFICE OF FINANCIAL

MANAGEMENT received a typically warm response for its fourth jumbo issue since the coronavirus outbreak, raising A$15bn (US$10.7bn) last Tuesday from a syndicated sale of 1.75% June 21 2051 Treasury bonds.

was heavily skewed towards international investors, who picked up 66.9% of the new ultra-long benchmark.

The new maturity extends Australia’s sovereign curve by over four years and has particular appeal for global real-money accounts seeking duration and decent returns, with rising liquidity and

Covid-19 response and

regulatory structures underscoring the allure of the Australian market.

“Australia’s ultra-long end, in the 20 to 30-year segment, looks very steep versus peer curves like the UK and US. Given this and the global view that long-end curves will continue to

performance incentive for offshore investors,” said Craig Johnston, head of DCM

syndicate for Australia and New Zealand at Deutsche Bank, which was joint lead manager on the deal with ANZ, CBA, JP Morgan and UBS.

“The curve extension also looked attractive to domestic accounts, while many index-tracking funds had little choice but to participate given the size of the issue,” Johnston said.

The Australian government’s modest pre-coronavirus borrowing requirement also supported investor appetite.

“The AOFM has had to increase borrowing massively, but it started from a good spot,

do not have. It is also seen to be dealing with the crisis and its increased funding task in a sensible and well-managed way, including the early

announcement of Tuesday’s deal back on July 10,” Johnston said.

Australia remains one of only 10 countries to be Triple A rated by all three main ratings agencies, and the economic impact of the coronavirus has been relatively muted – even with a worrying upturn of cases in Melbourne in recent weeks.

Bankers close to the deal said they heard no investor questions regarding the Australian federal government’s often criticised green credentials and,

recently launched by a retail investor, 23-year-old student Kathleen O’Donnell.

The suit alleges the government failed to include climate change in its list of material risks for Treasury bonds and seeks an injunction to block

ESG investors look beyond business as usual

People & Markets Companies under pressure to show impact and data

BY TESSA WALSH

ESG investors are increasingly focusing on the concepts of additionality and materiality – what companies do over and above business as usual and how central that is to their business – as they weigh up the surge of social bonds being issued during the Covid-19 crisis.

Issuance of social debt has exploded during the pandemic as sovereign and supranational issuers rushed to raise funds, and now corporates are increasingly following suit. French resource management company SUEZ, for instance, has just completed a €100m syndicated social loan that is the

addressing the impacts of the Covid-19 crisis.

But investors are beginning to ask tougher questions about

beyond conventional deals.“If it’s simply business as

usual, that’s not good enough,” an investor said.

Companies are also under growing pressure to support their workforces and other stakeholders – and to demonstrate convincingly that they are doing so.

“I prefer it if issuers can be

transactions with a higher degree of transparency and

said.That demand certainly seems

to have been met by NATWEST’s

€750m November social bond. The report said that £642m had been disbursed in loans to 2,750 SMEs with an average size of £280,000 – and that money had created 6,900 jobs in deprived

parts of the UK across 96 industry sectors in 86 local authorities.

MAKING A DIFFERENCEThe Loan Market Association issued guidance to support its green and sustainability-linked loan principles in May that included additionality and materiality considerations designed to make targets more ambitious, and the International Capital Market Association followed suit with updated social bond principles in June.

So far this year, US$51.7bn of social bonds have been issued, more than triple the US$13.7bn issued in 2019, and social bonds made up a quarter of the market

from 5% a year earlier.As the concepts of

additionality and materiality remain somewhat vague, investors are looking on a

practical level at the percentage

projects, rather than simply

targeting companies that are changing their focus under responsible management teams.

“It is hard to say every single

either because it’s hard to pull it

from the past – however, some issuers are very credible,” said

portfolio manager at Newton Investment Management..

PEARSON IN FOCUSOne deal that underlined the issues surrounding additionality and materiality came in June when education company PEARSON sold a £350m social

be targeted at education.

“Australia’s ultra-long end, in the 20 to 30-year segment, looks very steep versus peer curves like the UK and US”




it from selling more exchange-traded government bonds until it does so.

FOURTH JUMBO

Buyers in the UK had the largest overseas allocation of 22.9%, followed by North America with 17.6%, Asia ex-Japan’s 12.7%, Europe’s 9%, Japan’s 3.1% and others’ 1.7%. Domestic investors bought 33.1%.

Fund managers dominated by investor type with a 68.7% allocation. Hedge funds took 13.5%, bank trading desks 11%, bank balance sheets 3.1% and others 3.7%.

“Many of these global buyers have long been participants in the ultra-long Treasuries, Gilts and Bunds markets, for example, and are becoming increasingly willing to hold ultra-long ACGBs as liquidity and

longer dates,” said Tim Galt,

syndicate at UBS.The only previous (post-war)

syndicated 30-year benchmark sale in Australia was the 3% March 21 2047 Treasury bond line from October 2016, which raised a then-record A$7.6bn on a A$13.8bn order book and had a similar geographical split.

The new 1.75% June 21 2051s were priced at 95.601 for a yield of 1.94%, at the tight end of the EFP (10-year futures) plus 98bp–105bp guidance range.

By comparison, US and UK 30-year benchmarks were yielding 1.22% and 0.62% last Tuesday, respectively.

The AOFM has secured huge orders, approaching A$130bn combined, for its three previous issues.

These comprised the A$13bn sale of November 2024s on April 15, the A$19bn sale of December 2030s on May 13, and the A$17bn sale of November 2025s on July 14.

The £350m 3.75% 10-year

social bond from a public corporate that was solely linked to education.

As the self-styled “world’s learning company”, Pearson’s business as usual contributes to the fourth of the UN’s sustainable development goals – inclusive and equitable quality education and lifelong learning opportunities for all.

Similar additionality issues surfaced when Pearson completed a US$1.19bn sustainability-linked revolving credit facility in 2019, when some lenders said the targets

Pearson put a social framework in place for its bond, which committed it to reporting on outcomes and providing data to let investors make their own

decisions. The deal saw strong demand of £3.7bn and pricing was tightened.

“I can’t claim the bond is funding anything completely new,” Pearson PLC group treasurer James Kelly said. “Much of it would have happened anyway as we’re funding existing projects in existing parts of the business; our social bond framework makes that clear. But we have focused on areas that have the greatest social impact.”

Around 80% of the bond’s proceeds will go to the Connections Academy, Pearson’s full-time virtual schools network serving US students. The remainder is earmarked to fund the education of US students who didn’t complete high school and BTEC, which provides

technical training world-wide.“Measuring the impact our

products have is one of the key ways we are highlighting to investors that we are not just reaching learners and they are completing their courses but

doing so in the outcomes they achieve,” Kelly said.

GS: decarbonisation to drive recovery

People & Markets Clean energy technology essential

BY TESSA WALSH

Decarbonising the energy industry by 2030 is a US$16trn investment opportunity that could create 20 million jobs by 2030, according to Goldman Sachs.

Investors’ increasing engagement with climate

change in capital allocation with a growing divergence between the cost of capital for high-carbon and low-carbon energy developments that will continue to incentivise the shift to renewable energy.

The transformation of big oil

players is curbing long-life hydrocarbon development as it

new long-term oil projects. Investors are already pricing in higher CO2 prices of up to US$40-80/tonne on these developments, despite an average global carbon price of US$3/tonne.

Only 16% of global carbon emissions currently include carbon pricing, Goldman said.

Clean-energy technologies are developing rapidly and will

capital and attractive regulation but more innovation is needed to get to net-zero carbon emissions target.

“Without clean hydrogen, it’s

to net zero,” said Michele Della Vigna, head of European natural resources research at Goldman.

Hopes are pinned on hydrogen-based energy to decarbonise up to 45% of global emissions in high-emitting sectors.

Goldman expects the new technology, which is a major feature of the EU’s €750bn recovery plan, to be economically viable by the end of the decade.

“It is very exciting what the EU is doing on hydrogen,” Della Vigna said. “With scale, I think we

which with a low cost of capital will ultimately lead to hydrogen becoming economically viable by the end of this decade.”

Hydrogen is a high-energy fuel and cost-effective compressed hydrogen gas could power heavy transport, such as trucks, as it is lighter than batteries and takes up less space.

Hydrogen can provide fuel cells for electric vehicles, but is still too expensive for passenger cars. It can also be used in freight trains and as aviation fuel.

“We think hydrogen is a superior fuel and it’s likely to succeed in decarbonising the trucking industry. We don’t believe hydrogen will be used for passenger vehicles, we think

there,” Della Vigna said.In buildings, hydrogen could

be blended to avoid gas network upgrades and it can also be used

manufacturing to supply high temperature heat, and reduce chemical emissions.

Clean “blue” or “green” hydrogen is currently expensive due to the cost of electricity and carbon capture. Blue hydrogen is generated from gas and followed by carbon capture while green hydrogen is made by using renewable energy to power electrolysis of water.

Goldman expects green hydrogen to become cost competitive with blue by the end of the decade in locations with lower renewables costs, and sees carbon capture coming back from a “lost decade” as one of the key, underinvested technologies to achieve net-zero carbon.

“We think carbon sequestration will become very important, not only because it can recoup some of the more

also because it could be a way to actually reduce the stock of carbon if we were actually to overshoot emissions,” Della Vigna said.

“If it’s simply business as usual, that’s not good enough”


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The IFR website at www.ifre.com has been redesigned. It now features improved search capabilities, expanded navigation, powerful personalization tools and a more intuitive layout. It combines IFR’s industry-leading content from across all the global capital markets asset classes onto a single, consolidated platform.

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People&Markets

FRONT STORY STRATEGY

Deja vu: CS revamps investment bankSees SFr400m of cost savings from unifying investment bank againCREDIT SUISSE‘s new chief executive Thomas Gottstein has reversed changes made by his predecessor and put all the Swiss bank’s investment banking activities into one combined unit to be led by head of global markets Brian Chin.

Five years ago, previous CEO Tidjane Thiam split wholesale banking and capital markets from the secondary markets activities and created the same divisions

Gottstein is simplifying the structure and said he can save SFr400m (US$439m) of overlapping costs. But he said the change is mainly so the parts of the investment banking work better to serve Credit Suisse’s prime customers: entrepreneurs and other rich individuals from around the world.

“The combination is less driven, frankly, by cost consideration but more by the increased revenue growth opportunities that we see,” Gottstein said.

He said the previous split had mainly been done to restructure the global markets business. It was now a “natural step” to bring both parts together again.

STILL MILLER TIMEDavid Miller, current head of investment banking and capital markets, will remain in charge of these activities but step down from the executive board and report to Chin.

The group will have one chief risk and

on the executive board and was previously

Gottstein is also pooling research resources in a new team focused on sustainability. He wants to offer SFr300bn of

That will be led on the executive board by

sustainability leader.Banks have struggled in the last two years

to make research pay, after new European MiFID II rules forced them to unbundle

Credit Suisse’s research will now be drawn from wealth management and the investment bank to give one house view for corporate, institutional and private clients.

Gottstein said he wants to grow mid-market

with wealth management for entrepreneurs. Some advisory bankers are already working in the wealth management business.

The SFr400m savings will be reinvested in the group, but some job losses could occur, he said. Gottstein wants the investment

capital over the medium term.

its regulatory capital will be committed to this business and the remaining one-third to the

capital was tethered to positions held by the investment bank.

Thiam left in February after a scandal that saw spies deployed by Credit Suisse to track former head of wealth management Iqbal Khan – also Thiam’s neighbour – who had left to join arch-rival UBS.

The restructuring will result in one global equities platform and pull capital markets origination and execution together. Asia-

remain within that regional division, as will equivalent fees for the Swiss universal bank.

The restructuring was unveiled alongside strong investment bank results for the second quarter. Its Q2 primary market revenues

reported by US banks. Equities trading was

exposure to structured products. US banks

Credit Suisse took a SFr296m provision for credit losses in the quarter, up from

most banks have booked for the last quarter.Gottstein said he expected further

volatility to help the trading businesses and

in capital markets. But he said there could be a delay in M&A fees improving as there was a weaker pipeline.

Credit Suisse said it still intended to pay its

distribute at least half of future net income to shareholders in dividends or by share buybacks.Christopher Spink

Citigroup

makes

bold plans for

environmental finance

to help accelerate the

transition to a low

carbon economy

The ECB

extends its

ban on banks paying

dividends, just as

Australia opens the

door for banks to

resume payouts

Barclays

CFO Tushar

Morzaria says the UK

bank is keeping pace

with US rivals and is

taking market share

-2

0

2

4

6

8

10

12

14

16

18

MAKING PROGRESS: CREDIT SUISSE RETURN ON TANGIBLE EQUITY

Source: Credit Suisse results

%

H1 2

013

H1 2

014

H1 2

015

H1 2

016

H1 2

017

H1 2

018

H1 2

019

H1 2

020

4 IFR PM 2344 p11-20.indd 11 31/07/2020 18:18:23


Who’s moving where…

NEW CREDIT SUISSE CEO THOMAS GOTTSTEIN, P11

BNPP, Barclays lead chase to match US FICC surgeEuropean banks enjoyed some record performances in trading and underwriting last quarter, although they did not quite match the blistering pace of their US rivals and had to make some hefty provisions to brace for loan losses coming down the tracks.

BARCLAYS, DEUTSCHE BANK, CREDIT SUISSE and BNP PARIBAS last week all reported a jump in

at BNP Paribas. Revenues for underwriting bond and equities deals were also strong, including a more than doubling in revenues for Deutsche.

Equities trading was weaker, with a good performance by Barclays but underperformance by all the rest, and M&A advisory fees slumped for all the banks.

Those trends were on the back of volatile

raise debt and equity to shield them from the impact of the coronavirus and lockdown measures.

European banks echoed their US peers in warning that those good times are likely to moderate in the second half, although Barclays CEO Jes Staley said issuance should hold strong.

“The underlying growth of capital markets activity I think is going to continue to be robust,” Staley told reporters on a

will subside in the second half of the year

continued growth in underwriting of debt and equity and hopefully M&A starting to come back.”

Barclays and BNP Paribas showed the impact of unusual markets most clearly.

BNP Paribas’ surge in FICC trading was in

trading, as derivatives were weak and it continued to be hurt by dividend restrictions.

Barclays, meanwhile, reported its second-

seven years and its best quarter for equities in that time. It had one of its best quarters ever for DCM and ECM, but one of its worst for M&A advisory.

ECM, DCM REVIVAL

investment banks that have reported so far, including UBS earlier in the month, were US$9.2bn in aggregate in the April-June

US banks.Almost all areas and regions were

FICC and picked out primary and credit

markets, rates, foreign exchange and emerging markets as all very strong.

markets. FX and rates boosted its macro products, partially offset by a dip in securitised products revenues.

sale of Tradeweb last year were stripped out

continues to win market share.“I think we’re right at the top end of our

peer set and that’s a continuation of the trend we’ve seen for several quarters,” said

Peter Richardson, analyst at Berenberg, concurred. “Our estimates suggest Barclays’

EVERCORE has hired Michael Meyers from Credit Suisse to head its convertible securities team. Meyers, working out of New York, is tasked with helping to expand Evercore’s capital-raising capabilities representing a “natural extension” of

its equities business. Meyers was most recently managing director of global markets convertibles at CS, where he ran the team across the US and Europe. He was previously head of US convertible sales.

Bryan Carter has joined HSBC GLOBAL ASSET MANAGEMENT from BNP Paribas as head of emerging markets debt. Carter is based in London and reports to Xavier Baraton. Carter will be responsible for the management of GAM’s EMD team,

investment process and portfolios. He replaces Nishant Upadhyay, who will focus on fixed income investment platform projects. Carter joined BNP Paribas Asset Management in 2016 from Acadian Asset Management in Boston.

“The combination is less driven by cost consideration, but more by the increased revenue growth opportunities”

-100

-50

0

50

100

150

200

EUROPEAN BANKS TRY TO KEEP PACE WITH US RIVALS IN STUNNING Q2; REVENUES % CHANGE VS YEAR AGO

Source: Bank results, IFR estimates; some units may not be directly comparable; Deutsche has no equities unit, BNPP advisory/underwriting is its corporate banking figure.

Big 5 US banks avg

UBS Barclays Credit Suisse

Deutsche BNPP Europeavg so far

FICC Equities Advisory/underwriting DCM ECM M&A

4 IFR PM 2344 p11-20.indd 12 31/07/2020 18:18:28


People&Markets

Please contact us if you have information about job moves: [email protected]

rise during Q2 2020, although at a slower pace,” Richardson said.

European banks lagged behind their US rivals far more starkly in equities, led by BNP Paribas’ troubles. Equities revenues for the four European banks (Deutsche no

All the banks enjoyed a robust quarter for underwriting, led by a revival at Deutsche, where debt capital markets revenue jumped

almost trebled.

That meant for the four European banks that report the units separately, DCM

But it was a different story in M&A advisory, where revenues across the four

Barclays, Deutsche and BNP Paribas were also all hit at group level by hefty provisions for potential loan losses in the future.

credit losses, more than three times the

The bank said it was being conservative and preparing for worse to come.

less than analysts had expected.Steve Slater

Restructuring wave rescues LazardLAZARD

activity slumped in the wake of the coronavirus pandemic.

But while the pandemic has been bad for M&A, companies reeling from the economic

independent investment banks for restructuring advice helping to save the quarter.

“Our franchise and restructuring is

executive Ken Jacobs. In the latest cycle

part of this year, largely driven by companies that were already facing challenged liquidity positions and balance sheets prior to the pandemic, which was then accelerated.

Jacobs said restructuring activity levels were going to be historic and probably continue through next year.

None of the independent investment banks separate restructuring from M&A

historically, restructuring revenues as a

could be at the higher end of those ranges for the next year and a half.

increase in activity, Jacobs said. The bank is

and the Middle East on debt restructuring, and continues to advise governments in developed economies on programs to support the private sector.

restructuring activity in Europe in the second half of the year as central banks and governments scale back their economic support programmes.

“MEANINGFUL INCREASE”Rival MOELIS

its capital markets activity. But it reported a

experienced an uptick in restructuring

the longer-term contribution from the restructuring group.

“These are volatile, volatile times,” said Moelis CEO Ken Moelis. “My sense is that the

bottomed,” Moelis told analysts. “I sense a very strong desire to participate in M&A, especially for high-quality assets.”

Moelis said there was an uptick in dialogue late in the second quarter, but that was hurt by the most recent spike in Covid-

Even with the boost from restructuring,

tougher quarter than bulge-bracket banks.

year-on-year rise in advisory revenues, despite the weak environment for deals.Philip Scipio

Russian investment

bank RENAISSANCE CAPITAL has hired

Maria Radchenko to

head its fixed income

analysis. Radchenko

will be based in

Moscow and report

to Grigory Sedov,

head of private clients

and head of Russia

and CIS distribution.

Radchenko will lead

credit analysis and be

tasked with providing

fixed income ideas

for institutional and

private clients. She

joined from rival BCS

Global Markets, where

she was head of fixed

income research

and deputy head of

research.

Rob Ward has been

appointed as head

of project and ESG

finance for Oceania

at MUFG BANK.

The newly created

ESG financing role

for Oceania will

help coordinate and

develop MUFG’s

products in the

area, including ESG

loans and bonds,

renewables PF and

emerging energy

technologies. Ward

joined MUFG in

2012 and has led its

advisory business in

Oceania since 2016.

MUFG last year said

it would commit

¥20trn (US$188bn) to

sustainability-related

financing by 2030.

“My sense is that the inactivity in the M&A market has definitely bottomed. I sense a very strong desire to participate in M&A, especially for high-quality assets”

4 IFR PM 2344 p11-20.indd 13 31/07/2020 18:18:32

Bellwether: n. From the practice of placing a bell around the neck of a castrated ram so that it might lead its flock

Bellwether


Who’s moving where… HSBC has

promoted Eric Bai and Alexander Paul to global co-heads of FIG investment banking coverage within its financial institutions group. Bai is based in Hong Kong and Paul is in London and they will be responsible for leading event business and strategic coverage

of FIG clients. Bai and Paul will report to Peter Enns, who has overall responsibility for FIG. Egmont Schaefer and Pedro Urresti have also been appointed co-heads of FIG corporate banking for Europe.

DEUTSCHE BANK has hired Colin Parkhill as head of European ABS and CLO syndication. Parkhill recently quit Lloyds, where he headed the European ABS syndicate desk. Parkhill will join in the autumn and report to John O’Connell, global head of global credit

trading syndication. Parkhill replaces Jonathan McCormick, who will move to a senior client coverage role focusing on UK and Irish banks. Parkhill has been replaced at Lloyds by Eve Marlborough, who previously worked in Lloyds’ securitised product group.

Hiren Singharay has joined RSA CAPITAL LIMITED, a Dubai International Financial Centre based investment bank specialising in emerging markets, as a senior adviser. Singharay has 40 years of experience in European and emerging markets and will be involved in developing

and expanding the advisory and M&A business of RSA into Africa. Singharay was previously head of syndications for Europe, Africa and South Asia for Standard Chartered, based in London. He led syndication for the same region and Eastern Europe at Citibank before that.

off for the summer with an upbeat message for staff after Deutsche Bank posted a decent set of second-quarter earnings.

Sewing said the results served as a vindication of his strategy. But a dive into the numbers tells a different story. Revenues at the corporate bank, the cornerstone

performance came from the investment bank, where

powerhouse, FICC – the lightning rod for so much criticism and a symbol of the free-wheeling image that Sewing is so desperate to shed. Sewing should be applauded for his turnaround efforts, but don’t take credit for credit.

Sewing also pointed to the results of the bank’s “people survey” as further evidence he is steering the ship in the

said.And if that’s not enough, Sewing said the survey

showed staff “also support our strategy more and you are happier with your managers”. Given that very few will have seen their manager since March, you wouldn’t expect anything less.

has become the latest bank to

something to do, they could always follow the lead of their US colleagues, who have set up RBCCM US Kids Club.

It’s a virtual summer camp at which staff volunteer

Kids Club offering “story time” and “weekly sing-alongs”. Could this also be a chance to raise some money for good causes? Bellwether is surely not alone in being willing to pay good money to watch Darrell Uden and Josh Critchley

managed to maintain its record for

guilt or liability – but keeping a straight face – after reaching a US$3.9bn settlement with the Malaysian

scandal.

and head for the hills, Goldman’s boss David Solomon headed for the Hamptons, where he performed a live set at an open air gig as his alter ago DJ D-Sol.

But his fun was cut short when it emerged that New York’s health authorities are investigating the concert for rampant violations of social-distancing rules.

Governor Andrew Cuomo having a pop on Twitter. A spokesperson for Solomon said: “The vast majority of the audience appeared to follow the rules, but he’s troubled that some violated them and put themselves and others at

CONTINUING THE THEME of law-related levity, HSBC has appointed Egmont Schaefer and Pedro Urresti as co-heads of FIG corporate banking for Europe, according to a memo. Apparently, all of Pedro’s direct reports are “under Uressti”.

4 IFR PM 2344 p11-20.indd 14 31/07/2020 18:18:34


Please contact us if you have information about job moves: [email protected]

People&Markets

CREDIT SUISSE

tapped Tom Greenberg

and Jonathon

Kaufman to run

its newly formed

global energy

and infrastructure

group. The group

combines the global

infrastructure, utilities

and renewables

team with its oil and

gas team. The new

group will work with

clients across energy,

utilities, renewables

and infrastructure.

Greenberg and

Kaufman will report

to Malcolm Price as

coverage and advisory

head. Greenberg has

spent his 22-year

career at CS, most

recently co-heading

oil and gas.

CITIGROUP has

appointed Stephen

Randall as global

head of liquidity

management services

in its treasury and

trade solutions

business. Randall is

based in London and

will start the role on

August 17.

JP MORGAN has

hired Oliver Clarke from

Deutsche Bank to join

its FIG syndicate desk.

Clarke has worked

at Deutsche since

2013, starting as an

emerging market

syndicate official,

moving to SSA and

covered bond syndicate

in 2015, then on to FIG

syndicate in 2017.

WESTPAC has

made a further

shake-up to its front

bench with Scott

Collary joining as chief

operating officer and

acting chief financial

officer Gary Thursby

due to leave in early

2021.

JARDEN has

made another hire

in Australia with

Matthew Moffatt

joining from Jefferies.

Moffatt, who has been

based in Hong Kong,

will relocate to Sydney

as director in the New

Zealand firm’s equity

sales division.

Losada switches back to derivatives at MSSam Losada has quit his role as head of equity capital markets for Europe, Middle East and Africa at BANK OF AMERICA to join MORGAN

STANLEY as co-head of strategic equity solutions.

His co-head at Morgan Stanley is New York-based Serkan Savasoglu.

half years alongside James Fleming and on a sole basis for the past two years.

equity derivatives before switching to a similar role on the debt side. It was then a big jump to

capitalises on his strength in equity derivatives.James Palmer

ECM experience, although almost all of it has been in the US.

Palmer joined BofA in November, just a year after arriving at Credit Suisse as vice-chairman of investment banking and capital markets in EMEA. He spent the previous two decades in the US at UBS, ending his tenure there as head of ECM for the Americas.Owen Wild

DeMare to head BofA global marketsBANK OF AMERICA has named Jim DeMare as head of global markets, reporting to chief

DeMare was previously co-head of global

trading, and head of the commercial real-estate bank. He also co-chaired the global

markets risk committee and is a member of the management committee.

Citigroup, ahead of Merrill’s merger with BofA. Prior to Citi, he was a trader at Bear Stearns and Prudential Securities.

In a series of promotions, BofA named

Bernie Mensah as head of International, which will exclude the Americas, reporting to Montag. Mensah previously jointly led the bank’s FICC trading business globally. In

responsibilities as the BofA’s EMEA president. was named co-head global

equities alongside Fab Gallo.Philip Scipio

UBS shakes up M&A, TMT, Australia leadershipUBS has promoted its European M&A chief Nestor Paz-Galindo to co-head of mergers and acquisitions globally to replace Greg Peirce, who is moving to co-head global banking in Australasia.

The moves are part of a series of senior changes in the Swiss bank’s global banking division, according to a memo to staff seen by IFR.

UBS four years ago from JP Morgan, where he spent 22 years as an M&A and corporate

and geographies. UBS said he will start shifting to the role and take it up fully in

Peirce joined UBS as an intern in 2000 and headed general industrials and co-headed

coverage and advisory for Australasia until

Philipp Beck head of EMEA M&A. Beck joined UBS in 2002 and leads M&A for Germany, Austria and

In the Americas, and Solon Kentas have been appointed co-heads of Americas M&A.

Deutsche Bank, and previously worked at HSBC as head of M&A for North America.

Jeff Rose will shift from his dual role as co-head of M&A to lead the Americas consumer products and retail team.

M&A. UBS also appointed as

global co-head of technology, media and telecommunications, alongside Christian

in the Americas with . Crisci will become chairman of global TMT, in addition to his role as global head of private markets.

will join UBS’s global banking management committee (GBMC).

Also joining GBMC are John Lee, head of Greater China, and David James, head of global banking for the UK, because both cover geographies considered important for overall strategy, the memo said.Steve Slater

4 IFR PM 2344 p11-20.indd 15 31/07/2020 18:18:34


FEE TABLES JULY 2020

1/1/2020 to 30/7/2020

Source: Refinitiv

MOELIS CEO KEN MOELIS, P13

“These are volatile, volatile times”

Jan–July fee income up 7% vs year ago as Q2 surge slows

The revival in investment banking fees seen since mid-March slowed during July, leaving global revenues from debt and equity underwriting, M&A advisory and syndicated

Global fees from DCM, ECM, M&A and

industry through to July 30, up US$4.2bn

the performance during July was down slightly on last year.

That echoed comments from bank executives during July, who said activity had moderated from the record revenues seen between April and June.

JP MORGAN remained on top of the rankings

on 3,090 deals in the seven months, compared

GOLDMAN SACHS ranked second after

year earlier, the biggest year-on-year

JEFFERIES and EVERCORE were the only banks to show stronger fee growth from a year

year earlier.BNP PARIBAS

said.

showed a decline in fees from a year earlier. The worst performer was DEUTSCHE BANK,

banks and Credit Suisse and Barclays in

year ago.Steve Slater

EMEA INVESTMENT BANKING

Managing No of Total Share bank or group issues US$(m) (%)

1 Goldman Sachs 378 1,096.6 7.1

2 JP Morgan 692 1,030.0 6.6

3 BNP Paribas 735 771.8 5.0

4 Citigroup 525 696.9 4.5

5 Barclays 561 646.8 4.2

6 BofA 461 646.5 4.2

7 Credit Suisse 337 638.3 4.1

8 Morgan Stanley 309 619.9 4.0

9 Deutsche Bank 505 557.3 3.6

10 HSBC 693 540.5 3.5

Total 6,218 15,537.8

GLOBAL LOANS


1 JP Morgan 675 807.3 7.1

2 BofA 769 747.8 6.5

3 Citigroup 474 537.8 4.7

4 Goldman Sachs 285 526.4 4.6

5 Mizuho Financial 650 505.2 4.4

6 MUFG 871 463.7 4.1

7 Sumitomo Mitsui 723 463.2 4.0


9 BNP Paribas 493 422.0 3.7

10 Barclays 358 392.2 3.4

Total 5,312 11,439.7

GLOBAL EQUITIES


1 Goldman Sachs 307 1,500.8 10.2

2 JP Morgan 312 1,268.8 8.7

3 Morgan Stanley 291 1,213.8 8.3

4 BofA 267 999.0 6.8

5 Citigroup 209 783.3 5.3


7 UBS 133 395.9 2.7

8 Jefferies 140 387.3 2.6

9 Barclays 141 340.9 2.3

10 CICC 61 261.5 1.8

Total 3,521 14,662.5

ASIA-PACIFIC & JAPAN INVESTMENT BANKING


1 Citic 3,213 698.2 4.1

2 Bank of China 2,426 660.0 3.9

3 Mizuho Financial 1,264 659.6 3.9


5 Sumitomo Mitsui 1,196 475.7 2.8

6 CICC 1,215 442.7 2.6


8 ICBC 2,204 428.0 2.5


10 UBS 218 384.3 2.3

Total 17,027 17,058.0

GLOBAL BONDS


1 JP Morgan 1,962 1,916.9 7.5

2 BofA 1,628 1,588.6 6.2

3 Citigroup 1,587 1,396.2 5.4

4 Goldman Sachs 1,106 1,075.7 4.2

5 Morgan Stanley 1,645 1,069.2 4.2

6 Barclays 1,361 961.2 3.7

7 Wells Fargo & Co 1,360 875.4 3.4

8 Deutsche Bank 1,445 790.1 3.1


10 HSBC 1,310 633.1 2.5

Total 21,398 25,646.5

AMERICAS INVESTMENT BANKING


1 JP Morgan 2,146 3,653.3 10.6

2 BofA 2,070 3,132.4 9.1

3 Goldman Sachs 1,186 3,017.0 8.7

4 Citigroup 1,565 2,461.1 7.1

5 Morgan Stanley 1,239 2,362.8 6.8

6 Wells Fargo & Co 1,835 1,307.6 3.8

7 Barclays 1,186 1,302.9 3.8

8 Credit Suisse 693 1,241.1 3.6

9 RBC CM 1,363 916.6 2.6

10 Jefferies 562 779.6 2.3

Total 11,477 34,609.9

GLOBAL INVESTMENT BANKING FEES


1 JP Morgan 3,090 5,038.3 7.5

2 Goldman Sachs 1,875 4,553.1 6.8

3 BofA 2,786 4,063.4 6.0

4 Morgan Stanley 2,267 3,632.9 5.4

5 Citigroup 2,389 3,500.3 5.2

6 Credit Suisse 1,203 2,282.8 3.4

7 Barclays 1,932 2,048.3 3.0

8 Deutsche Bank 1,879 1,388.7 2.1

9 Wells Fargo & Co 1,925 1,374.7 2.0

10 BNP Paribas 1,556 1,301.2 1.9

11 HSBC 1,878 1,164.6 1.7

12 Mizuho Financial 2,159 1,150.5 1.7

13 RBC CM 1,552 1,117.8 1.7

14 UBS 725 1,044.0 1.6

15 Jefferies 643 961.3 1.4

16 Sumitomo Mitsui 1,770 885.4 1.3

17 MUFG 1,553 832.0 1.2

18 Bank of China 2,535 727.0 1.1

19 Evercore Partners 145 720.8 1.1

20 Citic 3,219 700.1 1.0

Total 34,437 67,205.7

4 IFR PM 2344 p11-20.indd 16 31/07/2020 18:18:35


People&Markets

Hedge fund activist Hohn finalises charity splitThe stormy marriage of Johnny Depp and

in the UK’s Supreme Court about Chris Hohn’s Children’s Investment Fund.

Hedge fund manager Hohn, who boasts chancellor Rishi Sunak as a former employee, split from his wife Jamie Cooper

the highest ever UK divorce settlements.But the couple could not decide how

the charitable foundation behind the

Children’s Investment Fund should be run.

The foundation was set up in 2002 to support children in developing countries with both Hohn and Cooper as members alongside another independent person.

The couple had invested the bulk of their interests in the hedge fund under an arrangement that saw the foundation receive a proportion of any bonus for outperformance each year. That has seen the endowment swell to about US$4bn.

Hohn had proposed that Cooper step down and be given US$360m from the

foundation to set up a new charity after their split. But the third member, Marko

decide whether the foundation should back the proposal, had refused to get involved and make the decision.

After a lengthy series of appeals, the Supreme Court last week decided the gift to

should be carried out as it is in the interests

will allow Hohn to take back control of decisions at the CIF foundation.Christopher Spink

Eurozone dividends, bonuses in line of firefrom paying dividends until at least next year, but Australia has said payouts can restart, as regulators take different stances on how far banks need to go to prepare for rising losses from bad loans.

dividend prospects across the banking sector.

Days after most European banks were blocked from payouts this year, CREDIT SUISSE told investors it wanted to pay the

year, and intended to increase the payout by

this year accordingly. Rival UBS had already said it wanted to

resume share buybacks in the fourth quarter. The two banks postponed payouts in April after mounting pressure from authorities to be prudent.

US banks have been allowed to continue paying dividends, although they have been blocked from buying back shares, which is a far bigger part of their capital distribution plans.

PROCEED... WITH CAUTIONThe Australian Prudential Regulation Authority told banks last week they can start

big regulator to lift restrictions it had imposed in April.

“APRA believes that banks and insurers do not need to continue to defer capital distributions, provided they moderate payments to sustainable levels based on robust stress testing, and continue to prioritise supporting their customers and

But the European Central Bank extended its

pay dividends until the end of the year. The ban had been in place until the end of October. The ECB said it would allow banks to eat into their capital and liquidity buffers for even longer, to help them cope with the economic fallout of the coronavirus pandemic.

Kian Abouhossein, an analyst at JP Morgan, said dividend payouts were crucial for a re-rating of European bank valuations and the update was disappointing for stronger banks that had hoped for the ECB to show greater differentiation.

more buybacks,” Abouhossein said in a note.

MODERATE BONUSES TOOThe ECB also told banks to “exercise extreme moderation” with bonuses, especially for material risk takers – sending a warning shot across the industry.

Analysts said that could put pressure on DEUTSCHE BANK, in particular, to cut bonuses for staff this year.

The ECB said banks could withstand a second wave of infections, but it called on

authorities to be ready to intervene and prevent a credit crunch.

2022 under its baseline scenario. But under a

The Bank of England said it would assess in the fourth quarter whether to extend a suspension on dividends and share buybacks beyond the end of the year. Banks were told in March to suspend payouts, causing an outcry among HSBC‘s shareholders in particular, many of whom are Hong Kong retail investors.

In New Zealand, whose market is dominated by Australia’s big four lenders, banks have been ordered to stop paying dividends or redeeming capital securities,

demand of its kind anywhere.Many banks are hoping to restore

often announced in February. Some have dangled the carrot of extra payouts if capital is not eroded too much by the crisis.

Indeed, several banks’ capital ratios jumped during the second quarter, despite a rise in impairment charges, including at BARCLAYS, Credit Suisse and UBS.

But UBS CEO Sergio Ermotti summed up the uncertainty on capital distribution.

some share buybacks in the fourth quarter,” Ermotti said. “But as we all know, nowadays,

going to be in a better position to give you more details in October.”Steve Slater, Thomas Blott

The ECB also told banks to “exercise extreme moderation” with bonuses, especially for material risk takers – sending a warning shot across the industry

4 IFR PM 2344 p11-20.indd 17 31/07/2020 18:18:35


BARCLAYS CEO JES STALEY, P12

“The underlying growth of capital markets activity I think is going to continue to be robust”

HSBC creates ESG unitHSBC has launched an ESG solutions unit to help global clients in transitioning businesses and economies to a more sustainable low-carbon model in the post-coronavirus world.

The unit will form part of the strategic

and investment banking division, and will combine the bank’s sustainability capabilities to provide ESG-related advice,

build a future in which economic growth and sustainability are well-aligned,” said Daniel Klier, global head of sustainable

“These changes will allow us to rapidly

grow our role in providing ESG strategies for clients so we can accelerate their ability to contribute to a low-carbon future.”

HSBC is already active in sustainable

response bonds that were issued from February to July to mitigate the economic effects of the pandemic, according to the bank.

The bank also launched a reporting service in July that allows institutional investors to measure the sustainability credentials of their investments by tracking the ESG ratings of large holdings.

The creation of the ESG solutions unit mirrors similar moves at Citigroup and Deutsche Bank as investors’ focus on sustainability continues to attract more capital.

ESG SOLUTIONSHSBC’s ESG solutions unit will be led by Jonathan Drew, who is based in Hong Kong,

Julie Bennett in New York.The bank said they will be supported by

hundreds of others and the network is expected to expand to meet the growing

HSBC’s broader strategic solutions group also includes a team focusing on corporate

institutions and capital.The group will be led by Nik Dhanani,

Americas.Tessa Walsh

Citi sets US$250bn environmental finance targetCITIGROUP

accelerate the transition to a low carbon

sustainable progress strategy as the banking industry gears up to help “brown” companies become more sustainable.

The new goal will focus on low-carbon transition, climate risk and sustainable

form part of Citi’s environmental and social policy framework.

leading bank in driving the transition to a low-carbon economy, which we anticipate will accelerate as businesses of all kinds shift to a more sustainable future,” said CEO Michael Corbat.

The bank is aiming to use its global presence to help companies transition, aided by the rise in investor assets and interest, in a move that will also help the bank to reduce its climate change risk.

clients on their transition journey and we’re doing it at the same pace that investor assets are ramping up and increasing,” said Phil Drury, Citi’s EMEA head of banking, capital markets and advisory.

“MORE TO DO”Citi created a sustainability and corporate transitions group in May in its global banking, capital markets and advisory business unit after identifying ESG as a priority.

said ESG criteria are not yet fully integrated across the banking industry and more banks need to place sustainability in risk management frameworks and measure it more effectively.

“A handful of banks are leading the way, with most still having some work to do to fully embed ESG factors in their corporate strategy, governance and risk management frameworks,” said Virginie Mennesson, head

NEW TARGETCiti put the new target in place after

structures to help clients achieve positive impact at scale in renewable energy, clean technology, water quality and conservation, sustainable transport, green buildings,

sustainable agriculture and land use.“A large part of it will come through

capital markets underwriting. It’s all our

capital markets,” Drury said.

The bank aims to reduce the climate risk and impact of its client portfolio, initially by measuring the impact of its own portfolios

2 degrees Celsius global warming scenario.Citi will also test the resilience to

transition of its lending portfolios and physical risks of climate change, and continue to disclose in line with the Task Force on Climate-Related Financial Disclosures.

Principles for Responsible Banking, and has issued its second benchmark green bonds

since the start of the pandemic, and

purpose acquisition company.The bank said it will look beyond labelled

bond products to underdeveloped areas of green equity and M&A as companies start to target acquisitions to speed transition.

with clients, and we have targeted M&A discussions with CEOs about their transition to a low carbon capture corporate strategy and structure. That M&A advisory is

place,” Drury said.The bank is also looking to use its

slow start as investors continue to call for

Tessa Walsh

“We’re doing it at the same pace that investor assets are ramping up and increasing”

4 IFR PM 2344 p11-20.indd 18 31/07/2020 18:18:35


People&Markets

DCM surge lifts DeutscheDEUTSCHE BANK‘s debt capital markets business outperformed US rivals in the second

That partially compensated for a comparatively lacklustre showing in its core

Many competitors, including European rivals UBS and BNP Paribas, reported a near doubling of FICC revenues due to volatile and lively markets (see previous P&M story).

the more restrained gains at Deutsche was partly due to its European focus after a retreat to its domestic base as a result of CEO Christian Sewing’s reorganisation a year ago.

“The restructuring has ended up with us having a more stable revenue base,” said Nayak. “[The relative performance of]

European banks versus US peers in FICC is a function of their business mix.”

Rates was a stand-out product for the bank, recording its best second-quarter result for a decade. FX and emerging markets trading was also strong.

second quarter, largely against positions in its investment banking book. Despite this

against a €946m pre-tax loss a year earlier.Deutsche said it is also keeping a lid on

costs.“Costs remain a key thing for us. Very few

while reducing cost bases. These results show we can,” said Mark Fedorcik, head of the investment bank.

Some analysts were concerned the bank could see elevated loan provisions next year, however.

“There is a risk that losses end up being at the upper-end of the guidance this year and

we expect these to decline at peers,” said Andrew Coombs, analyst at Citigroup.

Fedorcik said it was the third consecutive quarter of revenue growth in the investment bank that had “driven our market shares back to where they were one or two years ago”.

Equity capital markets revenues nearly

bank ditched its equities trading arm as part of the restructuring.

“In both investment-grade DCM and

gains in ECM,” said Fedorcik.

bridge loans and lots of sub-investment-grade clients were accessing the market in May and June.” Others had yet to see such

Christopher Spink

Record quarter for Nomura wholesaleNOMURA moved back into the black during the April-June quarter following a record performance in its wholesale division and its international business.

The Japanese investment bank, which

the three months to the end of March, said net

by a surge in trading activity and a one-time

banks, following a blowout quarter across multiple product lines including credit, securitised products and rates.

Nomura’s international business, so often a drag on earnings in the past, posted its best quarter on record with pre-tax income more than doubling to ¥64.2bn.

three regions outside Japan – Americas, Europe, and Asia and Oceania. All three made a loss in the previous quarter.Thomas Blott

StanChart eyes more cost cuts as impairments jumpSTANDARD CHARTERED

by a third as it increased impairment charges more than six-fold in response to

lender warning that income was likely to remain subdued for the rest of the year.

That was primarily due to an increase in

The bank struck a cautious note, warning that income was likely to be lower during the second half as low interest rates and less

StanChart already walked back a number of its medium-term targets at the beginning of

this year, and its return on tangible equity came

a year ago and well below its previous target of

going to take longer to hit its return target.But StanChart said it had kept a lid on costs

this year, excluding the UK bank levy.

was “accelerating some elements of existing projects targeted at creating a leaner and more agile organisation” and was “developing new expense reduction initiatives” to keep costs

This would involve a “very small number

disclosing which businesses would be impacted.

impairments relating to three unconnected

US$3.99bn on the back of the same buoyant trading activity that has lifted the results of its US and European peers.

Revenues from foreign exchange and

respectively. Revenues from credit and

more disappointing, with revenues falling

attributed to the impact of rate cuts on its cash management business.Thomas Blott

4 IFR PM 2344 p11-20.indd 19 31/07/2020 18:18:35


VIRGINIE MENNESSON, HEAD OF REGULATORY AFFAIRS AT MAZARS, P18

“A handful of banks are leading the way, with most still having some work to do to fully embed ESG factors”

Goldman turns page on 1MDBGOLDMAN SACHS moved to put the 1MDB scandal behind it with a US$3.9bn settlement that

Malaysia.The settlement with the government of

Malaysia now turns attention to ongoing proceedings in the US and whether the bank will be forced to admit criminal liability for

Goldman has agreed to pay Malaysia

from the US investment bank that the South-East Asian nation would recoup at

governments around the world. Crucially, Malaysia agreed to withdraw all criminal

with the exception of former Goldman

have both been charged in the US over their

Observers are now watching to see whether the US Department of Justice will accept a similar settlement, or force Goldman to admit criminal liability.

“The key point in the US is not so much

have to acknowledge that they were guilty or not,” said one rival banker. “It could have serious reputational repercussions.”

AN HONEST DAY’S WAGE?Goldman has faced questions over its

the fund in three private placements

The three deals raised eyebrows at the time, not just because of the exorbitant amount of money that Goldman made but also because of how the deals were structured.

bankers questioned why the deal was structured as a private placement to begin

with and why the coupon was so high when the bond was rated Aa3 by Moody’s.

A-rated oil and energy sector paper in the Asia secondary space will tell you that the

IFR wrote at the time.Goldman insiders said at the time the

holding structured bonds on its books for an extended period – a line repeated after a further US$3bn placement in the run-up to

The US DoJ alleges that more than

used to buy artwork, including paintings by Vincent Van Gogh and Claude Monet,

Vegas – among other things.Goldman has always maintained it was

not aware of how the proceeds were to be used, and the Malaysia settlement leaves that argument intact.

“At a certain point, the issue becomes not so much about use of proceeds, over which Goldman had no involvement, but the amount it was able to charge,” said one former Goldman banker. “In comparison, I’ve issued bonds for Triple B Thai

covering the price of the plane ticket.”“If all Goldman had done was to achieve

an honest day’s wage for an honest day’s work, what can you do? It was the amount that Goldman was able to make that became

settlement is mostly a disgorgement of the

COLLECTIVE LIABILITY?Goldman has repeatedly said that certain members of the former Malaysian

proceeds from the bond sales would be used

Goldman’s former South-East Asia chairman.

how he deliberately hid details from the

mastermind behind several transactions.Goldman had previously determined that

questioned by compliance personnel and

according to US prosecutors.

him in the US of conspiracy to launder money and conspiracy to violate the Foreign

that he conspired to conceal facts from Goldman’s compliance and legal staff but argued that this was in line with the culture at the bank.

The US proceedings are expected to focus on how much the bank knew about

transactions.“If an individual lies to a committee then

it becomes an issue of individual liability but there is still the question about whether the bank should have investigated more thoroughly. Then it could become a question of collective, rather than individual, liability,” said the rival banker.

Most analysts reckon that regardless of whether Goldman is forced to plead guilty to federal criminal charges, the bank is

–

prosecutors.Thomas Blott

Please contact us if you have information about job moves at your firm or within the marketCall +44 (0)20 7542 4367

or email [email protected]

4 IFR PM 2344 p11-20.indd 20 31/07/2020 18:18:38

FRONT STORY FINANCIALS

Co-op targets crucial MREL issuance Challenged lender looks to H2 after delay

Uncertainty over ability to meet regulatory requirements

The CO-OPERATIVE BANK has announced it aims to issue much-needed MREL-eligible debt in the second half of 2020 as it seeks to raise £550m by 2022, acknowledging that failure could cast doubt over its ability to continue as a going concern.

In its second-quarter results, published on Thursday, the UK bank said it was forced to delay plans to issue an MREL-

year after markets deteriorated due to the coronavirus pandemic.

The issuance of such loss-absorbing debt remains more challenging for Co-op Bank than for most of its peers. The bank is still

having come close to collapse in 2013 after the revelation of a capital shortfall.

In July, Moody’s and Fitch – which rate Co-op Bank B3 on stable outlook and B– on Rating Watch Negative, respectively – both underlined that the bank’s capital position is vulnerable to stress while it remains structurally loss-making.

Yet the bank must brave the wholesale market if it is to meet its regulatory targets.

It said it was now aiming to issue approximately £550m of MREL-eligible debt by a January 2022 deadline.

“We delayed our plans to issue MREL in

wholesale market conditions and because our strong CET1 ratio allowed us to do so,” said Andrew Bester, chief executive of Co-operative Bank.

“Nevertheless, we are committed to achieving our future MREL obligations by

targeted before the end of this year, and our shareholders continue to be supportive.”

Co-op Bank adds that its directors consider there to be material uncertainty over the bank’s ability to complete its MREL issuance programme in a reasonable timeframe.

group’s ability to continue as a going concern”, it said.

“Nevertheless, after making careful enquiries and considering the current forecasts, in particular those up to July 31 2021, the directors have a reasonable expectation that the group will complete its MREL issuance programme and continue to have adequate resources to continue in business over this period,” it said.

“We have a reasonable expectation that the appetite will be available to the bank to complete MREL issuances when required, assuming market and economic conditions support.”

TIMING IS EVERYTHING

Uncertainty surrounds the market outlook for the second half of the year, given the potential for volatility arising, not just from the pandemic but also from other factors, including the US election, Brexit and banks’ Q3 results.

open for issuers to print strategic or subordinated trades from mid to late August, including smaller or weaker credits that have not yet tapped the market in 2020.

“[Co-op Bank] is certainly a name you need to pick the right window for,” said a syndicate banker.

“There is a story there and it’s going to be very much a question of to what extent that story gets across to investors and they buy into it. They’ve also got shareholders you would assume would support any transaction.”

DOWNWARD PRESSURE

Co-op’s last MREL-eligible transaction was

at 9.5% in April 2019. The unrated deal was fully subscribed, orders reaching around

to the bank’s shareholders. The bond was quoted at 12.96%, bid, on

The average yield of the iBoxx GBP Banks Subordinated index was 2.845% at Thursday’s close, showing how Co-op Bank’s funding costs remain elevated well above its peers’.

Co-op Bank acknowledged in its results that issuing MREL-eligible debt in weaker conditions could force it to pay a higher coupon and add further downward

The bank’s net interest margin, a key

from 158bp at end-2019 to 141bp at the end of H2.

The NIM is forecast to fall further to 135bp–140bp by end-2021. The bank aims

Co-op Bank also reported a fall in its Common Equity Tier 1 ratio from 19.6% at the end of 2019 to 18.2% at the end of Q2.

It forecasts a fall to 16%–17% by year-end, driven by growth in its risk-weighted assets and continuing losses. Its minimum CET1 requirement stands at 13.2%.

Co-op said it was forecast to remain compliant with its binding liquidity and capital requirements, but to temporarily use an undisclosed Prudential Regulation Authority buffer that sits above its minimum regulatory requirements, as is permitted by the PRA. Tom Revell


BONDS SSAR 23 Corporates 26 FIG 31 Covered Bonds 32 High-Yield 33 Structured Finance 36

CO-OP TIER 2S WIDEN TO NEW HIGHYIELD OF CO-OP’S OUTSTANDING TIER 2 NOTES

Source: Refinitiv Eikon

Bid yield

7

8

9

10

11

12

13

July

22

Jun

e 2

2

Ma

y 2

2

Ap

ril

22

Ma

r 2

2

Fe

b 2

2

Jan

22

20

20

De

c 2

2

No

v 2

2

Oct

22

Se

p 2

2

Au

g 2

2

July

22

Jun

e 2

2

Ma

y 2

2

Ap

r 2

2 2

019

5 IFR Bonds 2344 p21-47.indd 21 31/07/2020 18:46:22


Sub-IG issuers find favour with high-grade buyers German crossover credits entice with yield

A pair of German high-yield names tapped the investment-grade market for fresh funding last Wednesday as investors become more receptive to the yields that some lower-rated credits offer.

PHOENIX PHARMA (BB+) and ADO PROPERTIES (Ba2/BB) each targeted both investment-grade and high-yield accounts as they raised term funding.

“They have sub-IG credit ratings, which is not the same as being high-yield credits necessarily,” said one syndicate banker.

“I think this is demonstrated by the fact that

call three, for example, senior unsecured, and no high-yield-style call structure.”

Nonetheless, the paper brought by the “sub-investment-grade” German duo was marketed in yield terms and some leads opted to run the trade through their high-yield teams.

Many investment-grade-focused investors are happy to look at names with ratings just below IG, especially in an environment where yields remain near all time lows, said bankers.

“I think that the European investor base has

banker, adding that since the 2008-2009 global

sceptical of the view of ratings agencies.One asset manager said credits were

assessed on a case-by-case basis. “We don’t have one rule, but it really does depend on the business we are looking at,” he said.

Having announced the mandate on Monday, Phoenix Pharma, a German pharmaceuticals wholesaler, brought an expected €300m August 2025 at IPTs of the 2.75% area, based on feedback gathered from

Involved in the provision of medical goods, Phoenix experienced a 10% growth in

the year as pharmacies took in more orders.However, while pharmacies stocked up on

then chose to run these reserves down during the second, negatively impacting Phoenix’s revenues. Conditions are now back to normal, said the issuer on an investor call.

Phoenix increased the size of the deal to €400m. The book peaked above €815m before dropping to €740m with the yield and coupon set at 2.5% and 2.375%,

around €690m.The senior unsecured deal, led by

Commerzbank, Credit Agricole, ING and UniCredit, was issued through Phoenix PIB

Dutch Finance BV and guaranteed by Phoenix Pharmahandel GmbH & Co KG.

With only one bond outstanding, and that due to mature in July 2021, fair value was hard to place, but leads suggested similar rated names Amplifon (BB+) and Wienerberger (Ba1) as comparables.

MUCH ADO ABOUT QUALITY ASSETS

ADO offered IPTs of the 3.75% area yield on its August 2025s, but bookrunners JP Morgan, Barclays and Deutsche Bank were able to cut this back to a 3.5% yield and 3.25% coupon.

The German REIT is focused on both residential and commercial properties. Much of its investment is in Berlin with a portfolio of around 18,000 units.

Books for the deal topped €925m with the issuer taking €400m.

The quality of the REIT’s assets was one factor behind the interest from typically investment-grade investors in the proposed new issue, in addition to ADO’s aspirations of becoming an investment-grade credit.

Leads explained that while the issue was targeting both investment-grade and high-yield investors, they expected the former to lead the transaction. However, after the deal was completed one lead offered a contradictory view, indicating that the buyer base was largely high-yield, with the addition of investment-grade investors.

ADO is looking to repay debt drawn under an M&A-related bridge facility with the funds raised from the new bond issue. In February, IFR reported that ADO was lining up a €2.963bn bridge loan as part of its acquisition of Adler Real Estate.

AMPLIFON, meanwhile, held a conference call through UniCredit last Thursday to provide an update to credit investors across Europe.

The Italian company, which makes hearing aids and is rated BB+ negative by S&P, reported

shrank to €7.4m compared with €36.8m a year ago. Revenue fell to €250.4m from €440.1m.

announced consolidated revenues of €613.9m, a decrease of 26% at constant exchange rates and 26.2% at current exchange rates compared

€59.4m on a recurring basis. The company said it achieved “excellent results in terms of

position” despite the impact of Covid-19.Its €350m February 2027s are bid at 97.19

to yield 1.58%.Ed Clark

WEEK IN NUMBERS

93.18 THE LEVEL THE US DOLLAR INDEX FELL

TO LAST WEEK, A TWO-YEAR LOW, AS THE

FEDERAL RESERVE CONTINUES TO RUN

ULTRA-LOOSE MONETARY POLICY

US$1,980.57 THE SPOT PRICE THAT GOLD HIT LAST

WEEK, A RECORD HIGH AS INVESTORS

HAVE SOUGHT REFUGE IN THE COMMODITY

ON THE BACK OF GROWING FEARS OVER

THE US ECONOMY AND A WEAKER DOLLAR

US$11bn THE AMOUNT RAISED BY AT&T LAST

WEEK THAT WILL FUND A TENDER

EXERCISE. THE FIVE-PART DEAL DREW

OVER US$31bn OF DEMAND AND

FOLLOWED ON FROM A SIMILAR

FIVE-PART US$12.5bn ISSUE IN MAY

92% THE YEAR-ON-YEAR GROWTH IN

DEUTSCHE BANK’S REVENUES FOR ITS

DEBT CAPITAL MARKETS BUSINESS

TO €470m. IT PARTIALLY OFFSET A

LACKLUSTRE SHOWING IN ITS CORE

FIXED INCOME AND CURRENCY TRADING

BUSINESS

€127m THE AMOUNT OF CORPORATE BONDS

THE ECB SOLD (NET) IN THE WEEK TO JULY

24 AS PART OF ITS CSPP COMPARED WITH

THE €640m IT BOUGHT THE WEEK EARLIER

In total, it has bought €41.597bn

87

89

91

93

95

97

99

101

103

105

2/1

/18

2/3

/18

2/5

/18

2/7

/18

2/9

/18

2/1

1/18

2/1

/19

2/3

/19

2/5

/19

2/7

/19

2/9

/19

2/1

1/19

2/1

/20

2/3

/20

2/5

/20

2/7

/20

1.9

2.4

2.9

3.4

3.9

4.4

4.9

5.4

1/1/

20

1/2

/20

1/3

/20

1/4

/20

1/5

/20

1/6

/20

1/7/

20

% AT&T 4.3% February 2030s

5 IFR Bonds 2344 p21-47.indd 22 31/07/2020 18:46:25

SSAR

US DOLLARS

NIB RAISES DOLLARS TO POST COLLATERAL

NORDIC INVESTMENT BANK tapped the US dollar market to raise funds for collateral purposes after a sizeable depreciation in the currency in recent months.

“The reason we’re doing it is because of

of funding at NIB, told IFR. “The dollar has gone weaker against the euro and the Nordic currencies have strengthened, so that means we had to pay collateral to our swap counterparties.”

Against the US dollar, in the last three months the euro has appreciated by about 7%, the Swedish krona 11% and Norwegian krone 12%.

The US$500m August 2022 transaction was priced at mid-swaps plus 3bp, via joint bookrunners Bank of America and TD Securities.

Fair value for the deal was put at 2bp over mid-swaps by Hellerup.

The issuer, rated Aaa/AAA (both stable), last raised US dollars in May with a US$1.5bn May 2023 deal, landed at mid-swaps plus 13bp after tightening by 2bp from IPTs on an order book of more than US$2.75bn.

“We saw wider spreads in April and May, like the whole market, but now it’s more or less back to where it was at the beginning of March,” said Hellerup

Before the latest deal, the issuer had raised €5bn this funding year, with plans to raise a total of €8bn-€9bn.

“The funding programme has increased about €1.5bn, as we set up a special loan programme in response to the Covid virus.

since the end of April,” said Hellerup.“We still expect to do a dollar

benchmark, minimum US$1bn, probably at the beginning to middle of September. We did a three-year in May, so there’s a

if there’s the demand. We will probably also do some environmental bonds – we’ve not issued any blue bonds this year, so that could also be in the next six weeks or so.”

EUROS

BADEN-WUERTTEMBERG FALLS FLAT AS KFW SAILS THROUGH

The STATE OF BADEN-WUERTTEMBERG‘s third bond

investors’ response contrasting with the one seen for a tightly priced KFW tap that was well oversubscribed.

Coming with a maturity in between its last two offerings, a no-grow €1bn August 2027 benchmark LSA note was priced at mid-swaps minus 5bp through lead managers Commerzbank, JP Morgan, LBBW, NatWest Markets, NordLB and UniCredit.

“For a €1bn transaction, I would say there needs to be some new issue premium at least shown to investors, otherwise you will not be able to sell it fully,” said a lead.

“We as a bank think it was fairly priced at minus 5bp when looking at the secondary

will get some help from the biggest money machine in Europe, the ECB.”

Similarly to the two previous transactions from the issuer, there was no movement in spread from guidance and no update on order book size.


BONDS SSAR

ALL INTERNATIONAL BONDS (ALL CURRENCIES)BOOKRUNNERS: 1/1/2020 TO DATE

Managing No of Total Share

bank or group issues US$(m) (%)

Including Euro, foreign, global issues. Excluding equity-related debt,

US Global ABS/MBS.

Source: Refinitiv SDC code: J1

1 JP Morgan 1109 289,905.39 8.6

2 Citigroup 872 243,597.48 7.2

3 Bank of America 902 242,568.37 7.2

4 Barclays 746 220,933.73 6.6

5 Goldman Sachs 630 184,184.01 5.5

6 HSBC 727 169,343.04 5.0

7 Deutsche Bank 610 157,574.57 4.7

8 BNP Paribas 583 155,785.27 4.6

9 Morgan Stanley 506 149,361.32 4.4

10 Credit Agricole 424 104,124.34 3.1

Total 3,852 3,364,877.20

ALL BONDS IN EUROS BOOKRUNNERS: 1/1/2020 TO DATE


bank or group issues €(m) (%)

Including Euro-preferreds. Excluding equity-related debt,

US Global ABS/MBS.

Source: Refinitiv SDC code: N1

1 BNP Paribas 326 90,917.58 8.2

2 JP Morgan 280 77,447.85 7.0

3 HSBC 279 69,241.91 6.2

4 Barclays 248 67,657.96 6.1

5 Credit Agricole 238 67,481.15 6.1

6 Deutsche Bank 244 65,415.89 5.9

7 UniCredit 220 56,908.49 5.1

8 Citigroup 196 54,858.94 4.9

9 SG 204 54,738.59 4.9

10 Bank of America 196 50,919.09 4.6

Total 1,228 1,111,243.85

ALL INTERNATIONAL GREEN BONDSBOOKRUNNERS: 1/1/2020 TO DATE



Excludes social bonds and mixed use of proceeds.

Source: Refinitiv SDC code: JG1

1 JP Morgan 35 5,246.52 6.5


3 BNP Paribas 30 4,902.33 6.1

4 Citigroup 22 4,443.61 5.5

5 Bank of America 29 3,810.30 4.8

6 SG 19 3,627.80 4.5

7 HSBC 31 3,602.22 4.5

8 ING 24 3,545.11 4.4

9 Barclays 20 3,428.96 4.3

10 Deutsche Bank 21 3,231.06 4.0

Total 148 80,111.45

EUROPEAN SOVEREIGN BOND AUCTION RESULTS WEEK ENDING JULY 30 2020

Pricing date Issuer Size Coupon (%) Maturity Average Yield (%) Bid-to-cover

Jul 27 2020 Belgium €805m 0.80 Jun 22 2025 -0.547 2.24

Jul 27 2020 Belgium €1.203bn 0.90 Jun 22 2029 -0.28 2.27

Jul 28 2020 UK £1.5bn 1.625 Oct 22 2054 0.612 1.74

Jul 28 2020 Italy (€i) €1bn 0.40 May 15 2030 0.46 1.48

Jul 28 2020 Italy €3.25bn 0.00 May 30 2022 -0.031 1.66

Jul 28 2020 Germany €3.281bn 0.00 Nov 15 2027 -0.62 2.44

Jul 28 2020 UK £2.75bn 1.25 Jul 22 2027 -0.046 2.08

Jul 29 2020 UK £3.5bn 0.125 Jan 31 2023 -0.088 2.18

Jul 29 2020 Germany €2.9236bn 0.00 May 15 2035 -0.33 2.05

Jul 29 2020 UK £2.75bn 1.625 Oct 22 2028 0.003 1.80

Jul 30 2020 Italy €2.75bn 1.85 Jul 1 2025 0.46 1.62

Jul 30 2020 Italy €3.25bn 1.65 Dec 1 2030 1.04 1.38

Jul 30 2020 Italy (CCTeu) €1.25bn 0.392 Apr 15 2025 0.72 2.55

Source: IFR

5 IFR Bonds 2344 p21-47.indd 23 31/07/2020 18:46:26

“Most of the transactions come right at fair value, don’t show any NIP – nothing, and then you struggle to sell it fully to the market,” said the lead.

ANOTHER TIGHT LANDThe German state of RHINELAND-PALATINATE also followed in the footsteps of most of its peers, with its latest euro offering priced on the curve and only met with modest interest.

A common theme of recent Laender issuance has been tight pricing and deals barely covered, if at all, and the latest trade was no different.

LBBW lead managed the August 2024 deal, a no-grow €250m with €75m retained,

6bp, unchanged from initial guidance.The decision to retain €75m by the issuer

forward, having already covered existing needs, according to a banker.

“The issuer is one of the only ones which can keep those things, because they actually have a Euroclear account. They don’t have the need for €250m, so they keep €75m and the €175m came to us,” said the banker.

“It was more like pre-sold. We had bank interest and then thought, why not, let’s try and sell as much to the market at the all-in spread.

“We sold €150m, which is good. The remainder stays with our traders and they now have something to play with.”

The transaction landed bang on fair value, according to the lead.

KFW TAP IN DEMANDAnother German name that has been active in July is KfW, also returning to the euro market for the third time in the month – although somewhat more successfully.

A no-grow €1bn tap of its 0.05% September 2034 paper encountered a solid

€2.5bn, excluding lead manager interest.“In a week of thin issuance, this is the

king,” said a lead. “We started pretty narrow

in terms of premium, I’d say it was 1bp, and ended up with a reasonably sized book and a tap that should get well looked after and perform.”

Barclays, Deutsche Bank and Goldman Sachs set the spread for the deal at mid-swaps minus 3bp, unchanged from initial guidance.

“These taps have turned into something of a bidding war, they’re all loss-making. This one was particularly expensive to bid for, from what we understand,” said a banker away from the trade.

“Also, if you have a €2bn book and you can’t move the price, it tells you it’s probably not a particularly strong book,”

KfW has been busy to start the second half of its funding year, with successful deals in the US dollar and sterling as well as the euro transactions.

GERMAN FLOW CONTINUES BUT DEMAND ON THE WANE

A couple more Laender deals came with minimal new issue concessions and meagre demand, meaning that none of the transactions from German states last week tightened from initial guidance.

BERLIN brought a €500m August 2040 note issue at mid-swaps plus 11bp via BayenLB, Commerzbank, Deutsche Bank, DZ Bank and UniCredit.

showed €475m, excluding joint lead manager interest.

extent we would have hoped for,” said a banker. “It’s a bit of a worn-out market at the moment.”

This is the longest maturity of the year for a benchmark deal from the issuer.

Berlin’s last deal encountered an impressive response just the previous week, as a €500m tap of its June 2035s tightened by 2bp to land at mid-swaps plus 7bp on order books in excess of €1.7bn.

Despite the success of the prior trade, the number of times the issuer has come to the market this year may be starting to dampen demand, according to the banker.

“Berlin have been all over this market quite frequently in 2020 already. It’s not the most rare name in the market, so maybe some people would have thought ‘ah well, I’ve had enough of it’. There’s nothing wrong with it but it’s certainly not the most shiny of trades.”

Meanwhile, the Free State of SAXONY also raised €500m, although via a shorter maturity with a no-grow August 2025.

Bookrunners Commerzbank, DekaBank, DZ Bank, LBBW and UniCreditat mid-swaps minus 6bp, unchanged from guidance.

“I have to confess here that fair value was probably more in the context of less 4bp,” said the banker.

ever syndicated euro-denominated benchmark. It’s a super, super-rare name and it was very rich at the end. People told us that this was over the top, and I think it was.”

CAB TAPThe EIB has carried out a €300m tap of its €1bn November 2035 climate awareness bond via bookrunners DekaBank, LBBW, Nomura and SEB. The deal came at mid-swaps minus 2bp, unchanged from guidance.

“[Thursday] was not a good day in general,” said a lead. “The EIB usually should have more interest when pricing something on the bid side of the market, but you have a

makes the tenor not that interesting anymore.”

The tap was priced with a yield of –0.112%.

Fair value for the deal was seen at minus 3bp by the same lead.

After 10 deals in May and June, this

ventured into the markets in July.


ALL US DOLLAR FIXED-RATE GLOBALS BOOKRUNNERS: 1/1/2020 TO DATE


Excluding equity-related debt, ABS/MBS.

Source: Refinitiv SDC code: O5

1 JP Morgan 273 92,984.29 11.0

2 Bank of America 269 92,700.78 10.9

3 Citigroup 244 90,255.90 10.6

4 Goldman Sachs 157 65,035.87 7.7

5 Morgan Stanley 147 56,020.55 6.6

6 Wells Fargo 169 48,523.94 5.7

7 Barclays 129 43,640.04 5.1

8 Deutsche Bank 93 35,944.67 4.2

9 RBC 94 29,681.44 3.5

10 TD Securities 81 28,757.71 3.4

Total 484 848,639.31

ALL INTERNATIONAL US$ BONDSBOOKRUNNERS: 1/1/2020 TO DATE


Including Euro, foreign and global issues. Excluding equity-related debt,

US Global ABS/MBS.

Source: Refinitiv SDC code: O1

1 JP Morgan 749 196,505.94 10.2

2 Bank of America 670 175,716.12 9.1

3 Citigroup 649 172,605.58 9.0

4 Goldman Sachs 474 135,501.72 7.0

5 Barclays 429 131,880.32 6.9

6 Morgan Stanley 381 112,637.84 5.9

7 Wells Fargo 357 87,653.65 4.6

8 Deutsche Bank 343 76,811.82 4.0

9 HSBC 324 72,740.55 3.8

10 RBC 224 55,733.48 2.9

Total 1,872 1,922,948.36

ALL SOVEREIGN BONDS IN EUROSBOOKRUNNERS: 1/1/2020 TO DATE

Managing No of Total Share bank or group issues €(m) (%)

Excluding ABS/MBS.


1 BNP Paribas 32 30,796.94 11.1

2 JP Morgan 43 27,897.27 10.0

3 Citigroup 28 19,609.56 7.0

4 HSBC 19 16,666.46 6.0

5 Barclays 28 15,823.63 5.7


7 Bank of America 32 14,800.72 5.3

8 SG 17 14,266.46 5.1

9 UniCredit 10 13,361.29 4.8

10 Goldman Sachs 19 13,351.50 4.8

Total 126 278,490.54

5 IFR Bonds 2344 p21-47.indd 24 31/07/2020 18:46:26

The last climate awareness bond from the EIB was a €1bn November 2035 issue in April, priced at mid-swaps minus 1bp.

The same lead admitted that under normal market conditions he would have expected a better outcome.

“Looking at what is about to come, not from the EIB but from the EU, maybe that was working against the deal,” he said.

BNG’S FUNDING HEAD CALM IN FACE OF COVID BUT EU A CONCERN

Public sector issuers have been at the heart of the Covid-19 response and some have seen borrowing needs rocket as a result, but for BNG BANK it is business as usual so far in 2020, albeit with some concern for the future given the EU’s upcoming plans.

As things stand, BNG’s programme is expected to remain in the €16bn–€17bn range, unchanged from pre-Covid guidance.

“As far as we can see right now, the impact of the whole Covid-19 pandemic will not affect the funding needs of BNG,” said Bart van Dooren, head of funding and investor relations at the Dutch agency.

“BNG’s balance sheet can’t handle another €25bn–€50bn. Nor [can] the funding team.

“Municipalities – our most important group of clients – are suffering from less income – less tourist tax, less parking tax and so on.

“They are more reliant on the support they’re getting from the central government, which recently announced the funding needs for the Dutch state have increased from an estimated €38bn at the start of the year to €143bn. That means that most of the funding done by the Dutch state will go to the municipalities.”

Stable funding needs are not the only thing working in BNG’s favour. Just like other public sector issuers, the Dutch

ECB purchase programmes.

“What we saw on the outbreak is that spreads widened, regardless of whether it’s euros or dollars, but pretty soon thereafter, especially after the ECB announced their measures with the PSPP and PEPP programmes, it started to return towards pre-crisis levels,” said van Dooren.

The size, speed and scope of the ECB’s response blew away anything seen previously, with its Pandemic Emergency Purchase Programme initially sized at €750bn and since increased to €1.35trn.

The programme was announced on March 18, not long after lockdown measures were implemented across the Continent.

“And then you realise there’s still a lot of money to be invested and I think more or less all SSA issuers have seen heavily oversubscribed order books,” van Dooren said.

Its last euro trade, a €1bn 15-year, had books in excess of €2.1bn, for example.

BIG COMPETITORStill, there is reason to be cautious. For instance, while the EU’s stimulus package agreed last month was groundbreaking in itself and is expected to have a transformational impact on capital markets, the sheer size of the programme could risk crowding out smaller issuers like BNG.

“The EU recovery fund will become a big competitor for the SSAs,” said van Dooren.

“In my opinion, the EU should focus on issuing through auctions. Given the size of the programme, they should act as a sovereign. Every two weeks a bond issue of €5bn is not easy to manage and in my view there is hardly room for performance,” he said.

And even though BNG’s direct funding needs are unlikely to change this year, the pandemic may not yet be over.

“For me it’s a matter of time until we see a second or maybe third wave unless,

which would help to get everything under control,” said van Dooren.

“When the lockdown measures were taken by the central government, everyone was happy to comply. But with people getting more freedom now, I think it’s much

lockdown for a second time.“Now everyone is used to a bit more

liberty, going to restaurants, to cinemas etc, to then lock everything back down, I think it

the street to accept that. So I’m really concerned about the real economy.”

When asked what gave him the most optimism, van Dooren said it was the prospect for an effective vaccine.

Oxford were positive. I think everyone

vaccine and then of course you have to produce it in quantity. We’ve overcome so many diseases, so why not this one?”

ESM MAKES SECOND PLEA TO MEMBER COUNTRIES TO USE ITS CREDIT LINE

Senior executives at the eurozone’s bailout fund have made another plea to member countries to use its new pandemic crisis

In a blog entitled “Why the Covid-19 credit line still makes sense”, the European

Kalin Anev Janse and head of funding Siegfried Ruhl said that while yields had fallen, many euro area countries could fund more cheaply via the ESM than directly from capital markets.

It is the second time that the ESM has urged countries to use its credit line of up to €240bn that seeks to help euro area member states cover healthcare costs, using the argument that it would be much cheaper.

But while Italy and Spain have made tentative noises about a potential use, no country as yet has applied for the pandemic crisis support.


BONDS SSAR

ALL AGENCY BONDS IN EUROSBOOKRUNNERS: 1/1/2020 TO DATE


Excluding equity-related debt. Including publicly owned institutions.


1 HSBC 35 11,530.61 11.7

2 JP Morgan 29 9,824.46 9.9


4 Barclays 21 7,526.32 7.6

5 Deutsche Bank 18 6,712.63 6.8

6 BNP Paribas 25 6,058.55 6.1

7 NatWest Markets 14 5,685.13 5.8

8 Bank of America 12 5,071.60 5.1

9 SG 20 4,876.31 4.9

10 Commerzbank 19 4,550.17 4.6

Total 136 98,823.01

ALL SUPRANATIONAL BONDS IN EUROS BOOKRUNNERS: 1/1/2020 TO DATE


Excluding ABS/MBS.


1 JP Morgan 13 5,655.23 9.2

2 Deutsche Bank 12 5,643.42 9.2


4 Goldman Sachs 7 4,685.00 7.7

5 HSBC 7 4,420.76 7.2

6 BNP Paribas 11 4,317.13 7.1

7 SG 8 4,089.88 6.7

8 Bank of America 10 4,049.30 6.6

9 UniCredit 6 3,751.63 6.1

10 Barclays 7 3,462.43 5.7

Total 45 61,185.25

MUNICIPAL, CITY, STATE, PROVINCE ISSUES IN EUROS BOOKRUNNERS: 1/1/2020 TO DATE


Excluding ABS/MBS.


1 UniCredit 43 12,445.55 16.1

2 JP Morgan 20 5,395.91 7.0

3 DGZ-DekaBank 33 5,200.59 6.7

4 Nord/LB 31 4,835.69 6.3

5 Barclays 21 4,835.38 6.3

6 BayernLB 22 4,637.66 6.0

7 Deutsche Bank 22 4,198.22 5.4

8 HSBC 28 4,055.52 5.3

9 LBBW 20 3,262.53 4.2

10 Commerzbank 19 3,227.68 4.2

Total 132 77,136.28

5 IFR Bonds 2344 p21-47.indd 25 31/07/2020 18:46:26

European Union after member states agreed the previous week to set up the €750bn “Next Generation EU” (NGEU) funding programme that comes on top of the €100bn “Support to mitigate Unemployment Risks in an Emergency” (SURE) loan programme.

Anev Janse and Ruhl said the NGEU recovery package should be widely and deeply welcomed. However, they were quick to point out that “grants and loans from the Recovery and Resilience Fund will

“The ESM’s Pandemic Crisis Support complements that longer-term funding with shorter-term funding that targets the healthcare costs of Covid-19,” they wrote.

until the Recovery Fund is available.”They also added that while the cost savings

of Pandemic Crisis Support were less than they were two months ago, due to a contraction in spreads, the ESM was still attractive for a large number of European sovereigns.

“With bond yields falling across Europe, ESM yields have also fallen. Whereas in June we could illustrate that for 10-years a borrower would pay zero interest, it is now a negative rate,” they wrote.

The likes of Italy, Spain, Greece, Portugal and Cyprus all yield higher than ESM in seven-year, according to the blog.

Anev Janse and Ruhl were also keen to point out that the conditionality of the use of the credit line was limited to the use of proceeds.

“The money has to be used to fund direct and indirect costs of healthcare related to the pandemic,” they wrote.

“This is similar to what sovereigns and other issuers commit to when they issue green or social bonds – they give a promise to the lender about how they will use the money. There is no additional conditionality.”

They also said that there was no stigma in going to the ESM.

“It is a responsible decision to save taxpayers’ money,” they wrote.

STERLING

FIFTEENS FAVOURED FOR NEXT UK OUTING

The UK DMO has taken a step closer to building out its curve via syndication, with market participants suggesting a new Gilt around the 15-year point.

the curve, and with a bigger programme, that’s sort of natural,” said a senior DCM banker.

Conference calls were held on July 27 with GEMMs and investor representatives, primarily to inform the choice of Gilts to be sold via auction and syndication between September and November.

While there were mixed views on the year (2035 or 2036) and month, attendees generally expressed support for a new Gilt

of September.“It worked quite well in Continental

Europe,” said the banker. “I think the

Italians used 15 years and had an enormous result. Over the years it’s become standard in euro markets for governments and non-governments alike, so there’s no reason it can’t be so in the UK.”

Some support was expressed for a long-dated conventional outing in September, with a reopening of the 0.5% October 2061 the most frequently recommended move.

However, a number of market makers recommended holding only one syndication in September, with November preferred by most of them for a second transaction.

There were also some calls for three syndications in the period, including a linker, perhaps in November, subject to clarity on the outcome of the RPI consultation.

The DMO said earlier in July it would reduce the pace of supply and number of auctions from September, having ramped up issuance this year on the back of the pandemic.

Syndication has played an increasingly

The closest tenor to the 15-year point from the three recent trades was a record-breaking £12bn October 2030 issue in May – the largest sterling syndication of all time.

Order books swelled to in excess of £82bn

syndication at the tenor.

NON-CORE CURRENCIES

LGFA DUAL-TRANCHER NETS NZ$1bn

The NEW ZEALAND LOCAL GOVERNMENT FUNDING

AGENCY, rated AA+/AA+ (S&P/Fitch), raised NZ$1bn (US$665m) last Thursday from a dual-tranche domestic note sale.

A NZ$400m tap of the 2.75% April 1 2022s was priced at 104.783906 for a yield of 0.412%, within 20bp–23bp guidance at mid-swaps plus 21bp.

A NZ$600m sale of new 2% April 15 2037s was priced at 101.500481 for a yield of 1.937%, at the tight end of mid-swaps plus 97bp–104bp guidance.

BNZ was arranger and joint lead manager with ANZ, CBA and Westpac.

The agency, which provides cheap debt

previously raised NZ$1.1bn from a six-year bond offering on April 9, the largest domestic issue outside of the federal government.

Since February only the LGFA and the Treasury have accessed the public domestic bond market, with the latter raising a whopping NZ$15bn from new four-year, 10-year and 20-year benchmark lines.

Separately, Housing New Zealand, rated Aaa/AA+ (Moody’s/S&P), a crown agency providing housing for citizens in need, privately placed a NZ$300m 20-year

LGFA debuted in the market in March

notes, followed by a NZ$500m 1.5% 10-year retail note issue last August.

The New Zealand government owns 20% of LGFA, while 30 regional and territorial councils, including Auckland Council, Christchurch City and Wellington City, hold the remaining 80%.

LGFA has identical S&P and Fitch ratings to New Zealand sovereign bonds, but has no rating from Moody’s (which rates the sovereign Aaa) and no government guarantee.

On April 7, the Reserve Bank of New Zealand added NZ$3bn of LGFA debt to its Large Scale Asset Purchase programme, approximately 30% of the (then) total LGFA debt on issue, freeing up cash to, potentially, be reinvested in new bond issues.

SAFA TO TAP MAY 2032 BOND LINE

SOUTH AUSTRALIAN GOVERNMENT FINANCING

AUTHORITY, rated Aa1/AA+ (Moody’s/S&P), has mandated JP Morgan, NAB, RBC Capital Markets and Westpac as joint lead managers for a maximum A$1bn (US$720m) syndicated tap of its A$1.06bn 1.75% May 24 2032 bond line, expected this week.

SAFA is also considering a longer-dated bond issue and a further sale of one-year

CORPORATES

US DOLLARS

AT&T DRAWS STRONG DEMAND ON US$11bn JUMBO DEAL

AT&T

last Monday despite mixed results in its second-quarter earnings report from the prior week.


5 IFR Bonds 2344 p21-47.indd 26 31/07/2020 18:46:26

The deal drew US$31.5bn in demand at its peak and closed with a US$27.4bn order books while giving up some 6bp–11bp of new-issue concessions, according to IFR calculations.

Bookrunners Deutsche Bank, Goldman Sachs, JP Morgan and Morgan Stanley priced a US$2.25bn 7.5-year at 120bp over Treasuries, a US$2.5bn 11.5-year at 165bp, a US$2.5bn 22.5-year at 185bp, a US$2.25bn 31.5-year at 205bp and US$1.5bn 40.5-year at 225bp.

Spreads tightened by 20bp–30bp through price progression, which cut down on the 30bp–50bp of new-issue concession initially offered at price talk, according a CreditSights report.

bond in May that was used by investors to assess relative value.

The new bonds started 5bp–30bp tighter from where the May transaction was priced and AT&T staggered its maturity wall by offering the new bonds with an additional half year of duration.

Even after tightening through price progression, there was some concession left on the bone for investors.

For example, AT&T’s 2.75% 2031 was priced at 210bp over Treasuries in May but as of July 24 had tightened to a G-spread of 143.7bp, according to MarketAxess data. The new February 2032 landed 21.3bp wider at 165bp over.

Despite the added concession, the company still landed attractive low coupons of 3.5% on the 40.5-year tranche while retiring high-coupon debt through a US$9.3bn tender offer announced the same day.

The notes up for tender include AT&T’s 7.85% 2022s, Michigan Bell Telephone Company’s 7.85% 2022s and Historic Time Warner’s 7.57% 2024s.

“We expect AT&T is being proactive in taking advantage of the low yields to issue in size and undertake these liability management exercises,” CreditSights TMT analyst Mary Pollock noted in a report.

“This will help to decrease interest costs and, more importantly in our view, further decrease its maturity towers over the next

Second-quarter earnings show the telecoms company continues to be a strong

expected this year, according to a CreditSights report. Additionally, net leverage went unchanged quarter to quarter at 2.6 times debt to Ebitda.

However, the pandemic hurt AT&T’s wireless segment as it collected fewer

the entertainment group with sports on hold in the second quarter and delays to big

“We were on balance reassured by AT&T’s 2Q20 results last week and view the announcement of today’s liability management exercises as an incremental positive for the

“AT&T has made progress this year in shrinking its near-term debt towers, which may help reduce the technical [issuance-related] overhang for the company’s secondary spreads.”

SOUTHWEST AIRLINES TAPS TWO BONDS TO REPAY DEBT

SOUTHWEST AIRLINES raised US$1bn on Tuesday in the company’s fourth transaction of the year as it looks to pay down an upcoming bond maturity.

The company is the last remaining airline in the investment-grade sphere with Baa1/BBB/BBB+ ratings and has borrowed heavily this year as it seeks liquidity to survive the economic impact of the Covid-19 pandemic.

Including its latest deal, Southwest has raised US$5.3bn in the corporate bond market this year, which is more than the US$3.896bn it raised in total in the high-grade market from 1993 through 2019, according to IFR data.

Southwest tapped its 5.25% 2025s that originally priced in April for a US$300m add-on and tapped its June 5.125% 2027s for an additional US$700m.

Spreads tightened by 20bp–25bp through price progression, but still offered some 7bp–12bp of new-issue concessions compared with where those same bonds were trading, according to IFR calculations.

Order books totalled US$2.6bn across the two tranches.

“The Southwest deal seems well-timed to me, coming on the heels of earnings that from a bondholder perspective seemed to go a long way towards highlighting the companies tremendous liquidity available despite the very obvious industry challenges,” said Dan Bruzzo, a senior strategist at Amherst Pierpont Securities.

Price talk started in the area of Treasuries

the seven-year. The fact that initial price thoughts were quoted

in terms of a spread over Treasuries is a sign of just how much the market has rallied since June, when these same bonds were quoted by their yield, similar to how junk bonds are marketed.

The 2025s initially raised US$1.25bn and was priced at 5.30% but have since rallied to a yield of 3.463%, or a spread of 318bp over Treasuries as of Monday, according to MarketAxess data.

The 2027s initially raised US$1.3bn and was priced at 5.125% but have since tightened to a yield of 3.986%, or 353bp over.

“Current pricing is probably fair, even though they will tighten it,” one investor said mid-way through price progression. “I’d

The notes ended up pricing with more meat on the bone than that investor

year and 4.231% on the seven-year. Previous bond deals have already termed

out a portion of the company’s US$3.3bn, 364-day term loan, which should give it ample liquidity to manage through the worst of the economic downturn and start paying off debt in 2021, according to a report by Fitch in June.


BONDS CORPORATES

ALL INV-GRADE US CORPORATE BONDSBOOKRUNNERS: 1/1/2020 TO DATE


Excluding equity-related debt, ABS/MBS, all foreign issues, global issues

and non corporates.

Source: Refinitiv SDC code: F6a

1 JP Morgan 81 19,798.95 12.4

2 Bank of America 70 16,972.90 10.6

3 Morgan Stanley 48 14,076.08 8.8

4 Barclays 41 10,204.88 6.4

5 Wells Fargo 52 9,828.40 6.1

6 Citigroup 45 9,574.30 6.0

7 Goldman Sachs 36 9,273.96 5.8

8 Mizuho 31 6,599.86 4.1

9 Sumitomo Mitsui 20 5,276.13 3.3

10 MUFG 28 5,202.53 3.2

Total 159 160,081.53

ALL US INVESTMENT GRADE CORPORATE DEBT BOOKRUNNERS: 1/1/2020 TO DATE


Source: Refinitiv SDC code: F9

1 JP Morgan 495 163,085.21 12.6

2 Bank of America 470 153,225.57 11.8

3 Citigroup 389 123,760.75 9.6

4 Morgan Stanley 293 98,854.80 7.6

5 Goldman Sachs 271 94,835.68 7.3

6 Wells Fargo 280 93,300.95 7.2

7 Barclays 197 59,380.17 4.6

8 Deutsche Bank 131 41,502.33 3.2

9 Mizuho 170 39,501.79 3.0

10 RBC 160 38,206.32 2.9

Total 922 1,295,735.91

ALL CORPORATE BONDS IN EUROSBOOKRUNNERS: 1/1/2020 TO DATE


Excluding equity-related debt. FIGs, ABS/MBS.


1 BNP Paribas 174 31,671.65 9.3

2 Deutsche Bank 104 23,577.11 6.9

3 HSBC 127 23,104.32 6.8

4 Barclays 84 19,379.81 5.7

5 Citigroup 100 19,054.14 5.6

6 Bank of America 91 18,824.54 5.5

7 SG 108 18,217.97 5.3

8 JP Morgan 102 16,947.33 5.0


10 UniCredit 88 13,922.36 4.1

Total 364 340,964.66

5 IFR Bonds 2344 p21-47.indd 27 31/07/2020 18:46:26

“The company has a two to three-year runway on liquidity and is less exposed to business travel, which will be slowest to recover,” the investor said.

Proceeds from the taps are set for repayment of unsecured debt maturing in the next 12 months.

Southwest Airlines has one US$500m note maturing in November this year and no outstanding bonds maturing in 2021,

Goldman Sachs and Wells Fargo were lead bookrunners on the trade.

FEDEX DIVERSIFIES FUNDING WITH SECURED AIRCRAFT IN EETC BOND

Delivery company FEDEX on Thursday priced

looks to use its planes to secure additional

The structure, which is typically used by airlines, secures the US$970m offering against 14 Boeing aircraft appraised at US$1.3bn that were delivered new to FedEx between September 2015 and June 2020, according to an investor presentation.

By the time of the expected bond maturity in February 2034, the aircraft will have a weighted average life of 8.8 years.

FedEx’s senior unsecured curve is rated Baa2/BBB but the secured structure is pushing the EETC offering to Aa3/AA–.

Those higher ratings allowed bookrunners Citigroup, Deutsche Bank and Morgan Stanley to price the deal at 1.875%, or a spread of 133bp, in from initial price talk of 2%–2.125%.

Order books grew to US$2.35bn, which helped leads upsize the deal from an initial US$690m.

Comparing yields on EETC transactions is tricky because the pools of assets differ greatly between companies, investors explained. That being said, the notes offered much less yield than the last EETC offering in the market from Alaska Air in June.

Alaska Air sold a US$965m 7.1-year EETC transaction rated A/A– that was priced with a yield of 4.80% and was last seen trading around 4.20%, according to MarketAxess data.

FedEx was last in the market in April with a US$3bn three-part senior unsecured offering that one lead banker pointed to for comparison.

In that deal, FedEx priced a US$750m 4.25% 2030 issue at 379bp over Treasuries that was last trading at a G-spread of 148bp – 15bp wide of where the EETC bond landed, according to MarketAxess data.

Not only was the pricing preferential but, by issuing in this EETC format, the company is diversifying its funding sources and liquidity, the banker said.

The aircraft are part of FedEx’s modernisation strategy, which looks to

All 14 aircraft are wide-body variants, which is typically a negative for bondholders in the passenger aircraft space because of the faster rate of depreciation since the start of the pandemic, according to a previous S&P report noting the trend.

However, wide-body freight models have held their value better, according to FedEx.

The pool of planes consists of 10 Boeing 767-300F aircraft and four Boeing 777F long-haul freighters.

767-300F set for delivery between 2020 and 2023, with the option to purchase 50 more through to 2028. Likewise, the company has

delivered between 2020 and 2024, with the option to buy 25 more through to 2027.

FED EXTENDS PANDEMIC LENDING FACILITIES TO DECEMBER

The Federal Reserve announced on Tuesday a three-month extension of its lending facilities designed to help markets through the pandemic.

Programmes such as the Primary and Secondary Market Corporate Credit Facilities will now expire on December 31, extending the previous deadline of September 30.

The extension also applies to other programmes, such as the Primary Dealer Credit Facility, the Money Market Mutual Fund Liquidity Facility, the Term Asset-Backed Securities Loan Facility, the Paycheck Protection Program Liquidity Facility, and the Main Street Lending Program.

“The board’s lending facilities have provided a critical backstop, stabilising and substantially improving market functioning

households, businesses, and state and local governments,” the Fed said in a statement.

Many market participants expected an extension of the Fed’s programmes as Covid-19 cases, hospitalisations and deaths all rise across the US even as the markets recover due to the strong technical support from the Fed.

“The market seems to be taking that news in its stride in a down day for stocks on weak earnings results,” said Dan Bruzzo, a senior strategist at Amherst Pierpont Securities.

“If anything, the lack of reaction might show the extent to which the market could be anticipating additional stimulus.”

When the pandemic hit, the average high-grade corporate spread blew out to around 400bp over Treasuries in late March, but has steadily tightened in as low as 139bp over on the back of the Fed’s programmes, according to ICE BofA data.

The Fed added another US$155m of securities to its corporate bond facilities in the week ended July 29, the smallest weekly increase since it started buying this type of paper in May.

The latest purchases brought the Fed’s combined holdings of corporate bond exchange-traded funds and individual corporate bond issues to US$12.255bn.

Despite the low levels of actual buying by the Fed, the market has rallied on the perception that those purchases could easily ramp up if there are signs of further weakness in the market.

Secondary spreads were not rallying on the news in early trading on Tuesday morning, according to MarketAxess data.

Credit analysts said that even if the programmes had expired on the original date the Fed showed, it has these tools and an ability to use them as necessary.

The extension was a precursor to Federal Reserve chairman Jerome Powell’s Wednesday press conference.

The Fed did not create big waves for the corporate bond market after its two-day meeting ended on Wednesday.


ALL INVESTMENT-GRADE BONDS IN EUROSBOOKRUNNERS: 1/1/2020 TO DATE


Excluding ABS/MBS, equity-related debt.


1 BNP Paribas 259 79,795.68 8.2

2 JP Morgan 223 68,888.40 7.0

3 HSBC 236 63,822.64 6.5


5 Barclays 187 58,429.09 6.0

6 Deutsche Bank 193 56,325.05 5.8

7 UniCredit 183 52,034.47 5.3

8 SG 180 51,732.73 5.3

9 Citigroup 140 46,189.41 4.7

10 Bank of America 157 43,958.91 4.5

Total 1,019 977,939.55

ALL CORPORATE BONDS IN STERLINGBOOKRUNNERS: 1/1/2020 TO DATE

Managing No of Total Share bank or group issues £(m) (%)

Source: Refinitiv SDC code: N8a

1 Barclays 25 2,901.87 14.7

2 HSBC 23 2,463.51 12.5


4 BNP Paribas 15 1,547.45 7.9

5 JP Morgan 9 1,480.43 7.5

6 Citigroup 9 1,086.38 5.5


8 Lloyds Bank 10 1,005.71 5.1

9 RBC 9 901.03 4.6

10 Deutsche Bank 6 749.62 3.8

Total 47 19,675.39

5 IFR Bonds 2344 p21-47.indd 28 31/07/2020 18:46:27

“The Fed delivered a dovish message but did not signal imminent policy changes. Forward guidance is still under review,” Bank of America said in a report.

“Powell underscored that there is still work ahead to fully repair the economy and linked the outlook to the virus path.”

EUROS

LIQUIDITY PILES PAVE WAY FOR CASH TENDER GROWTH

European bond market borrowers are

cash tender offers as low cash deposit rates and high levels of liquidity push a growing number of issuers towards debt buybacks.

In recent weeks, investment-grade corporates AROUNDTOWN and NORTEGAS (and Russian aluminium producer RUSAL, which is not investment-grade) have all brought pure cash tender offers with no new bond issues alongside. The trend is not, however, limited to the corporate market. REGIONE LAZIO, one of the administrative regions in Italy, last week announced it was looking to reduce its debt levels via a cash tender offer for its US$100m 6.53% February 2028s.

companies to deploy liquidity, since they can generate attractive yields on bonds repurchased versus other alternative uses,” said Graham Bahan, head of liability management EMEA, at Citigroup.

“Especially when cash deposit rates are relatively low. Companies that have strong liquidity will use this strategy.”

Spanish gas distributor NorteGas was the most recent corporate to announce the results of a tender offer, buying back €175m of its 2.06% September 2027s to decrease its gross debt levels.

Several recent cash tenders have also been linked to asset disposals.

“Those that do pure cash tender offers with no concurrent new issue are often trying to get rid of expensive cash due to some recent disposals,” said a syndicate

For instance, European logistics REIT GOODMAN EUROPEAN PARTNERSHIP recently bought back €71.038m of its €325m 0.875% October 2022s following the sale of 26 logistics properties in Poland, Slovakia, the Czech Republic and Hungary.

“The conversations we are having more of with issuers now is about how they can strategically manage their cash and debt because more and more we are seeing companies sitting on big piles of liquidity,” said a second syndicate banker.

LOTS OF LIQUIDITY Evidence suggests that much of the cash corporate borrowers raised through the

the year is yet to be spent.European companies engaged in €450bn

of net borrowing during March-May 2020 via bonds and loans.

However, deposits at eurozone banks by non-bank corporates for the March-May period also increased by €455bn, roughly the same as the increase in borrowing, wrote Citigroup analysts at the start of July.

While it may be too early for companies to begin using this liquidity to buy back outstanding debt, it does suggest that more cash tenders are possible down the line, once treasurers become more certain that they will not need the funding for other purposes.

“It’s a bit early for companies that raised insurance liquidity, eg, in Q2 in response to Covid-19, to tender now just one or two months later and spend it,” said Bahan.

“But as clarity emerges on the extent of any second wave and vaccine progress, then we expect this will be an increasing trend.”

MORE BUYBACKS, LESS SUPPLYA potential increase in tender offers without accompanying new issues would come at a time of falling supply in the European corporate primary for the summer break. And some bankers are predicting a lower second-half total than normal because of the

months.“I personally reckon we’ll struggle to

reach €200bn of supply during the second half of the year. I would think we’ll see a quieter H2 in 2020 versus H2 2019,” said the

With fewer bonds available for investors to buy in the primary market, could this potentially put a strain on demand for pure cash tender offers?

“Achieving strong take-ups in tenders with concurrent new issues is generally easier, given the replacement asset for bondholders to roll over into,” said Bahan.

“But with that said, providing the tender is structured and arranged appropriately there is no reason why participations in pure cash tenders, without new issues, can’t also perform well.”

The recent NorteGas tender offer highlights this fact. The company successfully hit its size target with its top priority bond, without needing to buy any of the “back-up”, priority two bonds. The transaction was executed in a week that saw only €660m of new euro corporate supply.

MORE TENDER AND EXTENDSWhile the attractions of pure cash tender offers are strong, the use of tender offers alongside a new issue to help extend a

market.AUCHAN was one of the most recent names

to execute such a liability management exercise. The French grocer sold a €750m 3.25% July 2027 at the start of the month alongside announcing a tender offer for four of its shortest-dated euro bonds, extending

rent holidays during lockdown.“We still think tenders with concurrent

new issues to extend maturity will remain as active as ever, but expect this to be supplemented by more pure cash tenders going forward as issuers try to capture NPV savings on liquidity,” said Bahan.

OMV SETS SIGHTS ON NEW M&A HYBRID

Austrian oil and gas company OMV plans to hit the hybrid market to fund its purchase of an additional stake in chemicals company Borealis.


BONDS CORPORATES

ALL INTERNATIONAL STERLING BONDS

EXCLUDING SECURITISATIONSBOOKRUNNERS: 1/1/2020 TO DATE


Including preferreds. Excluding equity-related debt.

Source: Refinitiv SDC code: K05a


2 HSBC 64 10,905.78 11.9

3 Barclays 69 10,143.12 11.0

4 RBC 32 7,701.41 8.4

5 Lloyds Bank 25 5,950.29 6.5

6 Citigroup 25 5,780.19 6.3

7 Bank of America 26 5,351.09 5.8

8 Deutsche Bank 21 4,703.68 5.1

9 BNP Paribas 21 4,699.73 5.1

10 TD Securities 16 3,462.48 3.8

Total 158 91,834.69

ALL SWISS FRANC BONDS INCLUDING

SECURITISATIONSBOOKRUNNERS: 1/1/2020 TO DATE

Managing No of Total Share bank or group issues SFr(m) (%)


Source: Refinitiv

1 Credit Suisse 88 11,328.2 31.2

2 UBS 69 7,863.0 21.6

3 ZKB 42 5,822.2 16.0

4 Verband 15 5,084.5 14.0

5 Raiffeisen Schweiz 28 2,737.8 7.5

6 Deutsche Bank 9 1,357.6 3.7

7 Basler KB 7 501.0 1.4

8 Commerzbank 4 373.2 1.0

9 BNP Paribas 5 365.4 1.0

10 Luzerner KB 2 281.3 0.8

Total 145 36,342.4

5 IFR Bonds 2344 p21-47.indd 29 31/07/2020 18:46:27

Within the next 12 months it is looking to raise up to €1.5bn via a perpetual, subordinated bond, according to an announcement made by the issuer last week.

OMV (A3/A–) had agreed to buy a 39% stake in plastics maker Borealis for US$4.7bn from its key investor Mubadala before the coronavirus crisis.

This acquisition had already prompted the company to raise €3.25bn in the senior bond market this year, issuing on two occasions

OMV already has three hybrids outstanding, issued in 2015 and 2018. The most recent, a €500m 2.875% perpetual non-call June 2024, was bid at a yield of 2.427% on Tradeweb last Thursday. One of the hybrids issued in 2015 will likely have to be

perpetual non-call December 2021.The new purchase, which lifts OMV’s

ownership to 75%, aims to strengthen its position in the industry and in the Middle East.

Mubadala will retain a 25% stake and the closing of the transaction is expected by the end of 2020, subject to regulatory approvals.

OMV reported a lower-than-expected 86%

it announced its results last Wednesday. In response to the Covid-19 pandemic and

global economic downturn, the company has put in place strict cost management and announced it was reducing spending plans. It cut its spending target to €1.7bn this year from €1.8bn.

MORE TO COMEHybrid issuance has been tipped to remain strong in the second half of the year by ratings agency Scope. There are more than €16bn of upcoming hybrid calls falling in the next 12 months, with borrowers likely

Should economic conditions improve, some companies may also resume or bring forward M&A activity. While much of this

some will also look to subordinated issuance, said a banker.

The European market remains highly conducive to hybrid sales as the ECB’s bond-buying continues to push investors towards higher-yielding assets, which is good news

early the €4bn of paper that has calls this year and some €12bn callable in 2021, according to Scope.

Corporate supply of subordinated debt rose to over €21.4bn for H1 compared to €14.9bn for the same period in 2019 despite the complete absence of new issues during March, April and most of May, according to the ratings agency.

STERLING

PLATFORM HG LANDS DEBUT ISSUE FOR DEVELOPMENT FUNDING

UK housing association PLATFORM HOUSING

GROUP brought a debut bond last Wednesday,

programme.Formed in 2018 through the merger of

Fortis Living and Waterloo Housing Groups, Platform owns over 45,000 properties across the Midlands.

The company is engaged in a major development plan, which includes building 5,000 new homes by the end of March 2022.

the mandate for a 30 to 35-year sterling bond on Monday, and on Wednesday leads Barclays, Lloyds and NatWest Markets offered an August 2055 at 125bp area over mid-Gilts.

“You see a lot of housing developers looking at the bond market because, as an alternative to bank loans, the funding is pretty cost-effective,” said a DCM banker.

Interest in the issue was strong, with the book in excess of £1.1bn at the tight end of the 110bp–115bp guidance. The deal was sized at £300m with a 110bp spread. An additional £50m was retained.

Platform’s debt is forecast to peak at just

having stood at £1.16bn in 2019, wrote S&P analysts when they awarded the corporate its A+ (stable) rating in March.

Lower interest rates have added to the allure of the sterling bond market, with housing associations able to access long-term funding at attractive prices, said bankers.

Since the start of May, housing associations have accessed the market on at least eight separate occasions, including Platform’s new issue, either to issue new debt or sell retained bonds.

Retained sales are a regular feature of UK housing association issuance, as often the borrowers do not need the full benchmark size initially, but have to offer a total size of at least £250m to access the market. The retained portion is then later sold when needed.

UK HA DOING OKThe sector is expected to come out of the Covid-19 pandemic in reasonable shape.

In a recent stress test of UK housing association borrowers, Moody’s observed that reductions in operating and capital spending should offset lower market sales income and potential increases in

Even in a severe downside scenario, the ratings agency found that stressed housing

However, in April, Moody’s did note that if a no-deal Brexit were to lead to a prolonged deterioration of the operating environment, higher unemployment would increase arrears and a weaker property market would lower market sales revenue.

YEN

TOKYO UNI PLANS SOCIAL BONDS

UNIVERSITY OF TOKYO

university bonds in the autumn with a social label and ultra-long maturity, taking advantage of a rule change allowing it to

“We would like to promote our bond as an investment in our unique activities that are socially meaningful,” vice-president Ichiro Sakata told DealWatch, IFR’s sister publication.

On Friday, the university picked Daiwa as documentation manager and Mizuho and SMBC Nikko as joint lead managers for the planned bond offering.

The institution is looking to raise about ¥100bn (US$952m) over the next 10 years from ultra-long-end university bonds, with the inaugural sale expected to be about ¥20bn–¥30bn.

UoT expects to receive an external

get a rating from JCR, in addition to an existing one from R&I (AA+).

The university can issue bonds with maturities of up to 40 years following a recent change in legislation.

“We need long-term funds, but it would be only up to 25 years if we borrow from banks,” Sakata said. He referred to the ultra-long-end bond issues by overseas universities in recent years. “Oxford did a 100-year bond in 2017 and Cambridge issued a 60-year bond in 2018.”

The new legislation also allows universities to use bond proceeds for advanced research facilities and equipment, though UoT is seeking a further relaxation so that it can use the funds to hire young researchers and for long-term research.

“The use of proceeds is still limited to facilities, equipment and land, so we will strongly request that these restrictions be abolished,” Sakata said.

The university plans to obtain global ratings once the restrictions are removed. “We would like to sell bonds in the international market,” he said.

UoT is not necessarily short of cash as it receives income from the university hospital and funds from private companies, but issuing bonds would give it

investments.


5 IFR Bonds 2344 p21-47.indd 30 31/07/2020 18:46:27

“Private sector funding comes from companies such as Taiwan Semiconductor Manufacturing Company, IBM and SoftBank, but not all come in at a convenient timing,” Sakata said. “Bond issuance will make it possible for us to invest at our discretion.”

UoT is looking to issue a bond in September. “We want to sell in early September, not late September, so we want to hire lead managers speedily,” he said. “Price moves in the bond market have been stabilising, so we don’t want to pass up this chance.”

Other Japanese universities may follow suit. “I hear other universities are studying bond issuance quite thoroughly,” Sakata said. “If you want to go in a direction other than what the Ministry of Education is expecting, you have to raise a large amount of money by yourself, so those who want to expand their activities need to issue a university bond.”

NON-CORE CURRENCIES

AUSGRID TAPS DEFENSIVE DEMAND

AUSGRID found strong demand from cash-rich investors starved of defensive corporate bond issues with a A$1bn (US$717m) dual-tranche senior secured MTN sale that equalled this year’s largest transaction in the Australian dollar corporate market.

The Australian energy infrastructure company, rated Baa1/BBB (Moody’s/S&P),

satisfy interest in shorter-dated notes.“Adding a second tranche has been a

feature of corporate supply this year and last, which serves to take advantage of strong demand, broaden the investor base

issuer,” said Tabitha Chang, director of corporate debt origination at NAB, joint lead manager alongside MUFG and UBS.

having a reassuring shareholder roster. The New South Wales government holds a 49.6% interest, while a consortium of IFM Investors and AustralianSuper controls the remaining 50.4%.

“Ausgrid is a well-supported, defensive,

operating under a regulatory cap regime with no volume risk,” Chang said.

to price the A$750m 1.814% 6.5-year note issue last Wednesday inside both initial 150bp area and revised 145bp area guidance at asset swaps plus 135bp.

The A$250m of 3.5-year FRN issue received A$420m of orders and was priced

110bp wide of three-month BBSW, tighter than initial 120bp area and revised 115bp–120bp area guidance.

Asset managers and insurance companies bought 77.4% of the 6.5-year notes with banks taking 11.5%, private banks/middle market 6.5% and others 4.6%. Australian investors were allotted 60.5%, APAC (including New Zealand) 37.3% and Europe 2.0%, to the nearest tenth of a percentage point.

The investor breakdown was similar for the 3.5-year tranche, with asset managers and insurance companies receiving 79.6%, banks 14.8%, private banks/middle market 4.4% and others 1.2%. Australians took 77.8%, APAC 19.6% and Europe 2.6%.

strong dual-tranche deal since Woolworths reopened the market on May 15 with a

Brisbane Airport raised A$850m on June 23, Sintel Optus raised A$850m on June 24 while Port of Brisbane netted A$500m on July 22.

Australian syndication desks believe the success of these transactions could tempt offshore corporates to consider Kangaroo issues in the not too distant future.

Ausgrid debuted in the local market in October 2017 with a domestic corporate record A$1.2bn seven-year trade.

It subsequently raised US$1bn from a

offering and a €650m long seven-year Eurobond issue, both in April 2018.

FIG

US DOLLARS

THREE BANKS ADD TO FINANCIAL SUPPLY

With the big six US banks largely sitting on the sidelines following earnings announcements, more Yankee and regional bank paper is making its way into the primary market.

Switzerland’s UBS GROUP launched a US$2.6bn two-part bond last Monday for its second senior unsecured US dollar offering of the year.

It priced a US$1.3bn four-year non-call three at 83bp over Treasuries and another US$1.3bn 6.5-year non-call 5.5 at 108bp over.

At those levels, UBS gave up just 2bp–4bp of new-issue concession when adjusting for the maturity extension over the 2.859% 2023s that were last trading around 69bp over Treasuries, according to IFR calculations.

In April, UBS Group priced a US$2.5bn two-year at 160bp over Treasuries that has since tightened to a G-spread of 40.9bp, according to MarketAxess data.

UBS was adding to already elevated foreign bank supply, which was up nearly 22% year-over-year midway through July to US$109.55bn, according to IFR data.

Regional bank FIFTH THIRD BANK was also in the market last Monday, marketing a

preferred that was upsized by US$50m through price progression.

Fifth Third’s unsecured issuer ratings are Baa1/BBB+/A– but this latest note moved down in the capital structure and received Baa3/BB+/BB+ ratings.

Initial price talk started in the high 4% range and landed at 4.5% at launch.

At that level, it offered some 350bp of

senior curve, where the 2.375% 2025s were trading at a yield of around 0.99% the prior week.

“We would be more wary of valuation if pricing tightens towards the ~4.5% range,” CreditSights noted in a report.

“That said, we expect the offering to

preferred supply, and the fundamental strength of banks so far through the Covid crisis should attract strong demand.”

Finally, TRUIST FINANCIAL returned to the

transaction of the year. The US$750m seven-year senior note was

priced at 75bp over Treasuries for a coupon of 1.125%, which is the lowest recorded for

according to CreditSights.Even so, the bank gave up some 9bp of

new-issue concession after accounting for the maturity extension over its 1.2% 2025s, which were trading at around a G-spread of 51bp, according to IFR calculation.

Truist has been a frequent issuer in the US high-grade bond market this year, having


BONDS FIG

ALL FINANCIAL INSTITUTION BONDS IN EUROSBOOKRUNNERS: 1/1/2020 TO DATE


Including banks, insurance companies and finance companies. Excluding

equity-related and covered bonds. Excluding publicly owned institutions.



2 SG 33 9,729.45 7.3

3 JP Morgan 50 8,234.93 6.2

4 Deutsche Bank 40 7,858.09 5.9

5 Barclays 36 7,749.69 5.8

6 Natixis 28 7,731.04 5.8

7 BNP Paribas 28 7,017.54 5.3

8 UniCredit 30 5,563.86 4.2

9 HSBC 35 5,554.38 4.2

10 UBS 23 3,986.95 3.0

Total 218 133,417.71

5 IFR Bonds 2344 p21-47.indd 31 31/07/2020 18:46:27

raised US$8.5bn across nine tranches this year.

Deutsche Bank, RBC and SunTrust Robinson Humphrey were bookrunners on the Truist trade.

STERLING

RBC HIGH COUPON SONIA FIRST EVADES NEGATIVE RATE RISK

ROYAL BANK OF CANADA

bank to issue a Sonia-linked FRN structured with a high coupon to mitigate the risk of negative rates, printing an upsized £500m one-year senior unsecured on Tuesday.

The senior deal comes as the sterling market faces up to the possibility of negative rates.

Sonia plummeted in March when the Bank of England twice cut its interest rate, falling from just under 71bp on March 10 to 7bp by March 20, according to the central bank. It has since remained around that level and was at 6bp last Friday, according to

A banker pointed out that Sonia remains positive in contrast to the deeply negative Euribor, but Bank of England governor Andrew Bailey said in May that negative rates were under review.

“Clearly we’re closer to [negative sterling rates] being a possibility than we were four months ago, so it wouldn’t surprise me if people start taking steps to mitigate that,” the banker said.

structured with a high coupon to protect against the risk of coupons turning negative in the future, using a solution already well established in the euro market.

“The genesis was the backdrop of increasingly possible negative sterling rates,” said a banker close to the deal.

“As the Sonia market has developed, and as it has seen more maturity, investors have become open to ideas like this that potentially unlock additional issuance.”

The coupon was set at Sonia plus 100bp and the deal priced at 100.80.

Sole bookrunner RBC marketed the deal with a spread of Sonia plus 20bp–22bp area for a minimum size of £250m. The spread

with books closing above £900m.The banker close to the deal said the

investor response was positive, with accounts already familiar with the structure due to its frequency in the euro market.

Fourteen investors participated in the deal, with UK accounts taking 97% of the bonds. Asset managers and insurers were allocated 85%, banks 9%, pension funds 3% and central banks 3%.

Longer-dated Sonia-linked bonds remain in positive territory, for now.

Through January and into early February a mix of UK and international banks sold Sonia-linked covered bonds. The bulk of

curve and was priced in the high 40s to mid 50s over Sonia.

The shortest and tightest this year was a £1bn three-year covered from Lloyds priced at 37bp over Sonia.

But given the potential for rates to fall further, bankers expect other issuers to consider the high coupon structure, now it has been successfully tested at the very short end.

“If you think about the tightest SSA names, for example, their short-dated deals are trading in the teens or 20bp over,” said the second banker.

“You don’t need much more of an adjustment to be in that negative coupon territory.”

COVERED BONDS

EUROS

H2 DYNAMICS CALL COVERED SUPPLY, DEMAND INTO QUESTION

The euro covered bond market faces an uncertain second half of the year, with expected low supply supportive for spreads, but demand potentially set to be curbed by a looming SSA supply wave and a possible ECB deposit rate adjustment.

The last euro benchmark covered bond was issued on July 8, and the asset class seems set for a long summer break in what has already been a below average year in supply terms.

Year-to-date euro-denominated covered bond issuance stands at €70.3bn, almost €35bn short of the supply seen over the same time period in 2019, according to IFR data.

months of a year, in 2009 and 2013, according to analysts.

Covered bond issuance dropped off sharply after the coronavirus crisis hit Europe, with banks’ funding needs curbed by slower loan growth and offers of new


ALL GLOBAL AND EUROMARKET YEN BONDSBOOKRUNNERS: 1/1/2020 TO DATE

Managing No of Total Share bank or group issues ¥(m) (%)

Excluding equity-related debt. Including preferreds.

Source: Refinitiv SDC code: K10

1 Mizuho 7 109,441.67 23.8

2 Goldman Sachs 2 60,275.00 13.1


4 JP Morgan 1 48,875.00 10.6

5 Bank of America 1 48,875.00 10.6

6 Mitsubishi UFJ MS 3 33,466.67 7.3

7 Nomura 3 27,833.33 6.1


9 BNP Paribas 1 12,500.00 2.7

10 MUFG 1 12,500.00 2.7

Total 12 459,335.00

ALL INTERNATIONAL YEN BONDSBOOKRUNNERS: 1/1/2020 TO DATE


Including all Euro, foreign and global issues. Excluding equity-related

debt.


1 Sumitomo Mitsui 16 159,216.67 20.4

2 Mizuho 10 129,791.67 16.6

3 Nomura 13 83,183.33 10.7

4 Daiwa Securities 12 80,883.33 10.4

5 Mitsubishi UFJ MS 11 78,816.67 10.1

6 Goldman Sachs 2 60,275.00 7.7

7 JP Morgan 1 48,875.00 6.3

8 Bank of America 1 48,875.00 6.3


10 BNP Paribas 1 12,500.00 1.6

Total 26 779,535.00

ALL SAMURAI BONDSBOOKRUNNERS: 1/1/2020 TO DATE


Excluding equity-related debt.


1 Sumitomo Mitsui 11 106,250.00 33.2

2 Daiwa Securities 11 72,550.00 22.7

3 Nomura 10 55,350.00 17.3

4 Morgan Stanley 8 45,350.00 14.2

5 Mizuho 3 20,350.00 6.4


Total 14 320,200.00

ALL SUBORDINATED FINANCIAL INSTITUTION

BONDS (ALL CURRENCIES)BOOKRUNNERS: 1/1/2020 TO DATE


Source: Refinitiv SDC code: J3a


2 Citigroup 20 3,697.65 10.4

3 JP Morgan 21 3,010.05 8.4

4 Bank of America 19 2,916.60 8.2

5 HSBC 17 2,447.88 6.9

6 UBS 10 2,350.19 6.6

7 Barclays 15 2,089.96 5.9


9 Goldman Sachs 10 1,430.75 4.0

10 Deutsche Bank 9 1,132.22 3.2

Total 58 35,723.00

5 IFR Bonds 2344 p21-47.indd 32 31/07/2020 18:46:27

cheap loans from central banks – the TLTROs in the EU and the TFSME in the UK.

“Issuers still seem more focused on strategically relevant transactions, preferring bolstering capital trades, and in that context one would not expect a sharp increase in covered issuance [after the summer],” said a syndicate banker.

The focus could shift later in the year if renewed volatility causes issuers to return to the safe option of covered bonds.

There are many potential triggers, including new waves of coronavirus infections, banks’ Q2 and Q3 numbers, the US election and Brexit.

But for now, issuance is expected to remain muted and analysts have cut their 2020 covered supply forecasts.

Some are now expecting euro supply in the region of €100bn–€110bn, down from projections of €125bn or higher and well short of the €142bn sold last year.

“The reduction [in supply] should be broad-based across all segments as core and semi-core banks made broad use of TLTRO as well,” said Michael Spies, strategist at Citigroup. “At the same time, many non-EA countries also introduced term funding schemes, decreasing the need for market funding to some degree.”

“Also, it becomes increasingly clear that the economic recovery will not be V-shaped at all. This may imply longer lasting restraint in housing market activity and accordingly lower lending activity for house purchases.”

SPREAD DIRECTION UNCLEARThe lack of supply is set to be exacerbated by sizeable redemptions ahead, while the ECB takes an increasing share of the market, bidding around 40% of new eurozone covereds.

“Against this backdrop, supply technicals should remain constructive to covered bond spreads for the rest of this year,” said

research at ING.“Year-to-date gross issuance still exceeds

redemptions by €8bn, but the euro benchmark covered bond market shrank for the second month in a row in July, by €8bn if [this] week adds no supply. Covered bond redemptions aggregate to €67bn in the second half of 2020, exceeding the €52bn

The iBoxx EUR Covered index closed last week at 13.7bp, having tightened

April 16.Spreads are still elevated above their pre-

crisis levels, leaving room for further tightening, according to some market participants. The index was at a year-to-date low of 6.45bp on February 24.

But some see potential for covereds to be dragged wider by an expected increase in SSA supply after the summer.

step up its bond issuance from September

of funding in just over four years.“This sort-of inaugural issuance probably

means some spread pick-up versus other zero-risk-weighted products,” said the syndicate banker.

“That could also impact demand or at least relative value for covereds, making it not the best place to be.”

TIERING IMPLICATIONSIf the ECB – as some market participants expect – adjusts the terms of its deposit rate tiering for banks, that too could curb demand for covereds, said Michael Weigerding, covered bond analyst at Commerzbank.

Commerzbank’s strategists expect the ECB to double its tiering multiplier from six to 12 in September, meaning EU banks could place much larger deposits with the ECB at a rate of 0%.

This could decrease demand for negative yielding covered bonds from bank treasuries, a key investor base for the product.

“This would potentially affect a large portion of covered bonds,” said Weigerding. “After all, since the crisis-driven yield volatility has abated, the share of negative yielding euro benchmarks has again climbed to over 90%.”

“On the primary market, core covered bonds would need to offer a maturity that is well longer than 10 years to feature a positive yield.”

Weigerding said this risk could incentivise issuers to return to the market sooner rather than later.

HIGH-YIELD

UNITED STATES

FALLEN ANGEL CENOVUS BOOSTS JUNK BOND OFFERING TO US$1bn

Canadian oil and gas developer CENOVUS

ENERGY raised US$1bn last Tuesday to pay

offering since becoming a fallen angel.Cenovus turned to debt markets as the

price of Western Canadian Select oil climbed above US$30 a barrel, up from below US$4 in April. The price move has prompted the company to ramp up production.

The Alberta oil sands operator priced a

5.375%, upsizing the deal from an initial US$750m and landing pricing in the middle of the price talk range of 5.25%–5.5%.

The notes, which carry Ba2/BB+ ratings from Moody’s and Fitch, were last trading around par on Thursday.

The company issued the debt to pay down borrowings on its revolving credit facility that it drew at the peak of the oil crisis earlier in the year.

“Preserving bank line availability for Covid, economic, industry and OPEC+ scenarios is smart on CVE’s part,” said analysts at CreditSights.

It had drawn C$1.5bn (US$1.118bn) against C$5.6bn of committed credit facility at the end of June.

FALLEN ANGELCenovus became one of the largest of an initial wave of fallen angels in the high-yield market in May when the index was rebalanced.

Its existing bonds dropped sharply at the height of oil market concerns in April, with its 3.80% 2023s falling from a cash price of 106 on March 2 to just 48 on April 1, according to MarketAxess.

Those notes, the closest maturity to the

to trade at par as the company

commitment to bringing leverage down.Cenovus was carrying around C$8.2bn

of long-term debt at the end of the second quarter. About US$4.9bn of that is in US dollar-denominated unsecured notes.

The company has a long-term goal of

C$5bn and is “laser-focused” on generating

help achieve that before considering re-instituting shareholder dividends, according to CFO Jonathan McKenzie on

July 23.


BONDS COVERED BONDS

ALL COVERED BONDS (ALL CURRENCIES)BOOKRUNNERS: 1/1/2020 TO DATE


Source: Refinitiv SDC code: J15a

1 Credit Suisse 23 8,700.90 7.1

2 Barclays 39 8,355.15 6.9

3 BNP Paribas 30 6,739.86 5.5

4 HSBC 31 6,537.61 5.4


6 Commerzbank 24 5,180.70 4.3

7 Natixis 24 5,107.68 4.2

8 ING 23 4,761.14 3.9


10 Santander 16 3,889.30 3.2

Total 143 121,733.51

5 IFR Bonds 2344 p21-47.indd 33 31/07/2020 18:46:27


McKenzie said there were “green shoots” in June after the company ramped up production by 60,000 barrels a day, with Western Canadian Select oil prices almost ten times higher than they were in April.

The company was also able to defer sales from April into June, which helped drive

more than C$290m.

of C$609m over the full second quarter after the company sold the inventory it had written down in March when oil prices slumped.

Tuesday’s bond offering was led by Bank of America, Bank of Montreal, Scotiabank, Royal Bank of Canada and TD Securities.

AMC NEARS FINISH LINE ON DEBT SWAP AMID MOVIE DELAYS

Cinema operator AMC ENTERTAINMENT is close

with its lenders that will inject US$300m of fresh cash into the business and reduce its debt load by at least US$460m.

The company announced last Monday the

US$1.67bn and £500m outstanding dollar and sterling bonds, which will be swapped for around US$1.46bn of new 10%/12% cash/PIK toggle second lien subordinated secured notes due 2026.

Investors holding around US$1.39bn of the dollar notes and £496m of the sterling notes have agreed to the swap.

Existing investors have also subscribed to a US$200m principal amount of new 10.5%

will issue US$100m of identical notes to

bring in a total of US$300m new cash.The exchange offer settles on July 31.

Moody’s and S&P, which rate the company Caa3/CC, viewed the exchange as distressed.

AMC said in July that the plan would reduce its debt by at least US$460m.

In addition, the interest on the new subordinated notes for the next 12–18 months will be paid in kind and deferred until 2026, saving around US$100m and US$200m of cash in the near-term, the company said.

The debt exchange offer had been extended several times after being announced in early June as the company negotiated with its lenders.

Plans to reopen cinemas were also dealt a blow by movie studios pushing back the launch of summer blockbusters.

AMC was planning to reopen its cinemas

to July 30 and then revising that to mid to late August, in line with the new release dates for several eagerly awaited movies.

FASHION RETAILER G-III OFFERS HIGH COUPON FOR DOUBLE B BONDS

G-III APPAREL GROUP, which owns and licenses over 30 fashion brands, including Donna Karen and DKNY, offered a generous coupon on a Double B rated high-yield bond issue on Thursday, with leads also tightening the covenant package in the deal.

Leads priced a Ba3/BB+ rated US$400m

offering at 7.875% on Thursday, upsizing the deal from an initial US$350m and bringing pricing in from talk of the 8% area.

Proceeds from the bond sale will pay down a US$300m senior secured term loan due December 2022 that was taken out in

acquisition of clothing brand Donna Karen International.

The rest will be used to put cash on the balance sheet.

The yield on offer on the new bonds is much higher than the 3.88% average yield on Double B rated bonds, according to ICE BofA data.

“A big difference between the price versus ratings,” said one high-yield investor who looked at the deal.

The Covid-19 recession is expected to have a severe impact on the apparel industry, and both Moody’s and S&P have negative outlooks on the company’s credit ratings.

S&P forecasts leverage at G-III will climb to the mid-single digits this year, up from around 1.9x at the end of last year.

As well as being exposed to changes in consumer spending and fashion tastes, the company sources a high concentration of products from China, and so recent tariff increases on products sourced in China and sold in the US will modestly increase costs, Moody’s said.

“Operating performance and credit

2021,” said Moody’s apparel analyst, Mike Zuccaro, in a ratings report.

“However, with a strong stable of brands

prior to the coronavirus pandemic, we expect performance and metrics to improve to levels more commensurate with the

said.The investor highlighted the company’s

reliance on longstanding relationships with large, powerful retailers as a potential concentration risk.

And Moody’s pointed out that licensed brands account for more than half of the company’s sales. The company’s largest and longest contract is with Calvin Klein and expires in December 2023, the ratings agency said.

“If the status quo [remains in place], then the credit works well,” said the investor.

As well as pushing for a generous coupon, relative to the ratings, investors were able to push back on the covenant package in the deal.

Leads tightened a test restricting how

can incur and reduced the asset sale proceeds application period to 365 days from 450 days.

Analysts at Covenant Review had earlier

covenants allowed the company to incur an unlimited amount of debt under US or foreign regulatory facilities.

The terms were drafted very broadly, the analysts said, to include any debt incurred under laws or regulations relating to Covid-19.

This “should be of real concern to

Bookrunners on the G-III transaction were Barclays (left), JP Morgan, Bank of America and Capital One.

EUROPE/MIDDLE EAST/ AFRICA

DOVALUE CONSOLIDATES NPL POSITION

Loan and real estate servicing platform DOVALUE placed a senior secured offering on Friday that will repay a bridge facility drawn in connection with the acquisition of an 80% stake in Eurobank’s FPS loan and servicing unit.

Barclays, Credit Suisse (B&D), Mediobanca and UniCredit were global coordinators and bookrunners for the €265m 2025 non-call two senior secured offering, which was launched at 5.25%, in line with price talk.

“In that sector right now, that doesn’t sound terrible,” said a banker away from the deal. “It’s not a bad outcome.”

ALL US$ DENOMINATED HIGH-YIELD BONDS BOOKRUNNERS – 1/1/2020 TO DATE


Including US domestics, Euro, foreign, globals. Excluding equity-related debt.

Source: Refinitiv SDC code: B5

1 JP Morgan 202 26,314.69 10.6

2 Bank of America 197 23,634.86 9.5

3 Citigroup 153 18,129.01 7.3

4 Goldman Sachs 157 18,088.28 7.3

5 Barclays 148 17,060.77 6.9

6 Morgan Stanley 106 14,927.04 6.0

7 Credit Suisse 125 12,198.06 4.9

8 Deutsche Bank 131 12,120.91 4.9

9 Wells Fargo 110 11,986.97 4.8

10 RBC 74 7,325.46 2.9

Total 386 248,561.26

5 IFR Bonds 2344 p21-47.indd 34 31/07/2020 18:46:28


BONDS HIGH-YIELD

DoValue, rated BB by S&P and Fitch, claims the leading position in NPL markets in Italy, Spain, Portugal, Cyprus and Greece.

“The FPS acquisition is strategic for doValue, improving geographical and customer concentration and long-term contracts in its portfolio,” wrote S&P.

The purchase of the stake in Eurobank’s servicing unit came alongside Eurobank

Greece’s Hercules scheme with an NPL securitisation and sale to doValue.

The Hercules bad debt reduction scheme provides state guarantees for the senior tranches of securitisations.

“The acquisition improves doValue’s market position in the Greek NPL market, adding about €23bn of assets under management, with Greece now representing about 16% of the company’s gross book value at transaction close as a result,” S&P wrote.

Eurobank sold a chunk of mezzanine and junior notes of the securitisation and retained 100% of senior notes, which will be included in Hercules.

The implied valuation of the whole deal, dubbed Project Cairo, equated to 33% of the gross value of the portfolio.

Cairo cut Eurobank’s NPE ratio to 15.6%, from 36.7% at the end of March 2019 – far below that of its rivals.

S&P forecasts that doVaue’s S&P Global Ratings-adjusted debt will be 3.2x in 2020, improving to below 3x in 2021 via Ebitda growth, cash generation and debt amortisation, in the absence of further debt-funded acquisitions

DoValue followed Intrum into the market, with the Swedish debt collector

two senior unsecured bond issue on July 24 at 4.875%.

Performance from debt collectors has been mixed during the coronavirus crisis, said a source familiar with the Intrum deal,

collect the cash from their debt portfolios and others affected by higher-than-expected default rates.

FAURECIA UPSIZES BOND AS IT TAKES OUT CLUB LOAN

French auto parts maker FAURECIA spotted a gap in the market on Tuesday and slipped in with an upsized €1bn two-part senior issue that will pay off an €800m club loan.

The company began marketing a €250m tap of its June 2025s at 96.25–96.75 and a new €500m eight-year non-call three at low 4s, via physical bookrunners and global coordinators BNP Paribas (B&D) and Credit Agricole, and joint global coordinators Natixis and Societe Generale.

CreditSights analysts had written in the hours before the bond announcement that a deal could be imminent and offered an attractive entry point into the credit.

“We like the spread pick-up on Faurecia bonds relative to other cuspy crossover auto supplier and original equipment manufacturer credits, and therefore are shifting to an outperform recommendation from a market perform recommendation,” they said.

After the bond was put on screens, CreditSights saw the tap as initially offering a pick-up of almost 60bp versus levels seen on Monday, while the 2028s were providing a pick-up of 85bp over the €700m June 2027s non-call three senior bonds.

The 2027s were placed in Faurecia’s last trip into the market in November to fund a tender offer for the company’s most expensive debt.

The tap was launched at 97.50 and the new bond at 3.75%, while the tranches were increased to €300m and €700m.

“The market is very much open across all parts of the risk spectrum,” said a leveraged

“Stronger Double B credits are appealing to investors in Europe even this late into the summer, and Faurecia and others can price in the 3s. Could it become a two handle? Absolutely.”

The deal is a leverage neutral transaction given it will pay off a €800m short-term unsecured club loan.

The company put the club loan in place in April to strengthen its liquidity during the coronavirus crisis, with the intention of replacing it in the second half of the year with longer-term debt.

with a six-month extension option.Faurecia drew down €600m from its

quarter in response to the crisis.The company (Ba2/BB/BB+) had €2.46bn of

Moody’s and S&P downgraded Faurecia by one notch in June, while Fitch revised its outlook to negative from stable. The moves were triggered by the consequences of Covid-19 delaying Faurecia SE’s deleveraging prospects.

S&P wrote that the company entered 2020

infotainment and audio systems company Clarion, which closed in March 2019.

PAYMENTSENSE SWITCHES FOCUS TO HOME MARKET

UK card processing company PAYMENTSENSE made an unconventional currency change during marketing, as anchor investors encouraged a move to switch from euros to sterling for its debut bond issue.

The company began on Tuesday by

non-call two senior secured note issue, marketing the bonds at IPTs of 8% area via lead-left and sole bookrunner JP Morgan.

But on Wednesday, the cards were

its focus to a £290m offering with IPTs of 8.75% area.

A banker said the change to sterling was highly unusual in the European market and

approach of initially exploring euros.“Several of the anchor investors who

knew the client would have a preference for sterling made a proactive approach,” the banker said.

“They knew that sterling is a thinner pool of liquidity and is a currency they can do, so it gave them an opportunity to get a larger piece. Some were cranky about it, who are unable to invest in sterling and got left by the side, but clearly this company would much rather go for sterling.”

In terms of pricing, the banker said it was challenging to quantify the pricing differential for the issuer between the two currencies.

ALL NON-DOLLAR DENOMINATED HIGH-YIELD BONDS1/1/2020 TO DATE




1 Deutsche Bank 33 3,538.06 7.6

2 JP Morgan 35 3,257.72 7.0

3 Barclays 29 3,209.59 6.9

4 Citigroup 32 3,067.33 6.6

5 BNP Paribas 31 2,883.68 6.2

6 Goldman Sachs 30 2,680.49 5.7

7 Credit Suisse 22 2,588.85 5.5

8 HSBC 30 2,211.25 4.7

9 Bank of America 22 2,171.98 4.6


Total 83 46,817.39

ALL EUROPEAN HIGH-YIELD ISSUERS1/1/2020 TO DATE



Source: Refinitiv SDC code: B06c

1 Citigroup 41 5,490.06 8.6

2 Deutsche Bank 36 4,842.22 7.6

3 Barclays 33 4,541.11 7.1

4 JP Morgan 40 4,292.04 6.7

5 BNP Paribas 36 3,827.03 6.0

6 Credit Suisse 26 3,732.45 5.8

7 Goldman Sachs 32 3,488.59 5.5

8 Bank of America 23 2,753.93 4.3


10 HSBC 29 2,486.28 3.9

Total 93 63,995.57

5 IFR Bonds 2344 p21-47.indd 35 31/07/2020 18:46:28


“Wherever it lands in sterling, chopping off 75bp gives a reasonable idea of what might have been achieved in euros,” the banker said. “Taking all the FX volatility out of the mix was a sensible way to go, though, even if the running yield is a little bit higher.”

The yield on the offering was eventually set at 8%.

Lucror Analytics saw the Paymentsense

levels of around 8.75%–9%.

constructive view on Paymentsense’s industry, with good growth rates and a relatively high barrier to entry, and said the company’s business model has strong underlying unit economics, which should continue to support revenue growth and

“The overall size of the business is still fairly small and post-issuance credit metrics would be stretched, in our view,” wrote Lucror Analytics.

“Moreover, the company is exposed to a customer base (SMEs, with circa 38% of customers in the catering/restaurant/pub space) that would have been disproportionately affected by the Covid-19 lockdown and overall slowdown in consumption activity.”

The expected instrument ratings are B3 with Moody’s and B+ with Fitch.

Paymentsense’s funds from operations gross leverage will peak at 7.1x. The agency’s base case is that that will decrease

The proceeds will go towards repaying a unitranche facility, certain indebtedness under a PIK loan and

purchase arrangement.

In April 2018, EQT and CVC provided

almost doubling their investment since 2016.

AFME BRINGS HY UP TO ESG SPEED

The ASSOCIATION FOR FINANCIAL MARKETS IN

EUROPE

guidelines for the high-yield market,

considerations for issuers and investors around high-yield bonds.

The guidelines make recommendations for considerations and practices to encourage transparency and consistency in disclosure, as well as recommendations for due diligence related to such transactions.

“Investment-grade companies have of

longer when it comes to sustainability topics, so they’ve been at the forefront of thinking about incorporating ESG into their investor and capital markets strategy,” said Arthur Krebbers, head of

Markets.“They also have more manpower to

execute such strategies. Part of the AFME guidelines, from my perspective, is about trying to bring what is best practice in the investment-grade market into the high-yield segment.”

Krebbers said that another key aspect to getting a more robust functioning of ESG parameters in the high-yield market relates to data availability and accessibility.

“Because they are smaller and privately listed, the breadth of sustainability data points available on high-yield companies is

said.The AFME initiative comes after the

European Leveraged Finance Association stepped up its drive to improve weak

categorising it as an ESG governance issue and launching a public consultation on best practice for covenant transparency and disclosure.

The trade association said increased transparency on covenants is essential to

borrowers, which are typically owned by

The AFME guidelines are intended to provide a framework for assessing ESG factors including disclosure and diligence considerations, the impact of ESG factors on an issuer’s strategy and business model, and the exposure of an issuer to ESG risks, at both the issuer and stakeholder level.

“While both market practitioners and policymakers are placing increased

the market is still lacking in overall consistency, with many decisions being made on a deal-by-deal basis,” said Gary Simmons, managing director of AFME’s high-yield division.

“These guidelines aim to provide structure and consistency to the market, balancing issuers’ ability to provide information with investors’ needs for clear, transparent information to support their investment decisions.”

Dominic Ashcroft, chair of the AFME high-yield division and co-head of EMEA leveraged capital markets at Goldman Sachs,

step in helping companies navigate ESG and ensuring appropriate disclosure is produced to help investors in their investment decisions.

STRUCTURED FINANCE

EMEA MBS

WARWICK 2 REFINANCED, DUKINFIELD AND ALBA CALLS COMING

BARCLAYS pre-placed the entire capital stack of a £932m UK non-conforming RMBS, AVON

FINANCE NO.1 on Wednesday. The deal is backed by mortgages originated by the Co-

WARWICK

FINANCE RESIDENTIAL MORTGAGES 2.

optional redemption date. The previous deal in the series, WARWICK FINANCE RESIDENTIAL

MORTGAGES 1, also hit its FORD at the same time, but there has been so sign of that deal being called.

due to step up to three-month Libor plus 150bp, while those for Warwick 2 would have stepped up to a more expensive three-month Libor plus 225bp.

The new issue’s £735.7m Triple A notes printed at Sonia plus 140bp, with a cash price slightly above par, at 100.24. The deal

AA+ to B3/BBB–.Sponsor Barclays is retaining a minimum

5% vertical slice as well as 100% of the Class

distribution were disclosed.Two more UK non-conforming RMBS,

DUKINFIELD PLC and ALBA 2006-1, are set to be called later in August.

which was priced in 2015, says the option holder call option will be exercised and the notes redeemed on August 17, the deal’s FORD.

Pre-crisis RMBS Alba 2006-1, meanwhile, will be redeemed on 24 August, according to a deal notice which says the issuer has the necessary funds required. A Deutsche Bank research report notes the deal has no

ALL ASIAN HIGH-YIELD ISSUERS1/1/2020 TO DATE



Source: Refinitiv SDC code: B06d

1 Credit Suisse 40 3,444.77 9.3

2 UBS 33 2,612.50 7.1

3 Citic 36 2,001.99 5.4

4 Haitong Secs 50 1,946.59 5.3

5 Bank of America 13 1,912.72 5.2

6 Goldman Sachs 19 1,873.31 5.1

7 Guotai Junan Secs 40 1,680.36 4.5

8 Deutsche Bank 31 1,518.18 4.1


10 Bank of China 22 1,374.26 3.7

Total 92 36,985.87

5 IFR Bonds 2344 p21-47.indd 36 31/07/2020 18:46:28


STRUCTURED FINANCE

step-up coupons and, with a deal factor of 13.5%, will be cleaned up.

A deal notice says a third RMBS, AGGREGATOR OF LOANS BACKED BY ASSETS (ALBA)

2015-1, could also be called in the coming months. That deal missed its April 2020 call date but the notice says the issuer

holder that may exercise the portfolio purchase option “in the next few months”.

Alba 2015-1] are perhaps more straightforward considering new deals in the primary are in a 150bp WA coupon context – albeit collateral performance and Covid impact would both matter,” according to Deutsche Bank research.

“Such calls will nevertheless provide an opportunity for investors to reduce exposure to GBP Libor considering the uncertainty of the benchmark beyond 2021, despite the UK FCA recently being granted additional powers to help manage the Libor transition for legacy products.”

COVENTRY’S EMI STATS MATCH PRE-PANDEMIC SMI

Distribution statistics for COVENTRY BUILDING

SOCIETY‘s RMBS show a striking similarity to another master issuer RMBS sold by Nationwide at the start of the year, before the Covid-19 pandemic began.

Coventry’s ECONOMIC MASTER ISSUER 2020-1 sold a publicly syndicated Triple A tranche, the £350m Class A1, which was 3.6 times

There were 26 investors allocated in the tranche. UK accounts made up 85%, other Europe 9% and the US 6%.

By type, asset managers took 64%, bank treasury investors 32% and central banks

Those numbers are almost identical to Nationwide’s Silverstone 2020-1 from January.

That deal’s Triple As went to 29 accounts, with a geographical split of UK 83%, other Europe 11% and USA 6%, and the breakdown by type showed asset managers at 63%, banks at 34% and CB/OI at 3%.

And Silverstone’s pricing had in fact been the same Sonia plus 47bp, although the tranche was much larger at £1bn.

securitisations to be fully syndicated deals with no pre-placed or protected orders. Distribution statistics for the second, legacy mortgage trade RESIDENTIAL MORTGAGE

SECURITIES 32 from KENSINGTON MORTGAGES,

classes, excluding trading allocations.Investors in Europe took 58.4%, the UK

almost 35% and the US 6.7%. Asset managers dominated at 89.2% of the book, with bank treasury at 7.2% and trading desks 3.7%.

Negative Sonia on the horizon for UK securitisations

SECURITISATIONS Negative rates a “potential tool” under review

Negative Sonia could see UK issuers

copying the high coupons and above par

issue prices routinely used in eurozone

securitisations to counter deeply negative

Euribor rates, bankers say, although there

appears little immediate prospect of those

structures being needed.

Negative rates in the UK were previously

seen as unlikely but in May Bank of England

governor Andrew Bailey said they were not

being ruled out.

Bailey later wrote to banks saying

negative rates were “one of the potential

tools under active review” and that many

banks would need 12 months to update

systems, according to the Sunday Times

newspaper in July.

Sonia was steady at around 70bp through all

of 2019, but in March this year fell to 7bp and is

now just under 6p, Bank of England data show.

Last week in the senior unsecured market,

RBC sold what it said was the first sterling

Sonia note issue structured to manage

potential negative rates. The £500m one-year

bullet offering has a Sonia plus 100bp coupon

and a 100.80 cash price for a Sonia plus 20bp

reoffer spread.

Recent new issue spreads for UK

securitisations are still far wider: a rare prime

deal from the high street sector came when

Coventry Building Society two weeks ago

printed at Sonia plus 47bp (at par), while other

deals from non-bank lenders have come with

margins well over 100bp.

But the prospect of negative Sonia in the

future may prompt some issuers to glance

across the Channel. In 2016, Obvion became

the first European asset-backed issuer to sell

above par because of negative rates.

A more recent example but before the

pandemic sent spreads wider was Volkswagen’s

German auto ABS VCL 30 in February. Its

senior notes had a coupon pre-set at one-

month Euribor plus 65bp but were sold above

par at 100.616 to give a 16bp spread.

NO NEGATIVE COUPONS

One attraction of this strategy is to neutralise

the risk of bonds paying negative coupons – or

rather, lenders paying coupons to borrowers.

So if the reference rate drops far enough to

cancel out the margin, bonds pay zero, but no

less than that.

This implicit zero floor prevents an

issuer benefiting from further reductions in

FRN financing costs if the reference

rate continues dropping over the life of

a deal.

And that implied floor can also create a

headache for any swaps, where there is no

implied zero floor. That leaves a potential

mismatch between the swap and the coupon,

or requires the issuer to pay for an often costly

floor to be added.

The high coupon, high issue price structure

addresses both problems, but leaves bond

investors exposed to pre-payment risk in

particular.

“Pre-payments might make it more difficult,”

said one ABS banker, pointing out that variable

pre-payment rates for UK non-bank RMBS in

particular “are a bit different to VW with 20

years of pre-payment data”.

SOFT BULLET SOLUTION

A typical UK mortgage with a fixed-rate

period and then reversion can produce very

concentrated, lumpy pre-payments across a

portfolio, especially if most of the loans were

originated at a similar time.

“But is not insurmountable. Often the best

way to introduce something like this is with a

premium top tier issuer leading the way,” the

banker said.

“And a master trust with soft bullets, or

scheduled amortisation, is an easy way to

introduce the concept.”

“It’s the guys that price the tightest

who already have revolving features – master

trust or stand-alone,” said another banker.

“Pretty much all master trust issuance is

controlled am[ortisation] and I don’t see why

you couldn’t price such a bond at a premium

– you wouldn’t need structural changes to

facilitate that.

“It’s everyday common practice on the

Continent and wouldn’t be a leap at all to bring

it here,” he added.

With the exception of Coventry, master

issuers have kept out of the market since the

Covid-19 pandemic.

Coventry itself debuted a new streamlined

master issuer structure which market

participants say could also be taken up by other

issuers put off by the costs and complexity of

previous structures. The ease of issuing bullets

or controlled amortisation bonds could be an

added attraction if UK rates do turn negative in

the future.

Chris Moore

5 IFR Bonds 2344 p21-47.indd 37 31/07/2020 18:46:28


NEW ASSET–BACKED SUMMARY DETAILS: WEEK ENDING 31/7/2020

Issuer Amount (m) WAL Coupon (%) Bookrunner(s) Rating Asset type

AFFRM 2020–A US$329.96 1.85 2.100 Barclays/JP Morgan NR/NR/NR ABS



AMSR 2020 SFR3 TRUST US$84.977 5.11 1.355 Nomura/Amherst/Deutsche Bank/Goldman Sachs Aaa/NR/NR RMBS

AMSR 2020 SFR3 TRUST US$33.697 5.11 1.806 Nomura/Amherst/Deutsche Bank/Goldman Sachs Aa3/NR/NR RMBS

AMSR 2020 SFR3 TRUST US$10.989 5.11 2.056 Nomura/Amherst/Deutsche Bank/Goldman Sachs A3/NR/NR RMBS

AMSR 2020 SFR3 TRUST US$15.384 5.11 2.106 Nomura/Amherst/Deutsche Bank/Goldman Sachs Baa3/NR/NR RMBS

AMSR 2020 SFR3 TRUST US$23.442 5.11 2.556 Nomura/Amherst/Deutsche Bank/Goldman Sachs NR/NR/NR RMBS






AVON Finance No 1 £735.698 – SONIA+140bp Barclays Aaa/AAA/NR RMBS

AVON Finance No 1 £70.52 – SONIA+210bp Barclays Aa1/AA+/NR RMBS

AVON Finance No 1 £30.018 – SONIA+265bp Barclays A2/AA/NR RMBS

AVON Finance No 1 £18.583 – SONIA+350bp Barclays Baa2/A+/NR RMBS

AVON Finance No 1 £23.347 – SONIA+400bp Barclays Ba2/A–/NR RMBS

AVON Finance No 1 £25.253 – SONIA+450bp Barclays B3/BBB–/NR RMBS

AVON Finance No 1 £28.59 – – Barclays – RMBS

CSMC 2020–NET US$415.900 5.02 2.256 Credit Suisse Aaa/NR/NR CMBS

CSMC 2020–NET US$58.800 5.02 2.815 Credit Suisse Aa3/NR/NR CMBS

CSMC 2020–NET US$51.600 5.02 3.526 Credit Suisse A3/NR/NR CMBS

CSMC 2020–NET US$48.400 5.02 3.827 Credit Suisse Baa3/NR/NR CMBS

FCAT 2020–3 US$139.1465 1.23 EDSF+48bp Deutsche Bank/JP Morgan NR/AAA/NR ABS

FCAT 2020–3 US$18.0595 2.97 IS+120bp Deutsche Bank/JP Morgan NR/AA/NR ABS

FCAT 2020–3 US$25.118 3.63 IS+150bp Deutsche Bank/JP Morgan NR/A/NR ABS

FCAT 2020–3 US$11.115 4.31 IS+225bp Deutsche Bank/JP Morgan NR/BBB/NR ABS

FCAT 2020–3 US$9.614 4.61 IS+475bp Deutsche Bank/JP Morgan NR/BB–/NR ABS

FREMF SPC K–F82 US$451.517 9.48 1mUSL+37bp Morgan Stanley/Goldman Sachs NR/NR/NR CMBS

FREMF SPC K–F82 US$450 9.48 SOFR+42bp Morgan Stanley/Goldman Sachs NR/NR/NR CMBS

MFIT 2020–A US$194.094 3.52 2.190 Goldman Sachs/Citigroup/Wells Fargo NR/AA–/NR ABS

MFIT 2020–A US$18.820 4.30 3.210 Goldman Sachs/Citigroup/Wells Fargo NR/A–/NR ABS

MFIT 2020–A US$15.796 4.50 4.100 Goldman Sachs/Citigroup/Wells Fargo NR/BBB–/NR ABS

MFIT 2020–A US$21.290 4.75 5.750 Goldman Sachs/Citigroup/Wells Fargo NR/BB–/NR ABS

RRME 4 €232 4.40 3mE+145bp JP Morgan Aaa/AAA/NR CLO

RRME 4 €30 6.00 3mE+200bp JP Morgan Aa2/AA/NR CLO

RRME 4 €10 6.00 2.500 JP Morgan Aa2/AA/NR CLO

RRME 4 €45.6 6.60 3mE+290bp JP Morgan NR/A/NR CLO

RRME 4 €26 7.10 3mE+425bp JP Morgan NR/BBB–/NR CLO

RRME 4 €14 7.60 3mE+685bp JP Morgan NR/BB–/NR CLO

TESLA 2020–A US$71.400 0.15 0.220 Deutsche Bank/Barclays/Citigroup/Credit Suisse P–1/NR/NR ABS

TESLA 2020–A US$214.790 1.10 0.550 Deutsche Bank/Barclays/Citigroup/Credit Suisse Aaa/NR/NR ABS



TESLA 2020–A US$54.570 2.54 1.180 Deutsche Bank/Barclays/Citigroup/Credit Suisse Aa2/NR/NR ABS

TESLA 2020–A US$42.880 2.59 1.680 Deutsche Bank/Barclays/Citigroup/Credit Suisse A2/NR/NR ABS

TESLA 2020–A US$29.230 2.70 2.230 Deutsche Bank/Barclays/Citigroup/Credit Suisse Baa2/NR/NR ABS

TESLA 2020–A US$31.180 2.71 4.640 Deutsche Bank/Barclays/Citigroup/Credit Suisse Ba2/NR/NR ABS

VSTA 2020–2 US$151.727 2.54 1.475 Credit Suisse/Guggenheim NR/AAA/NR RMBS

VSTA 2020–2 US$16.779 2.54 1.986 Credit Suisse/Guggenheim NR/AA/AA RMBS

VSTA 2020–2 US$24.871 2.54 2.496 Credit Suisse/Guggenheim NR/A/NR RMBS

VSTA 2020–2 US$11.781 5.22 3.401 Credit Suisse/Guggenheim NR/BBB/NR RMBS

VSTA 2020–2 US$11.663 5.22 4.900 Credit Suisse/Guggenheim NR/BB/NR RMBS

VSTA 2020–2 US$9.996 5.22 5.160 Credit Suisse/Guggenheim NR/B/NR RMBS

5 IFR Bonds 2344 p21-47.indd 38 31/07/2020 18:46:28


STRUCTURED FINANCE

S&P REPORT SUGGESTS UK BORROWERS COMING OFF PAYMENT HOLIDAYS

S&P reports encouraging anecdotal evidence that for some UK originators where around 25%–30% of borrowers previously took out Covid-19 payment holidays, 70%–80% of those borrowers are now back to paying monthly instalments.

UK borrowers who took out an initial three-month payment holiday are entitled to roll it over for a further three months. Some originators had previously told IFR they were pleasantly surprised that fewer than expected borrowers had so far chosen to roll over.

“Take up of payment holidays has varied

due to different eligibility criteria and application processes, but is now likely close to its peak,” S&P predicts. “Even if receipts drop substantially, most transactions can cover several periods of bond payments.”

S&P says in its H2 outlook, titled “Weathering The Storm”, it has lowered or placed on CreditWatch negative only 4% of its European securitisation ratings since the start of March.

Those asset classes most exposed to disruption from lockdown policies, such as corporate securitisations backed by leisure businesses and hotel-backed CMBS have been the most affected. Policy action has helped deals backed by consumer lending avoid much deterioration, S&P said.

“Credit conditions have tightened, but only moderately, given governments’ support for households,” S&P says.

“Conditions should gradually improve again, in line with the economic recovery, and we expect monetary policy to remain extremely loose across Europe for several years.”

EMEA ABS

ITALIAN NPL SALES RESUME AGAINST UNCERTAIN BACKDROP

Italy’s non-performing loan market resumed activity in June and could be helped by upcoming regulatory changes, but the threat of a draft law in Italy’s parliament still hangs over a market dealing with the fallout from Covid-19.

NPL sales could reduce near-term pressure on Italian banks’ ratings, according to Fitch Ratings. And UNICREDIT became the latest Italian bank to return to the market, selling around €1.5bn of non-performing SME loans into separate securitisation SPVs in July.

“NPL reductions would leave the banks better placed ahead of a likely increase in

earnings weaken due to the economic shock of the pandemic,” the rating agency said last month.

But concerns about a possible second wave of renewed lockdowns across Europe as well as the severity of the economic downturn could be keeping some investors on the sidelines.

“At the moment there is an increase in activity from domestic NPL buyers, while some international players appear to be more in wait-and-see mode,” said Norman

Services.As IFR reported in February, the Italian

parliament has been considering Draft Bill No. 788, which would in effect cap at 20% returns on past non-performing loan sales and securitisations.

The proposal was made by an opposition MP in 2018 but only put up for discussion

start of this year.Market participants said they thought it

unlikely to become law, but if it goes through it would give defaulted borrowers the right to know the purchase price of their loan and the option to repay their debt at that purchase price plus 20%.

In March the Bank of Italy came out against the proposal, saying it risked compromising the NPL secondary market – a key channel for banks trying to clean up their balance sheets.

The Bank of Italy also warned the proposal could create incorrect incentives for debtors, potentially encouraging them not to honour their debts.

A report published on Thursday by Italian Legal Services acknowledges that new measures are needed to tackle the social and economic impact of NPLs in Italy.

“[But] the solution envisaged in the Draft Bill appears to be draconian and potentially able to generate advantages for debtors

than the harm caused to the overall Italian economy via the banking system,” the report says.

A key concern is, although market participants say the draft bill is unlikely to become law, that it might could cause NPL investors to pay less for portfolios.

On a more positive regulatory note, the European Commission last week put forward Securitisation Regulation changes

deals that would calculate the 5% risk retention requirement based on the discounted value (rather than face value) of the underlying assets.

The proposal would also permit the servicer in an NPL securitisation to take the risk retention slice – the EC says the special position of servicers in NPL deals ensures the alignment of its interests with those of the investors.

A separate set of proposals, which are aligned with changes put forward by the Basel Committee on Banking Supervision, include establishing a standardised

where 90% or more of the assets in a portfolio are non-performing.

introduced for all NPL securitisation

the senior tranche from qualifying NPL securitisations.

The existing Securitisation Regulation was not up for review until 2022, but the European Commission says – given its forecasts for a deep recession caused by Covid-19 – that securitisation is a “key enabler” for banks to maintain and even enhance their capacity to lend to the real economy, especially SMEs.

“By transforming loans into tradable securities, securitisation could free up bank capital for further lending and allow a broader range of investors to fund the economic recovery,” the Commission says.

ALL INTL AUSTRALIAN DOLLAR BONDS BOOKRUNNERS: 1/1/2020 TO DATE

Managing No of Total Share bank or group issues A$(m) (%)



1 TD Securities 30 2,373.57 11.5

2 ANZ 13 2,132.34 10.3

3 Nomura 16 1,989.88 9.6

4 Westpac 9 1,816.07 8.8

5 CBA 6 1,762.46 8.5

6 NAB 8 1,549.86 7.5


8 RBC 8 999.11 4.8

9 Mizuho 13 978.62 4.7

10 HSBC 7 867.20 4.2

Total 105 20,635.28

AUSTRALIAN DOMESTIC BONDS BOOKRUNNERS: 1/1/2020 TO DATE

Managing No of Total Share bank or group issues A$(m) (%)

Source: Refinitiv SDC code: AJ02

1 UBS 22 22,602.42 16.7

2 ANZ 38 22,415.31 16.5

3 Westpac 40 18,990.56 14.0

4 CBA 39 18,133.71 13.4

5 NAB 48 11,532.92 8.5

6 Citigroup 15 9,717.66 7.2

7 Deutsche Bank 12 8,600.98 6.3

8 JP Morgan 6 8,336.40 6.1

9 Bank of America 8 6,225.65 4.6

10 Macquarie 10 1,864.23 1.4

Total 98 135,627.16

5 IFR Bonds 2344 p21-47.indd 39 31/07/2020 18:46:29


Away from NPLs, the Commission is also proposing a new category for on-balance-sheet synthetic securitisation that will comply with the STS (Simple, Transparent, and Standardised) label.

This is in line with proposals for synthetic STS securitisation published in May by the European Banking Authority.

UniCredit’s portfolio sales last week were

securitisation SPV called Gaia whose

Banca, and Barclays Bank.Earlier this month BPER Banca sold its

€1.2bn “Spring” portfolio of NPLs to a securitisation SPV and will seek the government GACS guarantee for the senior notes. It said it sold 95% of the mezzanine

and junior tranches to an institutional investor.

And in June, Banca Popolare di Sondrio sold a €1bn NPL portfolio to GACS securitisation Diana SPV.

WIZINK RETAINS PORTUGUESE CARDS ABS DEBUT

Online bank WIZINK has issued and retained VICTORIA FINANCE

NO.1. The deal comes a week after WiZink retained an issue from a Spanish cards vehicle.

The Portuguese deal was arranged by StormHarbour, and was rated by Fitch and DBRS. The senior notes are rated A+/AH.

The deal is backed by €505m receivables originated by WiZink Bank. WiZink bought BarclayCard’s Portuguese and Spanish business in 2016.

DELAMARE 2020-1 ISSUED AND RETAINED

TESCO PERSONAL FINANCE last week issued and retained a £1.55bn UK credit card ABS from its Delamare vehicle. Citigroup arranged DELAMARE 2020-1, which issued four

S&P and Fitch, and each with the same Sonia plus 85bp coupon. Three of the tranches are sized at £400m, and the fourth at £350m.

ITALIAN AUTO ABS GOLDEN BAR ISSUED BY SCB

SANTANDER CONSUMER BANK in Italy has issued a €559m auto loan securitisation from its Golden Bar platform. There was no sign of the deal being marketed and it is likely to have been retained.

GOLDEN BAR (SECURITISATION) SERIES 2020-2 issued a €483.5m Class A, rated A+/AH by

There is also a €37.7m BBB/BBB Class B at 1.5% and an unrated €37.7m Class Z paying a variable return.

The deal has a three-year revolving period. It was arranged by Banco Santander.

In April, Fitch put a negative outlook on the Class B from Golden Bar 2020-1, which was issued in February and that also not been publicly marketed.

EMEA CLO

REDDING RIDGE RETURNS

REDDING RIDGE ASSET MANAGEMENT (UK) priced a €391.8m European leveraged loan CLO via JP Morgan. RRME 4 is structured with a one-year non-call period and a 3.1-year reinvestment period.

Coupons include three-month Euribor plus 145bp for the deal’s Triple As (rated by Moody’s, S&P and KRBA), while the lowest-rated tranche, the NR/BB–/BB– Class D is at three-month Euribor plus 685bp. Issue prices and discount margins were not disclosed.

US MBS

FANNIE MAE RAMPS UP GREEN MBS ISSUANCE

FANNIE MAE is increasing its green single-family mortgage-backed bond programme after launching it in April, as it looks to

Investors move to senior for safety

US ABS Clock runs out on critical federal help for US workers

Senior tranches of US asset-backed securities

are getting a second look as a safe-haven

for investors as extra jobless payments for

Americans introduced during the Covid-19

pandemic are due to expire at the end of this

week.

“The stimulus has been huge for the

consumers,” said Jennifer Thomas, senior

consumer ABS analyst at Loomis Sayles. “That’s

made a big difference.”

In recent weeks, top-tier ABS paper had

lost some of its lustre among yield-oriented

investors due to tight spreads. Appetite for riskier

bonds had been stoked by better than expected

consumer credit data, analysts said, with some

borrowers restarting debt payments after

asking for short-term deferral at the start of the

pandemic.

But as the White House and Federal

lawmakers seek to hammer out an agreement

to extend extra unemployment aid, currently

at US$600 a week per person, investors

and analysts are favouring a more defensive

approach.

In a research note on Monday, Wells Fargo

analysts said “a move up in quality may be

prudent while another round of stimulus is

negotiated”.

Triple A rated ABS paper, especially that

backed by liquid assets such as car loans

and credit cards, may best weather a spike in

delinquencies if unemployed workers see their

extra government benefits either reduced or cut

entirely after July, analysts and investors said.

“If you are a Triple A or even Double A-only

investor, everything looks pretty robust,” said

Paul Norris, head of structured products at asset

manager Conning. “If you operate at the bottom

of the capital structure, you are definitely looking

at some risk.”

Adding to the financial pressure on jobless

Americans is the end of mortgage relief and

eviction suspensions in the coming weeks,

analysts said.

QUALITY MOVEWells Fargo analysts noted it was not necessary

to abandon all risk and give up on incremental

yield. While spreads on Triple A auto ABS from

benchmark issuers have returned to levels

from before their March sell-off, those from

non-benchmark issuers have lagged behind

somewhat, they highlighted.

Last week, TOYOTA MOTOR priced a U$1.6bn

prime loan auto ABS offering, TAOT 2020-C. The

two-year Triple A rated note priced at a spread of

23bp over swaps for a yield of 0.444%.

This compared with a similar tranche in

a US$1.35bn prime auto issue from CARMAX,

CARMX 2020-3, sold on July 14, which came in

at swaps plus 41bp for a yield of 0.628%.

The primary market pipeline has several more

auto deals from non-benchmark issuers in riskier

sectors.

And despite the looming risk of a huge income

shortfall, investor appetite for riskier ABS has

stoked esoteric issuers to bring supply to the

market.

TEXTAINER GROUP, for example, plans to sell a

US$300m shipping container deal, the first such

offering for this ABS sector in 2020.

Richard Leong

5 IFR Bonds 2344 p21-47.indd 40 31/07/2020 18:46:29


STRUCTURED FINANCE

expand its ESG footprint in real estate

said on Monday it issued two single-family green MBS in July, totalling US$19m, bringing the programme’s year-to-date issuance to US$40m.

The Fannie MBS are secured only by loans

Homes” programme and meet or exceed its

Their structure closely resembles Fannie’s regular MBS, where the bondholders receive underlying loan principal and interest payments every month.

“We are excited about the single-family green MBS programme and look forward to increasing our issuances backed by green,

Mae’s senior vice-president of capital markets Renee Schultz said in a statement last Monday.

Fannie said its two green MBS deals in July were backed by loans made by DHI Mortgage and Eagle Home Mortgage, which

DR

HORTON and LENNAR.Fannie had issued one green MBS in each

of the previous three months, which were also secured by loans from the DR Horton and Lennar’s lending units.

The larger of the two MBS issues in July, which total US$11.41m, has a weighted average net interest rate of 2.0% and is backed by 41 loans, according to Fannie.

The other issue, which totalled US$7.59m, had a weighted net interest rate of 2.50% and is secured by 29 single-family mortgages.

“We started off the single-family green MBS programme on a small scale so that we could address any of the challenges we encounter with the collection of data related to loans for green homes,” Schultz told IFR

Schulz declined to offer details on forthcoming issuance on its green MBS.

On July 24, Cicero assigned Fannie’s single-family green securities a “light green” opinion or rating.

Cicero’s ESG rating scale runs from “brown” – its lowest – to “dark green” its highest.

“Light green” is deemed for projects that are “climate friendly but do not represent or contribute to long-term vision,” according to Cicero.

“These offerings have attracted investor interest and serve to enhance liquidity in

market,” Schultz said.Schultz hopes other home builders with

expertise in environmentally friendly constructions will become partners in its green MBS programme.

It complements the US$75bn in green multi-family bonds that it has issued since 2010. Its green CMBS are backed by

apartment buildings or properties that target lower energy or water usage.

US ABS

TESLA ROARS BACK INTO ABS MARKET

TESLA roared back into the US asset-backed securities market with a US$709.4m transaction backed by leases on its electric vehicles, after the carmaker’s latest

The company, founded by Elon Musk, last tapped the ABS market in November with a US$860.9m auto lease offering. The latest, Tesla Auto Lease Trust 2020-A, (TESLA

2019-A) was led by Citigroup, Deutsche Bank, Barclays and Credit Suisse.

Orders for the senior notes were

10 times oversubscribed before the deal launch, two sources familiar with the deal said.

The transaction came at a time when there is strong investor demand for securitised auto paper, resulting in cheap borrowing costs for issuers.

Two weeks ago, FORD MOTOR priced a US$1.4bn auto lease issue, FORDL 2020-B, with its Triple A rated two-year tranche, clearing it at a spread of 49bp over swaps for a yield of 1.012%.

The latest Triple A rated two-year note priced at swaps plus 50bp for a yield of 0.690%.

As a comparison, Tesla’s prior ABS deal came in at swaps plus 60bp and a yield of 2.175%.

A factor that has stoked the recovery in auto lease ABS is the rebound in used vehicle prices, which helps determine the recovery values of vehicles that come off these leases and are resold.

Manheim’s widely-followed used vehicle price index hit an all-time peak in June at 149.3 following a record drop in April due to fears about the impact of the Covid-19 pandemic on car sales.

At the height of the market sell-off, spreads on auto lease ABS ballooned to 400bp in the secondary market, according to Bank of America.

After their steep drop in April, “the subsequent recovery in used vehicle prices pushed the auto lease ABS trend line into residual value gain territory in May,” Bank of America said on Monday.

Tesla ABS have been lightly traded with most of them quoted at 98 to 102 in price, according to TRACE data.

Improved car demand, which has helped the used car values, also bolstered Tesla’s bottom line.

Last Wednesday, Tesla said it produced a net income of US$104m for the second quarter, marking the

straight quarters.

ALL EUROPEAN ISSUERSBOOKRUNNERS: 1/1/2020 TO DATE


Includes securitisations, credit-linked notes (Euro, foreign, global and

domestics) and excludes CDOs.

Source: Refinitiv SDC code: B16n

1 Bank of America 13 4,184.31 15.2

2 Lloyds Bank 12 2,811.99 10.2

3 Citigroup 12 2,446.61 8.9

4 BNP Paribas 9 2,373.38 8.6


6 Barclays 11 1,616.44 5.9


8 Commerzbank 3 1,258.93 4.6


10 JP Morgan 5 1,198.84 4.3

Total 52 27,607.94

GLOBAL STRUCTURED FINANCE IN EUROSBOOKRUNNERS: 1/1/2020 TO DATE


Includes securitisations, credit-linked notes (Euro, foreign, global and

domestics) and excludes CDOs.

Source: Refinitiv SDC code: B16g

1 Bank of America 4 1,478.27 11.9


3 Deutsche Bank 2 1,283.04 10.3

4 BNP Paribas 4 1,170.25 9.4

5 Commerzbank 3 1,142.17 9.2

6 ING 2 873.04 7.0


8 LBBW 2 648.40 5.2

9 JP Morgan 2 574.63 4.6

10 ABN AMRO Bank 2 557.74 4.5

Total 21 12,427.60

ALL INTL ISSUERS (EXCLUDING SELF-FUNDED)BOOKRUNNERS: 1/1/2020 TO DATE


Includes securitisations, PFI bonds and credit-linked notes. Excludes US

global ABS/MBS, CDOs and self funded issues.

Source: Refinitiv SDC code: J10d

1 Goldman Sachs 44 12,227.15 10.4

2 Credit Suisse 59 10,749.90 9.2

3 JP Morgan 52 10,078.83 8.6

4 Deutsche Bank 49 9,432.36 8.1

5 Barclays 57 9,422.89 8.1

6 Citigroup 49 8,437.15 7.2

7 Bank of America 41 8,223.42 7.0

8 Wells Fargo 34 6,179.70 5.3


10 Nomura 32 4,947.86 4.2

Total 253 117,050.76

5 IFR Bonds 2344 p21-47.indd 41 31/07/2020 18:46:29


FITCH KEEPS HERTZ ON RATING WATCH AFTER DEAL WITH LENDERS

Fitch Ratings said last Monday it is keeping HERTZ‘s asset-backed securities on negative watch for further downgrades after the bankrupt car rental operator struck a temporary deal with its ABS lenders to

May 22, which kicked off a 60-day stay for the holders of its variable funding notes from seizing possession of the company’s

Under the agreement that the court approved on Friday and will end in January 2021, Hertz will sell 182,521 leased vehicles by the end of 2020 and plans to keep US$900 from the sale of each vehicle through its retail channel.

“While Fitch Ratings believes the agreement is a step in the right direction for ABS notes, the agency believes the company still faces notable execution risks due to ongoing coronavirus impact on the travel/rental car (RC) sectors,” the rating agency said in a statement.

Fitch said Hertz may be looking to clinch

the next six months or into early 2021.

Fitch downgraded US$6.04bn of the company’s securitised notes. The notes have been paid down to US$5.19bn through June, the rating agency said.

interim deal between Hertz and its variable funding noteholders.

Prices on Hertz senior ABS paper are running at or close to par, bouncing from the 90-area in late April, TRACE data showed.

Hertz ABS prices are also vulnerable to any renewed volatility in used car prices as the Covid-19 pandemic rages in the United States.

The Manheim used vehicle index posted a record 11.3% plunge in April. It staged a rebound to an all-time high of 149.3 in June, bolstered by a recovery in car sales and the reopening of used-car auction houses.

VERIZON PLANS RETURN AS OVERDUE MOBILE PAYMENTS RISE

VERIZON is readying a return to the ABS market with a deal backed by mobile payment plans as more of its customers fall behind on payments amid the Covid-19 pandemic.

The biggest US wireless service carrier by revenue is expected to offer this week a US$953.9m device plan securitisation, VZOT

2020-B. RBC, MUFG, Barclays and TD Securities are the bookrunners.

Verizon last tapped the ABS market in January with a US$1.6bn offering, VZOT

2020-A, in January. Strong investor demand led the company to upsize the deal from US$953.9m.

Mobile payment ABS, while a tiny part of the ABS market, are seen as low risk, comparable to securitised debt backed by prime auto and credit cards because customers have shown they are committed to making their monthly payments, analysts said.

However, delinquencies on Verizon ABS have increased during the pandemic as unemployment soared.

The Federal Communications Commission announced the “Keep America Connected Pledge” on March 13 which urged broadband and phone service providers not to cut service to customers who could not make payments due to the pandemic.

But the initiative expired on June 30 and analysts are seeing an increase in late payments to Verizon, which contrasts with trends seen in other consumer ABS sectors, Wells Fargo analysts said on Monday.

Delinquencies of 60 days or more on Verizon’s ABS deals are closing in on levels that would trigger rapid payments to its bondholders, they said.

The 60-plus delinquency rates on four Verizon ABS deals issued in 2017 and 2018 rose above 1.5% in June after holding about 0.5%–1.0% before the pandemic, according to Wells Fargo.

The amortisation trigger in these deals is about 2.75%.

“Rapid amortisation and structural deleveraging help to insulate investors from poor collateral performance,” they wrote in a research note. “However, temporary trigger breaches and the return of principal can impair investor total return performance if bonds are owned above par.”

A sellside analyst pointed out that early amortisation for these older Verizon paper is not as dire as it appears since they are set to mature later this year or in 2021 anyway.

Wells Fargo analysts expect some Verizon customers will start making payments again as the “Keep America Connect Pledge” expired on June 30.

However, the ability of some Verizon’s customers to pay their mobile bills again may hinge on whether the federal government extends extra unemployment

TEXTAINER LOOKS TO FLOAT CONTAINER ABS DEAL

TEXTAINER GROUP HOLDINGS is preparing to

ABS deal of 2020 this week, amid an uncertain global trade outlook with the US mired in a pandemic-induced recession.

Textainer last Thursday mandated RBC and Wells Fargo as the joint book managers for its US$300m TMCL 2020-1 offering.

The Bermuda-based company last tapped the ABS market in April 2019 with a US$350m offering.

Securitised container lease notes were one of the hardest hit sectors in the ABS market during its rout this spring, as their spreads blew out to levels not seen since

Textainer’s plan to bring a deal to market reinforces the view that credit conditions have stabilised enough for esoteric issuers to raise funding, analysts said.

“The market is open for any ABS issuer who wants to issue,” one buyside analyst said.

That said, leads are marketing the Textainer deal as a private 144A transaction.

GLOBAL SECURITISATIONS IN STERLINGBOOKRUNNERS: 1/1/2020 TO DATE


Including Euro, foreign, global and domestics, excluding CDOs.

Source: Refinitiv SDC code: B16i

1 Lloyds Bank 12 2,186.46 20.5

2 Bank of America 9 1,952.00 18.3

3 Citigroup 10 1,553.24 14.6

4 BNP Paribas 5 789.91 7.4

5 Barclays 7 755.94 7.1


7 JP Morgan 3 434.00 4.1

8 NAB 3 403.72 3.8

9 HSBC 3 365.13 3.4

10 StanChart 2 352.78 3.3

Total 29 10,643.44

SECURITISATIONS – ALL EUROPEAN RMBSBOOKRUNNERS: 1/1/2020 TO DATE


Including Euro, foreign, global and domestics, excluding CDOs

Source: Refinitiv SDC code: B10a

1 Lloyds Bank 9 2,048.43 14.1

2 Bank of America 8 1,899.04 13.0

3 Citigroup 8 1,562.14 10.7


5 Barclays 8 1,208.65 8.3

6 BNP Paribas 6 1,191.88 8.2

7 JP Morgan 4 1,009.16 6.9


9 Coop Rabobank 1 500.00 3.4

10 NAB 3 468.20 3.2

Total 27 14,555.43

5 IFR Bonds 2344 p21-47.indd 42 31/07/2020 18:46:29


STRUCTURED FINANCE

Scarcity of overall ABS supply has played a key role behind spread tightening and upsizing of some recent deals, analysts said.

In 2019, container lease ABS issuance managed only US$725m, stemming from the US$350m deal from Textainer and a US$375m offering from SeaCube amid a tariff spat between the US and China, IFR data showed.

“The current challenging economic environment also means we are strongly focused on our cash collections and monitoring of customer credit,” Textainer President and CEO Olivier Ghesquiere said

were released.He said the company is “protecting our

cash reserves and ability to invest upon the eventual return of container demand”.

On March 31, Textainer had US$128.7m in cash and cash equivalents, compared with US$180.6m on December 31 2019, after paring its outstanding debt by US$135m.

Secondary spread levels suggest Textainer faces a friendlier environment to sell container lease ABS.

container lease paper are quoted at 325bp over swaps, which narrowed from 625bp in early April but are still 125bp wider on the year, Bank of America data showed.

In Textainer’s previous ABS issue last year, TMCL 2019-1, the Single A rated note cleared at a spread of 155bp over swaps for a yield of 4.00%.

AVIS PREPARES RETURN TO ABS MARKET

AVIS BUDGET GROUP is seeking a return to the US asset-backed securities market in an effort to raise liquidity as used car prices make a strong comeback from the record drop in April.

The rental car operator seeks to bring a transaction backed by its rental vehicle

AESOP 2020-2, with Barclays, BNP Paribas and Citigroup as its underwriters, according

Avis previously tapped the ABS market in January with a US$700m offering,

Triple A rated tranche that priced at 75bp over swaps.

Spreads on senior rental car ABS have retraced some of their widening in April when used car prices were plunging.

are running at 275bp over swaps, compared with 550bp in early April and 102bp at the end of 2019, according to Bank of America data.

The reopening of used car auction houses and renewed overall car demand lifted used vehicle values to record highs last month, analysts said.

The Manheim used vehicle index, which saw a record 11.3% plunge in April, reached an all-time high of 149.3 in June.

Avis and its bankrupt competitor HERTZ have been selling vehicles to raise cash to meet expenses and pay their bond holders,

while the Covid-19 pandemic has slashed car rental demand.

reported a second quarter net loss of US$481m with revenues plunging 67% on a year-over-year basis.

“We continued to take aggressive action by raising liquidity and reducing cash burn, and we are focused on remaining

bounce back when demand recovers,” the company said in a statement on Tuesday.

over 100,000 vehicles and cancelling orders for 185,000 vehicles globally in the second quarter and amending a credit agreement with a covenant waiver and to allow an increase of authorized debt by US$750m.

It also priced US$500m in high-yield notes at a yield of 11.297% in May, and

facility to help sell vehicles directly to consumers.

Avis had US$1.5bn in liquidity at the end of the second quarter and posted a cash burn of about US$580m, which was US$320m or 36% less than it had

US ASSET-BACKED SECURITIESBOOKRUNNERS: 1/1/2020 TO DATE


Excludes MBS.

Source: Refinitiv SDC code: F14

1 JP Morgan 53 15,219.89 12.0

2 Citigroup 47 11,179.42 8.8

3 Barclays 44 10,539.84 8.3

4 Goldman Sachs 25 8,524.51 6.7

5 Wells Fargo 41 8,416.72 6.6

6 Bank of America 37 8,402.18 6.6

7 RBC 30 7,281.18 5.7

8 Deutsche Bank 37 6,632.26 5.2

9 Credit Suisse 30 6,261.83 4.9

10 Mizuho 24 6,086.12 4.8

Total 226 127,005.94

GLOBAL STRUCTURED FINANCE IN US$ BOOKRUNNERS: 1/1/2020 TO DATE


Including securitisations (Euro, foreign, global and domestics, excluding

CDOs) and PFI bonds.

Source: Refinitiv SDC code: B16b

1 JP Morgan 125 56,200.72 14.3

2 Credit Suisse 107 48,137.57 12.3

3 Wells Fargo 99 43,167.26 11.0

4 Citigroup 107 37,286.54 9.5

5 Morgan Stanley 71 30,046.35 7.7

6 Goldman Sachs 98 28,904.42 7.4

7 Bank of America 85 28,745.41 7.3

8 Barclays 77 18,979.70 4.8

9 Nomura 55 15,341.28 3.9

10 Deutsche Bank 74 14,038.50 3.6

Total 650 391,799.22

STRUCTURED FINANCE – ALL INTL ISSUERSBOOKRUNNERS: 1/1/2020 TO DATE


Includes securitisations, PFI bonds, self-funded issues and credit-linked

notes. Excludes US global ABS/MBS and CDOs.

Source: Refinitiv SDC code: J10c

1 Goldman Sachs 47 12,552.56 10.2

2 JP Morgan 57 11,850.90 9.6

3 Credit Suisse 59 10,749.90 8.7

4 Deutsche Bank 53 9,883.36 8.0

5 Barclays 58 9,711.23 7.9

6 Bank of America 44 9,371.61 7.6

7 Citigroup 50 8,477.27 6.9

8 Wells Fargo 35 6,427.09 5.2


10 Nomura 33 5,019.60 4.1

Total 267 123,080.35

GLOBAL CDOs BOOKRUNNERS: 1/1/2020 TO DATE


Including Euro, foreign, global, US domestics.


1 Citigroup 14 5,616.12 18.9

2 JP Morgan 7 4,474.53 15.0

3 Barclays 8 3,228.62 10.8

4 Credit Suisse 8 2,759.60 9.3

5 BNP Paribas 8 2,627.07 8.8




9 Natixis 3 1,152.04 3.9

10 Jefferies 3 1,039.90 3.5

Total 74 29,787.94

ALL EUROMARKET CDOs BOOKRUNNERS: 1/1/2020 TO DATE


Excludes global and domestic.


1 Citigroup 8 3,139.52 21.0

2 BNP Paribas 6 2,041.80 13.7

3 Credit Suisse 6 1,895.00 12.7

4 Barclays 4 1,410.45 9.4


6 JP Morgan 3 1,236.63 8.3

7 Natixis 2 890.74 6.0



10 Jefferies 1 507.90 3.4

Total 41 14,930.28

5 IFR Bonds 2344 p21-47.indd 43 31/07/2020 18:46:29


SSAR

US DOLLARS

Jul 30 2020 NIB US$500m Aug 8 2022 0.125 99.81 MS+3 / T+9.7 0.218

EUROS

Jul 27 2020 NRW.BANK €85m Jul 29 2030 (Jul 2022) 0.02 0 - -

Jul 28 2020 Baden-Wuerttemberg €1bn Aug 4 2027 0.01 102.8 MS-5 / B+29.4 -0.38

Jul 28 2020 KfW €1bn incr

(€3bn)

Sep 29 2034 0.05 102.7 MS-3 / B+29.3 -0.136

Jul 29 2020 Rhineland Palatinate €250m Aug 5 2024 0.01 101.9 MS-6 -

Jul 30 2020 Berlin €500m Aug 6 2040 0.05 99.41 MS+11 / B+40.1 0.08

Jul 30 2020 Saxony €500m Aug 6 2025 0.01 102.4 MS-6 / B+28.1 -0.465

Jul 30 2020 EIB CAB €300m incr

(€1.3bn)

Nov 15 2035 0.01 101.9 MS-2 / B+25.6 -0.112

STERLING

Jul 28 2020 BNG £200m incr

(£625m)

Aug 26 2025 1.625 106.7 G+40 0.275

SWISS FRANCS

Jul 28 2020 ZKB SFr150m incr

(SFr360m)

Oct 28 2030 0.75 107.4 MS+37 / Eidg+57 0.023

NON CORE

Jul 28 2020 AOFM A$15bn Jun 21 2051 1.75 95.6 EFP+98 1.94

Jul 29 2020 IFC A$25m incr

(A$100m)

Feb 6 2031 1.25 99.71 ASW+50 /

ACGB+36.5

1.28

Jul 29 2020 IFC A$75m Feb 6 2031 1.25 99.63 ASW+50 /

ACGB+36.75

1.288

Jul 30 2020 LGFA NZ$400m incr

(NZ$1.705bn)

Apr 14 2022 2.75 104.8 MS+21 0.412

Jul 30 2020 LGFA NZ$600m Apr 15 2037 2 101.5 MS+97 1.937

CORPORATES

US DOLLARS

Jul 27 2020 AT&T US$2.25bn Feb 1 2028 1.65 99.874 T+120 1.668

Jul 27 2020 AT&T US$2.5bn Feb 1 2032 2.25 99.819 T+165 2.268

Jul 27 2020 AT&T US$2.5bn Feb 1 2043 3.1 99.952 T+185 3.103

Jul 27 2020 AT&T US$2.25bn Feb 1 2052 3.3 99.942 T+205 3.303

Jul 27 2020 AT&T US$1.5bn Feb 1 2061 3.5 99.936 T+225 3.503

Jul 27 2020 Prosus US$1bn Aug 3 2050 4.027 100 T+280 4.027

Jul 28 2020 Adani Ports US$750m Aug 4 2027 4.2 100 T+376.2 4.2

Jul 28 2020 Florida Power & Light US$1.25bn Jul 28 2023 3mL+38 100 3ml+38 3ml+38

Jul 28 2020 Reliance Steel & Aluminium US$400m Aug 15 2025 1.3 99.694 T+110 1.363

Jul 28 2020 Reliance Steel & Aluminium US$500m Aug 15 2030 2.15 99.722 T+160 2.181

Jul 28 2020 Southwest Airlines US$300m May 4 2025 5.25 106.768 T+340 3.661

GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 31/7/2020

Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)

previously projected due to cost-cutting

It estimated cash burn would run at approximately US$900m, including US$100m for scheduled debt retirements.

an analyst conference call last Wednesday that Avis was “in compliance” with all its ABS term debt and bank conduit facilities globally. He added the company did not require any additional equity injections.

“The exercise now is more about

eliminating any perceived threat of needing to return to the capital markets,” CreditSights analysts wrote in research note last Tuesday.

ASIA-PACIFIC MBS

RESIMAC PLANS FOURTH RMBS

Australasian non-bank mortgage lender RESIMAC GROUP has mandated BNZ and Westpac New Zealand to market a potential RMBS

offering under Resimac’s Versailles programme.

Resimac issued its third New Zealand dollar RMBS in April last year, the no-grow NZ$250m (US$167m) prime and non-conforming Resimac Versailles 2019-1.

This followed its previous NZ$150m and NZ$250m RMBS trades in 2014 and 2017.

Resimac is one of only four Kiwi RMBS

Consumer lender Avanti Finance has issued two RMBS, a debut NZ$200m prime and non-conforming RMBS, Avanti RMBS 2018-1, in

5 IFR Bonds 2344 p21-47.indd 44 31/07/2020 18:46:30


BONDS SUMMARY DETAILS

MS+3 area - - Aaa/AAA BofA / TD -

0 - - Aa1/AA/AAA DZ -

MS-5 area - - Aaa/AAA/None CMZ / JPM / LBBW / NatWest /

NordLB / Uni

-

MS-3 area - €2.5bn Aaa/AAA/-/AAA

Scope

Barc / DB / GS -

MS-6 area - - -/-/AAA LBBW -

MS+11 area -1 €475m Aa1/-/AAA/Scope

AAA

BLB / CMZ / DB / DZ / Uni -

MS-6 area -1 - -/AAA CMZ / Deka / DZ / LBBW / Uni -

MS-2 area - €300m Aaa/AAA/AAA Deka / LBBW / Nomura / SEB -

0 - - Aaa/AAA/AA+ NatWest -

MS+37 area - - Aaa/AAA/AAA/N/A ZKB -

EFP+98/+105 - A$36.8bn Aaa/AAA/AAA ANZ / CBA / DB / JPM / UBS -

0 - - Aaa/AAA TD -

0 - - Aaa/AAA TD -

MS+20/+23 - - -/AA+/AA+ ANZ / BNZ / WBC / CBA -

MS+97/+104 - - -/AA+/AA+ ANZ / BNZ / WBC / CBA -

T+150 area,

T+120 (the #)

8 US$7.9bn Baa2/BBB/A- DB / GS / JPM / MS -

T+185 area,

T+165 (the #)

6 US$5.5bn Baa2/BBB/A- DB / GS / JPM / MS -

T+205 area,

T+185 (the #)

9 US$5bn Baa2/BBB/A- DB / GS / JPM / MS -

T+225 area,

T+205 (the #)


T+245 area,

T+225 (the #)


T+315 area,

T+280 (the #)

6 US$7.4bn Baa3/BBB- BofA / BNPP / Citi / MS -

4.625 area,

4.20% (the #)

22 US$2.15bn Baa3/BBB-/BBB- BofA / Barc / Citi / DB / JPM / SCB /

CS / DBS / ENBD / Miz / MUFG

-

3ml+55

3mL+40 (+/-2)

- US$3.1bn A1/A/A+ Citi / FTS / RBC / RF / USB / WFS -

T+145 area - US$2.3bn Baa3/BBB/BBB BofA / JPM / WFS -

T+200 area - US$3.5bn Baa3/BBB/BBB BofA / JPM / WFS -

T+365 area 9 US$1.bn Baa1/BBB/BBB+ GS / WFS -

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

June 2018 and the NZ$200m prime and non-conforming Avanti 2019-1 in June last year.

Besides Avanti and Resimac, New Zealand Finance and PSIS, which is now a co-operative bank, each raised NZ$100m from RMBS sales in 2010.

The country’s four major banks have targeted the overseas covered bond markets for their mortgage-backed issuance, but the Reserve Bank of New Zealand is looking to change this with the introduction of a new domestic mortgage bond standard called Residential Mortgage Obligations or RMO.

PUMA REFINANCES 2015-3 CLASS A NOTE

MACQUARIE priced an A$306.72m (US$218m) PUMA SERIES 2015-3 RMBS CLASS A-R

note last Wednesday inside initial 95bp–100bp and revised 95bp area guidance at one-month BBSW plus 93bp.

Macquarie was arranger and sole lead manager for the note which has a weighted average life of 2.3 years, credit support of 28.1% and expected ratings of AAA/AAA (S&P/Fitch).

Pricing was not disclosed for the A$90m of retained, Triple A rated Class B1R notes with a 4.8-year WAL and 7% credit support.

PEPPER PLANS NEXT NON-CONFORMING

PEPPER GROUP has mandated CBA, Macquarie, NAB, Westpac and Citigroup (co-manager) to market a potential non-conforming Australian dollar RMBS offering.

The non-bank lender previously issued an A$700m no-grow, non-conforming RMBS offering, Pepper PRS26, on June 10.

5 IFR Bonds 2344 p21-47.indd 45 31/07/2020 18:46:30


GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 31/7/2020 (CONTINUED)


Jul 28 2020 Southwest Airlines US$700m Jun 15 2027 5.125 105.17 T+380 4.231

Jul 29 2020 Alexandria Real Estate

Equities

US$1bn Feb 1 2033 1.875 99.812 T+133 1.892

Jul 30 2020 Enterprise Products US$250m Jan 31 2030 2.8 107.211 T+140 1.943

Jul 30 2020 Enterprise Products US$1bn Feb 15 2052 3.2 99.233 T+205 3.239

Jul 30 2020 Federal Express 2020-1 US$970m Aug 20 2035 1.875 100 T+133 1.875

Jul 30 2020 Highwoods Realty US$400m Feb 1 2031 2.6 99.591 T+210 2.645

EUROS

Jul 28 2020 Prosus €500m Aug 3 2028 1.539 100 MS+185 / B+218 1.539

Jul 28 2020 Prosus €500m Aug 3 2032 2.031 100 MS+220 / B+256.4 2.031

STERLING

Jul 29 2020 Platform Housing £350m Aug 10 2055 1.625 97.87 G+110 1.706

NON CORE

Jul 29 2020 Ausgrid A$250m Feb 5 2024 3mBBSW+110 100 3mBBSW+110 -

Jul 29 2020 Ausgrid A$750m Feb 5 2027 1.814 100 ASW+135 1.814

FINANCIALS

US DOLLARS

Jul 27 2020 UBS Group US$1.3bn Jul 30 2024

(Jul 2023)

1.008 100 T+83 1.008

Jul 27 2020 UBS Group US$1.3bn Jan 30 2027

(Jul 2025)

1.364 100 T+108 1.364

Jul 27 2020 Kinder Morgan US$750m Feb 15 2031 2 99.06 T+150 2.1

Jul 27 2020 Kinder Morgan US$500m Aug 1 2050 3.25 98.565 T+210 3.326

Jul 30 2020 Truist Financial US$750m Aug 3 2027 1.125 99.839 T+75 1.149

STERLING

Jul 28 2020 RBC £500m Aug 5 2021 Sonia+100 100.8 Sonia+20 -

HIGH YIELD

US DOLLARS

Jul 27 2020 Calpine US$650m Feb 1 2029

(Feb 2024)

4.625 100 T+408 4.625

Jul 27 2020 Calpine US$850m Feb 1 2031

(Feb 2026)

5 100 T+441 5

Jul 27 2020 Summit Materials US$700m Jan 15 2029

(Jan 2023)

5.25 100 T+475 5.25

Jul 28 2020 Cenovus Energy US$1bn Jul 15 2025 5.375 100 T+511 5.375

Jul 28 2020 Graham Packaging US$510m Aug 15 2028

(Aug 2023)

7.125 100 T+662.5 7.125

Jul 29 2020 SeaWorld Parks US$500m Aug 1 2025

(Feb 2022)

9.5 100 T+925 9.5

Aug 30 2020 G-III Apparel Group US$400m Aug 15 2025

(Aug 2022)

7.875 100 T+763 7.875

Aug 30 2020 NFP US$1.25bn Aug 15 2028

(Aug 2023)

6.875 100 T+643 6.875

EUROS

Jul 28 2020 Faurecia €300m incr

(€1bn)

Jun 15 2025 (Jun 2021) 2.625 97.5 B+389 3.182

Jul 28 2020 Faurecia €700m Jun 15 2028 (Jun 2023) 3.75 100 B+438 3.75

Jul 29 2020 ADO Properties €400m Aug 5 2025 3.25 98.87 B+422 3.5

Jul 29 2020 Phoenix Pharma €400m Aug 5 2025 2.375 99.42 MS+288 / B+321.2 2.5

5 IFR Bonds 2344 p21-47.indd 46 31/07/2020 18:46:30


BONDS SUMMARY DETAILS


T+400 area 14 US$1.6bn Baa1/BBB/BBB+ GS / WFS -

T+165 area,

T+135 (+/-2)

2 US$3.8bn Baa1/BBB+ GS / JPM / Miz / RBC -

T+165 area -1 US$1.4bn Baa1/BBB+/BBB+ JPM / Miz / MUFG / Scotia -

T+225 area 1 US$2.3bn Baa1/BBB+/BBB+ JPM / Miz / MUFG / Scotia -

2%/2.125% - US$2.35bn A3/AA- Citi / DB / MS(a) / BNPP(p) -

T+250 area,

T+215 (+/-5)

-2 US$1.9bn Baa2/BBB BofA / Jeff / STRH / WFS -

MS+245 area,

MS+210 area,

MS+185/+190

- >€6.7bn Baa3/BBB- BofA / BNPP / Citi / MS -

MS+280 area,

MS+245 area,

MS+220/+225

- >€6.8bn Baa3/BBB- BofA / BNPP / Citi / MS -

G+125 area,

G+110/+115

- >£1.1bn -/A+ Barc / Lloyds / NatWest -

3mBBSW+120 area,

3mBBSW+115/+120

- - Baa1/BBB MUFG / NAB / UBS AM/Ins 79.6%, Bks 14.8%, PB/middle

market 4.4%, Other 1.2%. Oz 77.8%,

APAC/NZ 19.6%, Eur 2.6%.

ASW+150 area,

ASW+145 area

- - Baa1/BBB MUFG / NAB / UBS AM/Ins 77.4%, PB/middle market 6.5%,

Other 4.6%. Oz 60.5%, APAC/NZ 37.3%,

Eur 2%.

T+112.5 area 1 US$4.3bn A-/A+ UBS -

T+137.5 area 2 US$4.1bn A-/A+ UBS -

T+175 area,

T+155 (+/-5)

-8 US$2.35bn Baa2/BBB/BBB BofA / JPM / MUFG / RBC -

T+235 area,

T+215 (+/-5)

-10 US$1.9bn Baa2/BBB/BBB BofA / JPM / MUFG / RBC -

T+85 area,

T+75 (the #)

9 US$1bn A3/A-/A DB / RBC / STRH -

Sonia+20/+22 - £900m, 14acs Aa2/AA- RBC UK 97%, Other 3%. AM/Ins 85%, Bks

9%, CB 3%, PF 3%.

4.75%/5% - - - CS / Barc / BNPP / BofA / Citi / CA-

CIB / DB / GS / JPM / MS / MUFG /

Natx / RBC / SMBC Friend

-

5%/5.25% - - - CS / Barc / BNPP / BofA / Citi / CA-

CIB / DB / GS / JPM / MS / MUFG /

Natx / RBC / SMBC Friend

-

5.25%/5.5% - - B2/BB BofA / Barc / Citi / DB / GS / Jeff /

Southcoast

-

5.25%/5.5% - - Ba2/BBB-/BB+ BofA / BMO / Scotia / RBC / TD -

7.25% area - - Caa1/CCC+ CS / HSBC -

10.25% area,

9.75%/10%

- - Caa2/CCC JPM / GS / DB / Barc / Citi / Citizens

/ FITB

-

8% area - - Ba3/BB+ Barc / JPM / BofA / Capone -

7% area - - Caa2/CCC+ BofA / Barc / JPM / MS / SMBC / TD

/ MUFG / CIBC / DB / Regions / UBS

/ KKR / MQB

-

96.25-96.75, 97.00-

97.50

- - Ba2/BB/BB+ BNPP / CA-CIB / Natx / SG / JPM -

Low 4%s, 3.875%

area

- - Ba2/BB/BB+ BNPP / CA-CIB / Natx / SG / JPM -

3.75% area, 3.5% yld

(the #)

- €925m -/BB+ JPM / Barc / DB -

2.75% area, 2.5%

area, 2.5% (the #)

- €690m -/BB+ CMZ / CA-CIB / ING / Uni Ger/Aus 40%, Fr 10%, UK/Ire 45%,

Benelux 2%, Switz 2%, Other 1%. FM

89%, Corp 6%, Bks/PWM 2%, Ins/PF

2%, Other 1%.

5 IFR Bonds 2344 p21-47.indd 47 31/07/2020 18:46:30

48 International Financing Review August 1 2020

GLOBAL DEBT: SOVEREIGN FOREIGN CURRENCY LONG-TERM RATINGS (31/7/2020)

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/

outlook

** Taken off negative watch/

outlook

Improvement in ratings,

outlook or watch status

Deterioration in ratings,

outlook or watch status

Moody’s S&P Fitch Sovereign 1 2 3 4 5 6

Moody’s S&P Fitch Sovereign 1 2 3 4 5 6

Abu Dhabi Aa2 – AA AA+ AA AA+

Albania B1 Ba2 B+ BB – –

Andorra – Ba2 BBB AAA BBB+ A+

Angola B3 B2 B– n B– B n B

Argentina Caa2 Caa1 CC n B– RD CCC

Armenia Ba3 Ba1 – – BB– BB

Aruba – – BBB+ n BBB+ BBB– n BBB

Australia Aaa Aaa AAA AAA AAA n AAA

Austria Aa1 Aaa AA+ AAA AA+ AAA

Azerbaijan Ba2 Ba2 BBn BB+ BB+ BB+

Bahamas Ba2 n Baa1 BB+ BBB– – –

Bahrain B2 Ba3 B+ p BB– BB– BBB–

Bangladesh Ba3 Ba2 BB– BB– BB– BB–

Barbados Caa1 B2 B– B– – –

Belarus B3 B3 B B B B

Belgium Aa3 Aaa AA AAA AA– AAA

Belize Caa1 n B1 CC n CC – –

Bermuda A2 Aa3 A+ AA+ – –

Bolivia Ba3 Ba2 B+ B+ B+ B+

Bosnia Herzegovina B3 B3 B BB– – –

Botswana A2 n Aa3 A– A+ – –

Brazil Ba2 Ba1 BB– BB+ BB– n BB

Bulgaria Baa2 A3 BBB A BBB p A–

Cambodia B2 B1 – – – –

Cameroon B2 Ba2 B n BBB– B n BB+

Canada Aaa Aaa AAA AAA AA+ AAA

Cape Verde – – B BB– B– B

Cayman Islands Aa3 Aa2 – – – –

Chile A1 Aa2 A+ AA A AA

China A1 Aa3 A+ A+ A+ A+

Colombia Baa2 A3 BBB– BBB+ BBB n BBB+

Congo (DR) B3 n B3 CCC+ CCC+ – –

Congo (Rep) Caa2 n B2 B– BBB– CCC B+

Cook Islands – – B+ AAA – –

Costa Rica B2 n Ba2 B– n BB– B n B+ n

Cote d’Ivoire Ba3 Baa3 – – B+ p BBB–

Croatia Ba2 p Baa3 BBB BBB+ BBB– p BBB+

Cuba Caa2 Caa2 – – – –

Curacao – – BBB+ BBB+ – –

Cyprus Ba2 p A2 BBB– AAA BBB– p A

Czech Rep Aa3 Aa1 AA– AA+ AA– AAA

Denmark Aaa Aaa AAA AAA AAA AAA

Dominican Rep Ba3 Ba1 BB– n BB+ BB– BB–

Ecuador B3 n B2 B– B– RD CCC

Egypt B2 B1 B B B+ B+

El Salvador B3 B1 B– AAA B– n B

Estonia A1 Aaa AA– AAA AA– AAA

Eswatini B3 B1 – – – –

Ethiopia B2 B1 B B B n B

Fiji Ba3 n Ba3 BB– BB– – –

Finland Aa1 Aaa AA+ AAA AA+ p AAA

France Aa2 p Aaa AA AAA AA n AAA

Gabon Caa1 p B1 – – B BB+

Georgia Ba2 Baa3 BB BBB– BB n BBB–

Germany Aaa Aaa AAA AAA AAA AAA

Ghana B3 n B1 B n B+ B B

Greece B1 Baa1 BB– AAA BB BBB+

Guatemala Ba1 Baa3 BB– BB+ BB n BB+

Honduras B1 Ba2 BB– BB – –

Hong Kong Aa2 n Aaa AA+ AAA AA– AAA

Hungary Baa3 Baa1 BBB A– BBB A

Iceland A3 p A3 A A A n A+

India Baa3 n Baa1 BBB– BBB+ BBB– BBB–

Indonesia Baa2 A3 BBB n BBB+ BBB BBB

Iraq Caa1 B3 B– AAA B– n B–

Ireland A2 Aaa AA– AAA A+ AAA

Israel A1 Aa3 AA– AA+ A+ AA

Italy Baa3 Aa3 BBB n AAA BBB– AA–

Jamaica B2 Ba3 B+ n BB– B+ BB–

Japan A1 p Aaa A+ AA+ A n AAA

Jordan B1 Ba1 B+ BB BB– n BB

Kazakhstan Baa3 p Baa2 BBB– BBB BBB BBB+

Kenya B2 n Ba3 B+ n BB– B+ BB–

Kuwait Aa2 Aa2 AA– n AA AA AA+

Kyrgyzstan B2 Ba3 – – – –

Laos – – – – B– n BBB+

Latvia A3 Aaa A AAA A– AAA

Lebanon C Ca CCC n CCC CC CCC

Lesotho – – – – B B+

Liechtenstein – Aaa AAA AAA – –

Lithuania A3 p Aaa A AAA A– p AAA

Luxembourg Aaa Aaa AAA AAA AAA AAA

Macau Aa3 Aa2 – – AA n AAA

Macedonia (FYR) – – BB– BB BB+ n BBB–

Malaysia A3 A1 A– n A+ A– A

Maldives B2 n Ba3 – – B n B

Malta A2 Aaa A– p AAA A+ AAA

Mauritius Baa1 A2 – – – –

Mexico Baa1 n A1 BBB+ n A+ BBB– BBB+

Moldova B3 B2 – – – –

Mongolia B3 n B1 B B+ B B+

Montenegro B1 p Ba1 B+ n AAA – –

Montserrat – – BBB– BBB– – –

Morocco Ba1 Baa2 BBB– BBB+ BBB– n BBB

Mozambique Caa2 Caa1 CCC+ CCC+ CCC B–

Namibia Ba2 n Baa3 – – BB BB+

Netherlands Aaa Aaa AAA AAA AAA AAA

New Zealand Aaa Aaa AA p AAA AA AAA

Nicaragua B2n B1 B– B– B– n B–

Nigeria B2 n B1 B B+ B+ n B+

Norway Aaa Aaa AAA AAA AAA AAA

Oman Ba3 n Baa3 BB n BB+ BB+ BBB–

Pakistan B3 B2 B– B– B– B–

Panama Baa1 A2 BBB+ n AAA BBB A

Papua New Guinea B2 B1 B– B– – –

Paraguay Ba1 Baa3 BB BB+ BB+ BB+

Peru A3 A1 BBB+ A BBB+ A–

Philippines Baa2 A3 BBB+ A– BBB p BBB+

Poland A2 Aa3 A– A A– AA–

Portugal Baa3 p Aa3 BBB AAA BBB AA

Qatar Aa3 Aa3 AA– AA AA– AA

Ras al–Khaimah A AA+ A AA+

Romania Baa3 n A3 BBB– A– BBB– n BBB+

Russia Baa3 Baa2 BBB– BBB BBB BBB

Rwanda B2 B1 B+ B B+ B+

St Vincent & Gren B3 Ba3 – – – –

San Marino – – – – BBB– n BBB+

Saudi Arabia A1 n A1 A– A A A+

Senegal Ba3 Baa1 B+ BBB– – –

Serbia Ba3 Ba1 BB+ BBB– BB+ BBB–

Seychelles – – – – B+ BB

Singapore Aaa Aaa AAA AAA AAA AAA

Slovakia A2 Aaa A+ n AAA A AAA

Slovenia Baa1 p Aa1 AA– AAA A AAA

Solomon Islands B3 B2 – – – –

South Africa Baa3 n A3 BB– BB+ BB+ n BBB–

South Korea Aa2 Aa1 AA AAA AA– AA+

Spain Baa1 Aa1 A AAA A– AAA

Sri Lanka B2 Ba3 B– B– B– n B–

Suriname Caa3 n Ba3 SD CCC– CC CCC

Sweden Aaa Aaa AAA AAA AAA AAA

Switzerland Aaa Aaa AAA AAA AAA AAA

Tanzania B1n Ba3 – – – –

Taiwan Aa3 Aa2 AA– AA+ AA– AA+

Thailand Baa1 A2 BBB+ A BBB+ p A–

Trinidad & Tobago Ba1 n Baa3 BBB BBB+ – –

Tunisia B2 n Ba3 – – B B+

Turkey B1n B1 B+ BB– BB– BB–

Turks & Caicos – – BBB+ AAA – –

Uganda B2 Ba3 BB A– B+ n B+

Ukraine B3 B3 B B B p B

UAE Aa2 Aa2 – – – –

UK Aa2 Aaa AA + AAA AA n AAA

USA Aaa Aaa AA+ AAA AAA AAA

Uruguay Baa2 A2 BBB A– BBB– n BBB+

Uzbekistan – – BB– n BB–

Venezuela C Ca SD CC – –

Vietnam Ba3 Ba1 BB BB BB p BB

Zambia Caa2 n B3 CCC+ CCC+ CCC B–

6 IFR Global Debt 2344 p48.indd 48 31/07/2020 17:17:29

Adani Ports pays up to print Yankee Port operator makes concessions on size and tenor

ADANI PORTS AND SPECIAL ECONOMIC ZONE has

Jihye Hwang

FRONT STORY PRIMARY MARKETS

Prosus proves stellar attraction in euros Tech company prices tight in dollars and euros as deal reaffirms European orientation

PROSUS

Robert Hogg


EMERGING MARKETS China India Philippines South Korea Nigeria Israel

Argentina Mexico Panama

7 IFR Emerging 2344 p49-58.indd 49 31/07/2020 17:31:31

ASIA-PACIFIC

CHINA

CCB GREEN BOND REPRICES CHINA BANK CURVE

CHINA CONSTRUCTION BANK CORP

GREENLAND DISMISSES CHANGE-OF-CONTROL CONCERNS

GREENLAND HOLDINGS

HILONG ISSUES PROFIT WARNING

HILONG HOLDINGS

Admiralty Harbour Capital as Sidley Austin

Houlihan Lokey (China)Linklaters Singapore

CSC FINANCIAL DEBUTS IN STYLE

CSC FINANCIAL


ALL INTL EMERGING MARKETS BONDSBOOKRUNNERS: 1/1/2020 TO DATE

Asia-Pacific



Source: Refinitiv SDC code: L4

1 HSBC 180 20,444.09 8.8

2 Citigroup 100 14,351.31 6.2

3 Standard Chartered 104 11,708.89 5.1

4 Bank of China 123 9,792.50 4.2

5 UBS 88 9,474.02 4.1

6 JP Morgan 78 8,667.77 3.8

7 Bank of America 54 8,510.98 3.7

8 Credit Suisse 81 8,084.28 3.5

9 Goldman Sachs 48 7,473.83 3.2


Total 494 231,054.97


CDB BREAKS CHINA’S GREAT BOND WALL

CHINA DEVELOPMENT BANK


EMERGING MARKETS ASIA-PACIFIC





1 Citigroup 177 42,934.00 8.9

2 HSBC 234 38,046.29 7.9

3 JP Morgan 167 35,830.90 7.5


5 Goldman Sachs 91 23,601.19 4.9

6 Deutsche Bank 86 22,904.13 4.8

7 BNP Paribas 101 20,997.89 4.4

8 Bank of America 98 20,606.02 4.3


10 Morgan Stanley 73 12,800.25 2.7

Total 746 480,672.33

Power surge lifts China bonds

ASIA-PACIFIC State Grid resets pricing with dual-currency benchmark

STATE GRID CORPORATION OF CHINA tightened

pricing for China’s corporate sector with a

US$3.3bn-equivalent benchmark at the lowest

coupons and reoffer yields on record in both US

dollars and euros.

The state-owned power grid operator, rated

A1/A+/A+, last Wednesday priced US$300m of

1% five-year notes at 99.331 to yield 1.138% and

US$1.15bn of 1.625% 10-year notes at 98.685 to

yield 1.769%, translating to respective spreads

of 88bp and 118bp over Treasuries, inside initial

guidance of 140bp area and 165bp area.

It also priced €1bn of 0.797% six-year bonds

and €600m of 1.303% 12-year bonds, both

at par, or 115bp and 145bp over mid-swaps,

respectively, inside price guidance of plus 155bp

area and 180bp area.

The coupons and reoffer yields on all four

tranches are new lows at the respective tenors

for any Chinese corporate issuer, confirming

State Grid’s profile as one of the country’s

strongest credits, just behind the sovereign and

policy banks.

The US dollar tranches even beat the terms

achieved by China’s Ministry of Finance in a

US$6bn sovereign deal last November, which

included a 1.95% five-year at a yield of 1.996%

and a 2.125% 10-year at 2.238% – a sign of how

far dollar yields have fallen since then.

ELECTRIC DEMAND

State Grid’s deal is the first dual-currency

offering from a Chinese corporate issuer this year.

It attracted robust demand as the issuer was

absent from the market last year and investors

have been awaiting a new issue, said a banker on

the deal.

Orders for the US dollar tranches peaked at

over US$14bn with more than US$7.2bn still in

the book at final pricing, leaving that portion

nearly five times covered. The euro tranches drew

combined final orders of over €5.1bn.

The banker said the dollar tranches were priced

about 10bp–15bp inside fair value estimates of

100bp for the five-year and 130bp for the 10-year.

He did not give the numbers for the euro tranches.

A second banker on the deal, however, said

the five-year dollar notes were 22bp and the 10-

year dollar notes 17bp inside fair value, while the

six-year and 12-year euro tranches were 20bp

and 15bp inside, respectively.

State Grid has printed 144A/Reg S bonds in

the past but it opted for a Reg S-only format this

time for a more flexible timetable.

“To access the 144A market it would have

needed to complete the issuance in May,

otherwise it would have had to update its audited

financial statements to meet the 135-day rule,”

said the second banker.

“The deal this time was more focused on

euros, not US investors, and the total deal size

is not big for such a name. The Reg S market is

more than enough.”

The notes have expected ratings of A+/A+

(S&P/Fitch).

S&P expects State Grid will use the proceeds to

refinance debt and support overseas activities. In

June, State Grid completed the acquisition of Chilean

utility Chilquinta Energia for about US$2.2bn.

Carol Chan



ASIA

Jul 27 2020 China Everbright Bank HK

branch

US$700m Aug 3 2023 3mL+85 100 3mL+85 -

Jul 27 2020 Chong Hing Bank AT1 US$250m Perpetual (Aug 2025) 5.5 100 - 5.5

Jul 27 2020 Dafa Properties US$150m Jul 30 2022 12.375 98.08 - 13.5

Jul 27 2020 Korea South-East Power

sustainable

US$300m Feb 3 2026 1 99.64 T+80 1.068

Jul 28 2020 Adani Ports SEZ US$750m Aug 4 2027 4.2 100 T+376.2 4.2

Jul 28 2020 CCB HK green US$500m Aug 4 2023 1 99.73 T+93 1.092

Jul 28 2020 CCB HK green US$700m Aug 4 2025 1.25 99.71 T+105 1.311

Jul 28 2020 Country Garden US$500m Aug 6 2030 (Aug 2025) 4.8 100 - 4.8

Jul 28 2020 Country Garden US$500m Feb 6 2026 (Feb 2024) 4.2 100 - 4.2

Jul 28 2020 CSC Financial US$500m Aug 4 2025 1.75 99.94 T+150 1.763

Jul 28 2020 Jiangsu Zhongnan

Construction

US$200m Aug 3 2021 9 99.67 - 9.35

Jul 29 2020 Chong Hing Bank AT1 US$50m incr

(US$300m)

Perpetual (Aug 2025) 5.5 100 - -

Jul 29 2020 CIFI Holdings (Group) US$200m incr

(US$500m)

Oct 20 2025 (Jul 2023) 5.95 100.8 - -

Jul 29 2020 Ronshine China US$200m Aug 5 2024 (Aug 2022) 6.75 100 - 6.75

Jul 29 2020 State Grid Corporation of

China

US$300m Aug 5 2025 1 99.33 T+88 1.138


China

US$1.15bn Aug 5 2030 1.625 98.69 T+118 1.769


China

€1bn Aug 5 2026 0.797 100 MS+115/B+150.2 0.797


China

€600m Aug 5 2032 1.303 100 MS+145/B+180.2 1.303

Jul 29 2020 Sunac China US$500m Aug 3 2024 (Aug 2022) 6.65 99.31 - 6.85

Jul 30 2020 Redco Properties US$220m Aug 6 2022 11 96.78 - 12.88

EMEA

Jul 22 2020 Israel ¥16bn Jul 31 2023 0.315 100 - 0.31

Jul 30 2020 First Abu Dhabi Bank Rmb3.25bn Aug 18 2025 3.4 100 - 3.4

LATAM

Jul 28 2020 Banistmo US$400m Jul 31 2027 4.253 99.25 - 4.375

Jul 30 2020 Industrias Penoles Sab

De CV

US$100m Sep 12 2029 4.15 106.026 3.375 3.375

Jul 30 2020 Industrias Penoles Sab

De CV

US$500m Aug 6 2050 4.75 100 4.75 4.75

GLOBAL EMERGING MARKETS BOND DETAILS: WEEK ENDING 31/7/2020




EMERGING MARKETS ASIA-PACIFIC

3mL+125a - - -/-/BBB BoC/BoCom/CCBI/Everbright HK/

Citi/CMBC Cap/ABChina/CCBA/

CICC/CMBCHK/Haitong/ICBC/

Industrial/JPM/Nanyang/Natx/

SPDB/BEA Everbright Sun Hung Kai

-

6% area, 5.5% - - Ba2 BOCI/CCBI/ChongHing/CLSA/

CMBI/CMBC Cap/CA-CIB/YueXiu/

WingLung/HSBC/ALPHA/CNCBI/

ICBCA

-

13.875% area, 13.5%

(the #)

- - B3 HSBC/CS/Guotai Junan/UBS/CMBI/

DB/Haitong

-

T+125 area, T+80 - US$2.1bn, 120acs Aa2/AA Citi/CA-CIB/HSBC Asia 77%, EMEA 23%. AM/FM 46%, CB/

PF/SWF 25%, Ins 15%, Bks 12%, PB/

Other 2%.

4.625% area, 4.2%

(the #)

- US$2.85bn Baa3/BBB-/BBB- Barc/BofA/Citi/DB/JPM/StCh/DBS/

ENBD/Miz/MUFG/CS

Asia 24%, EMEA 21%, Amers 55%. FM 85%,

Ins/Public sector 10%, Bks 3%, PB 2%.

T+135 area - US$2.7bn, 74acs A1/A/A CCB/ABChina/BNPP/BofA/Citi/

HSBC/Miz/ANZ/BoC/BoCom/BOSC/

CA-CIB/CBA/CICC/CTBC/DBS/ICBC/

JPM/KGI/StCh/UBS

APAC 64%, EMEA 36%. Bks 54%, AM/

FM 34%, CB 10%, PF 1%, PB/Other 1%.

T+150 area - US$3.2bn, 106acs A1/A/A CCB/ABChina/BNPP/BofA/Citi/

HSBC/Miz/ANZ/BoC/BoCom/BOSC/

CA-CIB/CBA/CICC/CTBC/DBS/ICBC/

JPM/KGI/StCh/UBS

APAC 64%, EMEA 36%. Bks 63%, AM/

FM 23%, CB/SWF 12%, PF 1%, PB/

Other 1%.

5.3% area,

4.8%/+4.85%

- US$2bn, 114acs -/-/BBB- MS/JPM/GS/UBS/StCh/CLSA Asia 83%, EMEA 17%. AM 65%, PB 25%,

Corp 8%, Ins/SWF/PF 1%, Bks/Other 1%.

4.6% area,

4.2%/4.25%

- US$2bn, 108acs -/-/BBB- MS/JPM/GS/UBS/StCh/CLSA Asia 88%, EMEA 12%. AM 49%, Ins/

SWF/PF 18%, PB 15%, Corp 11%, Bks/

Other 7%.

T+200 area - US$5.4bn, 122acs Baa1/-/BBB+ CSI/CNCBI/HSBC/Barc/ICBCA/

ABCI/BoCom/BoC/BOCOMI/CCB/

CMBC/CMBI/WingLung/BofA/Miz/

SPDB/StCh/Daiwa

Asia 97%, EMEA 3%. Bks 60%, FM 37%,

Sov/Corp/Other 3%

9.75% area - US$950m, 61acs - Guotai Junan/StCh/Haitong/Orient/

Admiralty Harbour/BOCOMI/CRIC

APAC 98%, EMEA 2%. FM/AM/HF 83%,

Bks/FI 7%, Corp 6%, PB 4%.

- - - Ba2 BOCI/ChongHing -

- - - -/BB-/BB GS -

7.25% area, 6.75%

(the #)

- US$2bn, 139acs -/-/BB-/BB+ (China

Chengxin)

CS/Citi/Guotai Junan/Haitong/

Orient/UBS

Asia 86%, Eur 14%. FM/AM 92%, Corp/

FI 5%, PB 3%.

T+140 area - US$3.4bn, 97acs -/A+/A+ BoC/ICBCI/HSBC/Citi/MS/GS/DBS/

Santan/Miz/MUFG/CCBI/CCBA/

JPM/ABCI/ABCHK/DB

Asia 81% , EMEA 17%, US O/S 2%. Bks/

FI 46%, FM 41%, Ins/Corp/Public Sector

12%, PB 1%.

T+165 area - US$3.8bn, 140acs -/A+/A+ BoC/ICBCI/HSBC/Citi/MS/GS/DBS/


JPM/ABCI/ABCHK/DB

Asia 79%, EMEA 20%, US O/S 1%. Bks/

FI 45%, FM 41%, Ins/Corp/Public Sector

12%, PB 2%.

MS+155 area -20 €3.7bn, 140acs -/A+/A+ BoC/ICBCI/HSBC/Citi/MS/GS/DBS/


JPM/ABCI/ABCHK/DB

Asia 47.62%, Ger 9.91%, UK 14.40%, It

3.54%, Switz 4.46%, RoEur 7.74%, US

O/S 12.34%. FM 50.7%, Bks 39.52%, Ins

2.3%, HF/PB 0.71%, Other 6.77%.

MS+180 area -15 €1.4bn, 94acs -/A+/A+ BoC/ICBCI/HSBC/Citi/MS/GS/DBS/


JPM/ABCI/ABCHK/DB

Asia 14.3%, Ger 16.2%, UK 16.9%, It

8.2%, Switz 7.9%, RoEur 12.2%, US O/S

24.3%. FM 87.37%, Ins 8.58%, Bks 1.18%,

HF/PB 1%, Other 1.87%.

7.25% area - - B1/BB-/BB MS/Barc/CNCBI/CISI/CMBI/CS/

Guotai Junan/HSBC

-

13.25% area,

12.875% (the #)

- - -/B/B CS/UBS/Barc/BNPP/Haitong/StCh/

DB/Heungkong/Orient/CRIC/BEA

Asia 95%, Eur 5%. FM/AM 75%, PB

20%, Corp/FI 5%.

- - 1ac A1/AA-/A+ GS Japan 100%.

3.4% (the #) - - Aa3 ANZ/Citi/StChTaiwan Taiwan 63%, RoAsia 37%. FM/AM 39%,

Ins 35%, Bks 15%, Agcy 9%, PB 2%.

5% area, 4.5% (+/-

12.5)

- - Baa3/-/BBB- BofA/Citi/JPM -

3.625% area 0 - BBB/BBB BofA/JPM -

Low 5%s 0 - BBB/BBB BofA/JPM -



INDIA

FITCH DOWNGRADES FUTURE RETAIL

FUTURE RETAIL

PHILIPPINES

FILINVEST EYES DOLLAR BONDS

FILINVEST DEVELOPMENT

SOUTH KOREA

KOREA SE POWER BOND COVERED

KOREA SOUTH-EAST POWER


China FIG joins dollar party FINANCIALS July issuance hits 2020 high as tighter spreads lure issuers

Issuers from China’s banking and financial sector

are stepping up their offshore funding after a

quiet first half, pushing US dollar bond issuance

in July to the highest monthly total this year.

Thirteen Chinese financial issuers, including

four last week, raised a combined US$9.2bn

in July, including deals through offshore units,

according to IFR calculations.

That is comfortably ahead of February’s

monthly high of US$7.02bn from six issuers,

dominated by Bank of China’s US$2.82bn

Additional Tier 1 offering and China Huarong Asset

Management’s US$1.8bn four-tranche issue.

July’s issuance has been far more diverse. In

addition to banks, leasing firms, securities firms

and insurers have also ventured offshore to raise

funding, with two first-time issuers coming to the

market – ZHONGAN ONLINE P&C INSURANCE and CSC

FINANCIAL.

Many financial institutions postponed their

regular offshore financings in recent months due

to the Covid-19 pandemic and volatile market

conditions, but are venturing back now that

spreads have contracted.

“Unlike some issuers such as LGFVs (local

government financing vehicles) that rely on

Chinese buyers, FIG issuers are more sensitive

to pricing and require more market participants,

so the market situation has a bigger impact on

them,” said a banker from a Chinese bank.

Another banker said bank issuers had

abundant liquidity and are in no urgent need of

refinancing.

“They have kept monitoring the market. Given

that it has improved a lot since the March turmoil

and room for further spread tightening seems

limited, issuers think it is an appropriate time to

launch their deals,” he said.

Last week alone, FIG issuers raised a total

of US$2.7bn. The four deals were CHINA

CONSTRUCTION BANK CORP‘s US$1.2bn green

bonds, CHINA EVERBRIGHT BANK‘s US$700m

floaters, CHONG HING BANK‘s US$300m AT1s and

CSC Financial’s debut US$500m bond. Hong

Kong-incorporated Chong Hing is 75%-owned by

Guangzhou Yue Xiu Holdings.

INDUSTRIAL AND COMMERCIAL BANK OF CHINA,

BANK OF COMMUNICATIONS and SHANGHAI PUDONG

DEVELOPMENT BANK are also among July’s list of

issuers.

Chinese banks’ investment banking and

leasing arms also joined the party. ABC

INTERNATIONAL HOLDINGS, ICBC INTERNATIONAL

HOLDINGS, BOCOM FINANCIAL LEASING and CCB

FINANCIAL LEASING all issued bonds in the month.

Huarong AMC’s leasing unit CHINA HUARONG

FINANCIAL LEASING also printed a US$300m 363-

day note.

TIGHTER PRICING

Last week’s new issues were mostly well

supported despite massive price tightening

during execution that left final pricing flat or

even inside fair value estimates.

CCB’s US$1.2bn dual-tranche green bond,

which priced last Tuesday, even helped reprice

the curve for Chinese senior bank debt following

a strong aftermarket performance as demand

exceeded allocations. Both tranches tightened

about 10bp on their first of trading day last

Wednesday, leading to a 2bp–4bp rally out to

five years from China’s big five banks.

CSC Financial, which trades as China

Securities, priced a debut US$500m bond

that was 10.8 times covered and went on to

rally in the aftermarket. The 1.75% five-year

senior unsecured notes priced 50bp inside

initial guidance at Treasuries plus 150bp, about

6bp inside the 2% 2025s of bigger peer Citic

Securities.

“With abundant liquidity, investors have to

find a way to deploy their money and have to

accept the new norm that many deals may see

a 40bp–50bp compression from IPG,” said a

banker on the CSC deal.

The banker expects supply from Chinese

FIG names will continue to pick up in the

coming months. He said issuers had adapted

to market conditions by spreading their funding

requirements across more, smaller deals in order

to control the funding cost.

“We could see deals of US$2bn in the past,

but now it’s more smaller sizes of US$500m to

US$1bn. Hence, they may come out again later in

the year if the windows are suitable,” he said.

Carol Chan


Citigroup Credit Agricole HSBC

EUROPE/AFRICA

NIGERIA

IHS INVITES HANDFUL INTO INNER CIRCLE

IHS

TOWERS

Goldman Sachs


EMERGING MARKETS EUROPE/AFRICA

Sri Lanka poll looms amid credit jitters ASIA Near-term default unlikely but weak fiscal position continues to weigh

Analysts expect Sri Lanka’s parliamentary

election this week to provide some clarity on

the lingering default risks hanging over the

sovereign’s offshore debt.

The election was originally planned for April

but was delayed by a nationwide lockdown

to contain the coronavirus outbreak. The

government has been operating under a “vote

on account”, or interim budget, for most of the

year in the absence of a full-year budget.

“After the election and government formation,

we expect a greater degree of policy clarity in

targeting some near-term economic and fiscal

challenges,” said Moody’s analyst Michael Higgins.

The DEMOCRATIC SOCIALIST REPUBLIC OF SRI

LANKA has a US$1bn bond due in October, while

its external debt service payments amount to

around US$4bn annually over 2020 to 2025,

according to the ratings agency.

S&P downgraded the sovereign rating to

B– from B on May 20, citing an already heavy

debt burden worsened by the pandemic as well

as increased uncertainty over the availability of

external financing.

While UK-based research firm Oxford

Economics said in a note a default by Sri Lanka

on its sovereign bonds was highly plausible, but

not necessarily inevitable, ratings agencies see

a near-term default on offshore debt as unlikely

because of the country’s external financing

arrangements.

“Our stable outlook on the rating reflects our

view that a default is unlikely in the next year or

so,” said Rain Yin, an analyst at S&P.

Sri Lanka is in talks with the International

Monetary Fund for emergency financial support

under the its Rapid Credit Facility after an

extended loan facility put in place in 2016 came

to an end in early June.

In a statement in May, the country’s central

bank also sought to reassure investors, saying Sri

Lanka will honour all its debt service obligations.

Still, a weak fiscal position is expected to

continue to put pressure on the sovereign’s

longer-dated bonds.

Although its 2030s have recovered from the

steep declines posted in March, they are still

trading much lower than at the beginning of this

year at a bid cash price of around 70 compared

to slightly below par in January, according to

Tradeweb. Sri Lanka’s 2020s, on the other hand,

were bid at a cash price of above 95 last week,

recovering most of the losses seen in March. The

bonds had dropped to as low as 73 on April 1

after hovering around par until early March.

External financing stress remains acute as

Covid-19 has slammed emerging market credit

sentiment.

“A default by Sri Lanka or similarly rated

peers could increase funding costs for other

EMs that also have vulnerable debt profiles,”

said S&P’s Yin.

Jihye Hwang


Europe/Africa




1 JP Morgan 35 12,685.22 15.8

2 Citigroup 26 10,610.29 13.2

3 BNP Paribas 17 7,101.69 8.9

4 Deutsche Bank 10 4,729.72 5.9

5 SG 13 4,561.65 5.7

6 HSBC 13 3,880.65 4.8

7 Barclays 9 3,520.29 4.4

8 UniCredit 9 3,210.49 4.0

9 ING 8 3,114.93 3.9

10 Erste Group 6 2,982.31 3.7

Total 66 80,139.66


MIDDLE EAST

ISRAEL

SOVEREIGN RETURNS TO YEN MARKET

The STATE OF ISRAEL

Goldman Sachs

AMERICAS

ARGENTINA

MENDOZA FALLS SHORT OF COLLECTIVE ACTION THRESHOLD

PROVINCE OF MENDOZA

,”



Middle East






2 Citigroup 24 10,647.98 13.0

3 HSBC 27 9,199.25 11.2


5 Deutsche Bank 10 5,878.94 7.2

6 JP Morgan 14 4,057.13 5.0



9 First Abu Dhabi 13 3,482.67 4.3

10 Barclays 6 2,494.03 3.0

Total 85 81,862.56


Latin America





1 JP Morgan 36 9,586.76 11.9

2 Citigroup 22 6,593.11 8.2

3 Bank of America 30 6,556.80 8.2

4 Deutsche Bank 10 6,311.66 7.9

5 Itau Unibanco 18 5,637.41 7.0

6 Goldman Sachs 26 5,526.84 6.9

7 Scotiabank 16 4,953.27 6.2

8 BNP Paribas 12 4,763.02 5.9

9 HSBC 13 4,440.36 5.5

10 Santander 16 3,772.97 4.7

Total 90 80,265.37

INTERNATIONAL ISLAMIC FINANCE DEBTBOOKRUNNERS: 1/1/2020 TO DATE






2 HSBC 11 1,871.25 12.3

3 Dubai Islamic Bank 9 1,369.63 9.0

4 Natixis 3 785.53 5.2

5 First Abu Dhabi 7 780.25 5.1

6 Citigroup 6 770.24 5.1

7 Islamic Dev 6 746.75 4.9

8 Emirates NBD 8 650.58 4.3

9 Malayan Banking 1 500.00 3.3

10 BNP Paribas 1 500.00 3.3

Total 17 15,242.60


ARGENTINA

MEXICO

INDUSTRIAS PENOLES RIDES PRECIOUS METALS BOOM

INDUSTRIAS

PENOLES

Bank of America JP Morgan

PANAMA

BANISTMO SQUEEZES PRICING ON FIRST DOLLAR NOTE IN THREE YEARS

BANISTMO

Bank of America, Citigroup, and JP Morgan


EMERGING MARKETS AMERICAS


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Building a better experience.


FRONT STORY ASIA-PACIFIC

Lenders cool on Chinese POEs Concerns grow over default risks for lower-rated private sector borrowers

POEs have raised US$1.7bn in offshore loans this year, compared with US$7.9bn for all of 2019

The increased risk of defaults is reducing lender appetite for privately owned entities in China, as the coronavirus pandemic continues to sour sentiment in the loan market.

Chinese businesses were already suffering from the effects of more than two years of trade tension between China and the US. The health crisis has compounded the problem and private-sector borrowers such as CHINA ZHENGTONG AUTO SERVICES HOLDINGS have struggled to repay debts in recent months.

The Hong Kong-listed car dealer was granted a reprieve until January next year to meet a repayment that was due on July 20 on a US$380m loan it raised in 2018, but not all borrowers will be treated the same.

“It is a priority to support our existing clients, especially when they have

challenging to lend to POEs with which we do not already have existing relationships, unless it is a market leader,” said a Hong Kong-based banker at a Chinese bank.

“We would also look into whether the Covid-19 pandemic and worsening of US-China relations would have a huge impact on the borrower’s business.”

Chinese POEs have raised US$1.7bn in the offshore loan market so far this year, compared with US$7.9bn for all of 2019 and

data.

PAPER CHASE

In late July, SAMSON PAPER appointed liquidators from Deloitte representatives to pursue a debt restructuring, after irregularities in its audit prompted the resignation of four directors and some lenders demanded immediate repayment.

In April, SHANDONG QINGYUAN GROUP also sought changes to the repayment schedule of a US$955m loan it signed last September

liquidity squeeze.“Our credit department has asked us to

avoid lending to non-tier-one Chinese POEs until early next year because of creditworthiness concerns and the fact that they do not have the same

no matter how rich the pricing is,” said another Hong-based banker from a Taiwanese bank.

Chinese POEs are facing increasing

with smaller businesses the most at risk of failure, raising questions on their ability to access liquidity when the time comes to repay maturing debts. Potential rating downgrades add to the challenge as borrowers could get caught in a downward spiral.

“The downgraded POEs face further

shortage for them could also worsen further if the rapid spread of the coronavirus results in a sharp drop in global demand,” said a third loan banker.

ZhengTong had planned a US$300m

pandemic and a credit downgrade from

the deal. Its woes increased on July 24 when

with a negative outlook, citing its tight liquidity position and the missed repayment.

The luxury car dealer on Friday said its controlling shareholder had agreed to sell a 29.9% stake to state-owned Xiamen ITG Holding Group, sending its shares up by over 38% as investors bet on a state rescue.

TOP-TIER EXCEPTIONS

While lower-rated borrowers struggle to

top-tier POEs with an established track record have been able to attract lenders and obtain lower-priced loans.

In mid-July, electronic components maker LUXSHARE PRECISION INDUSTRY increased its three-year revolving credit facility to US$800m from US$500m after attracting 22 banks in general syndication. The deal offered top-level all-in pricing of 156.67bp via an interest

As one of the main partners assembling wireless headphones for US giant Apple,

XIAOMI

US$1.2bn on the back of a successful US dollar bond debut in April. Xiaomi

lengthened its maturity and increased the size of the loan – no mean feat considering the virus-induced volatile market conditions.

The loan offered all-in pricing of 134bp, marginally tighter than the 135bp–145bp

sounded out banks in September last year. The deal attracted 15 lenders in general syndication.

The willingness of banks to participate in

their desire to strengthen those client relationships in the hope of further opportunities, as they have been struggling to meet asset growth targets.

“The doors are not entirely shut for Chinese POE borrowings. Deals for top-tier borrowers with bellwether status still have a very good following as every bank is hungry

third loan banker.Evelynn LinAdditional reporting by Apple Li

“It is challenging to lend to POEs with which we do not already have existing relationships, unless it is a market leader”

“Deals for top-tier borrowers with bellwether status still have a very good following as every bank is hungry for assets due to sketchy deal flow”


LOANS Australia 60 China 61 Hong Kong 61 Singapore 62 France 62 Oman 63 Russia 63 UAE 63

United States 63 Brazil 64 Leveraged Loans 65 Restructuring 70

8 IFR Loans 2344 p59-XX.indd 59 31/07/2020 17:20:52


ASIA-PACIFIC

AUSTRALIA

PERPETUAL TAPS FOR US BUY

ASX-listed asset manager PERPETUAL has obtained a fully underwritten US$195m debt facility to partially fund its proposed acquisition of a 75% stake in a Texas-based

Perpetual is also seeking an equity raising of about A$225m (US$154m) and will use A$60m of cash to fund its proposed

& Strauss.The new underwritten debt facility will

have gearing levels of 1.1 times, which Perpetual will aim to reduce to below 1.0x within 12 months of the transaction’s

The US$319m acquisition from

to be completed by December 31, subject to regulatory and customary approvals.

US$44.1bn of funds under management

across the world.

the acquisition.Perpetual is also in advanced discussions

over other complementary bolt-on acquisitions.

PILBARA RENEWS FACILITIES

is raising and renewing US$125m in loans.The company is tapping a new US$110m

outstanding Nordic bond and is renewing a US$15m working capital facility.

BNP Paribas is providing US$73.3m of the new loan, while Clean Energy Finance Corp is contributing US$36.7m.

The new loan will primarily be used to fund the early redemption of the US$100m

Western Australia.The average all-in interest rate on the new

loan is around 5% based on current market reference rates, a substantial cost saving compared to the Nordic bond.

senior secured bond under Norwegian and Australian law in June 2017.

Repayments on the loan commence in September 2022 as a result of which Pilbara

conditions, which have been exacerbated by the coronavirus pandemic.

Drawdown of the facility is expected in

documentation and customary conditions precedent.

US$15m working capital facility originally signed in 2018.

PILGANGOORA OPERATIONS, a wholly owned

Pilgangoora Holdings are guarantors.BurnVoir Corporate Finance

adviser.

TRANSGRID POWERS UP FOR REFI

by RBC Capital Markets, is seeking proposals

In June 2018, NSW ELECTRICITY NETWORKS

FINANCE, the borrowing entity for TransGrid,

seven tranches with tenors ranging from three to eight years.

Fifteen banks participated in that borrowing.

Employees Retirement System obtained a A$700m three-year club loan from six banks to back its acquisition of a stake in

lenders.

Omers has acquired a 19.99% stake in TransGrid from Wren House Infrastructure, a subsidiary of Kuwait Investment Authority.

TransGrid also counts Caisse de depot et placement du Quebec (25%), Abu Dhabi Investment Authority’s Tawreed Investments (20%) and Utilities Trust of Australia (20%) as shareholders.

FOUR SEASONS ASKS FOR WAIVER

FOUR SEASONS HOTEL SYDNEY is seeking a waiver from lenders for several covenants on a

coronavirus pandemic continues to batter the hospitality industry.

Sole mandated lead arranger and bookrunner Standard Chartered Bank is coordinating the amendment and waiver process for the borrowing, which comprises

expenditure piece.The process, which will grant the

certain covenants, was launched on July 17 and is expected to be completed in August.

Four Seasons Hotel Sydney, owned by

historically high occupancy rate of around 80%.

However, travel restrictions, including a ban on international travellers due to the Covid-19 pandemic, have impacted its bottom line and its shareholders have injected A$17.1m of additional liquidity to support the business.

Four Seasons Hotel Sydney raised a

after attracting seven lenders in general

increased to A$285m in October 2018.Australian Executor Trustees, a non-

government provider of trustee services, is the borrower of the transaction, which paid a top-level participation fee of 45bp and an

Investments bought the property for A$340m in 2013.

SEVEN WEST MEDIA AMENDS

SEVEN WEST MEDIA has amended A$750m of loans as it copes with the impact of the coronavirus pandemic.

The amended facilities carry a general security deed and pay an increased interest margin of 450bp, plus upfront fees.

Other amendments include the extension of the maturity on A$450m of credit limits to the second half of 2022 from the second half of 2021, and the substitution of existing covenants with a monitoring of liquidity and post Covid-19 earnings recovery until December 2021.

Grant Samuel and Ashurst advised Seven

revolving bilateral loans totalling A$1.4bn to

lengthening the company’s debt maturity to

ASIA-PACIFIC LOANS BOOKRUNNERS – FULLY

SYNDICATED VOLUME (INCLUDING JAPAN)BOOKRUNNERS: 1/1/2020 TO DATE


Proportional credit

Source: Refinitiv SDC code: S3a

1 Mizuho 266 62,440.82 20.4

2 MUFG 432 45,312.37 14.8

3 Sumitomo Mitsui 357 38,767.30 12.7

4 Bank of China 201 38,430.54 12.6

5 ANZ 40 8,172.13 2.7

6 HSBC 40 6,135.93 2.0

7 DBS Group 27 5,766.94 1.9

8 China Merchants Bank 13 5,215.44 1.7

9 Citigroup 17 4,873.25 1.6

10 Ag Bank of China 12 4,535.10 1.5

Total 1,615 305,457.06



LOANS ASIA-PACIFIC

borrower on the syndicated deal.

CHINA

PING AN LEASING BACK FOR REFI

returning to the loan market after a year.China Construction Bank (Asia) and Deutsche

Bank are the mandated lead arrangers and bookrunners on the bullet loan, which has

The borrower is PING AN LEASING HONG KONG

HOLDINGS

which is the guarantor.The deal offers an interest margin of

August 21 receive an early-bird fee of 10bp.

receive a top-level all-in pricing of 170bp via 105bp in upfront fees. Senior lead arrangers coming in for US$30m–$49m earn an all-in of 166bp via fees of 93bp, while lead arrangers taking US$15m–$29m earn an all-in of 163bp via 84bp in fees.

year loan raised in January 2018 and for general corporate purposes. Deutsche

which offered a top-level all-in pricing of 161.67bp via an interest margin of 135bp

The borrower’s most recent visit to the loan market was in July last year for a US$350m three-year loan. It offered an all-in pricing of 170bp via a margin of 135bp over

GLP CHINA ATTRACTS SEVEN

Seven lenders have joined a US$1.2bn three-year loan for GLP CHINA HOLDINGS’ acquisition of a 50% stake in the private equity

Group.

bookrunners Bank of China and Bank of Communications partially pre-funded the deal

its position.Lenders are ICBC Macau branch, ICBC Tokyo

branch, Nanyang Commercial Bank, Ping An Bank, Cathay United Bank, Chiyu Banking Corp, KGI Bank and Bank SinoPac.

The loan offered a top-level all-in pricing of about 180bp.

Proceeds will be used to back the

loan.

Group announced a strategic partnership

Rmb270bn (US$38bn) assets under

each other’s network of domestic and international investors to collaborate on the development of new funds.

HONG KONG

KAI TAK DEVELOPER SIGNS CLUB

A joint venture between China Resources

for a residential development in the Kai Tak district in Hong Kong.

Six lenders signed the loan, with Industrial and Commercial Bank of China (Asia) as the facility agent. Other lenders are DBS Bank, China Construction Bank, Bank of Communications, Bank of China and Mizuho Bank.

FAME WELL CREATION, a 65:35 JV between CR

guaranteeing the loan, and the land parcel will serve as security.

The loan offers an all-in pricing of around

that backed Fame Well Creation’s HK$12.91bn winning bid for the land parcel in Kai Tak last year.

Proceeds from the new loan will also go towards residential development of the site, which has an area of about 9,481 square metres and is designated for non-industrial purposes.

JAPAN

SONY RAISES U$2bn FOR EMI BUY

SONY has raised a US$2bn loan from Japanese lenders to fund the acquisition of the

Publishing.Japan Bank for International Cooperation

funded US$1.2bn, while Mizuho Bank, MUFG, SMBC and Sumitomo Mitsui Trust Bank provided the remainder.

In November 2018, Sony acquired the 60% stake it did not already own in DH

NewOcean Energy seeks to defer repayment HONG KONG Borrower had sounded market in May for three-year club

Hong Kong-listed NEWOCEAN ENERGY HOLDINGS

is in talks with lenders to defer a principal

repayment on a US$150m club loan it raised in

2016.

The privately owned borrower held a

conference call with lenders on July 24 and

requested a deferment of the instalment

because of the impact of the coronavirus

pandemic and a plunge in global oil prices.

In May, NewOcean Energy had sounded

the market for a three-year club loan of an

unspecified size, with an all-in pricing around

400bp.

However, the deal did not materialise because

of the coronavirus pandemic.

ANZ, CTBC Bank, Standard Chartered and

Taiwan Cooperative Bank were the lenders on the

US$150m four-year loan closed in August 2016,

which offers an interest margin of 350bp over Libor.

The loan has a 70% balloon repayment falling

due in August when the facility matures.

The amortisation schedule comprised repayments

in unequal semi-annual instalments starting 30

months after the first drawdown with the first three

instalments accounting for 10% apiece.

The company’s previous visit to the market

was in May 2018 for a US$170m-equivalent

four-year club loan from seven lenders,

including HSBC as the coordinator. That deal

offers an interest margin of 350bp over Hibor/

Libor.

The 2018 deal also has the same repayment

breakdown and amortisation schedule as the

2016 borrowing.

On July 7, NewOcean Energy said the group

was expected to record a consolidated loss of

approximately HK$340m for the six months

ended June 30 2020.

Due to Covid-19 and the slump in global

oil prices during the first half of 2020,

the group’s businesses, especially the oil

bunkering operations in Hong Kong and

Singapore and the electronics business in

China, have been seriously affected, the

company said.

Headquartered in Hong Kong,

NewOcean Energy is an investment holding

company mainly engaged in the sales and

distribution of liquefied petroleum gas and

natural gas.

Evelynn Lin, Apple Li



Investment.

SINGAPORE

VITOL DOUBLES REFI TO US$2BN

Energy trader VITOL has completed a larger

from an original target of around US$900m–$1bn.

The self-arranged one-year facility closed as a club after attracting 20 banks, most of which are existing lenders.

Lenders are Bank of China, DBS Bank, HSBC, Mizuho Bank, MUFG, OCBC Bank, SMBC, United Overseas Bank, ANZ, National Australia Bank, Westpac, Scotiabank, First Abu Dhabi Bank, Agricultural Bank of China, Maybank, Wells Fargo, ICBC, Land Bank of Taiwan, Arab Bank and Union de Banques Arabes et Francaises.

Vitol was seeking commitments of

slightly less than the US$150m it obtained at that level on its previous visit last year.

Proceeds from the latest loan will

credit facility completed in July last year for Vitol Asia with 21 lenders.

Pricing is said to be higher than what the Singapore unit paid on its borrowings in the last two years.

The July 2019 loan paid the same interest

on a US$1.855bn 364-day revolver from July 2018. The top-level all-in pricing on the July 2018 loan was 70bp.

M+S NETS ASIA’S LARGEST GREEN LOAN

Singapore government-linked property

the city state in what is the largest real

DBS Bank, OCBC Bank and United Overseas Bank acted as joint green loan advisers and mandated lead arrangers on the 3.5-year transaction.

MS COMMERCIAL will use the

which are valued at approximately S$5bn.

borrowing signed in February 2017.The property comprises 1.88 million

business district.

part of the green loan package.

The buildings have achieved numerous international accolades for their sustainable

sovereign wealth fund Khazanah Nasional and Singapore state investor Temasek Holdings.

EUROPE/MIDDLEEAST/AFRICA

FRANCE

SUEZ SIGNS SOCIAL RCF

Water and waste company SUEZ has signed a €100m revolving credit facility dedicated to social projects that address the impacts of the Covid-19 crisis.

globally to put in place a syndicated social credit facility, which has a two-year maturity with two one-year extension options.

The facility was structured and fully underwritten by UniCredit alongside BNP Paribas, Credit Agricole, NatWest and Santander, which joined as mandated lead arrangers.

Among other schemes, the loan will fund charitable foundations committed to deliver solidarity actions including Fondation Suez; its employees who have remained on the front line during the lockdown; families or corporates, customers or suppliers, or any individual who has been most affected by Covid-19 and the lockdown of the economy; and appropriate medical research.

Funds can be used in any country in which Suez operates, including France, Germany, Italy, Spain and the UK.

In April 2019, Suez renegotiated its RCF, increasing the size to €2.5bn from €1.5bn and linking the margin to the company’s environmental and social performance, which is based on the company’s sustainable development roadmap for 2017–21.

from February 2021 and includes options to extend until April 2026.

TEREOS NETS STATE-BACKED LOAN

Sugar and ethanol group TEREOS has secured a state-guaranteed loan of €230m, which should help it meet heavy challenges posed by the Covid-19 crisis, the borrower said.

Tereos, the world’s second-largest sugar

in three years last month, helped by higher sugar prices in Europe and asset sales, but debt remained high, at €2.6bn by

The loan, granted under a programme to support businesses impacted by the pandemic, is guaranteed at 80% by the French state and is

It was secured with Natixis, BNP Paribas, Rabobank, Commerzbank, Bred Banque Populaire, Banque Palatine, Caisse d’Epargne et de Prevoyance Grand Est Europe, Credit Cooperatif and Credit Industriel et Commercial.

GERMANY

VW’S TRATON SIGNS DEBUT RCF

TRATON, a subsidiary of auto manufacturer VOLKSWAGEN, has signed a €3.75bn debut syndicated revolving credit facility.

The loan was signed with 21 of Traton’s core relationship banks and has an initial three-year maturity with two one-year extension options.

The facility can be drawn in different currencies and will be used for general corporate purposes and back-up liquidity.

An ESG and sustainability link has been embedded in the facility.

Traton said the debut RCF marked an important step to back its recently published ratings.

In June, Traton received a credit rating of

ITALY

BRACCO GETS ESG-LINKED SSD

BRACCO IMAGING has signed a €120m ESG-linked Schuldschein.

development of the borrower’s international activities.

UniCredit was arranger and ESG structuring agent in the transaction. Cassa Depositi e Prestiti was also involved.

EMEA LOANS BOOKRUNNERS – FULLY

SYNDICATED VOLUMEBOOKRUNNERS: 1/1/2020 TO DATE


Proportional credit

Source: Refinitiv SDC code: R17

1 BNP Paribas 109 58,540.00 15.3


3 Santander 69 22,401.02 5.9

4 HSBC 63 19,881.17 5.2

5 SG 52 18,684.79 4.9

6 JP Morgan 44 18,395.84 4.8

7 Citigroup 41 17,803.47 4.7

8 UniCredit 76 17,755.99 4.7

9 Deutsche Bank 51 16,975.68 4.5


Total 437 381,372.69



LOANS NORTH AMERICA

Pricing on the loan is linked to

production sites using electricity from renewable sources.

€1.5bn.

OMAN

TWO COORDINATORS FOR OMAN

First Abu Dhabi Bank and Bank Muscat are coordinating a US$2bn bridge loan for OMAN.

and documentation agent for the one-year loan.

The loan facility is already oversubscribed, one banker said, though some banks have had to decline participation due to over exposure to Oman.

“We can’t do it, we have already stretched our Omani country limits,” said another banker.

Oman is expected to take the loan out in the bond market.

weakest economies in the oil-rich Gulf – was forced to put a US$2bn sovereign loan on hold after it was hit by falling oil prices, the impact of Covid-19 and a downgrade by

loan too expensive.However, as market conditions have

the one-year loan, even though it was

June 23.

SOHAR INTL BANK MARKETS US$100m LOAN

SOHAR INTERNATIONAL BANK is in the market for a US$100m two-year loan.

The loan is being arranged by Mashreqbank and pays all-in pricing of around 300bp over

Sohar was last in the market for a syndicated loan in August 2018 when it signed a US$250m three-year loan.

were mandated lead arrangers and bookrunners on that transaction.

Nizwa – citing the Omani government’s weakening capacity to support local banks following its downgrade of Oman’s

June 23.

RUSSIA

NLMK SEALS US$600m LOAN

Steel company NLMK has signed a US$600m revolving credit facility with 11 banks.

The four-year loan was provided by ING, Credit Agricole, Natixis, Intesa Sanpaolo, Societe Generale, Raffeisen Bank International, Bank of America, Mizuho, Deutsche Bank, ICBC and UniCredit.

ING was coordinator and UniCredit was facility agent.

The loan was closed in July and includes an accordion feature that could see the facility increased to US$1bn.

loan, which linked pricing to the company’s sustainability performance.

The new loan also has the option to link pricing to ESG targets at a later date.

UAE

NAKHEEL IN REFI TALKS

Dubai property developer NAKHEEL has

an economic downturn that is exacerbating property oversupply problems and has raised concerns over Dubai’s debt sustainability.

State-owned Nakheel, developer of Dubai’s palm-shaped islands, was forced into a massive debt restructuring in the aftermath of the emirate’s 2009–10 real-estate crash, when the company was one of the hardest hit.

It has recently approached banks to

reported.

raised for the development of its Deira

“As part of our usual business operations, we are in discussions with lenders and will announce further details as appropriate in due course,” Nakheel said in a statement.

Dubai’s real-estate sector, sluggish for most of the past decade, has been hit further by the coronavirus pandemic. A

world fair, which has been delayed by a year to October 2021, has worsened oversupply problems.

Nakheel slashed salaries by as much as 50% earlier this year, sources have said. Its

Dubai and government-related entities face some US$10bn in debt repayments

the economy could shrink by 11%, according to S&P.

meant to be one of the region’s largest with a net leasable area of 4.5m square feet, according to Nakheel’s website.

Nakheel said in July that, despite challenges caused by the pandemic, it had sold almost 250 properties with a total sales value of more than Dh600m in the last four months.

NORTH AMERICA

UNITED STATES

NOVELIS MINES FOR EXTENSION

Aluminium producer NOVELIS, a subsidiary of India’s Hindalco Industries, is seeking an extension of a US$1.1bn bridge loan it signed three months ago for its acquisition of rolled aluminium products supplier Aleris.

for the one-year extension around July 31. The loan is also likely to be repriced.

The borrowing was originally signed as a one-year loan in April and pays an

Subsidiary Novelis Holdings Inc is the

at a smaller size than originally envisaged due to delays in closing of the acquisition amid scrutiny from antitrust regulators.

In 2018, the company had put in place a larger borrowing comprising a US$1.5bn one-year bridge loan and a senior secured incremental term loan of up to US$775m.

AMERICAS LOANS BOOKRUNNERS – FULLY

SYNDICATED VOLUMEBOOKRUNNERS: 1/1/2020 TO DATE


Proportional credit

Source: Refinitiv SDC code: R7

1 BofA 587 149,278.69 13.1

2 JP Morgan 497 138,144.55 12.1

3 Citigroup 287 94,253.75 8.3

4 Wells Fargo 367 84,675.62 7.4

5 Barclays 176 37,649.95 3.3

6 Goldman Sachs 164 37,281.14 3.3

7 Morgan Stanley 93 34,184.48 3.0

8 RBC 160 34,131.33 3.0

9 Credit Suisse 111 31,660.39 2.8

10 US Bancorp 199 29,131.67 2.6

Total 1,918 1,140,801.19



MOSAIC UPS RCF TO US$2.2bn

Agricultural chemicals company MOSAIC has increased its revolving credit facility to US$2.2bn from US$2bn.

The borrower also extended the maturity date on the RCF by one year to November 18 2022. The facility was

November 2016.Wells Fargo is administrative agent on

the loan.The amendment also increased the

interest rate margin and commitment fee

with a 25bp commitment fee; for

is 275bp and 55bp.The amendment does not make any

changes to the covenants on the revolver with respect to the interest coverage and leverage ratio requirements.

As of July 24, there were no borrowings outstanding under the facility.

The unused commitment fee is currently 40bp per year.

STRATEGIC EDUCATION SEEKS REVOLVER

Nasdaq-listed education provider STRATEGIC

EDUCATION is increasing an existing revolving credit facility to US$350m as it acquires the Australasian portfolio of US-

Bank of America and SunTrust Bank have committed to increase the revolver from US$250m.

Strategic Education, formerly known as Strayer Education, has signed an

and New Zealand educational portfolio for US$642.7m in cash, subject to potential adjustments.

The portfolio includes Torrens University Australia, Think Education and

students of business, hospitality, health, education, creative technology and design.

The transaction is expected to close by

the satisfaction of customary closing conditions and regulatory approvals.

Following the transaction, Strategic will serve nearly 110,000 students online and at more than 85 campuses in the US, Australia and New Zealand.

adviser to Strategic Education on the

legal adviser.

LATIN AMERICA

BRAZIL

PETROBRAS REPAYS US$3.5bn

Oil and gas company PETROBRAS has repaid US$3.5bn of its revolving credit facilities after it drew down US$8bn in

Petrobras drew down on US$8bn from its dollar-denominated credit facilities due to volatility stemming from the coronavirus pandemic, a decrease in oil prices and lower demand for fuel.

2018 the company signed a US$4.35bn

The company also signed a US$750m 10-year credit line with Santander in November 2018.

Ford drives big support from lenders US Automaker stretches maturity of US$4.8bn of US$5.35bn RCFs

FORD MOTOR CO has obtained commitments

from enough relationship banks to extend the

maturity of US$4.8bn of US$5.35bn of revolving

loans for one year.

The second-largest US automaker began

discussions with its lenders in early July

about a one-year extension of its US$3.35bn

three-year main corporate revolving

credit facility and its US$2bn three-year

supplemental RCF.

JP Morgan led the deal.

The Ba2/BB+/BB+ rated automaker was

seeking to address loan maturities for the first

time since downgrades in March removed its last

investment-grade rating. The move was a test

of banks’ willingness to lend to a US household

name in an industry that has been hit hard by

the coronavirus pandemic.

“It’s good, given that they are not in an easy

sector,” a banker close to the transaction said.

“It’s a good outcome.”

Both facilities were due to mature on April 30

2022 and have been extended for one year.

The company offered an all-in spread of 225bp

over Libor, split between a drawn spread of 175bp

and an undrawn fee of 50bp for the main corporate

and supplemental RCFs that are extended.

All lenders agreeing to the extension received

a 40bp fee on the amount extended.

Lenders that chose not to extend will remain

in the existing loans at an all-in spread of 175bp

over Libor, split between a drawn spread of

147.5bp and an undrawn fee of 27.5bp for the

main corporate and supplemental RCFs.

The fees Ford’s lenders received for its

US$8bn in bond issues in April may have

helped lenders get more comfortable with

the extension. The perception that the US

government supported the automaker via the

Federal Reserve’s corporate bond purchasing

programme may have been another positive, the

banker said.

COVID-19 CHALLENGESThe company first approached its JP Morgan-led

bank group in February to refinance US$15.4bn

in revolving credits but in March decided to

draw down on the facilities and postponed

its refinancing plans as market conditions

deteriorated.

In March, Ford drew US$13.4bn under its

corporate credit facility – including the three-

year corporate revolver it has extended – as well

as US$2bn under its three-year supplemental

credit facility, for a total of US$15.4bn.

The company said borrowings would be used

to “offset the temporary working capital impacts

of the coronavirus-related production shutdowns

and to preserve Ford’s financial flexibility”.

In an earnings call on Thursday, Ford said it

expects a full-year loss but that it should have

ample cash for the rest of 2020, even if global

demand falls further.

The automaker also said it had repaid

US$7.7bn of an outstanding US$15.4bn RCF.

The better-than-expected results and

earnings outlook sent Ford’s shares up 2.5% in

after-market trading.

Michelle Sierra



LOANS LEVERAGED LOANS

LEVERAGED LOANS

UNITED STATES

ORION SEEKS US$700m FIRST-LIEN

ORION ADVISOR SOLUTIONS set the terms of a

Genstar Capital’s acquisition of the company.

The seven-year loan is being offered at

OID and 101 soft-call protection for six months.

Orion, which provides technology for

second-lien loan that will be privately placed and a US$80m revolving credit facility.

Credit Suisse, UBS, BMO Capital Markets, Citizens Bank and SunTrust are arranging the deal.

investment management company with US$24.5bn in assets under management as of June 19.

Genstar will invest in the combined business alongside Orion’s existing private equity sponsor TA Associates.

Independent music producer CONCORD

MUSIC GROUP has launched a US$400m loan to

The seven-year loan is being offered at

98.5 OID and 101 soft-call protection for six months.

JP Morgan is leading the deal.Concord will use proceeds to repay

borrowings from a revolving credit facility,

some of this loan towards general corporate purposes.

KKR‘s real-estate

seven-year loan that will be used to repay debt, acquire assets and put toward general corporate purposes.

Software provider LOGMEIN has scheduled

US$1.95bn loan that will support its

Francisco Partners and Evergreen Coast Capital.

The seven-year loan is expected to have

for six months.Barclays, RBC Capital Markets, Deutsche Bank,

Jefferies and Mizuho are arranging the transaction.

priority lien on substantially all assets and stock of the company.

an agreement to be acquired by Francisco and Evergreen in a transaction that valued the company at roughly US$4.3bn.

KKR REAL ESTATE FINANCE TRUST is offering the

OID and 101 soft-call protection for 12 months.JP Morgan is leading the deal.

CJ FOODS RELAUNCHES TERM LOAN

Pet food manufacturer CJ FOODS has relaunched a US$285m term loan into syndication that will support its acquisition of peer American Nutrition.

lien loan in February but withdrew the deal shortly after as the coronavirus pandemic weakened market conditions.

Goldman Sachs seeks up to US$17bn for private credit

US MIDDLE MARKET July saw 486 funds in the market, the most for five-and-a-half years

GOLDMAN SACHS MERCHANT BANKING DIVISION

is seeking up to US$17bn for private credit

investments for senior debt financings and special

situations transactions, according to documents

from Connecticut’s state pension plan.

MBD is targeting US$7bn for Broad Street Loan

Partners IV. The fund will participate in senior loan

deals in the upper middle market and smaller deals

in the broadly syndicated loan market.

The Goldman unit is also seeking US$5bn–

$10bn for West Street Strategic Solutions I,

a special situations fund that will invest in

transactions that include growth capital and

balance sheet restructurings.

Loan Partners IV has raised approximately

US$1bn from investors, excluding leverage, while

WSSS I has raised approximately US$6.4bn,

according to US SEC regulatory filings.

“We accelerated the marketing of a new credit fund

called West Street Strategic Solutions as a part of our

transition to fund-driven investing. Client receptivity

has been very strong,” CEO David Solomon said on

the bank’s second-quarter earnings call.

“We believe this strategy is well-timed to capture

opportunities in the market today and provide critical

private financing to companies in need.”

ON THE RISEMBD’s fundraise comes at a competitive time in

the private credit market, with 486 funds in the

market in July, the most in the past five-and-a-

half years, according to data from research firm

Preqin. Almost 300 of those vehicles are raising

capital for direct lending, most often associated

with senior debt, and special situations.

Fund managers investing in direct lending and

special situations are targeting more than US$124bn

of the US$239bn being raised across private credit

funds globally, as of July, according to Preqin.

Concurrently, lending to private equity-backed

companies in the middle market, the most common

type of private credit transaction, fell as much as 70%

in the second quarter, according to Refinitiv LPC data.

Limited partners such as university

endowments, insurance companies and pension

funds invest in private credit funds.

The Connecticut pension fund is considering

a US$350m allocation to Goldman Sachs’

investment funds to manage across different

credit strategies, including Loan Partners IV and

WSSS I.

The pension fund portfolio has a 5%

allocation to private credit, said Shawn Wooden,

Connecticut state treasurer.

“The purpose of this allocation is to generate

attractive, risk-adjusted returns above public market

debt strategies and reduce volatility through lower

correlation to other asset classes,” he said.

The private credit allocation can include sub-

strategies that invest in senior debt, junior debt,

distressed debt and special situations, Wooden said.

BACK TO BUSINESSAfter several months of caution following the

Covid-19 outbreak, LPs have broadly resumed

normal operations, according to a June investor

survey from Campbell Lutyens, a firm that helps

credit managers raise money.

Loan Partners IV will operate with fund-level

leverage, which would allow Goldman Sachs

to borrow money to invest alongside LPs’

commitments.

The two funds will mainly invest in North

American companies. After paying investors’

fees, target returns for Loan Partners IV will be

10% and 12%–14% for WSSS I.

“Credit markets have been volatile during

the beginning of 2020, and the coronavirus

pandemic has the potential to undermine

corporate fundamentals for some time,” said

Wade O’Brien, a managing director at investment

and advisory firm Cambridge Associates.

“Attractive opportunities remain in credit, but

investors may need a different playbook than the

one developed during the last financial crisis.”

Andrew Hedlund



97 OID and 101 hard-call protection for 12 months.

protection for six months.Citizens Bank and Keybanc Capital Markets are

arranging the deal.

Debt to Ebitda was estimated at around 6.1 times pro forma for the acquisition of

February.When including management’s Ebitda add-

backs and cost synergies, pro forma leverage

American Nutrition manufactures dry, canned and baked pet foods.

Chemicals company EMERALD PERFORMANCE

MATERIALS has launched a US$425m loan to

98.5 OID and 101 soft-call protection for six months.

The transaction, led by Credit Suisse, will also comprise a US$75m revolving credit facility.

Insurance broker BROADSTREET PARTNERS has launched a US$175m incremental loan to repay borrowings from an RCF.

The loan is being shopped at 375bp over

call protection for six months.RBC Capital Markets is leading the deal.

commit to the terms of the facility.The incremental loan will be non-fungible

with a loan that matures in January 2027.

fund acquisitions.

GRAHAM PACKAGING UPS LOAN

Container manufacturer GRAHAM PACKAGING has increased the size and tightened pricing on a term loan.

The seven-year loan has been increased to US$1.475bn from US$1.41bn and the margin has been lowered by 25bp to 375bp over

The OID has also been tightened to 99.25 from 98–98.5.

protection for six months remain unchanged.The company also raised a US$510m

senior unsecured bond and a US$100m revolving credit facility.

Credit Suisse and HSBC arranged the loans and bonds.

Graham Packaging is part of packaging manufacturer Reynolds Group.

Proceeds from this term loan will

Direct lenders modify fee structures to compete US Private equity-backed middle market deal activity fell 70% in Q2

Direct lenders in the US are modifying fund fee

structures to compete for limited investor dollars

in a lacklustre private debt space.

Investors are taking a step back from illiquid

opportunities as businesses worldwide grapple

with the global health crisis brought on by

the Covid-19 pandemic. After a decade-long

expansion, private debt fund commitments,

which, unlike shares, cannot be redeemed easily,

have seen fundraising numbers drop as a result.

Credit managers are no longer capturing the

fee income they were in years past due in part to

a 70% decline in private equity-backed middle-

market deal activity in the second quarter

compared to the first. The uncertainty of the

pandemic’s course on the US economy has seen

a drop in fundraising for many firms.

“Some investors, such as pension funds

and endowments, have been facing liquidity

constraints. As a result, they are increasingly

holding off on investing in private funds because of

the need for regular cashflow,” said Michael Ewald,

global head of private credit at Bain Capital Credit.

Direct lending funds raised US$9bn in the

second quarter of 2020, according to research

firm Preqin, a decrease from US$11.9bn over the

same time last year.

Downward pressure on fees has only

worsened. The proliferation of private credit and

direct lenders in the last four years has resulted

in an intense race among new and existing

players to raise capital causing further fee

compression.

In response to the challenges, funds are

modifying fee structures to entice investors.

Asset manager Barings launched a private

business development company with a 12.5%

incentive fee, lower than competitors’ typical

17.5% or 20%, along with a hurdle rate tied to

Libor.

A typical private debt fee structure has a

management fee of 1.5%–2% and an incentive

fee ranging between 15% and 20% paid out over

a 7%–8% hurdle, according to industry analysts.

The incentive fee allows managers to

participate in investment profits, while the

hurdle rate ensures investors earn a specific

amount before the manager takes any profits.

An incentive fee structure that is pegged to

Libor takes away the incentive to invest in riskier

assets, when Libor is low, as it is currently.

“By having a structure where the incentive

fee has a Libor component in it, there is no

motivation to chase risk to get your incentive

fee by chasing higher-yielding assets,” said

Robert Dodd, a BDC analyst at Raymond James

Securities.

In general, investments with a higher yield

carry more risk than lower-yielding positions.

The Barings vehicle also charges a 15bp

management fee, which the credit firm receives

for overseeing the capital. That figure is a

fraction of the 150bp BDC industry standard.

At the peak of the US shutdown, many

listed BDCs reported pressure on first-quarter

earnings. As a result, Gladstone Capital Corp, a

publicly traded BDC, increased its hurdle rate to

8% from 7%, which took effect on April 1. That

move meant investors would receive a higher

return before the BDC management earned a

share of the profits.

PAYING LESSDirect lenders have lowered their fees since a

high point in 2015, according to Preqin data,

to adapt to the intense competition in the US

middle market.

The average management fee this year is

1.45%, according to the data. In previous years

average management fees, though higher than

this year, have been lower than the 1.8% peak

average recorded in 2015.

Many fund managers raising BDCs will keep

a vehicle private, only allowing institutional

investors to buy into the fund, before conducting

an IPO. During that ramp-up period, lenders

traditionally offer institutional investors a lower

management fee and remove any incentive fee.

Owl Rock Capital Corp charged a 75bp

management fee with no incentive fee before

going public last year. Now public, the BDC

charges a 17.5% incentive fee over a 6% hurdle

rate and a 1.5% management fee.

Owl Rock offered fee waivers for the five

quarters following the IPO, allowing any

investors that committed money to the BDC at

rock-bottom fees to withdraw their money to

avoid the higher fees, Dodd said.

David Brooke, Andrew Hedlund




On July 9, New Zealand-headquartered Reynolds said it intended to raise standalone

Engineering services provider ALION SCIENCE

& TECHNOLOGY has tightened the margin by 25bp on a US$360m term loan.

The four-year loan was priced at 375bp

launch.A 99 OID and 101 soft-call protection for

six months remain unchanged from launch.UBS and KKR Capital Markets arranged the

transaction.

maturing in August 2021 and repay US$183m in mezzanine debt.

The company has also put in place a US$40m revolving credit facility.

this transaction will reduce the company’s overall debt, the ratings agency said.

Debt to Ebitda will reduce to the mid 4.0 times range from the low 6.0 times area.

In August 2015, Alion raised a US$300m six-year term loan and a US$40m revolver.

TOSCA TIGHTENS PRICING

Packaging company TOSCA SERVICES tightened the margin and OID on a US$526.5m term loan.

The seven-year loan was priced at 425bp

from a range of 475bp-500bp. The OID was amended to 98.5 from 97.

protection for six months remained unchanged.

Credit Suisse, Deutsche Bank, UBS, Goldman Sachs, Rabobank, KKR Capital Markets and Mizuho arranged the deal.

Proceeds will support the acquisition of

As a result of the loan and acquisition, pro forma adjusted debt to Ebitda will increase to the 5.0 times area in 2020 before declining to the mid-4.0 times area in 2021 and beyond, S&P said.

Partners, will commit additional equity to

support the acquisition of Contraload, a European plastic pallet maker.

Plasmid DNA supplier ALDEVRON increased its term loan by US$50m to US$100m.

The incremental debt priced at 425bp

versus a range of 99–99.5 at launch.Proceeds will pay down borrowings from

a revolving credit facility.Morgan Stanley led the deal.

The debt will be fungible with an existing

US$1.13bn debt package that backed the

Partners and TA Associates.The debt comprised a US$740m seven-

RCF.

Investors bet on risky borrowers in search for yield US Average margin for drawn Single B TL now 460bp from 390bp in February

Low-rated borrowers are prying open a window

of opportunity to raise money in the leveraged

loan market as a dearth of higher-rated deals

has investors seeking returns from a riskier

corner of US credit markets.

At least six companies rated B3 by Moody’s

launched loans in July, but have done so with

attractive coupons that have enabled these

deals to sail through the syndication process.

Higher coupons are quickly becoming the

new normal for lower-rated borrowers. In recent

months, these companies have struggled to

attract interest from risk-averse investors wary of

companies’ debt being downgraded by ratings

agencies.

Since the onset of the coronavirus pandemic

loan defaults have soared and companies

have drawn down credit lines or tapped capital

markets for emergency funding.

In July, however, a lack of higher-quality

Double B rated loans has granted Single B

borrowers greater investor attention. Albeit at

a steeper cost, these companies have seized

on this momentum and raised loans that have

repaid recent borrowings, funded acquisitions or

extended maturities.

In July, produce company AGROFRESH agreed

a US$275m loan at 625bp over Libor to amend

an older deal that paid just 475bp and extended

the maturity by three years to 2024.

Earlier in the month, aftermarket automotive

company FIRST BRANDS offered investors

a lucrative 750bp margin for a US$810m

incremental term loan to fund an acquisition.

The average margin of a drawn Single B

term loan has increased to roughly 460bp over

Libor in July from 390bp at the end of February,

according to Refinitiv LPC data.

Single B borrowers are the most exposed to

downgrades into Triple C territory, which is just a

few notches above default.

“B3s are definitely making a comeback. These

businesses can get deals done, but it will just

cost them a bit more right now,” said Michael

Marzouk, managing director for bank loan

strategies at Pacific Asset Management.

Furthermore, loan quality fell to a new low in the

first quarter and may worsen, according to Moody’s.

The ratings agency’s Loan Covenant Quality Indicator,

a measure of investor protections, weakened by 8bp

to 4.3 in the first quarter of 2020 compared with the

prior two-quarter period. At 4.3, this score, measured

from one to five with five indicating the worst possible

protection level, is the highest it has ever been.

“Borrowers have expanded the set of tools to

alleviate their credit stress at lenders’ expense,”

Moody’s analysts wrote in the report on July

28. “They also retain several options not yet

widely deployed ... which could present serious

complications for secured lenders.”

MEAGRE SUPPLY

As lower-rated borrowers fill the market, at the

heart of the matter is a lack of higher-quality

supply.

Investors, particularly CLOs, are

clamouring for higher-rated loans for

businesses with greater cashflow that can

withstand bouts of uncertainty brought on by

the pandemic.

But with little in the way of top-quality

leveraged loans, portfolio managers must

weigh the risks and rewards of Single B rated

companies, particularly against the backdrop of

economic volatility.

CLOs remain wary of stuffing their vehicles

with B3/B rated loans as downgrades to Triple C

can trigger tests within the CLO.

CLO new issuance volume in June was at its

highest since Covid-19 gripped capital markets

in March. In June, 21 CLOs raised US$8.2bn,

37% more than in May, and investors are under

pressure to fill these vehicles with new loan

facilities.

“Folks that raised new CLOs need to put

money to work and find the necessary paper,”

said an investor that focuses on performing

loans. “There is not much else in the market

right now, so this limited, lower-quality stuff gets

an audience.”

Aaron Weinman



ALIGHT AGREES US$2.63bn LOAN

administration services company ALIGHT

SOLUTIONS has raised a US$2.63bn loan.

guidance.

soft-call protection for six months.Proceeds will amend and extend an

The loan, led by Bank of America, will mature on October 1 2026.

Alight, formerly known as Tempo, raised

in April 2017.Proceeds supported its buyout by private

Software company BLUE YONDER has agreed

existing debt.The 5.5-year loan was priced at 325bp

101 soft-call protection for six months.JP Morgan led the transaction.

maturing in October 2023.

Software, raised a US$1.23bn loan at 275bp

Ticketing and concert company LIVE NATION has amended its credit agreement to give

covenants.

Nation now has the option to substitute its consolidated net leverage ratio covenant with a liquidity covenant until December 31 2021 from September 30 2020.

liquidity and up to US$250m in event-related deferred revenue. This will be measured at the end of September and

December this year and then on a monthly basis thereafter until November 30 2021.

Under the amended agreement, the company is also temporarily limited in making certain investments, incurring additional debt and making certain voluntary restricted payments.

debt ratio must not exceed 6.75 times. This will step down to 6.25 times after four quarters, 5.75 times after eight quarters, 5.5 times after 12 quarters and 5.25 times after 14 consecutive quarters.

The amendments apply to a US$120m incremental revolving credit facility that

Nation signed in April.

alongside a US$500m credit facility that pays

JP Morgan is administrative and collateral agent on the credit facilities.

EUROPE/MIDDLE EAST/ AFRICA

ROVENSA DETAILS BUYOUT LOAN

Portuguese agrochemical company ROVENSA‘s €440m buyout loan backing its acquisition by Partners Group is in the market.

OID.There is 101 soft-call protection for six

months.BNP Paribas, Credit Agricole, HSBC and

Rabobank are joint physical bookrunners, while Mizuho and Societe Generale are joint bookrunners.

Partners Group is acquiring of a majority

at around €1bn, including debt.

Proceeds from the loan will be used to

secured debt and pay related fees and expenses.

Rovensa’s portfolio of agricultural products and technologies helps farmers improve crop yields. Its products are sold in more than 70 countries and generate annual revenues of approximately €360m.

REFRESCO MAKES CHANGES

Dutch bottling company REFRESCO has wrapped a €400m loan that will be used to

and Europe.

was priced at 98.5 OID, the tighter end of 98.0–98.5 initial guidance.

Pricing remains the same at 400bp over

protection for six months.A ticking fee has been changed to more

investor-friendly terms and will pay 50% of the margin after 45 days, as opposed to 60 days; and the full margin after 90 days, as opposed to 120 days.

Physical bookrunners are BNP Paribas and Credit Suisse and joint bookrunners are Deutsche Bank and Rabobank.

Refresco raised a US$150m add-on Term

July 2019, Refresco raised a €150m add-on to repay drawings under a revolving credit facility, paying 325bp over Euribor.

Refresco secured €2bn-equivalent of loans in 2017, to back its buyout by PAI Partners.

The seven-year, covenant-lite €1.217bn

Euribor, at 99.5 OID. A £200m seven-year

EUROPEAN LEVERAGED LOANSBOOKRUNNERS: 1/1/2020 TO DATE



Excluding project finance. Western Europe only included.

Source: Refinitiv SDC code: P10

1 HSBC 19 5,161.57 7.3

2 BNP Paribas 28 5,027.53 7.1

3 JP Morgan 25 4,590.85 6.5

4 Goldman Sachs 20 4,570.18 6.4


6 Barclays 19 4,177.21 5.9

7 Deutsche Bank 22 3,756.82 5.3

8 Citigroup 11 3,446.14 4.9

9 Natixis 8 3,018.13 4.3

10 UniCredit 14 2,950.48 4.2

Total 111 71,003.45

EMEA SPONSORED LOAN BOOKRUNNERS BY VOLUME: 1/1/2020 TO DATE

Europe, Middle East, Africa



Excluding project finance.


1 HSBC 10 2,557.16 6.8

2 BNP Paribas 13 2,297.64 6.1

3 JP Morgan 13 2,226.55 5.9


5 Deutsche Bank 13 2,041.11 5.4

6 SG 7 2,007.09 5.3

7 BofA 9 1,962.05 5.2


9 UniCredit 8 1,758.86 4.7

10 Barclays 11 1,722.40 4.6

Total 60 37,675.50

US LEVERAGED LOANS BOOKRUNNERS: 1/1/2020 TO DATE



Excluding Project Finance.


1 BofA 336 55,110.22 11.9

2 JP Morgan 248 40,618.13 8.8

3 Wells Fargo 198 37,548.34 8.1

4 Citigroup 130 28,178.96 6.1

5 Credit Suisse 94 25,342.44 5.5

6 Goldman Sachs 127 24,605.53 5.3

7 Barclays 119 22,632.26 4.9

8 Morgan Stanley 70 18,062.47 3.9

9 RBC 75 15,124.80 3.3

10 Deutsche Bank 85 14,257.90 3.1

Total 936 463,520.57




The company is Europe’s largest manufacturer of soft drinks and fruit juices.

IVC LAUNCHES ADD-ON

UK veterinary care provider IVC has launched a £160m-equivalent add-on loan to repay acquisition-related drawings under a revolving credit facility.

The deal has a euro-denominated tranche and a sterling-denominated tranche, which are guided to pay 400bp over Euribor and

the euros is guided at 97.5–98, while the sterling is guided at 96.5–97.

towards the end of the syndication process.The add-on will be fungible with an existing

NatWest Markets and SMBC are joint physical bookrunners and coordinators.

February 2019, when it secured a

A £350m-equivalent, euro-denominated tranche was priced at 400bp over Euribor, while a £432m tranche was priced at 450bp

second-lien facility and a £200m RCF.EQT acquired IVC in 2016 and merged it

with portfolio company Evidensia in 2017. It acquired Evidensia in 2014.

The company has operations across Europe.

DEDALUS SEEKS €240m ADD-ON

Italian healthcare company DEDALUS has

an acquisition of US-based DXC Technology’s healthcare software division.

The covenant-lite term loan is guided to pay 450bp over Euribor, the same as an

mid-July to fund a purchase of Agfa HealthCare’s IT business.

OID.

BNP Paribas and UBS are active bookrunners and global coordinators, alongside UniCredit as global coordinator.

Dedalus has been on a buying spree this year. After it agreed to purchase Agfa HealthCare’s IT business for €975m in

acquisition of DXC’s healthcare division in July.

According to a Fitch report on July 22, the purchase of DXC’s division will positively impact Dedalus due to

enhanced R&D capacity and larger scale operations.

The credit agency said the assets were

with a focus on hospital information

systems, which are characterised by high recurring revenues and long-term contracts.

Florence-based Dedalus is approximately 75% owned by private

remaining 25% owned by Dedalus’s founder.

AMER SPORTS RAISES €100m

Finnish sporting goods company AMER

SPORTS has raised a €100m loan for general corporate purposes.

JP Morgan, was priced at 625bp over Euribor

The loan ranks pari passu with existing

and then will be redeemable in year two at a call premium of one point and at par in year three.

outbreak of the Covid-19 pandemic will have severe and protracted adverse impacts on Amer Sports’ sales and earnings in 2020.

Amer Sports was last in the loan market

debt package to fund its buyout by a Chinese-led consortium that includes

Default rate for loans increases – Fitch EUROPE Rate rose to 1.7% in June, but still lower than US

The trailing twelve-month default rate for

European loans increased to 1.7% in June 2020

from 0.8% in December 2019, Fitch Ratings said

in its latest report on the European leveraged

loan market.

The default rate of European loans is lower

than in US, which approached 4% in June 2020.

However, Fitch’s “Loans of Concern” list

declined to 4.6% of Fitch’s Insight Index in June

2020, from a peak of 10% in March 2020. It was,

however, an increase from 3% in December 2019.

“Loans of Concern” rose to a value of €14.65bn in

June 2020, from €9bn in December 2019.

Fitch said the European loan default rate

forecast for full-year 2020 remained at 3.8%,

up from a pre-pandemic forecast of 2.5%.

The revision reflects a combination of factors,

including rating actions, secondary pricing and

maturity profiles.

WIDENING SPREADSIssuers are now required to show lenders post-

lockdown policies and the trajectory of economic

recovery as well as its effect on cashflows and

leverage profiles, Fitch said.

European leveraged loan volume reached

€31.1bn year-to-date, with resilient credits in

relatively unaffected sectors leading the recovery

in issuance after the March lockdown.

Issuers had to pay up to attract cash.

According to Fitch, the impact of the pandemic

caused average weighted spreads in its

Leveraged Loan Insight Index to increase by

178bp.

The “new normal” on credit spreads was

demonstrated by US cruise line operator

CARNIVAL‘s €800m Term Loan B, which was

priced at 750bp over Euribor; Norwegian ship

operator HURTIGRUTEN‘s €105m Term Loan C,

which was priced at 800bp over Euribor; and

Madrid-based theme park operator PARQUES

REUNIDOS‘ €200m term loan, which firmed at

750bp over Euribor.

There were only four transactions below

400bp after the pandemic, including reusable

plastic containers provider IFCO‘s €200m term

loan, which was priced at 350bp over Euribor;

Dutch media firm VNU‘s €420m TLB paying

375bp over Euribor; US agricultural equipment

company AGCO‘s €235m term loan, paying 213bp

over Euribor; and Belgian cable and mobile

company TELENET INTERNATIONAL‘s €510m

revolving credit facility, paying 225bp over

Euribor, according to Fitch.

On average weighted spreads, Fitch

said Triple C spreads increased to 10.8% in

June 2020 from 10.43% in March 2020 and

Single B credit spreads rose by 167bp to 5%.

However, Double B credits fell to 3.33% from

4.19%.

Meanwhile, by the end of June 2020, loans

trading above par decreased to 1.1% from 59.1%

in December 2019 and loans trading between

90 and 100 rose to 82.8% from 34%. For credits

rated “CCC” and below, loans trading below

90 increased to 80% from 70%, while no loans

traded above par in June 2020 from 15% in

December 2019.

Prudence Ho



FountainVest Partners, Chinese tech giant Tencent Holdings and Chip Wilson, the billionaire founder of yoga-apparel

Amer priced a €1.7bn seven-year

Euribor, and the pricing on a €315m

over Euribor.Amer Sports operates in 34 countries

and it owns a portfolio of brands such as Salomon, Arc’teryx, Peak Performance, Atomic, Suunto, Wilson and Precor.

In 2019, Amer Sports generated a revenue of €2.9bn and Ebitda of €286m.

RESTRUCTURING

UNITED STATES

ASCENA SEEKS DIP LOAN

Women’s clothing retailer ASCENA RETAIL

GROUP is seeking court approval for US$711.8m in debtor-in-possession

business, which has been challenged by the coronavirus pandemic and a large debt load.

protection on July 23.The DIP, provided by an undisclosed

group of secured lenders, includes a US$400m asset-based lending facility and a US$311.8m term loan. The term loan includes a US$150 new money multi-draw term loan facility and US$161.8m in rolled-up pre-petition term loan debt.

The new money DIP term loan is priced

JP Morgan Credit Suisse is the DIP term loan agent.

emergence from bankruptcy.Ascena’s US$1.6bn of pre-petition debt

US$1.27bn term loan facility.Ascena’s 2015 deal to buy clothing

enterprise value of US$2bn saddled the company with a large debt load.

Then, the coronavirus pandemic, coming after an ongoing shift from traditional bricks-and-mortar shops to e-commerce, forced the company to accumulate more debt.

The retailer agreed to a restructuring support agreement on July 23 with a group of secured lenders to provide the

sell off the intellectual property assets and the e-commerce business of its plus-sized clothing brand, Catherines, to Australian retailer City Chic Collective in a court-supervised auction.

Ascena’s bankruptcy pushed the retail trailing 12-month institutional term loan default rate to 17%, up from 15.1% at the end of June, according to Fitch. It is the

CALIFORNIA PIZZA SEEKS DIP

Casual dining restaurant chain CALIFORNIA

PIZZA KITCHEN is seeking court approval for US$107.3m in debtor-in-possession

bankruptcy on Thursday.The DIP, which is provided by an

structured as a senior secured multi-draw term loan facility. It includes about US$46.9m in new-money loans and almost US$60.5m in rolled-up pre-petition term loan debt.

The new money DIP portion is priced at

Of the rolled-up DIP portion, US$30m

paid in cash. The remaining US$30.5m

but will be payment-in-kind. The rolled-up

Jefferies is the DIP agent.The company’s US$403.1m in pre-

petition debt includes US$60.8m under a

US$12.5m under a revolver and US$75m under second-lien facility.

California Pizza Kitchen, which was facing competition from other casual dining chains and changing consumer tastes, hired advisers in the autumn of

coronavirus pandemic caused the company to stop the sales process.

Faced with unpaid rent obligations and only US$13.5m in cash on hand, the

signed a restructuring support agreement

The RSA lenders are providing the DIP

swap for all but US$50m of the pre-

The company hopes to emerge from bankruptcy by October 7. When that happens, it will receive up to US$177.3m

US$127.3m and a US$50m second-lien term loan.

of the DIP facility and will include an additional US$18.75m in new money loans.

will have the option of paying 100bp of interest in cash and 1,100bp of interest paid in kind.

After 2021, the facility will be priced at

The 4.5-year second-lien term loan will

paid in cash and 1,250bp of interest paid in kind.

ASIA-PACIFIC

SAMSON PAPER APPOINTS LIQUIDATORS

SAMSON PAPER has appointed Deloitte as joint and provisional liquidator for its debt restructuring.

Tohmatsu, and Rachelle Ann Frisby of

jointly and severally, according to an order from the Supreme Court of

restructuring of the company’s debt to allow the company to continue as a going concern, and seek out equity investors

other things.

winding-up petition and an application for the appointment of provisional

following an acceleration of debt repayment by certain lenders and the resignations of four directors in relation to disagreements within the board over certain auditing issues.

Trading in Samson Paper’s shares on the Hong Kong stock exchange has been halted since July 2, pending the release of the company’s audited annual results for

Samson Paper currently has two outstanding syndicated loans: a HK$356m (US$46m) three-year loan completed in July 2019 and a HK$780m 3.5-year loan signed in September 2017.

mandated lead arrangers and bookrunner

other banks.

led the 2017 facility, which attracted 10 other lenders in syndication.


FRONT STORY INDIA

Mindspace broadens REIT market India’s second REIT listing attracts wider range of investors

A positive response to the Rs45bn (US$599m) IPO of MINDSPACE BUSINESS PARKS REIT, India’s second real-estate investment trust, shows that investors are warming up to the format.

Ample liquidity, a benign interest rate outlook and muted economic growth are enhancing the appeal of REITs that offer steady yields, provided the sponsors are well-known, the assets stable and the issue size decent.

BROOKFIELD ASSET MANAGEMENT is next in line for an up to US$500m IPO later this year via Bank of America, Citigroup and Morgan Stanley.

“Indian equity investors are still chasing growth but are now open to the idea of steady returns,” an ECM banker on the Mindspace deal said.

When books closed on Wednesday, Mindspace REIT’s IPO was covered 12.96 times, far more than the 2.57 times

The institutional tranche was covered 10.61 times and the non-institutional portion 15.77. Pricing is likely to come at the top of the Rs274–Rs275 range per unit, implying an annual yield of 7.5%.

decision by the Securities and Exchange Board of India last year to reduce the minimum subscription amount to attract more individual investors.

The Mindspace REIT IPO came with a minimum order size of just Rs55,000, compared to Rs200,000 for Embassy REIT prior to the rule change.

WORK FROM HOMEWidespread working from home as a result of the Covid-19 pandemic has dampened the outlook

tax rules introduced in the 2020 federal budget and a nationwide lockdown since March 25 also delayed the IPO, originally slated for March.

Bankers attributed the success of the deal to the reputation of the sponsor, real-estate developer K Raheja Group, and the stable

multinational corporations.“The Raheja brand name is quite well-

known both locally and internationally and people have appreciated this opportunity to partner with them,” another banker on the deal said. According to him, Mindscape has scope to increase rents as its average rental leases are 27% below market.

FIRST-TIME BUYERSThe investor base for REITs is also growing, as evidenced by the deal’s no fewer than 54 anchor investors.

Global real-estate fund Cohen and Steers International Realty Shares and Fullerton

investors in an Indian IPO.Although foreigners still accounted for

the majority of buyers, local institutions, which were not very active in the Embassy

Axis Mutual Fund, ICICI Mutual Fund, HDFC Life Insurance, SBI Life Insurance, IIFL Special Opportunities Fund and Aditya Birla Sun Life Insurance are all anchor investors.

There is a 30-day lock-up for all anchors.The primary/secondary split of the

163.6m unit IPO is 22%–78%, with K Raheja and Blackstone selling the secondary shares.

The IPO proceeds will be used to repay debt.Axis Bank, Ambit, Bank of America, Citigroup,

CLSA, HDFC Bank, ICICI Securities, IDFC Securities, JM Financial, Kotak, Morgan Stanley, Nomura and UBS are lead managers.Anuradha Subramanyan

Beane plays ball with US$500m IPO Moneyball manager joins SPAC rush

Former Oakland Athletics baseball team general manager Billy Beane, the subject of the “Moneyball” book by Michael Lewis as well as the subsequent movie, is turning his eye for value to the SPAC business as the co-chair of REDBALL ACQUISITION.

US$500m IPO that could launch as early as this month. Goldman Sachs is sole bookrunner.

banker and sports investor Gerald Cardinale, RedBall intends to focus its hunt on businesses in the sports, media and data analytics sectors with a focus on professional sports franchises.

Sponsor RedBird Capital, the sports-focused

has committed to invest US$100m of its own money at the time of acquisition.

Alec Scheiner, a former Dallas Cowboys executive, is RedBall’s CEO.

HEADLINE ATTRACTION

progressive and iconic executives in professional sports and has been a leader in bringing analytics to the forefront of professional sports”.

Having spent 18 years as the A’s general manager before his current role as the team’s executive vice-president of baseball operations, Beane is best-known for recruiting undervalued players after rigorously assessing their statistical performance and regularly taking a bottom quartile payroll well into the postseason.

Since Beane was promoted to general manager in 1997, the value of the Oakland A’s has increased from US$118m in 1998 to US$1.1bn currently.

He is also an adviser to Dutch football club AZ Alkmaar and a minority owner of England’s Barnsley Football Club, which was promoted from 3rd to 2nd division under his watch.

While at GS, Cardinale helped create the Yankees Entertainment & Sports Network, which was sold to Twenty-First Century Fox in 2014, only to buy the network in partnership with the New York Yankees, Amazon and Sinclair Broadcasting last August.

CEO Scheiner not only helped oversee construction of the Cowboys’ US$1.2bn stadium, but was at the helm of “an unprecedented business turnaround” as president of the Cleveland Browns between 2012 and 2016, though that was not matched

SPACs have comprised more than 30% of total US IPO proceeds this year, while nearly

raise about US$7.6bn. Anthony Hughes


EQUITIES China 72 India 74 Japan 74 South Korea 74 France 75 Germany 75

UK 75 United States 76 Brazil 81 Structured Equity 81

9 IFR Equities and SE 2344 p71-85.indd 71 31/07/2020 20:03:20

ASIA-PACIFIC

CHINA

XPENG MOTORS GETS NEAR

Electric vehicle manufacturer XPENG MOTORS is planning to bring a US IPO of at least US$700m to the market as early as mid-August, said people with knowledge of the matter.

The deal comes after fellow Chinese EV maker Li Auto raised US$1.09bn from a Nasdaq IPO and saw its shares rocket 43% on debut on Thursday.

Bank of America, Credit Suisse and JP Morgan

Xpeng said last Monday that it has raised

from a group of investors, including Aspex, Coatue, Hillhouse Capital and Sequoia Capital China.

The latest fundraising is a top-up of a US$400m private round in November last year which is said to have valued the company at nearly US$4bn. Smartphone maker Xiaomi was one of the investors in the November round.

The Guangzhou-based company also counts Alibaba Group and IDG Capital

Xpeng G3 vehicle to customers in December 2018 and launched a second model in April this year

WEDOCTOR DELAYS IPO

Tencent-backed WEDOCTOR is deferring its planned Hong Kong IPO to early next year and is considering a private fundraising

knowledge of the matter.The Chinese online healthcare company

picked CMB International, Citigroup and JP

Morgan in April to arrange a Hong Kong IPO of about US$1bn, which was expected to come in the second half.

WeDoctor is taking time to restructure its

The restructuring may lead to the exclusion of its agency business and units containing sensitive patient information and government data from the planned listco, said the people.

Since the IPO will come later than planned, WeDoctor is considering raising about US$300m from a private round ahead

It is understood that some existing shareholders have recently sold WeDoctor shares at a valuation of about US$6bn.

IFR reported in April that WeDoctor was planning to seek an IPO valuation of up to US$10bn.

In May 2018, the company raised US$500m at a valuation of US$5.5bn.

On the WeDoctor platform, there are over 2,700 hospitals, 220,000 doctors, 15,000 pharmacies and 27 million monthly active users.

WeDoctor did not respond to emails seeking comment.

EVERGRANDE THINKS BIG

CHINA EVERGRANDE GROUP is planning to list its property management services unit in a Hong Kong IPO which could raise about

according to people with knowledge of the matter.

The Hong Kong-listed Chinese property developer is working with Huatai Financial, UBS, ABC International, CCB International, CLSA and Haitong International on the proposed listing of JINBI PROPERTY MANAGEMENT.

According to Evergrande’s annual

property management in 2019 amounted to Rmb4.38bn (US$626m), up 7.6% from 2018,


WEEK IN NUMBERS

41 THE SURGE IN EQUITY-LINKED

ISSUANCE IN EUROPE CONTINUED LAST WEEK WITH A TRIO OF ISSUES PROVIDING FIVE NEW CBS. IT TAKES THE NUMBER OF DEALS IN EMEA TO 41 SO FAR THIS YEAR, MATCHING THE TOTAL NUMBER IN 2019, WHILE DOLLAR PROCEEDS COMFORTABLY EXCEED 2019

US$6bn GENERAL ELECTRIC WAS WIDELY

EXPECTED TO SELL-DOWN ITS US$6bn/36.5% STAKE IN OILFIELD SERVICES PROVIDER BAKER HUGHES, THE QUESTION WAS HOW. CITIGROUP WILL SELL THE STAKE OVER THREE YEARS THROUGH A STRUCTURED FORWARD SALE PROGRAMME, DELIVERING GE A CLOSE TO VWAP RETURN

US$44bn US MORTGAGE ORIGINATOR ROCKET

COMPANIES IS SEEKING A VALUATION OF US$44bn ON ITS UP TO US$3.3bn IPO. EXTENSIVE PRE-MARKETING OF THE NATION’S LARGEST MORTGAGE LENDER MEANT THE DEAL LAUNCHED WITH INDICATIONS FOR HALF THE DEAL. IT WROTE US$26bn OF LOANS IN JUNE, TO CONTINUE SEQUENTIAL GAINS IN EVERY MONTH THIS YEAR

Two years THE US$1.09bn NASDAQ IPO OF LI

AUTO IS THE LARGEST CHINA-TO-US LISTING IN MORE THAN TWO YEARS. THE FINAL PRICE VALUES LI AUTO AT CLOSE TO US$10bn, MORE THAN DOUBLE THE US$4bn VALUATION ACHIEVED WHEN THE COMPANY CLOSED A PRE-IPO ROUND OF US$550m ON JULY 1

ASIA-PACIFIC EQUITIESBOOKRUNNERS: 1/1/2020 TO DATE


Including all domestic and international deals and rights issues

Source: Refinitiv SDC code: C4a1

1 Morgan Stanley 60 15,105.24 9.5

2 Goldman Sachs 54 10,699.98 6.7

3 CICC 52 9,881.19 6.2

4 China Secs 29 7,870.82 5.0

5 JP Morgan 35 7,836.68 4.9

6 Citic 42 7,511.71 4.7

7 UBS 49 6,705.50 4.2

8 Citigroup 32 5,543.70 3.5

9 Credit Suisse 30 5,237.55 3.3

10 Macquarie 30 4,789.30 3.0

Total 1,392 158,595.70

ASIA-PACIFIC EQUITIES (EX-JAPAN)BOOKRUNNERS: 1/1/2020 TO DATE



Source: Refinitiv SDC code: C4a2

1 Morgan Stanley 56 14,893.61 9.8

2 CICC 52 9,881.19 6.5

3 Goldman Sachs 52 9,168.37 6.1

4 China Secs 29 7,870.82 5.2

5 JP Morgan 35 7,836.68 5.2

6 Citic 42 7,511.71 5.0

7 UBS 49 6,705.50 4.4

8 Citigroup 31 5,443.81 3.6

9 Macquarie 29 4,639.95 3.1

10 HSBC 22 4,528.76 3.0

Total 1,309 151,276.29

-4

1

6

11

16

21

20202019

Jan Feb Mar Apr May Jun Jul Aug-Dec

US$bn


mainly due to an increase in the portfolio under management.

Chinese property developers are rushing to spin off their property management services arms for separate listings in Hong Kong.

least US$500m. The property management arms of China Resources Land and Sunac China are both planning IPOs this year to raise up to US$1bn.

WIMI HOLOGRAM MAKES QUICK RETURN

Nasdaq-listed WIMI HOLOGRAM CLOUD has raised US$61.8m through a marketed follow-on, four months after its downsized Nasdaq IPO secured just US$26m.

The company sold 7.56m ADS at US$8.18 each, a 27% discount to the close of US$11.21

offering of up to 4.2m ADS, said in a press release that buyers were US and Asian institutions, including WB Online

Shares in WiMi Hologram Cloud closed down 35% last Monday at US$7.29.

There is a 90-day lock-up on the company

The IPO in March saw 4.75m ADS sold at US$5.50 apiece.

Proceeds from the follow-on will be used for operating expenses and R&D into holographic technologies in the semiconductor industry, strategic acquisitions and investments, as well as general corporate purposes.

Benchmark Company and FT Global Capital were the underwriters.

TIGERMED TARGETS TOP-END PRICING

Shenzhen-listed HANGZHOU TIGERMED

CONSULTING is guiding investors that it plans to price its Hong Kong listing at the top end of the indicative price range.

The Chinese clinical research service provider is selling 107m shares, 12.5% of the enlarged share capital, at HK$88–$100 per share to raise up to HK$10.7bn (US$1.38bn) from Asia’s biggest healthcare listing this year.

The range represents a 2021 P/E of 42.9–48.8.

The books are heavily oversubscribed with limited price sensitivity.

The shares will start trading on August 7.Bank of America, CICC, CLSA and Haitong

International are sponsors, and joint global coordinators with Jefferies and UBS.

Tigermed plans to use the proceeds for potential acquisitions, organic business expansion, biopharmaceutical R&D, to repay borrowings and for working capital.

WUMART PICKS TRIO FOR IPO

WUMART TECHNOLOGY GROUP, a Beijing-based retail giant, has picked CLSA, CMB International and Goldman Sachs to arrange a Hong Kong IPO of about US$1bn–$2bn, according to people with knowledge of the matter.

The deal is expected to come as early as the end of the year, said the people.

Wumart Tech operates Wumart Stores, which was listed in Hong Kong before the parent company took it private in 2016.

Wumart Tech took control of German wholesaler Metro’s Chinese arm last month in a deal valuing the unit at €1.9bn (US$2.1bn). The German group owns a 20% stake in Metro Wumart China, a joint venture with Wumart.

According to Wumart’s website, it operates more than 1,000 stores in China with annual sales over Rmb100bn (US$14.1bn) and assets of over Rmb50bn.

NETJOY PLANS HONG KONG IPO

Chinese online and video content provider NETJOY HOLDINGS is looking to raise US$100m–$200m from a Hong Kong IPO, according to people close to the deal.

Exchange of Hong Kong without disclosing a fundraising target or timeline.

Founded in 2012, Netjoy provides online marketing content and services to advertisers. Video content is typically shared via social networking sites like Douyin, the Chinese version of short-video app TikTok.

in 2019, up 4% from Rmb69m in 2018.Haitong International is the sole sponsor.

WUXI APPTEC PLACES H-SHARES

Hong Kong and Shanghai-listed WUXI APPTEC has raised HK$7.37bn (US$950m) from a primary placement of 68.2m H-shares at HK$108 per share.

The deal, representing about 2.9% of the company’s enlarged H-share capital, was

price translates to a 5.2% discount to the company’s close of HK$113.90 last Tuesday.

Books were multiple times covered with about 120 investors participating. The top 10 investors took about two-thirds of the deal and the top 20 more than 80%.

There is a three-month lock-up period.The Chinese contract medical researcher

will use the proceeds for mergers and acquisitions to expand the company’s

to expand overseas operations, repay bank loans and for project development.

Morgan Stanley, Huatai Financial, Goldman Sachs and JP Morgan were bookrunners.

Wuxi Apptec announced in March that it planned to sell A-shares and H-shares to raise funds. It plans to raise up to Rmb6.53bn (US$932m) by selling up to 105m A-shares to a maximum of 35 investors. Huatai United Securities is arranging the deal, which is awaiting approval from the China Securities Regulatory Commission.

FIRST WVR COMPANY TO LIST ON CHINEXT

XIAMEN MEET YOU, formerly known as Xiamen

the Shenzhen Stock Exchange for a Rmb1.87bn (US$268m) ChiNext IPO that

weighted voting rights to list on the start-up board.

The company, founded in 2013, develops mobile apps mainly for women and generates revenue through in-app advertising and e-commerce services.

Class A shares have 10 times the voting

giving founder Chen Fangyi and related parties combined voting rights of 79.15%. They hold a combined 7.98% stake before the IPO.

Xiamen Meet You plans to offer up to 13.3m shares, or 25% of the enlarged capital. There is a 15% greenshoe.

Proceeds will be used on research and development, e-commerce and online content platforms, and for marketing.

Rmb124m, down 16%, on revenue of Rmb617m.

Huatai United Securities is the sponsor.Home appliances maker MIDEA GROUP is

planning to list its photoelectric unit on ChiNext. The Shenzhen-listed company said last Monday that the proposed spin-off will help establish a fundraising channel for the unit, MIDEA INTELLIGENT LIGHTING & CONTROLS

TECHNOLOGY, to support its business development and increase its competitiveness.

Shares in Hong Kong-listed DONGFENG

MOTOR rose as much as 27% last Tuesday after the company said it plans to list on ChiNext.

The Chinese carmaker plans to sell up to 957m A-shares or 10% of its total share capital. Based on its market capitalisation of HK$44bn (US$5.7bn), the A-share offer could raise US$570m.

GUOLIAN SECURITIES‘ A-shares surged 44% to

on the Shanghai Stock Exchange, hitting the daily cap for a newly listed stock.

The Hong Kong-listed brokerage raised Rmb2.02bn (US$289m) from an IPO which was priced at Rmb4.25 a share.

Guolian Securities sold 476m A-shares, or 20% of the enlarged capital, down from the originally planned 634m.


EQUITIES ASIA-PACIFIC


Nanjing Securities was the sponsor and joint bookrunner with Huaying Securities.

CANSINO ON TRACK TO RAISE FIVE TIMES ORIGINAL TARGET

Hong Kong-listed CANSINO BIOLOGICS has priced its Rmb5.2bn (US$743m) Shanghai Star IPO at Rmb209.71 a share.

The issue price was at a 5.5% discount to the company’s closing price Wednesday of HK$246.00 in Hong Kong, where the shares have surged 631% in the past 12 months.

The biotech, which is researching a potential Covid-19 vaccine, is offering up to 24.8m new A-shares, or 10% of the enlarged capital. It sold 3.1% of the shares to strategic investors and left 81% and 19% of the remaining shares to institutional and retail investors.

Its original target was Rmb1bn. The Tianjin-based vaccine company has

cooperated with the Chinese Academy of Military Medical Sciences on the research and development of potential Covid-19 vaccines since the outbreak of the coronavirus.

Its 2019 net loss widened to Rmb157m from 2018’s Rmb138m.

Citic Securities is the sponsor and joint bookrunner with CICC. Bohai Securities is the junior bookrunner and Morgan Stanley Huaxin Securitiesthe deal.

INDIA

DELOITTE, EDELWEISS WIN ROLES ON UP TO US$12bn LIC IPO

India’s Department of Investment and Public Asset Management has selected Deloitte India Touche Tohmatsu and Edelweiss Financial Services for a pre-IPO advisory role in the planned listing of state-owned LIFE

INSURANCE CORPORATION OF INDIA, people with knowledge of the transaction said.

Citigroup, Credit Suisse and SBI Capital Markets had been shortlisted for the role but

Securities did not qualify for the shortlist.

mandated a pre-IPO advisory role for an issue.

LIC’s IPO is expected sometime next year and is set to be the country’s largest at a likely Rs800bn–Rs900bn (US$11bn–$12bn).

Under Indian stock market regulations, the government has to sell at least 10% of a state-owned company in an IPO and then

of the listing.

Deloitte is also advising Dipam on the sale of a strategic 52.98% stake in BHARAT

PETROLEUM CORP, while this is Edelweiss Group’s second major transaction on behalf of the government. Edelweiss Asset Management is the manager of the

ever, Bharat Bond ETF, which invests in the bonds of state-owned companies.

ICICI BANK TO LAUNCH US$2bn SHARE SALE

Private sector lender ICICI BANK plans to

institutional placement of shares over the next few weeks, people with knowledge of the transaction said.

Bank of America, BNP Paribas, Citigroup, HDFC Bank, ICICI Securities, JP Morgan, Kotak, Nomura, Motilal Oswal, Morgan Stanley and SBI Capital Markets are among the banks working on the deal.

ICICI Bank last raised primary capital of Rs200bn in 2007, but it has been selling stakes in subsidiaries ICICI Prudential Life Insurance, ICICI Lombard General Insurance and ICICI Securities since 2016.

ICICI Bank shares are down 35% year-to-date.

The bank is raising the funds to strengthen its balance sheet.

JAPAN

IIFI PLANS TO LAUNCH FOLLOW-ON

INDUSTRIAL & INFRASTRUCTURE FUND INVESTMENT is planning to raise up to ¥34.3bn (US$325m) from a follow-on offering of units, based on

close.The base size of 181,000 units is being

marketed at an indicative discount range of 3%–5% to the market close on the pricing day. There is an up to 9,000 units greenshoe, or 5% of the base size.

The deal will price in between August 4 and 11. About 30% of the transaction will be allocated to international investors. There is a 90-day lock-up for the issuer.

Proceeds will be used to acquire three properties.

Citigroup, Mitsubishi UFJ Morgan Stanley, Nomura and SMBC Nikko are joint bookrunners and lead managers.

MALAYSIA

AXIATA SAYS BANGLADESHI IPO ON TRACK

list its Bangladeshi subsidiary ROBI AXIATA on

the Dhaka and Chittagong stock exchanges in the fourth quarter.

On the other hand it has no immediate plans to list two other subsidiaries, tower company Edotco and mobile services provider Celcom.

Edotco has been planning an up to US$500m IPO since 2018 but has not launched it because of weak market conditions. CIMB, Deutsche Bank, JP Morgan and UBS are working on the transaction.

In a news release, Axiata said the Robi listing will “enable Axiata to accelerate growth in anticipation of revenue generating opportunities”.

In an earlier disclosure Axiata said Robi’s IPO would comprise 523.7m new shares, or 10% of the expanded capital, at Tk10 each totalling Tk5.24bn (US$62m).

Axiata’s shareholding will be reduced by 6.9% from the current 68.69% as a result of the IPO.

Robi is the second-largest mobile network operator in Bangladesh, where it also provides internet services.

The other shareholders are Bharti

NTT Docomo (6.31%).CIMB is the adviser to Axiata and IDLC

Investments has been appointed by Robi as the issue manager for the listing.

Axiata shares are down 22% this year on Bursa Malaysia.

SOUTH KOREA

SK BIOSCIENCE PLANS IPO NEXT YEAR

SK BIOSCIENCE, a South Korean pharmaceutical company backed by Bill Gates’s foundation, plans to launch a KRX IPO as soon as next year, said people close to the deal.

NH Investment & Securities is the lead manager and Korea Investment & Securities is co-manager. The company may add foreign joint lead managers later this year, while the fundraising size is yet to be decided.

SK Bioscience, which was spun off from

vaccine developer that received US$3.6m of funding from the Bill & Melinda Gates Foundation in May to help accelerate the development of Covid-19 vaccines.

that the company might be capable of producing 200 million coronavirus vaccine

SK Bioscience is also one of the contract manufacturers working with AstraZeneca to make vaccines. AstraZeneca and Oxford University are among the pioneers in developing a Covid-19 vaccine and are at the



The company is 98% owned by SK Chemicals, which in turn is 33.5% held by SK Discovery.

SK Chemicals’ shares jumped 11% last Monday on news of Gates’s letter, which was disclosed by the Seoul presidential

year so far.

EUROPE/MIDDLEEAST/AFRICA

FRANCE

FFP SELLS 1% OF GROUPE SEB AFTER 16 YEARS

BNP Paribas was sole bookrunner on an unexpected selldown in household appliance manufacturer GROUPE SEB by FFP last Monday evening.

The Peugeot family’s listed holding company cashed in €69m, reducing its 16-year-old stake by one percentage point. It is now locked up for 120 days on the remaining 4% and keeps 5.2% of SEB’s voting rights post-placing.

A wall-crossing exercise with a limited number of accounts led to the deal being covered from indications at launch. In total 500,000 SEB shares were sold at €138.50, representing a 4.9% discount to Monday’s close of €145.60.

UK and US accounts took the lion’s share of the offering, followed by Continental European names.

Shares in SEB managed to stay above ABB pricing on Tuesday following the selldown, closing more than 3% down at €141.20. By last Friday at 9.30am in London they had risen to €142.20 each.

Last Monday’s trade equated to about seven days’ average trading volume, or nearer nine days based on volume in the past week.

FFP is not a regular seller and last appeared in the market in February 2019 when it sold its entire 5.9% stake in outsourcing company DKSH for more than US$200m. Before that, it shed 0.85% of retirement home company Orpea for

CEA INVESTISSEMENT SELLS 3% OF SOITEC

CEA Investissement sold 3.2% of semiconductor materials manufacturer SOITEC last Tuesday evening, cashing in €105m.

It will remain Soitec’s third-largest investor with a 7.7% stake behind National

Silicon Industry Group and Bpifrance Participations, which own 10.96% each.

The selldown consisted of 1.065m shares at €98.45 each, representing a 4% discount to last Tuesday’s close of €102.60.

Societe Generale was bookrunner following an auction conducted by Lazard as adviser, and was not preceded by a wall-cross.

While the name was expected by the market, some had expected a larger deal.

The book was covered in one hour and was mainly UK driven, with UK investors taking around 65%. A further 15% of the book came from US accounts, while Swedes took 10% and the rest went to other European names.

Soitec’s stock was volatile last Wednesday, hitting lows of €96.90 in early trading and oscillating around ABB pricing for the rest of the day before a close 1.1% above pricing at €99.55.

By last Friday at around 10am shares were higher at €100.50 apiece

GERMANY

BASF CEO SAYS WINTERSHALL DEA IPO PLANNED FOR 2021

on Wednesday that its oil and gas group WINTERSHALL DEA, a merger of subsidiary Wintershall and rival DEA from May 2019,

Engel said on an earnings conference call that the company is aiming for a 2021 IPO, depending on market conditions.

On Wednesday BASF reported a Q2 net loss of €878m on an €819m impairment against its stake in Wintershall DEA following a fall in oil and gas prices.

UAE

NETWORK INTERNATIONAL SHARES STRUGGLE AFTER £205M FUNDRAISING

NETWORK INTERNATIONAL tapped investors for fresh cash last Tuesday evening

to part-fund its acquisition of DPO Group.Demand poured in for the M&A driven

oversubscribed.

ABB, having listed in an all-secondary

Citigroup and JP Morgan were bookrunners offering 50m new shares or around 10% of the company’s share capital. The shares priced at 410p each, an 8.9% discount to last Tuesday’s close of 450.2p.

Network International is locked up for 180 days.

More than 90 investors were in the book, which was covered from indications at launch from a two-day wall-crossing, and led by a large US order that came during the bookbuild.

The top 10 orders took 60% of the deal and the top 25 took around 80%.

Fintech funds dominated, with emerging market investors also snapping up shares. UK and US accounts took the lion’s share.

Shares in Network International opened last Wednesday well below the placing price at 400p but within half an hour were above the placing price. However that was short-lived and shares spent most of the day well below before closing at 403.2p, down 10.4% for the day and 1.7% below the ABB price.

By last Friday morning at 9.30am they had risen above ABB pricing to 411.40p each.

The company said last Tuesday it is buying African payment company DPO for

placing, the rest of the acquisition will be covered through the issue of shares to the sellers and debt facilities. The transaction is expected to close in Q4.

Network International said the acquisition will consolidate its presence in Africa’s under-penetrated and fast-growing payments market. The region is expected to represent around 40% of Network International’s total revenue by 2024, up 27% in 2019.

DPO expanded its client base in April in its main market South Africa as consumers went online amid stringent lockdown measures in the country.

UK

MITIE FALLS AS £201m RIGHTS ISSUE COMPLETES

Shares in MITIE GROUP dropped sharply on Wednesday as banks launched a rump


EQUITIES EMEA

EMEA EQUITIES BOOKRUNNERS: 1/1/2020 TO DATE



Source: Refinitiv SDC code: C4cr

1 Goldman Sachs 46 8,639.29 10.0


3 Citigroup 39 7,536.73 8.8

4 JP Morgan 53 7,183.37 8.3

5 Bank of America 33 6,154.83 7.2

6 Credit Suisse 27 5,642.75 6.6

7 Barclays 33 3,989.96 4.6

8 UBS 19 3,154.65 3.7

9 Jefferies 32 2,648.44 3.1

10 HSBC 22 2,201.07 2.6

Total 605 86,044.10


placing to complete the UK facilities

issue.Shares fell nearly 14% in early trading.

Take-up was high with 93.4% of rights exercised though the volume of 52.8m shares to be sold in the rump is optically high relative to the roughly 2m shares traded per day, a function of the heavy 11-for-5 rights issue ratio.

38.1p, and had fallen to 32.8p by 11:30am. The rump of 52.8m shares priced at 31p, with two large orders from existing shareholders alongside new money. The stock closed down more than 13% at 33p. The shares were trading just above €32 on Thursday afternoon.

The underwritten rights issue saw 805m shares offered at 25p, a 40.7% discount to TERP of 42.2p at launch, to part-fund its

Management. The capital increase was underwritten by

global coordinators Jefferies and JP Morgan and bookrunners Barclays and Santander at a fee of 200bp. Evercore

brokers.

AMERICAS

UNITED STATES

IPO MARKET HEADS INTO BIG WEEK

The US IPO market is poised for one of its biggest weeks of the year as ROCKET COMPANIES

nearly US$5bn from investors.Bankers also expect secondary ECM to

start to pick up after an enforced hiatus due to the second-quarter earnings season, which is now well through the half-way mark.

boom amid low interest rates, Rocket is set to price the year’s biggest (non-SPAC) IPO, a US$3.3bn offering scheduled to price post-close on Wednesday, August 5.

Management will look to return multicloud services provider Rackspace Technology to public markets via an up to US$804m Nasdaq IPO scheduled to price post-close on Tuesday, August 4.

Healthcare platform Oak Street Health (up to US$265m), e-commerce software company BigCommerce (US$137m) and outsourcer Ibex (US$105m) are also slated to price in the week ahead.

These companies are coming to market with the momentum created by a strong slate of IPO pricing outcomes in the past week. Five debutantes raised US$2.3bn of proceeds, led by the US IPO of Chinese electric carmaker Li Auto. All but one priced above range.

Bankers are rushing to do deals to get ahead of US Presidential election uncertainty, with the election now less than 100 days away, and concern that activity will soon start to slow as the candidates step up campaigning.

One banker said he expected private

another round of equity raises to help buffer companies against Covid-19 is also possible before this window closes ahead of Labor Day on September 7.

ALLOVIR SOARS ON DEBUT

Heavily oversubscribed but tightly allocated, ALLOVIR’s upsized US$277m IPO provided a much-needed boost for biotech new issues.

session at US$25.39, 49% above the US$17.00 price set on an upsized offering of 16.3m shares.

The offering was more than 10-times oversubscribed with 90% of the stock allocated to just 20 institutions, the bulk of whom already owned the stock.

Morgan Stanley, JP Morgan, SVB Leerink and Piper Sandler increased the offering size from 14.75m to 16.3m shares at pricing.

The biotech, which is developing T cell therapies to restore immune systems against viruses, now has US$390m of cash, more than enough to fund development through 2023.

The outcome was a sharp contrast to more aggressively priced deals the previous week by Annexon (now trading 8.3% above offer), Inozyme Pharma (up 24.3%), iTeos Therapeutics (down 2.6%) and Nurix Therapeutics (up 0.2%).

About 5.3m AlloVir shares changed hands on Thursday at a US$22.40 VWAP, or about one-third of the shares sold and a lower amount of churn than witnessed on the previous week’s IPOs.

Unlike most of this year’s other biotech IPOs, AlloVir did not conduct a late-stage crossover round. It raised US$120m in May 2018 via a Series B round.

development pipeline that has produced multiple T-cell candidates targeting a variety of viruses.

Viralym-M, its lead T-cell therapy, completed a Phase II trial that provided proof of concept against one virus that threatens patients after undergoing a hematopoietic stem cell transplant (HSCT).

AlloVir is planning Phase II trials later this year using Viralym-M to restore immune

viruses. It has two other drugs heading for Phase II trials this year, including a T-cell

The drug is a virus-seeking T-cell (VST) that is similar to a cancer CAR-T, genetically

virus.In addition to its Covid-19 drug, AlloVir is

developing VSTs against four viruses that are known to cause respiratory illness.

VERTEX STAGES SOLID DEBUT

Though promising lower growth than peer Avalara and still selling on-premise software in a era of cloud computing, VERTEX produced a solid aftermarket performance on debut after pricing a larger-than-expected US$401.9m Nasdaq IPO.

Active bookrunners Goldman Sachs and Morgan Stanley late Tuesday priced the sale of 21.15m shares in the indirect tax software provider at US$19.00, well above the top of the US$14–$16 range.

Debuting on Wednesday, the stock opened at US$25.56 before settling to close

on volume of 16m shares.It may have helped that the company

opted not to upsize the offering, ensuring

outstanding.

at a 2020 sales multiple of less than 10 times versus 20 times for the cloud-based rival Avalara, whose shares have risen more than 400% since its 2018 IPO.

The latter is currently growing its top-line twice as fast, at about 40% versus sub-20% for Vertex.

With 4,000 customers and 89% of its revenue generated from subscriptions to its software, Vertex last year generated net income of US$31m from sales of US$322m.


US EQUITIESBOOKRUNNERS: 1/1/2020 TO DATE



Source: Refinitiv SDC code: C3r

1 Goldman Sachs 107 19,678.64 13.0

2 Morgan Stanley 91 18,583.93 12.3

3 JP Morgan 117 18,230.22 12.0

4 Bank of America 114 16,742.42 11.1

5 Citigroup 72 13,714.02 9.1

6 Barclays 60 10,411.06 6.9

7 Credit Suisse 46 6,376.07 4.2

8 Jefferies 73 4,355.98 2.9

9 Evercore Partners 30 3,880.93 2.6

10 Wells Fargo 48 3,719.50 2.5

Total 480 151,503.38


OAK STREET TOUTS VALUE-BASED HEALTHCARE ON IPO

General Atlantic-backed OAK STREET HEALTH is

and expand”, building out a nationwide healthcare network one market at a time by

Oak Street launched marketing on Wednesday of an up to US$265m all-primary NYSE IPO to fund expansion as well as to take out a high-cost loan.

JP Morgan, Goldman Sachs, Morgan Stanley, William Blair and Piper Sandler are combining efforts on the sale of 15.625m shares at US$15–$17 apiece for pricing after the market close on Wednesday, August 5.

High-end pricing would value Oak Street at roughly US$4bn, rich on historic numbers but underpinned by its ambitious growth agenda.

Oak Street is the latest player to tackle escalating healthcare costs through a so-called “value-based” approach.

One Medical, the Carlyle-backed membership-based healthcare provider that

out this approach. One Medical is valued at US$3.9bn, nearly double where it went public, despite stumbling by 8.9% to US$30.56 Wednesday on expiration of the IPO lock-up agreement.

In contrast to fee-based healthcare, where patients are billed for services on an ongoing basis, value-based providers take a large cut of insurance premiums and are responsible for all healthcare costs.

patients covered under Medicare Advantage.Founded in 2012 by three former Boston

Consulting colleagues, the company now operates 54 healthcare facilities in 13 markets. And while stunted by Covid-19, it plans to open new facilities this year in Texas, Mississippi and New York with a longer term goal of 29 markets.

mature markets to fund expansion into new markets, starting with a few facilities and in-

Using what it calls patient contribution, revenue received minus medical claims expense, it made US$64.3m combined on the

quarter. On platform contribution, a measure

In the second quarter, patient contribution and platform contribution dipped to US$48m–$53m and US$14m–$20m.

ACUTUS MAPS IPO COURSE

ACUTUS MEDICAL, a medical device specialist with an FDA-approved treatment for cardiac arrythmia, launched a US$132m Nasdaq IPO last week.


EQUITIES AMERICAS

Vital Farms cashes in ESG credentials on IPO US Pasture-raised egg producer breaks shell on debut

Roosters are crowing and hens be clucking

across the Southeast US and the streets of New

York, after pasture-raised egg producer VITAL

FARMS strutted its way to an upsized US$205m

raise on its IPO.

The company, which sources its eggs and

butter from 200 family-owned farms and sells

through 13,000 stores, is arguably the first to

truly benefit from inflows into ESG-dedicated

investment strategies.

Goldman Sachs, Morgan Stanley and Credit Suisse specifically targeted ESG funds, both

in the US and Europe, as part of a broader

marketing effort that was capped by a five-day

public bookbuild.

“Management were highly focused on who

their partners were going to be,” said one banker

involved. “As with any IPO, they were involved in

determining which investors got stock.”

Vital Farms’ management made those

decision in the context of 9.3m shares placed

on Thursday at US$22.00 apiece, rounding off

a progression from 7.8m shares at US$15–$17

at launch, to US$19–$21 on Wednesday, and

upsized on the final pricing.

Vital Farms broke through that shell with a

US$35.00 opening trade on Friday and midday

trade at US$36.50, 65% above offer.

“I should be thankful for the virtual roadshow.

Being able to see so many great investors in such

a short period of time and being able to sleep in

my own bed was something to be thankful for,”

said Vital Farms CEO Russell Diez-Canseco in a

CNBC interview on Friday.

“The conversations were really inspiring. I

think there are so many people in the investor

community that really get what we’re trying to

do. They understand that this is a long game

and that we’re still early chapters of it.”

Plant-based alternative meat maker Beyond

Meat, which debuted in May 2019 and has

quadrupled in price since, is the obvious

comparison of a similar beneficiary of changing

consumer behaviour toward healthier, less

processed, and sustainable consumption. At

the time of its IPO, however, ESG-dedicated

funds were not as fashionable, even though

the investment merits were based on the same

economics of social consumerism.

KKR, TPG and Blackstone, among others,

have all since launched dedicated ESG

strategies.

“There isn’t a week that goes by that I don’t

get questions from institutions about starting

an ESG or carving out a strategy as part of their

investments,” the head of ESG banking at one

firm told IFR. “They are getting pressure from

their investors, pension funds, endowments and

family offices.”

NO YOLK

Vital Farms sewed up its ESG credentials

by becoming a certified B Corporation, a

classification that balances profits against

social and environmental performance, public

transparency and legal accountability.

There have only been five B Corps that have

gone public through US listings. Art & crafts

retailer Etsy was the first in 2015, followed

by LatAm-focused higher education provider

Laureate Education in 2017, New York City-

focused Amalgamated Bank in 2018, online

insurer Lemonade in July, and now Vital

Farms.

In the second quarter, Vital Farms expects

to generate adjusted Ebitda and revenue of

US$8.4m–$8.6m and US$57.3m–$57.8m,

compared with US$6.4m and US$140.7m for all

of 2019, based on preliminary results.

Profitability, and the ability to remain so at

scale, is rooted in the fact that Vital Farms eggs

are among the most expensive on the shelf, at

US$6.99 per dozen, more than double the cost

of mass produced eggs.

Vital Farms is planning to scale profitably

by growing market share, from 2% currently,

expanding its products in current and new

stores, and through new products.

Whole Foods, Kroger and Sprouts Farmers

Market account for more for more than half of

current sales, providing expansion opportunities

through other grocers.

The farm-to-table economics reach down to

individual farmers.

Vital Farms partners with farmers that agree

to provisions, including that each hen is required

to have 108 square feet of land and daily outdoor

access, or about 400 chickens per acre. It

focuses on the pasture belt, a 13-state area in the

southeast US defined as “perfect year-round for

our picky ladies”.

Stephen Lacey


JP Morgan, Bank of America and William Blair are marketing 7.35m shares at US$16–$18 for pricing Wednesday, August 5.

There is a US$45m IOI from existing shareholders.

Healthcare specialists OrbiMed Advisors

shareholders respectively, with 30.5% and 18.4% equity stakes.

Acutus is using the proceeds from its IPO for the sale and marketing of its AcQMap System for identifying and treating blockages that cause of cardiac arrythmias.

Cardiac ablation is well-established as the standard of care treatment for arrythmia.

Doctors performed more than 1m

estimated US$5.7bn global market opportunity for surgical equipment suppliers.

Up to half of arrythmia patients can expect their symptoms to recur within 12 months of the ablation procedure.

In clinical trials 73% of patients treated with the AcQMap System remained symptom-free after 12 months while 93% of patients with recurring arrythmias remained symptom-free over the same period.

Acutus expects to receive FDA approval to begin selling the AcQMap System by the end of this year.

IBEX MAKES RENEWED US IPO PUSH

IBEX is making a return effort to list in the US after the business process outsourcer’s failed attempt in 2018.

Citigroup, RBC Capital Markets,Baird, SunTrust Robinson Humphrey and Piper Sandler are leading Ibex’s revamped Nasdaq IPO of 4.76m shares, including 1.2m from its Pakistan-based parent The Resource Group International, at US$20–$22 for pricing in the coming week.

The US$104.7m IPO aims to increase the

marketplace, according to the roadshow presentation.

Though the roadshow highlights Ibex’s role in helping companies’ digitally transform their businesses, only 30% of annual revenues come from digital clients.

Ibex has 22,000 employees and serves 90 clients from 27 locations in seven countries.

In the nine months ended March 31, Ibex reported net income of US$11.6m from sales of US$304.3m, up 8.4% year-on-year.

Ibex’s early 2018 attempt to go public via the sale of 4m shares or about one-quarter of the company at US$14–$16 struggled in part because of the relatively small size of the offering.

Customer concentration may again loom as an issue since US telecommunications provider Frontier Communications, accounting for 18.6% of Ibex’s revenue in the nine-month period,

Ibex’s top three clients account for 45% of revenue in the same period, though this is down from 51.8% in the prior period.

The company carries US$29.2m of net debt, excluding lease liabilities.

TENABLE BACKER JUMPS ON STOCK SPIKE

TENABLE

Insight Partners, last week leapt on a favourable reaction to the cybersecurity software provider’s second-quarter earnings

Tenable shares surged 17.9% to US$35.80 in Wednesday’s session post-earnings only for the company to hit the bid post-close with the one-day marketed all-secondary US$254m sale of 8m shares.


BigCommerce seeks US$137m to spur growth US Shopify halo effect likely to drive demand for smaller rivals IPO

BIGCOMMERCE is hoping to close the competitive

gap to high-flying competitor Shopify via an up

to US$137m Nasdaq IPO set to price Tuesday,

August 4.

BigCommerce is a VC-backed provider

of e-commerce software used by small and

medium-sized businesses to create and manage

online stores. It is coming to market at a steep

valuation discount to Shopify, whose market cap

has exploded to US$115bn – from US$17 a share

to more than US$1,000 – since it went public in

2015.

Bookrunners Morgan Stanley, Barclays,

Jefferies and KeyBanc Capital Markets are

marketing 6.85m Series 1 common shares or just

10.4% of BigCommerce at US$18–$20.

Easing the task, Tiger Global Management

has already committed to buying 20% of the

shares offered.

The midpoint of the terms attribute

BigCommerce an enterprise value of US$1.3bn

or eight times forecast 2021 sales. The faster-

growing Shopify is trading at 40 times by the

same metric, while web development platform

Wix.com, which is growing at a similar pace to

BigCommerce, trades at 12 times.

A banker close to the deal said

BigCommerce’s offering had already drawn

strong interest. Like other recent tech IPOs, this

could ultimately result in an increased range

and/or accelerated pricing.

CREDIBILITYBigCommerce was going public to “create the

transparency and credibility behind our platform

that our mostly public competitors already

have”, CEO Brent Bellm, a former HomeAway

COO and former PayPal executive, said in the

online roadshow presentation.

“When a small business or even a VP of digital

at a very large business is betting their digital

future or transformation on a platform, they

want to have confidence ... that the platform is

a market leader, is growing and has financial

stability and strength. By going public, we can

offer that transparency.”

BigCommerce plans to further accelerate

revenue growth from around 30% in recent

periods both by attracting greater numbers of

large enterprise customers and through deals

with IT partners.

The company expects to report annual

revenue run-rate of US$150.9m–$151.2m as

of June 30, up 31.4%–31.7% year-on-year,

according to preliminary numbers in its SEC

filing.

Shopify, in contrast, grew first-quarter

revenues 47% to US$470m.

Though Shopify’s success has cast a long

shadow over its rivals, the so-called M&A floor,

often cited as an attraction of software IPOs,

may have greater relevance in BigCommerce’s

case.

Several rivals have been taken over by larger

software companies in recent years, including

Demandware, now owned by Salesforce, and

Magento, now part of Adobe.

BigCommerce is also tackling a large market

given e-commerce penetration of global retail

spending is expected to double to 20% by 2023,

while SaaS solutions such as BigCommerce’s are

taking shares from on-premise/legacy software

that can be harder to update, more expensive

and less secure.

One of BigCommerce’s strengths is so-called

“headless” commerce, whereby companies can

decouple their front-end and back-end systems

to personalise the customer experience, usually

with the aid of APIs or tools provided by IT

partners.

BigCommerce expects to report a roughly

US$6m Ebitda loss and US$9m net loss for the

second quarter.

Anthony Hughes


Tenable slumped 10.7% to US$31.97 in Thursday’s session before bookrunners JP Morgan, Morgan Stanley and Barclays priced a full-size offering at US$31.75.

The offering enabled Insight to cut its stake to 14.2% from 22.1% with a 60-day lock-up on further sales.

2018 but never completely won over investors, spending some time in the hole on several occasions, including in March this year when the stock dropped to as low as US$16.28.

Tenable’s earnings release saw it report 24% enterprise customer growth, produce a revenue/billings beat and reinstate of 2020

least at the non-GAAP net income line, with US$4.7m in the quarter.

After the earnings release, Cowen analysts raised their price target to US$35.00

target to US$45.00.

ZENTALIS MAKES RAPID RETURN TO ECM

ZENTALIS PHARMA late on Wednesday priced an

came less than four months after its IPO.After two days of marketing, joint

bookrunners Morgan Stanley, Jefferies, SVB Leerink and Guggenheim Securities priced the upsized sale of 4.125m Zentalis shares, up 10% from 3.75m shares at launch, at

still well above April’s IPO price of US$18.00.Zentalis shares closed on Thursday’s

aftermarket session at US$35.06 on volume of about 1.3m shares, suggesting the shares were tightly placed with existing holders.

Viking Global Investors, a Greenwich-based investor managing about US$34bn, is Zentalis’s biggest shareholder with 11% post-offering.

The follow-on raised a little less than the US$165.2m base size of the IPO, leaving Zentalis with about US$400m of cash to fund clinical trials of its lead candidate focusing on breast cancer, plus other earlier stage drug candidates.

Zentalis went into the follow-on with

month it entered into a collaboration with Eli Lilly to combine treatments, in addition

Zentalis’ lead drug aims to overcome limitations of existing hormonal therapies, including AstraZeneca’s FDA-approved drug fulvestrant, which had US$1bn of sales in 2018.

Only a handful of 2020 IPOs have so far returned with follow-ons (1Life Healthcare and Revolution Medicines are two that have) but the coming weeks could offer a window

for strongly performing deals priced in the early part of the year to return to the market.

Schrodinger, Keros Therapeutics, OneWater Marine, I-Mab and Reynolds Consumer Products are among the best candidates based on their strong returns.

ARCTURUS FUNDS COVID-19 VACCINE TRIAL

ARCTURUS THERAPEUTICS is the latest Covid-19 vaccine developer to tap ECM, raising an upsized US$173m overnight on Tuesday ahead of the start next month of a Phase I/II clinical trial in Singapore.

Citigroup, later joined by Guggenheim Securities and Barclaysmarketed the equity raise before publicly

a US$51.50–$53.00 marketing range, against a US$55.60 last sale Tuesday.

They placed 3.26m shares at US$53.00, the high-end of the marketing range, to increase the size of the offering to US$173m.

Arcturus, which raised US$80.5m from an overnight stock sale in April at US$17.00 a share (a 5.6% discount) saw its shares tumble 12% to US$55.60 on Tuesday. Shares have surged 420% this year.

While less advanced than either Moderna

Covid-19 vaccines in Phase III trials for completion as early as October, Arcturus is making progress in the lab.

the biotech gained approval from the government of Singapore to conduct a Phase I/II trial on 108 patients.

Arcturus plans to launch the Phase I/II trial in August with a Phase III global trial to follow, depending on results.

Singapore awarded it a grant to assist development in exchange for a supply agreement within Singapore.

Separately, Arcturus entered into a binding supply agreement with the Israeli

minimum and maximum number of vaccine doses with a maximum payout of US$275m.

BIOXCEL SHREDDED ON US$200m EQUITY RAISING

Having passed an important Phase III milestone, psychiatric drug developer BIOXCEL

THERAPEUTICS is gearing up for commercialisation with US$200m it raised on Tuesday from a marketed follow-on stock sale.

the biotech’s second equity raising this year following the sale in February of 2.3m shares at US$32.00 apiece.

BioXcel has gained renewed investor attention due to the potential of its

schizophrenia and bipolar drug, as its shares had nearly doubled since the February offering to US$61.48 ahead of last week’s deal launch.

BioXcel stock got shredded, falling 14.5% to US$52.54 over the one-day marketing period on Tuesday.

Bank of America, Goldman Sachs, Jefferies, Guggenheim Securities and SunTrust Robinson Humphrey sought to cushion the blow by placing 4m shares at US$50.00 apiece, an additional 4.8% discount, after marketing

This is a much larger syndicate than in

Guggenheim are new additions, but this is a

volume and 15% of the outstanding.A week earlier, BioXcel reported Phase III

results on its sub-lingual schizophrenia and bipolar drug showed a reduction in agitation

improvements in as early as 20 minutes. That quick onset was viewed as important for in-home treatment of patients by care-givers as well as in hospitals.

BioXcel plans to submit a new drug application (NDA) early next year, setting the stage for potential approval by the end of 2021 or early 2022.

TCR2 THERAPEUTICS was more successful in cashing in on momentum from interim Phase I trial data with an upsized US$124m raising on Tuesday in a marketed follow-on.

Jefferies, SVB Leerink, Piper Sandler and BMO Capital Markets placed 8m shares, roughly 25% of the biotech and an increase from the 6m shares marketed on Tuesday, at US$15.50 apiece, a 4.8% discount to last sale.

since its US$86.3m IPO at US$15.00 a share in February 2019, though in March it put in place a US$75m at-the-market programme.

Over the weekend, TCR released interim Phase I results for its cancer treatment. All

mesothelioma and one with ovarian cancer, showed tumour regression.

SPECTRUM RAISES US$65m FOR CANCER DRUGS

SPECTRUM PHARMACEUTICALS raised US$65m last week from an overnight stock sale that will help fund the potential launch of two promising cancer drugs.

Though small in comparison to the week’s other biotech deals, the offering was

of its market cap.Jefferies and Cantor placed 21.66m shares at

days of trading volume overnight on Wednesday at a 22.6% discount to last sale.


EQUITIES AMERICAS


Spectrum recovered only a little of that

US$3.10.Spectrum has US$250m of cash for its two

cancer drugs.The lead drug is under FDA review for

approval as a potential treatment for patients with compromised immune systems arising from chemotherapy.

The drug, called Rolontis, is an extended release formulation of a generic drugs that stimulate bone marrow to produce more white blood cells.

The FDA has until October 24 to rule on Rolontis’ approval.

A second drug, called poziotinib, may be on track for early approval as a treatment for type of lung cancer.

Spectrum reported new data this week from a Phase II trial of poziotinib that may allow the biotech to skip Phase III trials altogether.

poziotinib should qualify for accelerated approval because no other drugs are FDA-approved for the target patient population.

Spectrum hopes to set up a meeting with the FDA soon to discuss the Phase II trial results and plans for early approval.

CHURCHILL CAPITAL IV SPAC RAISES MAMMOTH US$1.8bn ON IPO

Former Citigroup banker Michael Klein’s fourth SPAC, CHURCHILL CAPITAL IV

NYSE debut on Thursday despite hauling in US$1.8bn, or US$800m more than the sum

Though the lack of aftermarket enthusiasm might suggest SPAC investors are tiring as the seeming endless supply of SPACs compete for quality targets, demand for Klein’s latest vehicle included some broadening of the investor base beyond the hedge fund faithful, one banker said.

“Broader participation is very healthy for the product,” the banker said.

Citigroup, acting as global coordinator for its former M&A rainmaker, along with joint bookrunners Goldman Sachs and JP Morgan, and six other co-bookrunners, publicly marketed the deal for one day on Wednesday before placing 180m units at

where it closed on Thursday despite churn of 50.9m units. The session high was US$10.12.

The pricing marked a progression from

and then to US$1.8bn, with an additional bump to US$2.07bn from the 15% greenshoe.

Churchill IV is structured as one share,

gearing low that may have turned off some SPAC-dedicated investors.

For a product predicated on management pedigree, this is a disappointing outcome for Klein.

Somewhere across town, Bill Ackman and the Pershing Square team are pondering how to deploy the US$4bn raised a week earlier by Pershing Square Tontine, now trading at US$20.92, above the US$20 IPO print.

The US$1bn Churchill Capital III just agreed to a US$11bn tie-up with Hellman & Friedman-backed insurer Multiplan, even though the US$690m Churchill

original Churchill Capital is now Clarivate, a former Thomson Reuters subsidiary.

That’s US$3.5bn of SPAC capital devoted to the Klein complex.

The pace of entrepreneurs lining up for SPAC money is relentless. On IFR’s count, there are now 29 vehicles seeking to raise

week alone.“What you can’t see is that a lot of the

high-quality SPACs have signed letters of intent,” said one SPAC originator. “There

acquisitions.”

RACKSPACE REPOSITIONS FOR IPO

RACKSPACE TECHNOLOGY is hoping its transformation into a partner rather than a rival to large public cloud providers, plus its greater reliance on recurring revenues, will lure investors to its up to US$804m Nasdaq IPO.


ECM DEALS: WEEK ENDING 31/7/2020

Stock Country Date Amount Price Deal type Bookrunner(s)

Grupo de Moda Soma Brazil 29/07/2020 R$1,800m R$9.90 IPO (Primary) Itau, JP Morgan, BofA, XP

Vasta Platform Brazil 30/07/2020 US$352.9m US$19 IPO (Primary) Goldman Sachs, BofA, Morgan Stanley, Itau

Hangzhou Tigermed Consulting China 30/07/2020 HK$10.7bn HK$100 IPO (Primary) BofA, CICC, CLSA, Haitong, Jefferies, UBS

Li Auto China 30/07/2020 US$1.09bn US$11.50 IPO (Primary) Goldman Sachs, Morgan Stanley, UBS, CICC

WiMi Hologram Cloud China 28/07/2020 US$61.8m US$8.18 Follow-on (Primary) Benchmark Company, FT Global Capital

Wuxi AppTec China 29/07/2020 HK$7.37bn HK$108 Follow-on (Primary) MS, Huatai, Goldman Sachs, JP Morgan

Groupe SEB France 27/07/2020 €69m €138.50 Accelerated bookbuild (Secondary) BNP Paribas

Soitec France 28/07/2020 €105m €98.45 Accelerated bookbuild (Secondary) Societe Generale

AU Small Finance Bank India 30/07/2020 Rs5.6bn Rs746.40 Follow-on (Secondary) ICICI Securities

Mindspace Business Parks REIT India 30/07/2020 Rs45bn Rs275 IPO (Primary, Secondary) Axis, Ambit, BofA, Citigroup, CLSA, HDFC, ICICI,

IDFC, JMF, Kotak, MS, Nom, UBS

Network International UAE 28/07/2020 £205m 410p Accelerated bookbuild (Primary) Citigroup, JP Morgan

Mitie Group UK 28/07/2020 £201m 25p Rights issue Jefferies, JP Morgan, Barclays, Santander

ACE Convergence Acquisition US 27/07/2020 US$200m US$10 SPAC IPO Cantor Fitzgerald

Allovir US 29/07/2020 US$277.1m US$17 IPO (Primary) MS, JP Morgan, SVB Leerink, Piper Sandler

Arcturus Therapeutics US 28/07/2020 US$173m US$53 Accelerated bookbuild (Primary) Citigroup, Guggenheim Securities, Barclays

BioXcel Therapeutics US 28/07/2020 US$200m US$50 Follow-on (Primary) BofA, GS, Jefferies, Guggenheim, SunTrust RH

Calix US 29/07/2020 US$56m US$20 Follow-on (Primary) Jefferies

Churchill Capital IV US 29/07/2020 US$1,800m US$10 SPAC IPO Citigroup, Goldman Sachs, JP Morgan

E.Merge Technology Acquisition US 28/07/2020 US$522m US$10 SPAC IPO Cantor Fitzgerald, Mizuho

NewHold Investment US 29/07/2020 US$144.4m US$10 SPAC IPO Stifel

Spectrum Pharmaceuticals US 29/07/2020 US$65m US$3 Accelerated bookbuild (Primary) Jefferies, Cantor Fitzgerald

TCR2 Therapeutics US 28/07/2020 US$124m US$15.50 Follow-on (Primary) Jefferies, SVB Leerink, Piper Sandler, BMO CM

Tenable US 30/07/2020 US$256.6m US$31.95 Follow-on (Primary) JP Morgan, Morgan Stanley, Barclays

Vertex US 28/07/2020 US$401.9m US$19 IPO (Primary) GS, Morgan Stanley, BofA, Citigroup, Jefferies

Vital Farms US 30/07/2020 US$204.7m US$22 IPO (Primary) Goldman Sachs, Morgan Stanley, Credit Suisse

Zentalis Pharmaceuticals US 29/07/2020 US$144.4m US$35 Follow-on (Primary) MS, Jefferies, SVB Leerink, Guggenheim Securities


Marking a return to public markets about four years after Apollo took it private, Rackspace on Monday launched an IPO of 33.5m shares or 16.8% of the company at US$21–$24 each for pricing post-close on Tuesday, August 4.

A syndicate led by Goldman Sachs, Citigroup and JP Morgan is undertaking seven days of marketing.

The IPO marks a quick turnaround for Apollo, which agreed to buy Rackspace for US$4.3bn in August 2016 capitalising on the company’s share price halving in the previous four years.

Rackspace is now going public with an enterprise value of close to US$9bn on a fully diluted basis and including about US$3.2bn of net debt post-IPO.

The IPO proceeds will be mostly used to cut some of the debt Apollo layered on after it bought the company. Rackspace’s longer-term leverage target is 3–3.5 times net debt/Ebitda.

generated US$185.6m of adjusted Ebitda from sales of US$652.7m, the latter up 7.5% year on year. Flash numbers for the second quarter show 9.1% top-line growth.

Rackspace is therefore going public with a roughly low-teens EV/Ebitda multiple, a big discount to the 20-plus multiples that competitors such as data centres command.

Though relatively low growth, Rackspace has spent the past year or two overhauling its management and business model to bolster its prospects.

“We work across all the major clouds, including AWS, GoogleCloud, Microsoft Azure, VMware and more in a way that is seamless and practical for our customers,”

Rackspace’s managed hosting services traditionally competed with these companies but that is no longer the case.

Rackspace’s sales growth in the past

growth had exploded to 107% (a leading indicator of future revenue growth), and

It instead competes with in-house IT departments, systems integrators such as

providers and co-location data centre REITs.

The roadshow encourages investors to think of its recurring revenue stream (95% of total revenue) as akin to that of an enterprise software company.

Yet Rackspace’s long-term targets include relatively unexciting “double-digit” core revenue growth and gross margins in the early 40s (versus 70%-plus for many software companies).

BRAZIL

VASTA FINDS PLATFORM FOR GROWTH

VASTA PLATFORM, the online education arm of Brazil’s Cogna Educacao, drew strong

to-US listing since late last year.Global coordinators Goldman Sachs, Bank of

America, Morgan Stanley and Itau attracted heavy oversubscription before pricing the sale of 18.6m primary shares at US$19.00, above the US$15.50–$17.50 range, for proceeds of US$352.9m.

Debuting on Nasdaq on Friday, the shares opened at US$22.10 for an immediate 16.3% gain.

Vasta, which provides a digital education platform for private schools in the K-12

The proceeds will be used to repay debt owed to Cogna, which emerges from the IPO with an economic interest of 77.6% assuming the greenshoe is not exercised.

valuation discount to Arco Platform, whose shares have risen 150% since it went public in the US in September 2018.

GRUPO DE MODA SOMA FASHIONS R$1.82bn IPO

GRUPO DE MODA SOMA, a Brazilian omni-channel clothing retailer, secured R$1.82bn (US$350m) last week from its IPO.

Itau, JP Morgan, Bank of America and XP placed 184.1m shares, including 27.3m by secondary sellers, on Wednesday at R$9.90, the mid-point of the R$8.80–$11.00 range. That included allocating the full 20.5m share 15% greenshoe based on a primary issuance of 136.3m shares.

The offering values Grupo de Moda at R$4.7bn, or roughly US$900m, not including the potential exercise of a 27.3m shares upsize.

“Investment banks have been speaking to the company for some time,” said a banker involved. “The valuation on the cover was informed by meetings with investors before the deal launched. We always suspected that the size of the company would make it

funds.”The retailer’s small size, operational

uncertainties surrounding Covid-19, and lack of brand recognition outside of Brazil saw the bulk of the deal placed locally, though there were some big orders from international accounts, according to the banker.

Grupo de Moda will debut on Monday on

if required.

Grupo de Moda, which operates 257 stores across Brazil and whose largest clothing lines are Animale and Farm, has been struggling to deal with the fallout of Covid-19.

Having been forced to shut most of its stores, the retailer saw same-store sales decline by 32% and 36.7% in April and May, which was only partially offset by upticks in

in April and May, with a 13% increase in the number of active users.

R$1.5m of adjusted Ebitda on revenue of R$182.6m, a precipitous drop from the R$214.5m and R$1.3bn in all of 2019.

RIVA 9 EMPREENDIMENTOS IMOBILIARIOS, a subsidiary of Brazilian homebuilder Direcional Engenharia, cancelled its R$1.1bn spin-off IPO last week after balking on valuation.

BTG Pactual, Bradesco, XP and Caixa had marketed the offering of 58m primary shares at R$15–$19 for three full weeks. They were able to present a deal late on Tuesday below that marketing range, but Direcional management elected not to move forward.

“They decided to hold off and re-explore that market in the future,” said a banker involved.

In the week ahead, Brazilian home improvement retailer LOJAS QUERO-QUERO is seeing healthy investor interest in its R$2.1bn IPO.

BTG Pactual, Bank of America, Itau, Bradesco and BB Investimentos are marketing 153.4m shares, the bulk of which are from secondary sellers, at R$11.30–$14.00, for pricing after the market close on Thursday, August 6.

D1000 VAREJO FARMA PARTICIPACOES, the retail arm of Brazilian drug distributor Profarma, is hoping to raise R$478.3m on its IPO, due to price after the market close on Wednesday. XP and BB Investimentos are joint bookrunners.

STRUCTURED EQUITY

CHINA

CENTURY HUATONG UPSIZES CB TARGET

Shenzhen-listed ZHEJIANG CENTURY HUATONG

GROUP has upsized a proposed six-year convertible bond issue to Rmb7.7bn (US$1.1bn) from Rmb5.7bn.

The company is now planning to acquire an additional 32.4% in internet data centre provider Shanghai Long Rui Information


STRUCTURED EQUITY


Technology rather than 10% as previously intended. The investment will raise its stake to 71.6%.

The rest of the CB proceeds will be used to repay loans and replenish working capital.

Shanghai Long Rui has partnered with

supercomputing centre project based in Shanghai.

Zhejiang Century Huatong Group posted

revenues of Rmb14.7bn.The proposal still needs approval from

shareholders and regulators.

LONGI GREEN’S RMB5bn CB OPENS BOOKS

Shanghai-listed LONGI GREEN ENERGY TECHNOLOGY opened books for a Rmb5bn (US$714m) six-

The initial conversion price has been set at Rmb52.77. The CB issue, which has received an AAA rating from United Rating, pays an initial coupon of 0.3% in year one, stepping up each year to 2% in year six.

Proceeds will be used for two monocrystalline wafer and battery projects in Ningxia and Shaanxi provinces.

Rmb5.56bn in 2019, more than double the

Rmb2.57bn in 2018, on revenues of Rmb32.9bn, up 50%.

Guosen Securities is the sponsor.

BEIBU GULF PORT PLANS RMB3BN CB

Shenzhen-listed BEIBU GULF PORT is preparing a Rmb3bn (US$428m) six-year convertible bond offering.

Proceeds will be used to acquire 100% of Taigang Petrochemical Terminal in Guangxi province and build new container berths.

Rmb264m in Q1 2020, on revenues of Rmb1.13bn.


Zalando rides tech and EQL wave with €1bn dual-tranche

GERMANY Wave of issuance takes EMEA deals tally past full-year 2019

Demand for new equity-linked paper continues

at a pace, particularly for technology-related

names.

Following the brace of semiconductor new

issues on Tuesday, from STMicroelectronics and

BE Semiconductors, on Wednesday evening saw

the launch of €1bn of dual-tranche convertible

bonds from German online fashion retailer

ZALANDO.

The bonds, with tenors of 2025 and 2027,

were €500m each and convert into new and/or

existing shares. The five-year paper can be called

from August 2023 subject to a 130% hurdle, with

the call on the seven-year paper from August

2025 at 150%.

As a new name to equity-linked, and with no

other debt outstanding, peers and credit analysis

provided a credit assumption of 275bp for the

five-year paper and 325bp for the seven-year.

This was based on recent issuers HelloFresh,

Just Eat Takeaway.com and Ocado, and a banker

involved said that Zalando had the tightest

credit spread of that peer group. There was no

pushback and borrow was available at 40bp.

The deal was pre-sounded.

Offered at 100%–102.15% and redeemed at

par, the five-year CB came with a coupon range

of 0.05%–0.125% for a yield-to-maturity of

–0.375% to 0.125%. The conversion premium

was 40%–45%.

The seven-year paper was offered at par, with

a 0.375%–0.875% coupon, up 47.5%–52.5%.

PRICING AT MIDSBoth tranches were covered throughout the

range by 7pm in London, with guidance after

8:30pm that orders below the mids risked

missing out. The book closed shortly before

9pm.

Pricing on the 2025s came at 100.88% with

a coupon of 0.05% for a yield-to-maturity of

negative 0.125%, and mid-range premium of

42.5%.

For the 2027s, there was mid-range pricing of

0.625% coupon and 50% premium.

Implied vol for the five-year paper was

27%–34% and 26%–33% for the 2027s, with

mid-range pricing putting both at around 30%.

The bond floor on the five-year CB was 88% and

85.5% for the seven-year.

The up to €275m delta placing comprised

just 2.8m shares for proceeds of €172m with

pricing at €61.50, a 3.95% discount to the €64

Wednesday close.

There were around 50 lines in a multiple

times covered book for the equity.

Investors were able to indicate whether they

wanted zero, 50% or the full delta hedge, with

the delta on the five years at 50% and at 56% for

the seven years.

Bankers said the delta sizing showed, as

has been the case with much of the recent

issuance, a good blend of long-only accounts

and hedge funds. Across both tranches and the

delta placing, Zalando management was highly

involved in allocations.

The delta placing provided the reference

price so the conversion price on the 2025 CBs is

€87.6375 and €92.25 for the 2027 CBs.

CORONAVIRUS BENEFICIARYAs has been the case with a number of tech or

e-commerce stocks, Zalando appears to be a

coronavirus beneficiary, with shares up nearly

40% year-to-date and the stock passing €50 at

the close in May for the first time since its 2014

listing. The record closing high of €66.66 was in

early July.

A multiple times covered convertible book of

more than 100 lines had around 70% demand

from hedge funds, dropping to 55% on allocation.

UK and offshore US money represented 78% of

demand on the 2025 CB and 70% on the 2027.

“Not everyone will survive this current crisis

and it will definitely lead to some form of

consolidation,” said a second banker involved.

“Zalando is a leader in its market and that’s

what people want, and being cashflow positive

was a big advantage and made this name easy

to sell to equity-linked investors.”

The first banker said that there was a large

outright order in the book for the 2027 CB. “If you

wanted the equity, you came into the seven-year and

if you wanted optionality you came into the five-year,

but we fine-tuned on allocations to make sure there

was a strong outright presence,” he said.

A third banker said that increasing volatility

and widening spreads had helped the recent

glut of issuance. The expectation from bankers

now is that there will be a traditional August

lull until either the last week of the month or

beginning of September, traditionally a busy

month in equity-linked.

Zalando takes the number of deals in EMEA

up to 41, matching the whole of 2019, while

taking proceeds past US$20bn. Last year

proceeds of US$18bn represented a 40%-plus

improvement on the terrible year of 2018.

Zalando shares opened at €62.72 and closed

down 4.63% at €61.04.

Proceeds are slated for growth, strategic

opportunities that may arise, and for general

corporate purposes.

JP Morgan and Morgan Stanley were global

coordinators, and bookrunners with BNP Paribas

and UniCredit.Robert Venes


The proposal still needs approval from Chinese regulators.

FRANCE

STMICRO RAISES US$1.5bn WITH DUAL-TRANCHE CB

French semiconductor company STMICROELECTRONICS secured US$1.5bn on

coupon convertibles, reprising a structure used in 2017.

Part of the proceeds will fund a call on the US$750m 2022s.

The deal was not pre-sounded in part due to name recognition and strong trading in the outstanding 2022s and 2024s. As a result, the deal launched with early orders coming from hedge funds, with long-only accounts following on.

As before, the new paper converts into new and/or existing stock. STMicro shares were up nearly 6% year-to-date as of the €26.15 Monday close, not far off the mid-February €29.35 record closing high.

STMicro is rated Baa3/BBB/BBB and the bonds are expected to receive a rating.

104.5%–107.1% of principal, to be redeemed at par, with no coupon and a negative yield to maturity of 1.36% to 0.88%. The premium guidance was 45%–

50% and there is a call from three years with a 130% hurdle.

For the 2027s, the issue price guidance of 102.7%–106.3% translates into negative YTM of 0.87% to 0.38%. The premium range was 50%–55% with the call from four years, with the same 130% hurdle.

CDS trading in euros is liquid and around 30bp, which alongside the outstanding paper provided a credit assumption of 50bp for the 2025s and 75bp for the 2027s. There was plenty of borrow available at 35bp. That provided

CBs and 29%–37% for the seven-year CBs.

US$1.5bn total fundraising size but minimum sizes of US$500m for each tranche. A covered message came after around two hours, with subsequent messages guiding to the middle of ranges

The book closed at around 11:30am in London.

Pricing came shortly after 4pm at 105.8% on the 2025s for a negative yield of 1.12%. The premium was set at 47.5%, which gives an initial conversion price of US$43.62, based on the VWAP from launch to pricing of €25.1945.

For the 2027s, pricing was 104.5% for a negative yield of 0.63%. The 52.5% premium gave a conversion price of US$45.10.

was 91% and for the seven-year paper was 88%.

A banker involved said that there was good interest as “investors have always made money on STMicroelectronics’ CBs”, adding that long-only accounts took their time after some initial large orders from

split on allocations. There was a lack of

oversubscribed book.BNP Paribas, JP Morgan and UniCredit were

global coordinators, and bookrunners with Citigroup, Banca IMI, Morgan Stanley and Natixissyndicate since 2017.

from their roles as bookrunners on the 2017 issue, while BNP Paribas had not been involved in the previous trade and Morgan Stanley and Societe Generale were on the top line.

The 2022 CBs were bid at 140.09% on Tuesday and the stock closed down 5.2% at €24.78.

NETHERLANDS

BESI ADDS TO SEMICONDUCTOR FLOW IN EQUITY-LINKED

BE SEMICONDUCTOR INDUSTRIES raised €150m from a seven-year convertible bond issue


STRUCTURED EQUITY

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on Tuesday evening in the second equity-linked deal from a European semiconductor company that day.

BESI released second-quarter results on Tuesday morning but STMicroelectronics of France launched US$1.5bn of dual-tranche convertible bonds shortly after, scuppering BESI’s chance for an intra-day launch.

The second-quarter results helped provide momentum. Revenues rose 34.1% year-on-year to €124.3m and orders were €101.3m, up 22.5% from 2019, though third-quarter revenues are expected to fall by 10%–25% due to typical seasonal

to the coronavirus pandemic. The shares are up more than 8% in the year to-date but were little changed on the results.

Wall-crossing for BESI’s CBs took place on Tuesday afternoon ahead of a post-close launch. As bookbuilding came after trading had ended, a delta placing of approximately €40m was included to give the opportunity to hedge and provide the reference price.

were given the opportunity to indicate whether they wanted to hedge zero, 50% or the full delta alongside their CB orders.

BESI has CBs maturing in 2023 and 2024 that provided the basis for a 325bp credit assumption. As with the previous issues, Morgan Stanley was sole bookrunner on the CB.

Previous deals had come with upsize options but on this occasion it was €150m at launch.

Use of proceeds included the catch-all of general corporate purposes, but also some

generation packaging technologies, expansion of Asian manufacturing operations, as well as potential acquisitions and share buybacks.

The 2027s were offered with a coupon of 0.5%–1.2% and premium of 35%–40%. There

callable from year four with a 130% hurdle.A covered message came inside 45

minutes of launch, and shortly after 7:30pm in London investors were guided

37.5% premium.

with pricing of €37.50 a 3.1% discount to the €38.73 close.

Compared with a more than €3.1bn market cap, the deal size was small with the underlying shares representing 3.5% of share capital and BESI wanted to push on pricing. At the premium of 37.5% the conversion price is €51.56, versus a record close of €41.54 in mid-February.

vol of 28.5%.There was a good balance between long-

only and hedge fund accounts in a book of around 50 lines.

A banker involved said that there was plenty of demand at the mids but not enough to push tighter.

The shares closed down 2.45% at €37.78 on Wednesday.


EQUITY-LINKED DEALS WEEK ENDING: 31/7/2020

Issuer Country Date Amount Greenshoe Tenor Coupon/YTM % Premium (%) Bookrunner(s)

STMicroelectronics France 28/07/2020 US$750m - 5y 0% / -1.12 47.5 BNPP, JPM, UC, Citi, Banca IMI, MS, Natixis

STMicroelectronics France 28/07/2020 US$750m - 7y 0% / -0.63 52.5 BNPP, JPM, UC, Citi, Banca IMI, MS, Natixis

BE Semiconductor Netherlands 28/07/2020 €150m - 7y 0.75 37.5 Morgan Stanley

Zalando Germany 29/07/2020 €500m - 5y 0.05 / -0.125 42.5 JP Morgan, MS, BNP Paribas, UniCredit

Zalando Germany 29/07/2020 €500m - 7y 0.625 50 JP Morgan, MS, BNP Paribas, UniCredit

GLOBAL CONVERTIBLE OFFERINGSBOOKRUNNERS: 1/1/2020 TO DATE


Including exchangeables and domestic offerings.

Source: Refinitiv SDC code: C9

1 JP Morgan 82 15,637.73 14.0

2 Goldman Sachs 71 13,934.76 12.5

3 Morgan Stanley 60 12,023.11 10.8

4 Bank of America 59 11,595.40 10.4

5 Citigroup 38 6,756.16 6.1

6 Barclays 26 3,987.94 3.6

7 Credit Suisse 21 2,963.06 2.7

8 Wells Fargo 17 2,795.28 2.5

9 Guotai Junan Secs 12 2,689.81 2.4

10 BNP Paribas 15 2,585.07 2.3

Total 316 111,661.17

GLOBAL CONVERTIBLE OFFERINGS – US BOOKRUNNERS: 1/1/2020 TO DATE


Source: Refinitiv SDC code: C9a

1 Goldman Sachs 50 10,479.25 17.6

2 JP Morgan 52 10,172.92 17.0

3 Bank of America 48 9,996.87 16.7

4 Morgan Stanley 40 8,233.77 13.8

5 Citigroup 25 4,220.85 7.1

6 Wells Fargo 17 2,795.28 4.7

7 Barclays 18 2,551.51 4.3

8 Credit Suisse 13 2,243.62 3.8

9 RBC 8 937.74 1.6

10 Jefferies 9 838.17 1.4

Total 104 59,696.64

GLOBAL CONVERTIBLE OFFERINGS – EMEA BOOKRUNNERS: 1/1/2020 TO DATE


Including exchangeables.

Source: Refinitiv SDC code: C09d

1 JP Morgan 21 4,055.69 19.8

2 Morgan Stanley 10 2,096.02 10.2

3 Goldman Sachs 13 1,697.64 8.3

4 BNP Paribas 11 1,662.57 8.1

5 UniCredit 8 1,524.82 7.4

6 HSBC 8 1,194.17 5.8

7 Barclays 6 1,158.93 5.7

8 Citigroup 5 1,041.67 5.1

9 Credit Agricole 7 971.52 4.7

10 SG 7 735.58 3.6

Total 41 20,501.87

ALL INTERNATIONAL ASIAN CONVERTIBLESBOOKRUNNERS: 1/1/2020 TO DATE



Source: Refinitiv SDC code: M10

1 Goldman Sachs 5 1,512.03 14.9


3 UBS 7 1,370.77 13.5

4 Citigroup 6 1,127.81 11.1

5 JP Morgan 6 965.78 9.5

6 Bank of America 3 818.14 8.0


8 HSBC 4 382.03 3.8

9 Nomura 2 280.93 2.8

10 CICC 3 225.00 2.2

Total 27 10,178.30

ALL INTERNATIONAL ASIAN CONVERTIBLES

(EXCLUDING JAPAN) BOOKRUNNERS: 1/1/2020 TO DATE



Source: Refinitiv SDC code: M11

1 Goldman Sachs 5 1,512.03 16.7


3 UBS 7 1,370.77 15.1

4 Citigroup 6 1,127.81 12.5

5 JP Morgan 6 965.78 10.7

6 Bank of America 2 666.18 7.4


8 HSBC 4 382.03 4.2

9 CICC 3 225.00 2.5

10 BNP Paribas 1 200.00 2.2

Total 21 9,054.33


OUR DATA COMES DOWN TO TWO SIMPLE THINGS.WHAT WE DO WITH IT. AND WHAT YOU ACHIEVE WITH IT.Make better business decisions with Refinitiv’s filtered, cleaned, integrated data sets.

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INTERNATIONAL FINANCING REVIEW INDEX

1MDB 1, 20

ABC International Holdings 54

Acutus Medical 77

Adani Ports and Special Economic Zone 49

ADO Properties 22

Agco 69

Aggregator of Loans Backed By Assets

AgroFresh 67

Aldevron 67

Alight Solutions 68

Alion Science & Technology 67

AlloVir 76

AMC Entertainment 34

Amer Sports 69

Amplifon 22

Arcturus Therapeutics 79

Argentina 57

Aroundtown 29

Ascena Retail Group 70

Asda 6

Assoc for Financial Markets in Europe 36

AT&T 7, 26

Auchan 29

Ausgrid 31

Australian Office of FM 8

Avis Budget Group 43

Banistmo 57

Bank of America 15

Bank of Communications 54

Barclays 12, 17, 36

Beibu Gulf Port 82

Berlin 24

BE Semiconductor Industries 83

Bharat Petroleum Corp 74

BigCommerce 78

BioXcel Therapeutics 79

Blue Yonder 68

BNG Bank 25

BNP Paribas 12, 16

BoCom Financial Leasing 54

Bracco Imaging 62

BroadStreet Partners 66

Brookfield Asset Management 71

California Pizza Kitchen 70

CanSino Biologics 74

CarMax 40

Carnival 69

CCB Financial Leasing 54

Cenovus Energy 33

China Construction Bank Corp 50, 54

China Development Bank 51

China Everbright Bank 54

China Evergrande Group 72

China Huarong Financial Leasing 54

China ZhengTong Auto Services 59

Chong Hing Bank 54

Churchill Capital IV 80

Citigroup 18

CJ Foods 65

Concord Music Group 65

Co-operative Bank 21

Coventry Building Society 37

Credit Suisse 11, 12, 17

CSC Financial 50, 54

d1000 Varejo Farma Participacoes 81

Dedalus 69

Delamare 2020-1 40

Delek Drilling 4

Deutsche Bank 12, 16, 17, 19

Dongfeng Motor 73

doValue 34

DR Horton 41

Dukinfield Plc 36

EIB 24

Emerald Performance Materials 66

Evercore 16

Fame Well Creation 61

Fannie Mae 40

Faurecia 35

FedEx 28

Fifth Third Bank 31

Filinvest Development 54

First Brands 67

Ford Motor 41, 64

Four Seasons Hotel Sydney 60

Future Retail 54

G-III Apparel Group 34

GLP China Holdings 61

Goldman Sachs 16, 20

Goldman Sachs Merchant Banking 65

Goodman European Partnership 29

Graham Packaging 66

Greenland Holdings 50

Groupe SEB 75

Grupo de Moda Soma 81

Guolian Securities 73

Hangzhou Tigermed Consulting 73

Hertz 42, 43

Hilong Holdings 50

HSBC 17, 18

Hurtigruten 69

IAG 3

Ibex 78

ICBC International Holdings 54

ICICI Bank 74

IFCO 69

IHS Towers 55

ICBC 54

Industrial & Infrastructure Fund 74

Industrias Penoles 57

IVC 69

JDE Peet’s 2

Jefferies 16

Jinbi Property Management 72

JP Morgan 16

KE Holdings 2

Kensington Mortgages 37

KfW 23

Kinder Morgan 7

KKR 65

Korea South-East Power 54

Lazard 13

Lennar 41

Li Auto 2

Life Insurance Corporation of India 74

Live Nation 68

LogMeIn 65

Lojas Quero-Quero 81

LONGi Green Energy Technology 82

Lufax 3

Luxshare Precision Industry 59

Macquarie 45

Midea Group 73

Midea Intelligent Lighting & Controls 73

Mindspace Business Parks REIT 71

Mitie Group 75

Moelis 13

Morgan Stanley 15

Mosaic 64

MS Commercial 62

Nakheel 63

NatWest 8

Netjoy Holdings 73

Network International 75

NewOcean Energy Holdings 61

NZLGFA 26

NLMK 63

Nomura 19

Nordic Investment Bank 23

NorteGas 29

Novelis 63

NSW Electricity Networks Finance 60

Oak Street Health 77

Oman 63

OMV 29

Orion Advisor Solutions 65

Parques Reunidos 69

Paymentsense 35

Pearson 8

Pepper Group 45

Perpetual 60

Petrobras 64

Phoenix Pharma 22

Pilgangoora Operations 60

Ping An Leasing Hong Kong Holdings 61

Platform Housing Group 30

Prosus 49

Province of Mendoza 56

Rackspace Technology 80

RedBall Acquisition 71

Redding Ridge Asset Management (UK) 40

Refresco 68

Regione Lazio 29

Resimac Group 44

Rhineland-Palatinate 24

Riva 9 Empreendimentos Imobiliarios 81

Robi Axiata 74

Rocket Companies 2, 76

Rovensa 68

Royal Bank of Canada 32

Royalty Pharma 2

Rusal 29

Samson Paper 59, 70

Santander Consumer Bank 40

Saxony 24

Seven West Media 60

Shandong Qingyuan Group 59

Shanghai Pudong Development Bank 54

SK Bioscience 74

Sogou 3

Sohar International Bank 63

Soitec 75

Sony 61

South Australian Government 26

Southwest Airlines 27

Spectrum Pharmaceuticals 79

Sri Lanka 55

Standard Chartered 19

State Grid Corporation of China 51

State of Baden-Wuerttemberg 23

State of Israel 56

STMicroelectronics 83

Strategic Education 64

Suez 8, 62

TCR2 Therapeutics 79

Telenet International 69

Tenable 78

Tereos 62

Tesco Personal Finance 40

Tesla 41

Textainer Group 40

Tosca Services 67

Toyota Motor 40

Trafigura Beheer 6

Traton 62

Trip.com 3

Truist Financial 31

UBS 12, 15, 17, 31,

UK DMO 26

UniCredit 39

University of Tokyo 30

Vasta Platform 81

Verizon 42

Vertex 76

Vital Farms 77

Vitol 62

VNU 69

Volkswagen 62

Walmart 6

WeDoctor 72

WiMi Hologram Cloud 73

Wintershall DEA 75

WiZink 40

Wumart Technology Group 73

Wuxi AppTec 73

Xiamen Meet You 73

Xiaomi 59

Xpeng Motors 2, 72

Zalando 82

Zentalis Pharma 79

Zhejiang Century Huatong Group 81

ZhongAn Online P&C Insurance 54

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