Maturity: 8 February 2017
Issue price: 100.264
Fixed re-offer price:99.814
Spread at re-offer: 200bp over mid-swaps
Launched: Tuesday 10 January
Payment date:8 February
Joint books:Barclays Capital, BNP Paribas, Royal Bank of Scotland, UBS
Bookrunner’s comment:This was a great trade for BAA’s debut Swiss franc transaction. We launched it at Sfr200m but the books grew to Sfr400m — a size capped by the borrower — in just two hours. The deal’s volume could have grown north of Sfr500m if we had left the books open.This was quite an unusual transaction for the Swiss franc market, it being a secured note — halfway between a senior unsecured trade and an asset-backed security — secured by assets from BAA’s London airport group, which includes the Heathrow and Stansted airports. We therefore had to provide thorough explanations to our investors, also because BAA is an unknown name in Switzerland; its rarity value was key to the trade’s success.
BAA also benefited from being the first corporate in the category of higher yielding names to tap the market this year. With no competing supply or need to reach psychological yields given the attractive spread BAA was already offering, we were able to choose the best tenor at five years. This also allowed us to offer the eye-catching 2.5% coupon.
The borrower roadshowed in Switzerland last November. The market had already closed by the time meetings were over, so BAA decided to issue as soon as possible in the New Year.
Private banks placed almost half of the orders, followed by insurance companies at 25% and asset managers at 20%. Pension funds and treasury accounts took the balance.
Market appraisal:"...the amount of demand for this trade was a surprise to everyone, especially as the leads didn’t receive great feedback during soft-sounding. The trade worked so well because the leads took time to explain the note’s mechanism to investors.
The spread of 200bp over mid-swaps seemed to have locked in a lot of investors looking for yield.BAA’s sector, its single-A rating and attractive pricing all contributed to achieving a successful trade. Nobody was really buying because of the secured note format."