The difference with the DP World bonds is that, in contrast to other deals of this kind, some thought appears to have been given to which banks are best placed to print certain types of notes.
As well as a core of four international banks used across all tranches, an Islamic bank was added to the sukuk mandate, for example, and the mandates for the euro and sterling tranches were kept neat, without the local banks and without some of the international banks with no strong track record in these currencies that appeared on the dollar bond mandate.
This is not rocket science, but, bizarrely, it is not the usual way of global capital markets.
Though having different banks for different tranches is not without precedent, in the emerging markets the most common way by far of mandating for a multi-tranche, multi-currency deal would be to simply merge the list of banks across the tranches and mandate all those banks for all the trades.
But DP World’s way is better.
Why should an Islamic specialist bank be on a conventional dollar deal if it is bringing no extra value to a deal? Why should a bank with no real expertise be on a euro or sterling mandate just because an issuer wants them on their dollar mandate, or vice versa?
DP World’s way of doing things allows the banks that are actually doing the work to claim both the league table credit and the fees for it, rather than having to split it among a long list of banks, many of which may have had no practical input on placement of a given tranche.
Banks are still rewarded for lending, but through fees paid to a smaller list of banks on one tranche rather than a longer list on four tranches.
On the surface some may think that splitting the mandates in this way creates inefficiencies.
But on a jumbo deal like this, that problem was solved by having a core few banks across all tranches, and who really wants to be on a pricing call with 15 banks, 10 of which aren’t really doing any work?
With a little effort and communication, the process is manageable with the mandates in this form, as DP World is showing by pulling off its note, widely considered so far to be a success.
In the emerging markets, multi tranche deals are more common in differing maturities rather than different currencies and product types.
For those more common trades, there may be less to learn here, as it is difficult to argue that the best banks to print your dollar 10 year are not the best banks to print your dollar 30 year. Similarly, if you need to reward banks for lending and have only one tranche to work with, do what you have to do.
But as jumbo trades in multiple currencies become more frequent — especially out of the Middle East — more issuers should look at adopting the DP World approach. Rewarding on merit, rather than indiscriminately, makes the market a better, more transparent place.