Compagnie de Saint-Gobain, one of the world's largest building materials companies, had the floor to itself this week in the corporate market, when it priced a faultless 10 and 18 year sterling transaction.
Despite appetite remaining strong for credit product, Saint-Gobain was the only investment grade corporate issuer to tap the markets this week.
This should change in the week ahead — already a number of mandates have been announced. Greek telecom operator OTE has finally confirmed the Citigroup, Dresdner Kleinwort, JPMorgan and National Bank of Greece mandate for a dual tranche euro issue.
The deal will be split between a three year FRN and a May 2016, to be launched after a roadshow which ends next Friday.
In the more immediate future, Dutch telecom operator KPN is tendering up to Eu750m of its November 2008 bonds via BNP Paribas, Credit Suisse and Rabobank, to be replaced with a new 10 year which should exceed Eu500m.
Away from the telecom theme, Imperial Tobacco will be roadshowing a sterling/euro deal during the week starting November 6 via Barclays Capital, Deutsche Bank and JP Morgan.
Saint-Gobain's visit was effectively its first benchmark-sized trade in sterling according to lead managers Barclays Capital, HSBC and Royal Bank of Scotland and was driven by the £5.7bn acquisition of UK plasterboard maker BPB in 2005.
As well as acquisition financing, the issuer was keen to extend the duration of its debt while raising a decent size out of the market. While the 10 year tenor was viewed as the sweet spot on the curve, there was no shortage of appetite for the 18 year either. Indeed, both tranches ended up by being covered a multiple amount of times.
Having completed a non-deal roadshow a few weeks ago, Saint-Gobain decided to take advantage of the momentum it created. The leads released guidance at 105bp area for the 10 year and 130bp area for the second tranche.
Investors rushed to the deal and a £1.5bn book on the 10 year and £1.25bn on the 18 year meant that the leads revised guidance to 100bp-105bp and 125bp-130bp. They finally printed the 10 year at the tight end and the 18 year at 125bp.
As has been the case with a lot of issuance this year, Saint-Gobain was able to achieve competitive funding levels by tapping the sterling market.
Indeed, while in euros the differential between the issuer and competitor Bouygues is around 10bp, this was reduced to 5bp in the sterling market.
The deal did not offer any premium to the 2016 euros either which were at swaps plus 63-64bp.
