Rating: —/—/A-
Amount: £300m of tier three capital
Maturity date: 20 July, 2022
Issue/reoffer price: 100.00
Coupon: 4.125%
Spread at reoffer: Gilts plus 337.5bp
Launched: Monday, January 16
Payment date: January 20
Joint books: Bank of America Merrill Lynch, JP Morgan Cazenove, Lloyds, NatWest Markets
Bookrunners’ comment:
We did a roadshow in two days, plus conference calls, before taking advantage of the strong window we had at the beginning of the week before UK Prime Minister Theresa May was due to speak [about Brexit] on Tuesday.
Phoenix is a name the market has grown to receive very well, and we got a lot of good feedback on the roadshow. You could see that in the £1.5bn ($1.85bn) order book, and in the issuer’s ability to tighten from initial price thoughts of Gilts plus 375bp area right in to 337.5bp. You would not normally expect to see those kinds of revisions in the sterling market.
Relative value was a little difficult to calculate because the tier three market is relative untested. But Phoenix Group Holdings has a December 2025 tier two that was trading around 470bp on Monday, while its July 2021 senior bonds were at 243bp. There was a little bit of price discovery to get to the right level between those two points.
The maximum size the issuer wanted was £300m and that was very easily covered. Despite the big revision in the spread there was very little sensitivity in the book, which fell from about £1.6bn to £1.5bn towards the end.
Geographical distribution
UK/Ireland 73%
Italy 14%
Switzerland 6%
Germany/Austria 3%
Nordics 2%
Others 2%
Distribution by investor type
Fund managers 71%
Hedge funds 17%
Banks/private banks 6%
Central banks 3%
Insurance/pension funds 2%
Others 1%
Market appraisal:
“…tier three debt currently represents a great opportunity to deploy cash. We like where it sits in the capital structure, investors are not accepting much more than senior risk and the lack of issuance to date gives it scarcity value.”
“…it is good to see such strong order books in sterling, which has been very competitive in recent months. Issuers have been able to really bring the spread in without losing demand and Phoenix’s trade was a real case in point.”