US DOLLAR STRAIGHTS

  • 01 Feb 2002
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Globals

* Asian Development Bank

Rating: Aaa/AAA/AAA

Amount: $2bn

Maturity: February 5, 2007

Issue/re-offer price: 99.61

Coupon: 4.875%

Spread at re-offer: 51bp over the 3.5% November 15 2006 UST

Launched: Monday January 28

Joint books: HSBC, Nomura, Morgan Stanley

Borrower's comment:

The deal has gone very well. We made extensive preparations for the issue, including a series of roadshows across Asia and in the US. The transaction was strategically important to us, as it was our first dollar bond issue after an absence of almost two years. It was also designed to help us meet a much increased borrowing requirement for this year.

We waited almost two years to return to the dollar market because we did not have a significant funding capacity. Our borrowing requirements during the last two years were very small, so we concentrated more on private placements and small international bond issues.

The roadshow was not deal related, but was intended for us to gain more flexibility to meet our funding needs for this year. But during the roadshow, the key feedback we received was strongly supportive of another deal. We felt that it made a lot of sense to keep the momentum of the roadshow rather than wait a long period to do a transaction.

After completing the US roadshow we closely monitored the markets and last week watched closely for opportunities, but there was a lot of supply in the five year maturity.

Fortunately, after Alan Greenspan's comments last Thursday (January 24) it appeared that the FOMC meeting this week was going to be a non-event, and the week looked like a good opportunity to launch the deal. Basically, we almost had the window to ourselves. One interesting fact to note is that we are the first supranational to do a bond issue with a five year maturity since September 2001.

For the ADB, both the five and 10 year maturities are benchmarks and we were indifferent as to which we would use. But given the Libor figures, it was not efficient for us to do 10 year funding, so we opted to do a five year bond issue instead.

Our funding needs this year are mainly dollar denominated, and for us it would have been cost prohibitive to do funding in either euros or Japanese yen and then swap it into dollars.

Based on our current objectives, we expect to have a borrowing requirement of $8bn between April this year and May 2003. A large part of this $2bn will be used to fund the $8bn, leaving $6bn.

We are looking to raise up to $3bn through the use of the global MTN programme, meaning largely structured private placements at attractive cost levels. We are also looking at financing in several different bond markets, including regional currency bond markets, which could raise $1bn.

The ADB also has a Japanese yen requirement this year to the tune of $1bn-$1.5bn. Subject to market conditions in the yen market, we would like to do a yen benchmark deal this year, possibly for about ¥100bn.

Finally, we are looking at the possibility of doing a dollar bond issue later in the year. This would have a different maturity to this deal, most likely three years.

A lot of the ADB's borrowing requirement this year stems from its redemption pipeline, with $5bn of debt maturing by May 2003.

This was an important deal for the ADB, given its long absence and funding requirements going forward. The issue has ensured good confidence during the bookbuilding process and we hope it will trade well in the secondary markets, while providing us with an constrained funding target in the future.

There are no direct five year comparables from development banks, but we used Fannie Mae as a benchmark. Our issue was 2bp outside Fannie Mae's January 2007 deal, which is a much larger, more liquid transaction. Our issue was priced 2bp inside KfW's deal, though, so we feel that this transaction was priced well and reflects the quality of the ADB.

Bookrunners' comments:

HSBC - From our perspective, this was a success. It is a transaction that we started off last week, but with all the supply that was around - Italy, L-Bank and Fannie Mae, and there were a lot of transactions coming in and hitting the swaps market - we decided to come this week.

On our side, we have seen pretty good take-up from ex-Japan Asia. Orders from mainland Europe were a bit sparse, but we had central bank orders from Africa and the Middle East, some take-up in Japan, and reasonable take-up in the US.

Japanese demand is down slightly, but overall the rest of the region is active. We saw very good demand from south east Asia and north Asia, and that helped the transaction build. But Japanese accounts are getting defensive, especially the yen-based investors who are getting a little bit nervous. The Japanese in general have been net sellers over the last couple of weeks. There is nothing sinister in that, but it is that stage of the cycle. The yen is underperforming heavily and they can feel March approaching.

On balance it would have been a bit better to get more from Europe and the US. Notwithstanding the tight pricing, the US seemed to participate in decent sizes, partly because the issuer held a roadshow there.

There was good broad distribution. We did see a lot of central banks in there, but you would expect that in this sort of transaction.

ADB has a certain amount of scarcity value, given that it has not come to the market for a while. We were marketing in the 2bp area, and at the time we were looking, the Fannie Maes were at 48bp-49bp over Treasuries, and rather than have an odd spread we decided to come at 51bp.

Although it was quite tight to the Fannie Mae, Asia was always going to be keen on this issuer. We have seen limited flowback from our accounts, and the spread has held versus Fannie Mae, despite the volatility in the market - within a couple of hours you had Tyco, WorldCom and JP Morgan and Citigroup all widening. Some corporate spreads were out between 10bp and 50bp. If this had not been well placed, you would have seen more of an impact.

Some bonds came back in the broker market, but from our perspective the flowback was commensurate with a $2bn transaction. We saw what we would expect from a transaction of this size. We have a brand new transaction with a short settlement date and some people are bearish on swaps and are shorting into it.

We did not see people holding back. With Fed chairman Greenspan making his comments last week, the downside came out of the FOMC meeting. Our economist, who has been very bearish, felt that they were not going to cut, and the major worry was whether the committee would reverse the easing bias. But the feedback that we had was that people were not greatly worried about the FOMC after what Greenspan said.

On Tuesday afternoon, we were quoting the ADB deal at around 51bp/50bp over, bid at re-offer. The market had widened slightly, but ADB was at a 2bp spread to the Fannie Mae. We had it this (Thursday) morning at 55bp/53.5bp, which is still the same spread to the Fannie Mae. The normal support is there.

This is the first deal off ADB's global debt issuance facility. It is its first global bond since May 2000, and only its second $2bn global.

It has $7.5bn to do in 2002 and has said that it will look at the public and private markets, which in ADB's case means the yen private placement/loan markets. It also has a commitment to issue in local Asian currencies, where regulations permit.

Morgan Stanley - Morgan Stanley is delighted to be a lead manager on ADB's first liquid global transaction for two years. It is only the bank's second $2bn offering ever.

ADB prepared for this deal fully. It was launched following roadshows in Asia and Japan last year, and a roadshow in the US this month. We considered launching the deal last week, but with the supply coming in - Fannie Mae, Italy and L-Bank - we decided to hold off.

The importance of the FOMC meeting decreased dramatically after Alan Greenspan's testimony on Thursday of last week. We made the decision, therefore, to launch it on Monday this week for pricing on Tuesday.

Given the reaction from the Asian markets, we feel that that decision was justified. In all the recent large dollar transactions, Asia has accounted for the lion's share of demand, and in this case that was even more the case, because of the natural audience that the ADB has in Asia.

Morgan Stanley's distribution was 30% to the US, 60% to Asia and 10% to Europe. The overall distribution was 65% to Asia and Japan, with the remaining 35% split fairly evenly between Europe and the US. From Morgan Stanley's perspective, we are particularly pleased with the pattern of distribution into the US.

Morgan Stanley's distribution was almost 60% into central banks, 30% into fund managers, 5% into insurance companies and 7% into banks and retail.

Over the past year there has been an enormous spread compression among high quality issues. Pricing at 51bp was a tight level relative to agencies and KfW and puts ADB firmly amongst the elite peer group of supranationals.

Obviously there has been a fair bit of volatility in bond swap spreads in the past couple of days, especially given the movement in the Treasury market. Swap spreads have been trading in a 7bp-8bp range, and there have been large movements in high quality paper. But the ADB deal continues to trade at around 2bp-2.5bp over the Fannie Mae.

The Fannie Mae issue is currently (Thursday) 51bp bid, and the ADB is 53.5bp bid, so it has maintained its relationship with comparables despite the volatility. There has been a lot of volatility in agency spreads and the Fannie Mae was at one stage at 48bp.

The bonds were essentially all placed, though the firm has a small long position. We have bought some back in secondary, and have continued to make sales throughout the week.

The co-leads had retention of $20m each, and there were eight of them.

Nomura - The background to the deal is that ADB had not done a strategic reference deal of this size for three years. The last dollar global it did was a year ago, but that was only for $1bn.

The issue has gone very well to a clearly identified audience of investors in specific categories. The bond followed roadshows arranged by the lead managers during December and January across Asia, Japan and the US, and was timed to achieve absolute market focus.

We launched the issue early morning New York time on Monday, and after a 24 hour bookbuilding process, was priced at around 9am New York time today (Tuesday).

Obviously the different firms had different order books, but all of us found a strong bid out of the Asian time zone.

In terms of timing and structure, this deal was one that the ADB wanted to take a lot of care over. We looked very carefully at coming about 10 days ago, and the market seemed very positive. Unfortunately, we then became aware that the Republic of Italy was coming with a lot of supply, and that L-Bank was coming, and we knew that Fannie Mae was due to come after that, so we decided to wait.

We the considered the hypothetical timing to be after the FOMC meeting, but we decided to accelerate launch after the feedback we received about Greenspan's comments last week. After his comments, the significance of the FOMC meeting was seen to be reduced and, supported by investor feedback, the issue's launch on Monday (well ahead of the Asian new year holiday period) was seen as timely.

We found a growing market consensus that while there was likely to be a 25bp cut, there would probably not be any further cuts after that one, which would lead to curve flattening. There were therefore a lot of accounts selling short dated Treasuries and other highly rated paper, and we saw some reverse inquiry coming in for the longer paper.

Price talk was according to the market context. We were talking about the 2bp area over agencies. The Fannie Mae deal has outperformed the market due to a technical scarcity. That tempted us to go for the rounder number of 51bp over Treasuries, rather than 50.5bp. So we priced the deal at 2.5bp to the Fannie Mae. This pricing was seen as competitive but fair value and reflects the ADB's credit strengths and rarity value, as well as the preparation for the issue.

ADB has tremendous investor appeal in Asia. It is very much liked and cared for by Asian central banks and Japanese accounts. ADB paper is fairly scarce, and we saw strong demand from Japan and Asian central banks. Morgan Stanley found some large blocks from good quality accounts in the US. Those were the main drivers. We also saw some good demand from Middle Eastern central banks.

The combined Asian order books of the three leads are estimated to exceed 60% of total placement. The remaining distribution was estimated to be fairly evenly split between the US and Europe/Middle East. Europe was slow to come forward.

In terms of negatives, some of the syndicate co-managers have struggled and we have bought back a few blocks of the group allocation. That is only natural. Nomura did a very thorough job in Japan, and if you have two Asia-oriented firms such as Nomura and HSBC, as well as Morgan Stanley, working very hard on the Asian central banks overnight, it can be very hard as a co-manager to sell to those accounts. Also, a lot of the US order book has come from the one-on-ones that Morgan Stanley did, and the accounts have either placed their orders with Morgan Stanley, or with Morgan Stanley and the other leads. So one cannot blame the co-manager group. If this had not been a strategic deal there would have been a business case for not having a group at all. But for a strategic reference deal you want the Street recognition and the liquidity, so you want to get the group involved.

There have therefore been bonds coming back, and a lot of it does represent the group's bonds, and we have been stabilising with appropriate vigour this afternoon. Having said that, the deal is in good shape and we should be finished tonight. We are quite relaxed about it - there has been flowback, and there will be follow-on buying out of Japan tonight.

We would not normally have proceeded with a deal before the Federal Open Markets Committee (FOMC) meeting. But people were aware that next week we are heading towards the Chinese new year, and that the Fannie Mae and KfW deals had gone well. The five year sector of the curve is a pivot. If this had been a three year deal, we would have waited. There has been selling in the very short end, three years have not moved much yet, but the five year sector is fairly safe whatever happens.

The ADB will have an increased borrowing requirement of up to $18bn over the next three years, of which around $7.5bn is for 2002. Therefore, after an absence of over 18 months from the dollar market, this transaction was prepared and executed as a strategic benchmark - the ADB only having issued in a size of $2bn on one previous occasion, May 1998.

Going forward we expect that the issue will go on to perform well and will represent a constructive benchmark for the ADB in the execution of their future funding needs.

Market appraisal:

"...it is an OK deal. It has not been a riotous success, and the pricing was a little on the aggressive side. We heard that quite a few of the bonds went down through the broker market.

We can see it bid now (Wednesday) at 55.5bp over the UST, which is 3bp over agencies. It has been as wide as 3.5bp over, and one suspects that it is not fully sold.

The name clearly attracts Asian interest, but Asian demand does not seem to have had the depth in January that it did last year. The Japanese accounts are not participating in the market as fully as they might be. In fact they may have been net sellers. There seems to have been some profit taking, as the yen falls against the dollar and they approach financial year end, and get some profit into the books.

It is always a bit of a battle to get things sold when you are a co-lead and competing with the leads, but one does find buyers more easily if the deal is correctly priced.

This came 1bp through KfW, which to my mind is punchy. The ADB has at least as good a franchise in Asia as any other issuer, but as I said, my perception is that the depth of Asian demand is not there.

To be honest, of the large institutional deals that have come this year, the only one to have really worked was KfW, because it was properly bookbuilt.

US investors will respect KfW more as an issuer, and that will play in their favour in the long term. Of course there is an argument that if you are only going to issue liquid size once every few years and you have a built in franchise in Asian central banks, it is not worth your while to leave money on the table as a sop to the US."

"...ambitious. There is definitely a rarity value and strong demand from Asia. The global format was intended to facilitate the deal for US investors, but I doubt the US took much of this, because it was a little too tight.

The 2bp area over agencies is good for some Asian accounts, but it did not let the deal build momentum. And it was not helped by swap movements. The bonds underperformed swaps on the break, which is never a good thing.

The five year maturity was a good choice.

There were strong rumours that the deal was going to come last week, but it did not materialise, which may have been to do with the pricing. It was the right maturity, a very good name with a strong Asian bid, but it was priced slightly too tight to allow good momentum and strong placement.

The placement was mixed. There were some good anchor orders, but also some speculative trading accounts. Dealers were shorting the trade because it was too tight.

It is not the worst deal of the year by a long way, but it is still underperforming swaps. It looks like it is settling about 3bp back from the Fannie Mae. If the leads had launched at that level, they would have got more momentum."

"...the pricing was fine. That is where we have been putting the borrower for at least the last couple of months. The choice of leads may not have helped the deal as they are not all strong in their understanding of the US investor base's role in dollar globals like these.

ADB always has a strong bid out of Asia - Asian central banks are pretty much compelled to buy its paper - but it was unfortunate timing. The market started to fall away and that fed through. I do not think it was fully sold, and there has been a fair amount of short selling by the Street.

I do not think the co-managers did as well as the leads.

It is a bit similar to ICO last year. That was a decent deal, there was nothing actually wrong with it, but the timing went wrong, the market fell away and the deal widened out against agencies.

In this case, it was not a particularly strong group of leads, but they suffered unfairly from a lacklustre market."

"...the levels felt tight and swap spreads have widened quite a bit after pricing, so I would imagine it has come off, though we have not seen much of it today (Wednesday)."

* Bank of America

Rating: Aa2/A+

Amount: $1.5bn

Maturity: January 2, 2007

Issue price: 99.631

Coupon: 5.25%

Spread at launch: 89bp over the UST

Yield: 5.335%

Launched: Friday January 25

Sole mgr: Bank of America

* Federal Farm Credit Banks

Rating: Aaa/AAA

Amount: $1bn

Maturity: February 1, 2005

Issue price: 99.701

Coupon: 3.875%

Spread at launch: 92.5bp over the 3.5% November 2006 UST

Launched: Tuesday January 29

Joint books: HSBC, Morgan Stanley

Bookrunner's comment:

HSBC - This went very well. We had an excellent international book. Ours was a bit more than $340m, with 86% international distribution. There was good central bank take-up of about 30%.

We roadshowed Federal Farm Credit Banks in Asia at the beginning of last year and continue to see good interest from those accounts, as well as very good take-up in Europe. It is a name that is not as well known outside the US as Fannie Mae and Freddie Mac. It does not issue that often. It also enjoys tax advantages here in the US with some investors - it is exempt from state and local taxes in some jurisdictions, so it enjoys a pretty good domestic bid.

The three year part of the curve is very attractive. There is no real benchmark. Freddie Mac is going to auction its $6bn due February 2005 on February 12, but we have not had a benchmark in quite some time. So we were looking at pricing against other deals that have rolled down the curve, and we got very good execution.

It came at 92.5bp over the Treasuries. Freddie Mac has a 6.875% January 2005, and there is a Fannie Mae 7.125% February 2005, but that is a mid-February maturity and there is quite a bit of yield curve there.

The Freddie Mac January 2005 was at 89.5bp over, and the Fannie Mae at about 95bp. The Freddie Mac has a bad maturity date as well, because it is January 15, 2005 and that is a long weekend. People are starting to notice that and you will see more of an effect as it gets closer to maturity. The Farm Credit is about flat to those deals.

The borrower comes with smaller transactions, and many investors expect to be paid a so-called liquidity premium, but what we have found is that because Farm Credit does not have that many deals outstanding, and because it is a different sector, you get a diversification premium. Only Farm Credit and FHLB get the tax exemptions.

One reason why we are so pleased is that we got very good execution. Morgan Stanley's book was maybe a little bit smaller than ours, we have not yet seen the total distribution of the transaction. But we have seen minimal flowback. We had a very strong book, and on these agency transactions you see a lot more going to the co-managers and to the selling groups too. You would tend to see 40% going to the co-managers and selling groups, whereas on a supranational transaction it would be maybe 15%. The deal is holding its level.

Market appraisal:

"...this happens to be an area of the curve that has good demand, and Farm Credit tapped it. I do not want to bad mouth it, but Farm Credit has a tendency to push pricing. It will tend to trade well over time, but occasionally it is a bit aggressive in primary. There is a fair amount of scepticism in fact.

It was priced at 92.5bp over Treasuries, and is now (Thursday) trading at 94bp over.

For a three year to widen 1.5bp is not a devastating indictment, but they probably tried to push it a little bit and given the timing - coming in right before the Fed - probably did not get the follow on demand. That is symptomatic of the deals that are coming to market at the moment. The market is subdued.

What will happen to the Farm Credit deal is that it will meet a lot of interest later on. It is a name that does not come often, it is triple-A rated, and it offers name diversification. So it should do well over time."

* US Bank NA

Rating: Aa3/A+/A+

Amount: $1bn

Maturity: February 4, 2014

Issue price: 99.825

Coupon: 6.3%

Spread at launch: 125bp over the 5% August 2011 UST

Launched: Monday January 29

Joint leads: Lehman Brothers (books), US Bancorp Piper Jaffray

* Wells Fargo & Co

Rating: Aa2/A+

Amount: $1bn

Maturity: February 15, 2007

Issue price: 99.967

Coupon: 5.125%

Spread at launch: 79bp over USTs (indicated: 80bp area)

Launched: Tuesday January 29

Joint books: Bear Stearns, Credit Suisse First Boston

Bookrunner's comment:

Bear Stearns - This deal was launched early Tuesday morning. The transaction was launched at the 80bp area and was about 50% oversubscribed and attracted a very diverse and strong book of buy and hold investors.

Not surprisingly, given the short time frame of execution, distribution was about 85% US and 15% non-US. It was a transaction that met with good demand and one that was viewed as a good credit within the sector.

It priced at 79bp, so 1bp inside the 80bp area talk. We certainly priced at an appropriate time as it came just before the overall bank sector started to widen. Wells Fargo is viewed a very strong bank in its sector and people feel it is a relatively infrequent borrower.

Its bonds freed to trade at issue bid and the whole market traded wide on the day by anywhere from 7bp to 20bp. The Wells Fargo deal outperformed the sector, widening only a few basis points.

Eurodollars

* John Hancock Global Funding II

Rating: Aa2/AA+

Amount: $250m

Maturity: December 31, 2007

Issue price: 101.25

Fixed re-offer price: 99.65

Coupon: 5.5%

Spread at re-offer: 110bp over the 3.5% November 2006 UST

Launched: Tuesday January 29

Joint books: BNP Paribas, RBC CM

Secured on: a GIC originated by John Hancock Mutual Life Insurance Co

Bookrunner's comment:

RBC CM - The John Hancock transaction is the logical continuation of the success of the EdF deal that we launched three weeks ago and which sold extremely well. It was also a December 2007 maturity and we had excellent flows from Switzerland and Germany. Having basically sold out of EdF, it was time to bring the next deal.

GIC-backed transactions are not typical retail product but John Hancock are well known in Switzerland through their Swiss franc deals and a recent IPO, which was very successful and also placed in Switzerland. As far as we are concerned, this is a retail name and this is their fourth dollar deal.

We brought the transaction in a difficult market environment, ahead of the FOMC and with the equity market in turmoil. Nevertheless, it had a good start and both BNP Paribas and ourselves made good sales on day one. The issue is on the buy lists and now it is a question of patience.

The spread is obviously a value trade at 110bp over at re-offer, which is where it is being bid. I think investors are effectively looking for higher yielders.

They were focusing on corporates, but corporates are under pressure while GICs have stayed firm and it is a natural choice to favour GICs if you are nervous about the corporate sector. You get the yield, you get the rating and that is what customers are looking for.

* TotalFinaElf Capital SA

Guarantor: TotalFinaElf SA

Rating: Aa2/AA

Amount: $300m

Maturity: February 12, 2007

Issue price: 101.27

Fixed re-offer price: 99.651

Coupon: 5.125%

Spread at re-offer: 72bp over the 3.5% November 2006 UST

Yield: 5.21%

Launched: Monday January 28

Joint books: ING Barings, JP Morgan

Bookrunners' comments:

ING - It has been a while since TotalFinaElf has made an appearance in the dollar market and we are pleased to have been able to joint lead this transaction with JP Morgan.

We led a Eu250m deal two years ago for this borrower and in that time we had identified good appetite for the name in many retail markets, notably Switzerland and the Benelux. There has also been an increase in the level of dollar demand, which again motivated the transaction.

With a rating of Aa2/AA and a spread of 72bp, this deal is attractive, with the added bonus of it being a rare name.

Although it is a retail size, there were no printed bonds. We targeted investors in Switzerland, France, Belgium and Luxembourg, out of which we saw strong dollar and retail demand.

We were able to take advantage of the market moving lower and offer a higher coupon over five years, which was important for retail. Five years was always the plan and it worked with the market going lower.

EdF is a good comparable and came recently in dollars. Its $250m deal trades 4bp or 5bp sub-Libor. It is triple-A and against the same Treasury bond it came at 86.5bp over. Rabobank and BNG issues were also both sub-Libor but were bigger. These are fairly good comparables but there really are not any of the same credit rating as TotalFinaElf.

We had good initial sales. The deal came at 72bp but is now trading at 75bp/73bp because of swaps moving upwards. But we are keeping an eye on it.

JP Morgan - We were looking for a solid double-A name with a little bit of spread to satisfy ongoing demand for retail dollars and Total was an excellent candidate. The company has issued in the Swiss franc market so is a name that goes down well in Switzerland.

At the same time, it appeals to Benelux investors and to the UK institutional investor base.

Double-A corporates are a rarity in the dollar market, as indeed are oil companies, and Total has not issued in dollars since 2000. As a result, investors were very responsive to the transaction.

We have the JPEX electronic trading system on which 720 clients participate so we get lifted out of a lot of small tickets every day and this is a good issue for that system, to feed out over time.

Market appraisal:

"...fairly tight on a Libor basis and the company released results a couple of days ago that were not that spectacular. But the deal has a high coupon and there are high redemptions in January and February that should support the issue."

"...a pretty expensive transaction. They have a deal in the secondary market trading at a wider spread, albeit with a 7% coupon, and this bond looked aggressive in comparison. However, I do think it will work over time because of the rarity value of double-A corporates in the market."

"...we are happy to be involved because we do not have a lot of dollar product on our books in terms of standard retail Eurodollars. The pricing on balance was on the aggressive side, which will make it more challenging, but we have only a small ticket so it will not be a big deal to place.

There has been a shake-up in corporate credits in the last week or so and that is making Total a little more difficult. We have not seen a huge amount of interest in the deal so far but it is a different name, more interesting than some. However, given what is going on in corporate land, it could be more difficult than it would have been in a less turbulent credit market."

"...Total is a well known and well recognised name, particularly among retail investors and especially in Switzerland. They come rarely to the market and we have already seen retail tickets coming into the deal. I believe that it will be easy to sell - I wish that we had been one of the leads. The pricing is a bit tight because Total's targets are relatively aggressive, but there is rarity value in a deal for a double-A corporate and customers are invariably willing to pay up for them. I think this deal will sell quite nicely over time."

* Toyota Motor Credit Corp

Rating: Aa1/AAA

Amount: $300m

Maturity: February 14, 2006

Issue price: 101.273

Fixed re-offer price: 99.873

Coupon: 4.875%

Spread at re-offer: 169bp over the 3% January 2004 UST

Launched: Tuesday January 29

Joint books: Dresdner Kleinwort Wasserstein, ING Barings

Bookrunners' comments:

DrKW - There has been a reasonable amount of dollar supply this year but relatively few of what I would call good retail deals. We had a number of clients wanting to put their money to work and four years was the maturity they were focusing on.

Toyota remains a first class retail name and this transaction, priced at around mid-swaps plus 7bp-8bp at re-offer, which equated to 169bp versus the US Treasury, generated a lot of demand. By the time of pricing, we were completely sold out with good demand, particularly from Switzerland.

ING - With this deal we wanted to target demand at the shorter end of the curve. There has been quite a lot of issuance from triple-As in the five year range, with hardly anything in four years. We took advantage of this and the deal benefited as a result.

This is still a name the market really appreciates, despite all the bad news from the sector.

Having said that, TMCC is one of the few carmakers that has not suffered as much as, say, Ford. They are, in fact, gaining market share and in terms of rating, they are the best carmaker in the world.

The Eu750m 2007 they issued recently was priced at Euribor plus 23bp and has since tightened to 11bp. This deal is shorter and has not paid the premium the company had to pay in euros. TMCC has to pay to more now than they did a few years ago but the spreads are nothing compared to those the other carmakers have to pay.

We have seen good demand from all the investor bases we targeted, namely in Switzerland and the Benelux. There was also demand out of Asia and the UK. Placement was mainly into private banking accounts.

This deal is in line with secondaries - it pays no premium to other triple-As in five years. There are no four year comparables. EdF trades at dollar Libor minus 5bp, BNG trades also 5bp sub-Libor.

Syndication went smoothly, there were no refusals. The transaction has gone well, between us and Dresdner, two-thirds of the paper has been sold.

This is good for what is really a retail deal. Today (Thursday) we have seen continuing demand and we will have no trouble placing all the paper.

Market appraisal:

"...a four year bond priced over the two year Treasury to manufacture a high headline spread, but a deal that will undoubtedly work slowly over time.

TMCC is a name investors like despite all the volatility in the automotive sector and it really is perceived as a company apart from the rest.

The sell-off in the dollar market, which has produced higher yields, will also help this deal."

Transactions increased:

* Council of Europe Development Bank

Rating: Aaa/AAA/AAA

Amount: $100m (fungible with four issues totalling $1.25bn first launched 17/01/01)

Maturity: January 25, 2011

Issue price: 105.27

Coupon: 6.125%

Launched: Thursday January 31

Sole mgr: Credit Suisse First Boston

Uridashi:

* World Bank

Rating: Aaa/AAA/AAA

Amount: $150m

Maturity: February 1, 2005

Issue price: 100.00

Coupon: 3.26%

Launched: Friday January 25

Sole mgr: Mizuho International

* World Bank

Rating: Aaa/AAA/AAA

Amount: $200m

Maturity: February 19, 2008

Issue price: 99.98

Coupon: 4.55%

Launched: Friday January 25

Sole mgr: Daiwa Securities SMBC Europe

  • 01 Feb 2002

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1 JPMorgan 92.59 388 8.96%
2 Citi 85.30 278 8.25%
3 BofA Securities 63.15 265 6.11%
4 Barclays 58.01 223 5.61%
5 Deutsche Bank 55.74 184 5.39%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 BNP Paribas 60.87 123 14.06%
2 Credit Agricole CIB 28.59 93 6.60%
3 Santander 25.41 90 5.87%
4 JPMorgan 23.88 61 5.52%
5 UniCredit 21.51 103 4.97%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 Goldman Sachs 2.07 11 10.42%
2 BofA Securities 1.40 6 7.01%
3 Citi 1.37 7 6.87%
4 Morgan Stanley 1.36 6 6.85%
5 JPMorgan 1.31 7 6.59%