The company had not roadshowed – it does its bond investor relations separately from deals – but published full year results on January 30 and had updated its MTN programme.
“The issuer felt this was an opportunistic time to come to the market, post-results,” said a banker at one of the leads, BNP Paribas, Citigroup, Danske Bank and SEB. “They haven’t been to the shorter end of the curve since 2009 but they have a gap in 2019 and this is definitely a current sweet spot.”
A banker at another of the leads said Telia normally issued in the nine to 20 year range of maturities but was focused on a five year tenor. “It offered investors that don’t normally play longer a rare opportunity to pick up Telia paper,” he said.
Telia is rated A3/A-, like Volkswagen, whose banking arm had issued the only five year corporate bond in euros last week. VW Bank paid a new issue premium of about 11bp-13bp, its lead managers estimated.
“There were some worries around whether that would happen [with Telia],” said the first banker. Telia’s leads were keen to come tighter to secondaries.
“We were seeing their February 2020s, which is the main comparable, at plus 46bp, and their March 2017s at plus 24bp,” said one banker. “The March 17s are slightly more illiquid, so if you look at fair value you get the high 30s, but it’s more prudent to assume the three to five year curve is steeper than the five to seven year, so fair value is probably more around the 40bp mark.” A banker away from the deal said 38bp.
The leads started price thoughts for the €500m no-grow bond at 50bp-55bp over mid-swaps. “It was a pretty successful transaction,” said one of them. “When we started we were offering a concession in the 10bp-15bp camp. The books grew nicely with a steady stream of orders and we were oversubscribed very quickly.”
Guidance was set at 45bp-50bp and with a pre-reconciliation book of €2.3bn from 150 investors, the bond was priced at 45bp, a pick-up of 5bp to 7bp.
“We had a lot of interest from German asset managers – six of the top 10 orders were German,” said one banker. “There was decent Nordic interest as well.”
The yield of 1.483% on a 1.375% coupon may have been too low to grab many of the French insurers.
From a reoffer of 79.9bp over the 1% February 2019 Bobl, the bond tightened to 76bp/74bp on the break.
“The market looks in decent shape,” said one of the leads. “From what we saw, for rare borrowers, as long as you start out with the right initial guidance and are conscious of the market you’re in, that market is there to execute at minimal new issue concessions.”