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European Investors Criticize Bookrunners

High-yield investors are taking issue with lead managers' downward revisions to price talk on new European deals, in a traditional gripe that intensified last week amid the pricing of three deals.

High-yield investors are taking issue with lead managers' downward revisions to price talk on new European deals, in a traditional gripe that intensified last week amid the pricing of three deals. While investors accept banks ought to strive for the best execution for issuers, they say the balance has shifted too far.

"The leads aren't taking the investor into account," said a London-based high-yield portfolio manager, expressing a widely held view.

Last week's new issues were priced tighter than guidance and traded higher afterward, but investors still take a dim view of lead managers lowering guidance right before pricing, and warn the strategy may backfire soon.

Naturally, bankers disagree. One of the three sales was Anglo-Dutch steel maker Corus's seven-year, non-call four deal. The €500 million deal was priced via Credit Suisse First Boston 25 basis points tighter than anticipated, at 7.5%. "Corus was priced to perfection," said Jim Amine, head of European leveraged finance at CSFB in London. "If a new deal trades up more than a few points, the issuer could wonder whether they've gotten the right execution, while if it trades down to par, the quality of the book could be called into question," he said.

Last week's other deals included a €185 million, 10-year non-call five offering priced to yield 8% by Culligan, a bottled water and water treatment company, and a €150 million sale from Auto-Teile Unger, a German auto parts manufacturer. That deal was due to be priced as BW went to press.

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