Amount: $400m lower tier two capital
Maturity: 22 September 2015
Issue/re-offer price: 99.778
Coupon: three month Libor plus 115bp until 22 September 2010; three month Libor plus 165bp thereafter
Call option: at par on 22 September 2010
Spread at re-offer: Libor plus 120bp
Launch date: Wednesday 14 September
Payment date: 21 September
Joint books: Barclays Capital, UBS
Barclays Capital — Man Group is a FTSE 100 listed company and has a market capitalisation of more than £5bn. However, while the group is well known in the financial world, its business model is not. We had to take time to explain the business to investors and show them how big the company is.
Man is now regulated by the FSA. In the past the majority of its capital has come from tier one equity and Man also has a lower tier two private placement outstanding. However, this was the group's debut public fixed income deal.
The bottom line was that we had to make sure the credit was well known to investors, so we took the borrower on an extensive roadshow. We spent two days in London, a day in the Netherlands, further time in Hong Kong and Singapore, and finally a day in Switzerland.
We were targeting a dollar benchmark deal as dollar funding made sense for the borrower from a balance sheet perspective. During the roadshow we received significant indications of interest globally, so having finished the roadshow on Monday morning, we went out with price talk of Libor plus 120bp/130bp for a $300m target trade.
We had two reference points for that pricing. The first was cash comparables in the dollar lower tier two market, especially among triple-B rated Asian banks. Those tend to trade around 80bp-100bp, and then there is a small premium because of the difference in business model.
The second comparable was the company's five year senior CDS. That trades at around 55bp, and using senior to subordinated multiples, a subordinated trade would be up towards 100bp. With the extension risk, you are up in the 120s over Libor.
The book grew quickly and we ended up with $1.9bn in orders. At that level we were able to price the deal at the tight end of talk and increase the size to $400m, the biggest that the borrower was willing to do.
It was pleasing to see a lot of sterling accounts in the book, as well as buyers across continental Europe, the Middle East and in Asia.
The deal has come in around 5bp in the aftermarket.
UBS — This is the first FSA regulated investment manager to offer bonds in public format and we might see more of these types of deals in the lower tier two market.
We took the borrower on an extensive roadshow for this deal, visiting investors in the UK, the Netherlands, Switzerland and Asia.
That was successful and we went out with price talk on Monday morning this week of 120bp/130bp over Libor for a benchmark deal.
Books built quickly and by the close of play on Tuesday we had a book of around $1.9bn, allowing us to price the deal at 120bp over. We had targeted a deal size of Eu300m but the subscription levels more than allowed us to print Eu400m.
Funds and banks were to the fore, but we also had participation from hedge funds, given the borrower's business model. UK and Swiss names were active, but demand came from across Europe and also from Asia.
The deal has since tightened to 113bp/112bp in the secondary market.
"...this was massively oversubscribed and there is an argument for it being a little generous in price. However, it's a new credit and there is a price discovery process at work here."