Corporate Bond of the Year
Vonovia
€500m 0% September 2023
€1.25bn 0% December 2025
€1.25bn 0.25% September 2028
€1.25bn 0.75% September 2032
€750m 1.65% September 2051
Bank of America, Morgan Stanley and Société Générale
In a year when entire sectors were picking through the debris of the coronavirus pandemic, the real estate sector came steaming into the bond markets to move from the sixth largest issuing sector to the first; and none took the reins of the market more so than German landlord Vonovia.
To finance its purchase of Deutsche Wohnen, and become one of the biggest residential landlords in Europe, the company completed €9bn of bond sales over the summer. But it was the larger deal in August that takes the prize. Vonovia proved that even a jumbo trade can be nimble when the borrower surprised the market by coming early to avoid the September rush. The issuer printed in size — at the time it was the largest deal of the year and was only surpassed in size by one other trade. And it went long, with a 30 year tranche that investors found tricky to evaluate for fair value because there just were not many other liquid notes at that maturity outstanding from real estate issuers.
The issuer could not have known this at the time, but opting to risk an August deal rather than wait for the thick of it in September proved to be a shrewd move, as the market quickly plunged into volatility and deteriorated for issuers as the year went on.
Corporate SRI Bond of the Year
Hennes & Mauritz
€500m 0.25% August 2029
BNP Paribas, Commerzbank, Danske Bank, SEB and Standard Chartered
Swedish fashion retailer H&M had never been to the bond market before 2021, but the stars aligned for it to benefit from one of the hottest trends in Europe’s capital markets and print the year’s standout SRI trade.
H&M opted for a sustainability-linked structure as it debut, something that was rare at the time but has evolved into a strong trend and is expected to become more commonplace through 2022.
H&M’s trade was the first sustainability-linked deal to be eligible for the ECB’s Corporate Sector Purchase Programme, which no doubt helped it gain an 11 times oversubscription and negative concession. Other debut issuers sought to print ESG debt for their first forays into the market as a result.
The key performance indicators helped H&M clinch the award. In one of the most watched sustainability-linked bonds yet, it included KPIs away from the standard and generalised reduction of greenhouse gas pledges, and adapted its targets to suit its industry, with financial ramifications if the company fails to use more recycled materials in its clothes making.
Dollar Corporate Bond of the Year
Amazon.com
$1bn 0.25% May 2023
$2.5bn 0.45% May 2024
$2.75bn 1% May 2026
$2.25bn 1.65% May 2028
$3bn 2.1% May 2031
$2bn 2.875% May 2041
$3.25bn 3.1% May 2051
$1.75bn 3.25% May 2061
Citi, JP Morgan, Morgan Stanley and Wells Fargo
Amazon.com could have been crowned with dollar corporate deal of the year for a few reasons. At $18.5bn, the size of the trade is certainly worth commending. The range of maturities on offer, too, is notable, with $5bn of the debt sold maturing at 30 years or longer.
However, it was the spread of the May 2023 tranche that really put Amazon.com at the top spot for dollar deals. The issuer, a corporate rated A1/AA-, sold two year debt that came in at just 10bp wide of US Treasuries — a record tight to US government debt from the corporate sector.
The coronavirus pandemic has been a boon for Amazon.com, pushing more people than ever away from physical shops and into online buying, but until Amazon.com achieved it, printing a hair’s breadth away from where the US government can fund was almost unimaginable. Even the 40 year portion only paid 95bp over the comparable US Treasury. The rates market has since sharply turned, inflation is rocketing and rates rises are expected across the West, meaning Amazon.com’s feat is unlikely to be replicated any time soon.
Sterling Corporate Bond of the Year
Tesco
£400m 1.875% November 2028 sustainability-linked bond
Citi, HSBC, Lloyds and NatWest Markets
The UK grocer made a bold choice to return to its domestic market to print its second sustainability-linked bond in October. The structure is rarely seen in sterling, and Tesco found roaring demand in euros for its debut sustainability-linked bond earlier in the year. On paper, it seemed going to euros, printing tight and swapping back to sterling was the best move.
Nonetheless, it wanted to shop local for its second SLB and, in doing so, showed the demand for the still-nascent structure among UK investors.
It rang up £1.8bn of orders at the tight end of guidance, launching 25bp inside initial price thoughts at 110bp over Gilts. Other sterling issuers noted what Tesco achieved. Sustainability-linked issuance in sterling remains rare, but Tesco showed the demand for such deals, which will no doubt be on sale far more often in the coming years.
High Yield Corporate Bond of the Year
Asda LBO
£2.25bn 3.25% February 2026 secured notes
£500m 4% February 2027 unsecured notes
Barclays, Deutsche Bank, Morgan Stanley, Bank of America, Lloyds, Rabobank and HSBC
The high yield bond market smashed records with over €125bn of euro high yield paper printed in the first 11 months, driven by high levels of dry powder in private equity and good buyside appetite for junk debt.
The financing of the acquisition of UK grocer Asda by the Issa brothers and TDR Capital showed the depth of the sterling high yield market — often derided as too shallow for large transactions. Left lead Barclays reported more than £5.5bn of orders for the secured tranche and £2.75bn for the unsecured tranche — unprecedented demand. It was the largest sterling corporate bond ever, the tightest sterling high yield debut, the largest single tranche in European high yield and the largest unsecured bond in sterling high yield. It also prompted a private equity rush to find other grocers to buy out.