Bookruners Deutsche Bank and HSBC received €1.2bn in orders for the sovereign’s first deal since 2005. They set initial guidance at the 4.375% yield area after taking indications of interest on Wednesday afternoon.
The strategy of giving investors the afternoon to get acquainted with the bond proved fortuitous, as bookrunners across all of Thursday’s emerging market deals found some investors concerned only with positioning against the Russian sell-off (see front page).
"Going out with terms on Wednesday meant that although it was difficult to contact some investors on Thursday because of the Russian sell-off, we had already given buyers enough time to familiarise themselves with the terms and do their credit work," said Souhail Mahjour, syndicate official at HSBC in London.
During the three day roadshow to Vienna, Frankfurt, Munich and London investors had looked at a wide range of potential comparables, but the two most relevant were Croatia and Montenegro, said a banker on the deal.
Montenegro sold a €280m five year euro bond in May which was trading at 390bp over mid-swaps. Montenegro is rated Ba3/—/BB- and Macedonia —/BB-/BB+. But some syndicate officials away from the bond thought the Montenegrin too small and the credit quality too low to be a decent reference point for Macedonia.
Croatia's 2022 euro bonds were trading at 287bp over swaps when Macedonia opened books. Adjusting for the curve and new issue premium Macedonia had priced 40bp-50bp back of Croatia, said Mahjour. Debt bankers away from the bond agreed this was fair value and a good result for Macedonia.
“There was a lot of belief in the credit story but Macedonia had to pay a premium to return after such a long time,” said a banker on the deal. “Croatia is also a much larger economy and investors have been following that credit for years.”
Macedonia’s deal was bid at 98.625 on Thursday afternoon after being priced at 98.365.
US accounts took 49%, continental Europe 35%, UK 16% and others 1%. Fund and asset managers took 89%, banks 4%, insurance 3% and others 4%.