Tranche 1: Eu500m
Maturity: 28 June 2010
Issue/re-offer price: 99.598
Spread at re-offer: 37bp over mid-swaps; 52bp over the 3.25% April 2010 Bobl
Tranche 2: Eu500m
Maturity: 28 June 2015
Issue/re-offer price: 99.757
Spread at re-offer: 57bp over mid-swaps; 66.6bp over the 3.25% July 2015 Bund
Launch date: Tuesday 21 June
Payment date: 28 June
Joint books: Barclays Capital, BNP Paribas, Deutsche Bank, JP Morgan
Telstra is a good responsible borrower and roadshows regularly so when it comes back to the market investors can easily reload to come into a new issuer as they know the credit.
The borrower spent three days roadshowing as this is potentially the last financing before the government sells off its shares in T3, which is in the final stage.
The company is rated A1/A+ but a lot of investors view it in the mid-single A category. The telecom sector is well liked and the company received an enthusiastic response on the roadshow.
We sounded out investors on five and 10 years and as there was good feedback on both maturities, Telstra decided to issue Eu500m tranches in both maturities.
The borrower wanted a maximum of Eu1bn. It could obviously have issued more with the strength of demand we saw. The books grew evenly and rapidly in the space of four hours to reach just shy of Eu2bn each.
The five year was priced at mid-swaps plus 37bp and the 10 year at 57bp. Initial guidance was the mid-swaps plus 40bp area on the five year and the 60bp area on the 10 year.
The main comparable is the Telstra 2011, which is a Eu1.5bn issue and was trading at 39bp/40bp. This is a bullet six year and we felt we should be able to drive the price of a five year through this level, which we did pricing the five year a 57bp over.
The curve between five and 10 years is 20bp, so we went out with 60bp area and priced the 10 year at 57bp, 20bp back from the five year.
The UK and France took the majority of bonds, with Germany coming in third.
Telstra is an A1/A+/A+ credit and it's not particularly offering a good yield so it was the big real money accounts that played in the transaction.
"...a rare name and a great credit. The combination of five and 10 years seemed to work well."
"...a lot of the deals this week have gone well with extremely healthy oversubscriptions and their pricing inside the tight end of the range. Telstra is no exception."
"...this looked like an excellent trade. The transaction was oversubscribed, priced inside guidance and both tranches were 3bp tighter on the break. "