Jumbo rights issue tops off Enel’s transformational first half

  • 28 Sep 2009
Email a colleague
Request a PDF
Enel’s funding strategy has been anything but staid this year, with the Italian utility tapping a diverse range of markets culminating in a jumbo equity offering in the summer. Nina Flitmanfinds out what’s next on the agenda.

The year 2009 has been a momentous one for Enel’s funding team, with the company tackling the transformational acquisition of Spain’s Endesa that began in 2007, a weighty bank financing deal and the biggest corporate equity offering in Europe this year.

It is now turning its attention to the bond markets, having mandated BNP Paribas and Deutsche to arrange investor meetings in mid-September in France, Germany and the UK.

The rights issue in June was perfectly timed, coming just as equity markets were recovering after their March lows. The Eu8bn transaction — which was used to part-finance its completion of the Endesa takeover — had a take-up level of 99.6%, while the remainder was sold in a Eu33.6m rump placement on the Milan stock market. Enel had taken its holding in the Spanish company to 92% after buying Acciona’s 25% stake in Endesa for Eu9.627bn.

Although executing such a big rights issue was risky, given that the company’s shareholder base is mostly retail investors, the deal was well supported and there was a record take-up for the offering.

"The rights issue was our biggest success this year," says Luigi Ferraris, chief financial officer of Enel in Rome. "The take-up was a confirmation of the trust that our shareholders have in us, and in the reliability of the strategy we have been implementing. We saw a very positive reaction from the market: around 1.2m retail investors subscribed to the deal and this was one of the most important signs of the confidence in the Enel name.

"A main pillar of our strategy is to maintain our financial stability, and after the rights issue the ratings agencies reaffirmed the A2/A- rating and removed us from any watch lists and upgraded our outlook to stable from negative (S&P and Fitch)."

This was the largest equity transaction in EMEA outside the financial sector since France Télécom completed a Eu15.3bn offer in March 2003, and was also the largest equity deal completed by an Italian company. However, the size of the deal meant that the execution had to be delicately handled.

"We announced the deal quite a long time in advance, so it wasn’t a big surprise to investors when the terms came out," says Stefan Weiner, head of EMEA equity syndicate at JP Morgan in London, who worked on the deal. "However, there was quite a lot of focus on the deal as a test of the overall liquidity in the equity market. It is the largest deal in Europe outside the UK, and there was a feeling that it was kick-starting liquidity in the market."

Challenging transformation

"The Endesa [takeover] was transformational for us," says Ferraris. "When it was completed, Enel became a multinational firm with a presence in 23 countries. Strategically, the acquisition was one of the most important deals of the year for us, but it was also the most challenging."

Enel had bought 67% of Endesa in 2007, tapping the bank market for a jumbo Eu35bn loan in the process. That loan, by the beginning of 2009, stood at Eu19.5bn following bond takeouts and repayments.

In order to fully complete the acquisition of Endesa, Enel tapped the loan market again this year, this time for an Eu8bn five and seven year facility to finance its purchase of Acciona’s 25% stake in Endesa, worth at the time Eu11.1bn. The Eu8bn loan was added on to Enel’s existing term loan ‘C’ which had been due to expire in April 2012.

However, as if to emphasise Enel’s confidence in working with the financial markets, it built a forward start structure into the ‘C’ tranche meaning that the maturity of Eu5.5bn of the piece was extended to April 2014 and another Eu2.5bn was pushed out to April 2016.

Having tapped equity and loan investors in the first half of 2009, Enel’s board of directors has turned its funding attention to the bond market. With more than Eu1.8bn of bonds maturing between July 1, 2009 and December 31, 2010, including debt from the Endesa Group, it has approved a bond issuance programme to raise up to Eu10bn by the end of June 2010. BNP Paribas and Deutsche are likely to lead the first bond from the shelf.

Enel was one of the few European utility firms absent from the bond market in the first half of 2009. Companies from the sector have been the largest issuers of non-financial bonds this year, raising $188.4bn globally by August, more than any previous full year on record.

"At the moment, about 60% of our gross long term debt is from bank financing and 40% is from bonds," says Ferraris. "The bond programme will focus on rebalancing this mix and on refinancing debt maturities, while we are also delivering an asset disposal programme to reduce our debt overall. After the finalisation of the rights issue, we are seen as a solid investment to bondholders and in the credit market in general. Our financial stability and reliability is key part of our appeal to investors, and the stability of our cashflows has been a key driver even in volatile market conditions."

  • 28 Sep 2009

Bookrunners of Global Covered Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 UBS 11,121.93 68 5.93%
2 HSBC 10,710.61 60 5.71%
3 BNP Paribas 9,831.12 47 5.24%
4 Credit Agricole CIB 9,404.76 44 5.02%
5 Commerzbank Group 9,001.98 53 4.80%

Bookrunners of Global FIG

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Oct 2016
1 JPMorgan 81,231.28 359 6.94%
2 Citi 71,707.01 430 6.13%
3 Goldman Sachs 66,474.43 345 5.68%
4 HSBC 65,008.61 267 5.56%
5 Morgan Stanley 64,563.48 305 5.52%

Bookrunners of Dollar Denominated FIG

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 63,581.57 256 10.75%
2 Citi 59,939.53 336 10.13%
3 Bank of America Merrill Lynch 50,999.42 275 8.62%
4 Morgan Stanley 47,227.84 232 7.98%
5 Goldman Sachs 44,763.52 269 7.57%

Bookrunners of Euro Denominated Covered Bond Above €500m

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 Credit Agricole CIB 8,094.29 29 8.24%
2 BNP Paribas 7,155.53 27 7.28%
3 UBS 6,612.03 23 6.73%
4 LBBW 5,728.28 22 5.83%
5 Commerzbank Group 5,651.39 24 5.75%

Global FIG Revenue

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 02 May 2016
1 Morgan Stanley 365.83 497 7.62%
2 JPMorgan 332.66 618 6.92%
3 Bank of America Merrill Lynch 299.89 590 6.24%
4 Goldman Sachs 276.71 375 5.76%
5 Citi 264.54 592 5.51%

Bookrunners of European Subordinated FIG

Rank Lead Manager Amount €m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 BNP Paribas 6,493.74 22 9.59%
2 UBS 6,355.46 25 9.39%
3 HSBC 6,275.95 20 9.27%
4 Barclays 5,430.32 15 8.02%
5 Citi 4,577.05 23 6.76%