Corporates warm to EMTNs and ECP

2012 was the busiest year for companies in privately placed euro medium term notes since 2009. Euro commercial paper flows were also healthy. But supply remains muted relative to the market as a whole. Craig McGlashan reports.

  • 21 Dec 2012
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Corporations have long been highly desired by EMTN and ECP dealers. Outside of the loan market, company borrowers have typically relied on public, syndicated deals rather than smaller EMTNs or short term ECP.

However, there were signs of change in 2012 with EMTNs and ECP benefitting from the wider trend for corporations to move from increasingly expensive bank lending into the capital markets.

Corporate issuers had placed $30.5bn of EMTNs as of December 3 2012, the largest volume since 2009, according to Dealogic. New issuers joined the fray during the year, helping to boost the volumes. Their sense of adventure was often rewarded with strong investor demand.

"A lot more corporates have moved from bank lending into the capital markets but there is still a lack of supply, despite heavy demand," says Henry Coyle, head of MTNs and EMEA CP at Royal Bank of Scotland.

He points to a key advantage that privately placed MTNs can offer corporates. "Regular issuers such as BMW can use private placements to flatten their redemption curve, so if circumstances beyond their control lead to poorer funding conditions, they are not forced to issue to cover redemptions."

Lanxess, a German chemicals company, sold its first private placements in March 2012. The firm placed a pair of €100m notes with tenors of 10 and 15 years.

"We were able to push out our tenors and gain attractive pricing with private placements," says Christoph Koch, head of treasury at Lanxess. "That was especially true of the 15 year private placement. It would be difficult for a triple-B chemical name to sell 15 year debt via a public deal. For very long dated paper private placements seem to be the right instrument."

The firm’s 15 year note was priced 15bp-20bp cheaper than an equivalent public deal would have been, says Koch.

But despite these advantages, many corporate treasurers remain reluctant to launch EMTN programmes. "Time constraints, lack of resources and documentation issues can stop corporate issuers from considering private placements," says Amaury Gossé, MTN director at Citi. "Some of their needs are big and their treasury teams don’t want to be bothered with small sized placements."

Instead, the driver behind last year’s increased corporate issuance came from the demand side, says Gossé. "The lack of alternatives has forced investors that hadn’t looked at corporations before to change their attitude," he says. "A few key players across the globe changing their position forced dealers to go out and pitch harder to potential corporate issuers."

Short term supply

Corporations have also gained ground in ECP. Money market funds — one of the main buyers of short term debt — saw their pool of investable products shrink in 2012 as banks and sovereigns suffered downgrades, meaning corporations became more important to them. Additionally, the European Central Bank’s long term refinancing operations in December 2011 and February 2012 brought banks’ levels tighter into line with corporations.

Meanwhile, in peripheral Europe many corporations performed better than their financial counterparts, in part because they avoided many of the rating downgrades that hurt the banking sector in 2012.

"Peripheral corporations did perform quite well, Spanish and Italian credits particularly," says Kieran Davis, head of European short-term credit trading at Barclays. "From October there was definitely a noticeable increase in volumes. It was a rehash of 2011 where banks underperformed but corporations were strong."

However, whether 2013 will record similar success is open to debate.

"Corporate flow will remain similar this year," says Ian Bedford, a director on the syndicate desk at RBS. "Corporations’ cashflow management is structured in such a way that they aren’t always able to issue just because the opportunity is there — and they can use term funding, which is on fire at the moment."

Davis thinks it will be a good year. "Corporations could have a good year as they come off the loan drug," he says. "It feels like liquidity and investor support would be very good. It is mostly a euro market for corporations and it’s mostly low single-A and below corporations that are looking to the front end to grow outstandings."

EMTN dealers are also hopeful that their efforts over 2012 will bear more fruit in 2013.

"We’ve sought out corporate issuers more than before and it’s a virtuous circle as well," says Gossé. "The more trades being done, the more CFOs and treasurers will talk and wonder why they’re not doing it as well."
  • 21 Dec 2012

Bookrunners of International Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Oct 2016
1 Citi 38,857.97 184 9.39%
2 HSBC 38,447.58 227 9.29%
3 JPMorgan 34,744.34 142 8.40%
4 Bank of America Merrill Lynch 28,556.15 119 6.90%
5 Deutsche Bank 18,270.77 72 4.42%

Bookrunners of LatAm Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 13,268.07 33 6.30%
2 Bank of America Merrill Lynch 11,627.56 29 5.52%
3 Citi 11,610.06 30 5.52%
4 HSBC 10,091.34 29 4.79%
5 Santander 9,533.17 25 4.53%

Bookrunners of CEEMEA International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 Citi 13,617.40 57 11.05%
2 JPMorgan 12,607.77 55 10.23%
3 HSBC 9,327.72 50 7.57%
4 Barclays 8,643.78 30 7.02%
5 Bank of America Merrill Lynch 6,561.15 18 5.32%

EMEA M&A Revenue

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 02 May 2016
1 JPMorgan 195.08 50 10.55%
2 Goldman Sachs 162.26 37 8.77%
3 Morgan Stanley 141.22 46 7.64%
4 Bank of America Merrill Lynch 114.20 33 6.18%
5 Citi 95.36 35 5.16%

Bookrunners of Central and Eastern Europe: Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 UniCredit 3,966.12 27 13.01%
2 SG Corporate & Investment Banking 2,805.90 16 9.20%
3 ING 2,549.27 20 8.36%
4 Citi 2,526.98 15 8.29%
5 HSBC 1,663.71 16 5.46%

Bookrunners of India DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 19 Oct 2016
1 AXIS Bank 5,944.45 123 18.53%
2 HDFC Bank 3,792.05 100 11.82%
3 Trust Investment Advisors 3,390.86 145 10.57%
4 Standard Chartered Bank 2,299.63 31 7.17%
5 ICICI Bank 1,894.86 51 5.91%