EMTN dealers have long cried out for more corporate issuers to sell private placements. Last year saw a shift as new issuers sold in private format for the first time, against a backdrop of strong overall volumes.
The first few months of the year has seen that nascent development start to bloom. Not only have corporate credits that debuted last year come back for more in 2013, but existing issuers have taken new approaches. And more new names have entered the market.
Credits like interdealer broker Icap, drinks maker Heineken and Belgian telecommunications company Belgacom are among those that have turned to private placements for the first time in 2013.
Linde, BASF and German machinery maker Robert Bosch had been almost inactive in private placements over the past few years but have been busy this year. In May alone, Linde sold its largest EMTN since July 2008, BASF priced a flurry of deals and Robert Bosch followed up rare public bond issues with a 20 year club deal.
And others have used the flexibility of EMTNs to their advantage this month. Swedish Match, which makes snuff, chewing tobacco and matches, used its programme to print in dollars for the first time ever, while BASF debuted in Norwegian krone.
All the while, those issuers that have provided the heaviest private placement volume — such as car giants BNW and Volkswagen — have showed no signs of backing away from the sector.
But there is one big advantage that will not be available forever.
Some borrowers — like Linde, Total and BASF — have taken advantage of investor fears over rising rates to sell unusually long dated floating rate notes. Right now, investors seem hungrier than ever for corporate EMTNs, eager to grab yield and happy to extend tenors to do so.
No one can be certain when central banks will start hiking their official rates, but it will happen and time is running out. And when it does, the buyside will surely temper its behaviour a little, reverting to a more traditional — but higher yielding — risk appetite.
For the moment, companies using EMTN programmes for syndicated deals should make sure they are responsive to any reverse enquiry opportunities. Those without should think about getting a programme in place, quickly.
Private placements offer a lot of benefits to an issuer’s funding toolkit, as new issuers are finding out. But some of those benefits will go away. Corporates should grab the demand while they can.
