Since the issuer had been out of the market since July 2009, lead managers Citigroup, Deutsche Bank, JP Morgan and Landesbank Baden-Württemberg gave investors a day’s warning of the deal by announcing it on Wednesday, but considering Bosch’s rating of AA- from Standard & Poor’s, they decided there was no need for an investor call.
Bosch has issued so few bonds that a banker at one of the leads said its outstandings were not useful as pricing benchmarks for the new issue. Bosch’s longest outstanding bond, a 2019, virtually never trades, while its 2017 and 2016 were too short to be helpful.
Instead, the leads focused squarely on Siemens, a close analogue with similar ratings – and joint venture partner with Bosch in BSH, their household appliances business.
"We pointed people to Siemens," said a banker at one of the leads. "It was put on negative outlook by Moody’s the night before last, so is now Aa3 (negative) and A+, while Bosch is AA- (stable). Investors could look at the Siemens curve and figure out where Bosch should trade, relative to it, given that Siemens has issued a lot more. Should Bosch trade flat to Siemens or through it? It’s not really my job to make that decision."
Siemens had also conveniently issued an eight and 15 year deal — the same maturities wanted by Bosch — at the end of February, raising €1.25bn and €1bn at 35bp and 70bp over mid-swaps.
"The Siemens March 2021s were trading at 38bp and its 2028s at about 66bp to swaps yesterday," the banker said on Thursday. "They were more or less unchanged this morning."
Other comparables the leads looked at were chemicals group BASF, with 2021s at 38bp; gases firm Linde with 2021s at 41bp; and BMW’s 2023 at about 44bp.
Initial price thoughts of 40bp-45bp and 70bp-75bp over mid-swaps did the trick for Bosch. The books grew to a shade under €3bn on each tranche, with French and German real money investors in the lead.
Guidance was set well tighter at 35bp and 65bp and Bosch priced a €500m eight year at 33bp and a €750m 15bp year at 65bp.
That was about 3bp and 1bp through Siemens’ secondary spreads. "Depending on whether you think Bosch should trade in line with Siemens or through it, the deal had either a zero new issue premium or came through Bosch’s own curve," the banker said.
The lead was bidding the bonds 1bp-2bp inside reoffer after pricing.
Apart from a €100m five year private placement via Deutsche Bank last year, Bosch last issued bonds in June and July 2009. Then it brought a €1.1bn four and six year issue led by Deutsche, JP Morgan and Société Générale, later tapped for another €200m, and a few weeks later a separate €300m 10 year issue. An older 2016 bond is also still outstanding.
Bosch is 92% owned by a private charitable foundation, Robert Bosch Stiftung, and the rest by the founder’s family.