Although the US stockmarket had closed 1% down yesterday, today’s open in Europe was more encouraging, with the Euro Stoxx 50 around 0.5% up by mid-morning.
“Retail issuers and low beta credits in general have been under pressure in the last few days,” said a banker at one of the leads, Barclays, Lloyds and Mitsubishi UFJ Securities International.
Nevertheless, Morrisons’ name was in demand as it is rated A3, albeit with a negative outlook, and had never issued in euros before.
“We’d done a great roadshow [starting on Thursday last week] and had the feedback behind us, so were confident of being able to print today,” the banker said.
Morrisons opted for a benchmark seven year bond, and announced initial price thoughts of 90bp-95bp over mid-swaps.
Investor feedback pointed to “a strong print somewhere in the 80s”, the banker said.
Tesco and Carrefour were the main comparables investors looked at. Tesco is a bigger UK player and the strongest UK supermarket group, so Morrisons was always likely to price wider than it; while Carrefour is lower rated, at Baa2/BBB.
As Morrisons is on negative outlook, investors “were thinking of them in the strong triple-B context,” the banker said.
With some good lead orders, demand from UK investors in size and German and French accounts coming in too, the book got to a high quality €2bn.
The leads priced a €700m bond at 88bp over mid-swaps and it tightened by 2bp or 2.5bp on a Bunds basis in the afternoon.