Spying opportunities in tough 2009

  • 14 Jan 2009
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EuroWeek canvassed the opinions of treasury officials at four blue chip European companies on the funding strategies their companies intend to employ in 2009.

German utility E.On, rated A2 by Moody’s, raised more than Eu12bn in the dollar, euro, Swiss franc and yen bond markets last year and ended 2008 with its credit facility heavily oversubscribed. Thomas Griesberger, a spokesman for the firm, remains confident about 2009.

I don’t think there will be a big change in our funding strategy — we will continue to look at different opportunities and take them as they arise. We have done deals not only in the euro, dollar and sterling markets, but also in Swiss franc, Czech koruna, Swedish koruna, Japanese yen and Slovakian koruna. 2008 was a peak year for funding, partly due to our acquisition of Endesa Europa, EnelViesgo and further Endesa generation capacities in Spain in June at a total cost of Eu11.5bn.

In September 2007, we announced a funding programme to raise Eu30bn before the end of 2010. We have issued Eu18bn of bonds so far. In addition, commercial paper is a flexible part of our funding, and at the moment we have about Eu7bn outstanding. Despite difficult market conditions, we were able to obtain funding via commercial paper for attractive spreads and more than 50% of commercial paper has a maturity beyond year end.

We also have been active in the loan market and have a Eu12.5bn syndicated credit facility which is used as our back-up for commercial paper. It is difficult or even impossible to make a forecast about the cost of funding.


France Télécom (rated A3/A-/A-) raised over Eu4bn in capital last year. Stéphane Pallez, the deputy CFO and Hervé Labbé, the trading floor director, explain the strategy in 2009.

2008 was a year in which nobody was able to predict what would happen and there were new challenges for everybody. However, we had always funded in advance and so never had an urgent need to raise capital, so we were able to cope when the Eurobond market closed for some time. Our strategy was to diversify our sources of funding: we issued two Eurobond benchmarks, an inflation-linked bond, and a sterling transaction. Our strong ratings mean that we were able to access markets which remained closed to other corporates. In total, we raised Eu4.4bn in 2008. Similarly, 2009 will be a year in which you can’t predict what markets will be open, for how long and at what levels. This is why it is essential to anticipate our needs in advance and take opportunities to raise funds when they arise.

There are still a lot of questions about pricing for 2009. The corporate bond market will have to take into account the very high level of government guaranteed (or quasi-guaranteed) issuers. These transactions are very well paid compared to the level of the risk they offer, and these levels are not conducive for a reduction of spreads. I don’t expect to see any tightening in the short term.

We always look for quality in our lead managers, and want to see good ideas and strong investor contacts. In the current climate, you have to know before you open the books the investors you are going to get, and then of course close the books as soon as you can as you never know how the market will change!


Swedish utility Vattenfall (rated A2/-/AA-) in November printed two benchmark bonds in the euro market totalling Eu1.5bn. Its Eu850m five year issue was priced at 230bp over mid-swaps, and its Eu650m 10 year at 280bp over. Johan Gyllenhoff is the group treasurer and president of Vattenfall Treasury.

We have relied solely on the bond market to fund the company, with short term paper used to bridge temporary liquidity gaps. This may change in the fut ure and we may look at alternatives to mitigate risks in case the bond market closes again. For example, there are various foreign loan markets and other funding sources which may be possibilities.

We are looking for more value from bookrunners. We demand a lot of good advice so that issues are correctly priced and properly allocated and, for that reason, well received in the primary market and consequently perform well in the secondary market. However, we would not expect them to guarantee anything.

I am optimistic about 2009. The situation as it is at the moment is not sustainable. The oil has to be fed back into the machinery and hopefully the credit market will work properly again. It’s not going to be a dramatic or swift change, but it will be a change for the better.


Telecoms company Vodafone (rated Baa1/A-/A-) visited the euro and sterling debt markets in 2008, raising more than Eu3bn through benchmark bonds and private placements. A spokesman for the firm told EuroWeek about its strategy for 2009.

Our approach in 2009 will be to issue more frequently and in smaller size across several markets and currencies in order to seek diversified investor demand.

When one adjusts correctly for currency differences (basis) all markets are looking equally unattractive. The bond market is providing access to borrowing tenors across a range of maturities, whereas the loan market is restricted to tenors of 18 months and in. Equity looks equally cheap, but is permanent capital and therefore the least appealing.

While there is heavy corporate supply waiting to access the bond market, in turn suggesting that credit spreads should not tighten, the current cost of credit is pushing the costs of corporate debt to equity-like levels. Thus on fundamentals it is believed credit spreads will tighten in 2009.

Bookrunners are demanding more fees irrespective of anyone’s approach to executing deals. Wider credit spreads and the lack of available bank finance would suggest M&A activity would be slower given the long term value propositions within the equity market.

  • 14 Jan 2009

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 70,767.73 236 8.54%
2 JPMorgan 65,265.75 234 7.88%
3 Barclays 56,658.40 187 6.84%
4 Bank of America Merrill Lynch 49,197.71 178 5.94%
5 Deutsche Bank 44,635.32 162 5.39%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Bank of America Merrill Lynch 6,812.19 7 16.21%
2 Deutsche Bank 3,538.77 6 8.42%
3 Citi 2,570.45 7 6.12%
4 Commerzbank Group 2,532.05 5 6.02%
5 BNP Paribas 1,798.71 8 4.28%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 UBS 998.25 3 11.59%
2 Citi 801.18 3 9.31%
3 Morgan Stanley 606.80 4 7.05%
4 Bank of America Merrill Lynch 509.34 3 5.92%
5 SG Corporate & Investment Banking 431.66 3 5.01%