“This was a very successful transaction,” said a Swiss based banker. “The market was tricky this week, and investors were very cautious when approaching credit. With Ferring, a couple things worked out for it — in particular, investors have seen the health and pharmaceutical sector as standing out over the course of the coronavirus pandemic.”
The company raised Sfr270m with a 1.05% July 2025 deal. It is not rated by S&P, Fitch nor Moody’s, but it does hold a Baa- rating from domestic Swiss ratings agency Fedafin and a mid-triple-B level from bookrunner Credit Suisse.
On Monday, Ferring had mandated Basler Kantonalbank and Credit Suisse to hold fixed income investor calls on Wednesday ahead of a potential Swiss franc benchmark bond. It also appointed Banque Cantonale Vaudoise as co-manager.
“Investors always are a bit reticent when it comes to privately held firms as they are less transparent compared to something publicly traded,” said the banker. “During the investor call on Wednesday, [Ferring] explained the business and credit to investors, with about 60 to 70 accounts taking part in the call.”
Conditions were right on Thursday, and the leads opened the books on the transaction at initial price thoughts of 150bp-160bp over mid-swaps, giving an indicative yield of 0.975%-1.075%.
“In terms of comparables, Vifor with a triple-B minus rating from S&P and Fitch is trading at about 115bp for its 2022, which gave us a fair value of 145bp for a Ferring five year,” said the banker. “In the end, we priced at 155bp, which for a newcomer is not that far away from fair value. Coming as close to a 1% coupon as possible was key in creating momentum in the book.”
The 155bp spread equated to 160.6bp over Swiss government bonds. The note was priced at 100.097 for a reoffer yield of 1.03%.
The bond is not expected to be repo-eligible with the Swiss National Bank.
A purely Swiss book of 49 accounts took part in the transaction. Asset managers were allocated the largest portion of the note, taking 81%, retail and private banks got 10%, followed by insurance accounts with 5%, and pension funds with 4%.
“In recent weeks most of the demand has come from asset managers,” said the banker. “There was some retail interest in the deal, which tends to happen when a trade yields more than 1% — especially on corporate issuers.”
On Thursday afternoon, after pricing, the bond was trading up, the banker said. “It’s trading a bit tight on the bid side. There’s a couple of buyers looking at the bond, so we might see some secondary flow in the coming days.”
According to Dealogic, Ferring has never issued a public benchmark bond. Its last visit to the bond market came in April 2011 when it sold a triple tranche $154m traditional private placement through Bank of America.
“For a company like this, coming into the bond market is a big step,” said the banker. “I don’t see it becoming a very frequent and regular issuer, but after the reception for this deal, if they want to come back, they’ll receive a warm welcome from investors.”
The Swiss-headquartered company focuses on reproductive medicine, women’s health, urology, and inflammatory bowel diseases such as Crohn’s and ulcerative colitis.
Elsewhere, Spanish crossover credit Cellnex Telecom, rated BB+/BBB-, tapped the Swiss franc market for Sfr100m on Monday. Deutsche Bank fixed the spread on the 1.17% July 2025 issue at 165bp over mid-swaps.
The firm made its Swissie market debut at the end of January when it raised Sfr185m with a 0.775% February 2027 bond through Commerzbank and Deutsche Bank. The spread on the 2027 was fixed at 129bp to mid-swaps.
Away from these two deals, there very little else made its through the Swiss franc market, as many start winding down ahead of the summer break.
“Next week we should see some domestic activity, but things are slowing down,” said the banker. “People are waiting to take some holiday and enjoy the sun after months spent stuck inside.”
However, issuance is not expected to shoot up ahead of the summer.
“The worsening coronavirus situation in the US and Latin America has worried the market over the last few sessions,” said the banker. “People want to this calm down before they can re-enter a full risk on mode.”