The opening two days of the week were lively with seven deals being priced in euros and sterling. But it has not been easy for issuers, with investors on the hunt for attractive new issue premiums — particularly at the long end of the curve.
A tepid investor reaction forced McDonald’s to pull the 20 year tranche of a four tranche euro deal on Monday, although the issuer was able to sell 4.25, seven and 12 year notes. Bankers away from the deal blamed a variety of factors, with different syndicate managers pointing to a too-flat curve between the 12 and 20 year notes, recent rates volatility and company-specific factors.
French tyre maker Michelin also attempted a long dated print on Tuesday, trying to add a 30 year tranche to seven and 12 year notes mid-bookbuild. That tranche also failed to materialise.
Illinois Tool Works showed there is still some appetite for longer dated paper on the same day, however, by pricing a €500m 15 year tranche and a €500m eight year tranche. Bankers away from the deal pointed to an attractive new issue premium of around 15bp and a modest deal size as being key factors for the issuer’s success.
General Electric will be the next issuer to take a tilt at a long dated euro bond, opening books for a benchmark 12 year on Wednesday morning, along with an eight year fixed rate print and a five year floating rate note.
The rest of the euro supply on Wednesday is expected to fall in the belly of the curve, where a good trade-off between yield and maturity has benefited deals from issuers like Adecco earlier this week.
Harman is expected to sell its debut euro deal, a €350m seven year with initial price thoughts of 150bp over mid-swaps, while Radiotelevisione Italiana will sell a €350m five year. Initial price thoughts of 140bp-150bp over swaps are being circulated for RAI’s trade.
It has been a slightly cheerier week for leveraged loan market activity as well. Monday began with bank meetings for BSN Medical and Terex as both borrowers sought €360m and €199m refinancing loans respectively.
BSN Medical, the German medical devices company, is seeking to take out mezzanine loans, Australian dollar loans and acquisition facilities. Meanwhile, Terex, the US maker of lifting and materials handling machinery, is refinancing dollar debt with its euro loan.
Then on Tuesday it was the turn of medical goods producer ConvaTec to bring its €1.5bn refinancing loan to the market. Schenck came the same day with its €605m deal, which was also a refinancing facility.
Although leverage loan activity is dominated by refinancing exercises, it is welcomed by the market given the spate of repricings that have preceded them. Signs are that investors have become fed up with margin slashing, as pushback kept Flint’s €1.5bn cross-border loan repricing on Monday at the wider end of guidance.
As the leveraged loan market kicked into gear, high yield bonds have been cruising at a lower setting. Rexel has been the only issuer in the market so far this week, with its €500m of senior unsecured notes. That is also a refinancing.
But cause for cheer arrived on Wednesday morning, in the familiar form of LBO darling Altice. Patrick Drahi, the company’s founder and head, has continued his acquisition spree with the $9.1bn purchase of a 70% stake in Cequel Communications.
In investment grade loans, Kleinwort Benson has entered a fantasy world. The bank has been appointed sole financial advisor to London Resort Co Holdings, the Kuwaiti-backed developer that is building London Paramount Entertainment Resort, a Hollywood-style theme park.
Kleinwort will oversee a £3.2bn debt and equity raising for the project. The resort will be on the Swanscombe Peninsula in Kent, an area that was formerly the site of the largest cement plant in the UK.
In another fairytale-style kingdom — Vienna — Austrian property company Immofinanz got a €300m loan from UniCredit Bank Austria and Deutsche Pfandbriefbank to refinance its Vienna property portfolio.
Stretching the theme, Lenzing and Fresenius in Germany have swallowed the 'Drink Me' potion and shrunk their Schuldscheine programmes. Lenzing reduced its deal to €150m and Fresenius has terminated €220m of notes over the last year.
Dan Alderson, syndicated loans editor +44 207 779 7311
Jon Hay, corporate finance editor +44 207 779 7321
Victor Jimenez, high yield +44 207 779 7379
Ross Lancaster, leveraged loans +44 207 779 7322
Richard Metcalf, corporate bonds +44 207 779 7315
Elly Whittaker, investment grade loans +44 207 779 8361
Top Corporate Financing stories this week:
McDonald's bins 20 year tranche, but US pipeline grows
Michelin returns after three years, but 30 year punt is too long
ITW shows long end still open for US issuers — but costs more
Investors draw “line in the sand” on Flint repricing
Kleinwort to steer £3.2bn raising for London Paramount Resort