Guarantor: Nestlé SA
Maturity: February 9, 2009
Issue price: 98.455
Fixed re-offer price: 97.055
Launched: Wednesday November 24
Lead mgr: Deutsche Bank
This is Nestlé's debut in this market and its first time in an eastern European currency. There is increasing demand for forint issues from Swiss investors and from Europe.
Because Nestlé is a Swiss name it sells extremely well into Switzerland as does this currency. This is a great opportunity for Nestlé to diversify its funding and its investor base.
The currency is stable and the currency risk is limited. The pick-up to the euro area is huge, with big money above euro yields.
So investors consider this currency an alternative and some find convergence a reason to participate. Some investors want to trade on the convergence play, some investors want yield pick-up.
There is no credit risk on the Nestlé name.
?...we took a block to sell on, but only a small amount. This is another forint deal in a well bid market. Flows are healthy. Nestlé is a triple-A credit and is extremely well known. But there are no definitives with the bond which could restrict distribution. The issue price is below par which means bonds will be mainly Germany-orientated.?
?...Nestlé is a rare issuer in any market and this is its debut in forints. It has not tapped the market for quite a while, and it is a rare issuer in the bond markets.
Here it has decided to do something different from usual, tapping a new market. It was able to achieve deep sub-Libor levels of minus 20bp. While at first glance this may seem expensive for a triple-A corporate issuer its rarity and huge investor appeal for the name from Switzerland explains the pricing.
This is close to supranational levels. It would have priced slightly back in euros or dollars. A supranational would have priced around Libor less 25bp.
Huf15bn is not a large amount in its core currency equivalent. Historically Nestlé has been able to price at extremely tight levels.
This is probably the strongest retail name to bring to the market, and bonds will succeed despite the pricey bonds.
Another triple-A rated corporate which comes to the market regularly, such as General Electric Capital Corp, would be priced in the high single digits through Libor. Toyota, another top rated corporate entity, would probably achieve funding of about 2bp or 3bp under Libor. Shell, another rare corporate, would fund at about 15bp-20bp through Libor.?