Scotland is looking for banks and lawyers to help bring its first bond to market. But the idea raised a number of questions at GC Towers this week. Firstly, what is Scotland? Is it a sovereign issuer, a sub-sovereign, or something altogether new?
Not only did we wonder what investors would be buying but we also questioned what Scotland was selling and why it wanted to do so. Scotland will be a fascinating new issuer in the bond markets and so we discussed what the capital markets have been telling us this week about its desirability as an investment, its credit, how it will be priced and what sort of bond it should issue.
We also investigated the relationship between the public CLO market and private credit. Many think the latter will devour public debt markets but we discovered that the relationship between direct lending and the CLO market is far more symbiotic.
Finally, we revisited the market for corporate hybird debt. A deal for an Italian utility company this week came at a record tight spread to the issuer's senior debt. We examined what has been driving this tightening trend and whether the spread between subordinated and senior bonds still reflects the full amount of risk investors are taking on.
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