Guarantor: Abbey National plc
Amount: Eu250m (fungible with Eu500m issue launched 18/02/99)
Maturity: July 12, 2004
Issue price: 99.098
Fixed re-offer price: 97.498
Spread at re-offer: 25bp over the 3.5% July 2004 BTAN
Launched: Wednesday June 30
Lead mgr: Nomura
n AssiDomän AB
Maturity: July 14, 2006
Issue/fixed re-offer price: tba
Spread at re-offer: 109bp to 114bp over the 7.25% April 2006 OAT (indicated)
Launched: Thursday July 1
Lead mgr: Merrill Lynch
We are very pleased to have successfully launched this deal in what has been a difficult market environment. It is our first international bond and it was launched in order to broaden our investor base and get our name more widely known than it is at present.
We are Europe's largest listed forestry company with 2.4m hectares of productive forest land and our main focus is the production of the packaging material grade paper.
The deal is launched off a Euro-MTN programme which we signed about a month ago. We also established a domestic MTN programme earlier this year and have been issuing under that facility since it was set up in February.
Although the market has been difficult we felt it was important to take the opportunity to launch this issue and take advantage of the marketing and roadshows we had carried out. We will be swapping part of the proceeds back into kronor.
Clearly the best comparison for this credit was the recently printed Fort James transaction. However, Fort James is closer to a consumer products company than a pulp and paper company and their deal came very cheap.
This could have been a stumbling block but we used it as a starting point and launched this issue at the equivalent of Euribor plus 82bp or 110bp over
the French curve. This is AssiDomän's inaugural trade in the international capital markets and the company is pleased with the pricing outcome.
It took a long time to tell the AssiDomän story. It was a two part education process as there are not a lot of publicly traded forestry products companies in the Euromarket and we had to explain the industry as well as the credit itself.
The company did a very thorough and well received roadshow. Although it looked at five years it had a strong preference for a longer maturity. We offered both maturities and the seven year had a good response so we decided to opt for that.
We are already sold at this point and the deal is in good shape.
"...generous pricing for the rating - it could work at plus 60bp to plus 65bp. It should appeal to Scandinavian accounts who are familiar with the name."
"...the borrower has a split rating, but if you consider it a triple-B plus credit then the pricing looks good. The borrower is in a cyclical industry, but the cycle is turning and over the length of the bond there is probably little downside risk."
n Bankinter Finance Ltd
Guarantor: Bankinter SA
Amount: Eu75m preference shares
Issue price: 100.00
Call option: at par from 05/07/04
Launched: Monday June 28
Joint books: Bankinter, Deutsche
Deutsche - Bankinter is a great credit. It is very close to the Santander group, which owns 10% of Bankinter. The chairman is Jaime Botin and the family is the largest shareholder. Emilio Botin, Jaime's brother, is joint chairman of Santander.
The deal itself is not very large. We saw some international demand, from the Benelux and Switzerland, but the majority went to Spain. The coupon of 5.76% is a decent level and compares well to other Spanish pref share issues, taking into account the rating and size. We are completely sold out.
n Caisse Centrale des Assurances Mutuelles Agricoles (Groupama)
Maturity: July 22, 2029
Issue/fixed re-offer price: tba
Spread at re-offer: equivalent to Euribor plus 95bp until 22/07/09 (indicated); Euribor plus 195bp thereafter
Call option: at par from 22/07/09
Launched: Thursday July 1
Joint books: CDC, JP Morgan
n City of Copenhagen
Maturity: August 4, 2007
Issue price: 100.288
Launched: Friday June 25
Sole mgr: Barclays
Despite the high market volatility we felt that there would be demand for a name like Copenhagen. It is a small transaction and we put in a bid at a level we felt would work and were then asked to firm it up which we did.
The city is quite a rare issuer in the capital markets. It has launched deals in the Schuldschein market once in a while and has issued in currencies including Deutschmarks and Luxembourg francs in the past. The rarity of the name and the zero risk weighting of assets of this type are the most appealing features of this deal.
We saw investor interest in Germany and sold all our bonds on Friday afternoon.
n Deutsche Bank Capital Funding Trust III
Amount: Eu300m preference shares
Issue/fixed re-offer price: 100.00
Call option: at par from 30/09/04
Launched: Tuesday June 29
Joint leads: Deutsche (books) Banco Bilbao Vizcaya
The European market for capital securities is young, but it is growing and we are in a good position to exploit its potential. European bank names naturally attract a wide audience and they are well placed to access the investor base in terms of distribution.
People have long flirted with the idea of a European retail market for tier 1 deals and this deal has succeeded in getting true retail participation. It is the closest thing we've seen to SEC registered dollar transactions where retail and private banking clients are driving the issues.
Ourselves and BBV have solid European franchises and as the market continues to mature you will see banks like ourselves working on more similar issues. This deal has been well oversubscribed and we expect to increase both the dollar and euro tranches.
This is the first tier 1 transaction to be distributed across European retail markets and marks a real change in the way this paper is being sold. It is listed in Frankfurt and will be listed on the AIAF debt trading exchange in Madrid after having been filed with the CNMV.
Before launch we talked to lots of investors about tier 1 and investors see that there is a place for it in their portfolios.
There are over half a million retail shareholders in Germany alone and they get a 3.2% yield on Deutsche stock, whereas they can get a 6.6% dividend on this pref share issue.
We sold nearly all the euro tranche in Europe, to the UK, northern and southern Europe. The dollar tranche was taken up globally - in the US, Asia, Latin America and Europe. We sized the issues according to demand, the Deutsche name obviously generating enormous European retail interest.
Banco Bilbao Vizcaya - This deal is expected to be filed with the CNMV today to make it possible to place the bonds with retail in Spain through Deutsche Bank's and our own retail networks.
We are currently placing the bonds with institutional investors and have seen strong demand from institutional clients both inside and outside Spain. Indeed the deal has been such a success that there might not be that much paper left for retail.
We saw as much demand for the dollar tranche as we did for the euro tranche of this issue. Due to the increasing yield of the 30 year Bund over the last few weeks the dividend on the euro tranche was adjusted from an initial 6.5% to 6.6%.
The downward trend of the 30 year Bund compared to a more stable US$ long bond enhanced the appeal of the US$ tranche, and strengthened demand for the dollar issue.
The deepest market for capital securities in Europe is Spain which is why Deutsche Bank asked us to be a joint lead on this transaction. There is natural demand for these products in Spain where capital securities have been some of the most successful issues of both this year and last.
n HSBC Holdings
Amount: Eu300m subordinated debt
Maturity: July 15, 2009
Issue/fixed re-offer price: 99.035
Spread at re-offer: 105bp over the 4% July 2009 Bund; 94bp over the 4% July 2009 OAT
Launched: Friday June 25
Lead mgr: HSBC
This is part of a global offering which also includes a $1bn 10 year issue. It is the first time that HSBC has marketed a deal on a global basis and is the bank's first offering since 1993 as well as its debut in euros.
The deal was part of the financing for the $10.3bn acquisition of Republic New York Corp and Safra Republic Holding announced back in April.
HSBC met with investors in the US and throughout Europe as well as in Asia in the run-up to launch. The marketing in Europe was important, given that the issue was the bank's debut, and we were delighted by the response from investors throughout the region.
The Eu300m issue was complimentary to the US$ deal reaching a number of investors in Europe who do not want to buy US dollars at the moment.
We had particular success in Germany and Holland and we also saw interest from accounts in France, Spain and the UK. We sold a good chunk of the issue into Asia where HSBC enjoys a very good following and we have seen retail distribution since the issue was launched.
The deal was launched at a spread of 105bp over the July 2009 Bund and has traded in the 103bp area since then, which is a strong performance compared to a lot of other subordinated issuance in Europe, some of which has performed quite weakly.
We had some good support from certain names in the syndicate, in particular from Rabobank which detected some very good demand from Dutch accounts.
"...this went very well. We saw lots of demand - we could have sold around Eu60m to Eu65m, even without having made any big sales effort, and that augurs well for the rest of the transaction. We ran a small short to cover demand and fortunately we managed to cover it quickly as the spread rapidly tightened.
It went far better than the recent NatWest and Woolwich deals, which didn't exactly fly out the door. HSBC is a pretty rare name, a massive bank and it has a positive credit story.
Our analysts think it's in line for an upgrade, but the rating agencies are quite conservative for the moment and are being cautious because of its Hong Kong operations.
We were surprised that they didn't do more in euros. They priced it wider in dollars for size, but looking at the price performance, they could have done more in euros.
The euro tightened, whereas the dollar didn't, even though our guys in the US thought that it would have tightened by at least 5bp. If they had balanced the tranches a bit better then they could perhaps have got better pricing for themselves as well."
"...we'd like to see more deals like this. We sold our allotment immediately. The re-offer spread of 105bp over was perfectly fair for a subordinated issue for HSBC - Woolwich was trading at around 91bp over, RBS at 92bp over, HypoVereinsbank at 90bp over and Commerzbank at around 97bp over.
The drop in the market further increased the attraction of the deal as the absolute yield was more interesting than it would have been earlier in the year."
"...we had an allotment of Eu10m and sold it to mutual funds in Spain. The pricing was within the range that had been discussed before the launch of the transaction and was on the generous side - they were talking about a spread of 100-105bp over Bunds and it was priced at the wide end of the range.
We placed out paper quickly and the deal tightened by a couple of basis points soon after launch."
n Kreditanstalt für Wiederaufbau
Guarantor: Federal Republic of Germany
Maturity: July 16, 2001
Issue/fixed re-offer price: 99.788
Spread at re-offer: 6bp over the 3% June 2001 Schatz; 1bp over the BTAN curve
Launched: Tuesday June 29
Lead mgr: SG
We have seen increasing demand for short dated bonds with a current coupon recently. However, there is nothing out there except for some Pfandbriefe which trade at between Euribor minus 11bp and minus 12bp. Investors are interested in this part of the curve because it is a safe place to be and the absolute yield level is also quite interesting.
Some investors are also interested in an instrument like this for a carry trade. The re-offer yield was around 3.25% and if accounts are funding themselves at Eonia or Euribor, you can get a big pick-up of around 70bp as Eonia is at around 2.54% and Euribor at 2.60%.
And accounts who think that the ECB might raise rates later in the year will still be left with a 50bp pick-up should that occur.
KfW is also seen as a good treasury surrogate and investors use their bond to play the yield curve or as a hedging instrument. The deal is liquid at Eu1bn and could be increased as it is one of KfW's benchmarks. Some accounts have been buying this and shorting five year BTANs.
The deal therefore appealed to a lot of investors, mainly money market funds, but some central banks as well. You can argue that the spread is a bit tight, but the deal is still trading at the re-offer spread.
It is cheaper than the OLO 7, which is roughly the same maturity, and the OLO 25, which is slightly shorter. There is a cheaper Austrian Bund, but it has a 5.75% coupon, trades well above par, and is completely illiquid.
We sold a lot on the day of launch, and although things slowed down on Wednesday because of the FOMC, sales have picked up again. We have made sales to France, Germany and Asia.
"...when you have a two year deal, investors are not going to differentiate between triple-A and EU sovereign credits. So although KfW may be better rated than Italy, Belgium or Spain, that is no reason why investors should pay more for KfW at the very short end.
This came about 3bp tighter than OLOs, 2bp to 3bp wider than a liquid on-the-run Bono, and about 10bp tighter than BTPs, which provide liquidity galore. Ironically, it might have been easier to market this as a Schatz or other government bond substitute if it had not been Eu1bn but Eu10bn.
It is therefore going to be tough to shift Eu1bn at this price. It should have come about 8bp wider.
The only investors who might buy this at the re-offer spread are in Asia, but they're not going to be takers of Eu1bn at the moment.
You could find some more buyers about 4bp wider, where SG could sell it without a loss if they didn't subsidise it, but to sell it all they will need to go wider than that.
Nevertheless, it is the right product for the market with all the volatility we've seen and they obviously jumped at the chance to do it when there was a swap spread widening at the short end - which hasn't occurred for a long time."
"...KfW is of course a great credit, but this was expensive. It could work as there is hardly any German government paper trading below par in this maturity area - only the Schatz is trading below par - and investors are shortening duration.
We have seen some interest from money market funds, but they won't be able to sell the whole Eu1bn at the re-offer spread."
"...awful. The idea was good as many investors are looking for quality, liquid, two year assets, but the spread was completely wrong.
The natural buyers of this kind of paper are looking at it because it is zero risk weighted and triple-A rated. But they'd need plus 10bp to buy this and it came at plus 6bp.
It was almost flat to BTANs and if you take into account the bid/offer spread you have no pick up at all over Bunds. The lead also offered bonds below the group's fees level for a short time soon after launch."
Maturity: July 15, 2004
Issue/fixed re-offer price: 99.583
Spread at re-offer: 52bp over the July 2004 BTAN
Launched: Monday June 28
Joint books: BNP, Deutsche
BNP - The deal went well. We got it done in a difficult market where other leads have been postponing deals because they can't sell the credit at the level they were mandated at.
We widened the issue here, but only slightly from price talk of around 48bp-50bp out to 52bp over. We also knew that 52bp over was a little too tight and that we would have to widen the spread further to 54bp to 55bp to find buyers.
On the one hand, it would have been stupid not to have widened the spread at all, but on the other hand we are committed to the borrower and had to find a compromise that would work for investors and the borrower. The fees on the issue were 6bp, so even if we are selling 2bp-3bp wider than the re-offer, we are still making money on the deal.
At 54bp or 55bp over it compares well to Fiat at 50bp over and Schneider at 50bp over. The fact that we were able to do the issue at a price close to the indicated spread for the borrower and that it didn't widen too much in the aftermarket is testament to investors' appreciation of Lafarge.
We sold 50%-60% of the paper to France on the day of launch and after the FOMC we made further sales to the Benelux and Italy.
Deutsche - We premarketed this deal for a couple of days before launch, launched it on Monday, and then priced it on Tuesday. That way we were able to find more orders in what was a quiet market. We were 70% done by pricing, made further sales in the following days and expect to be flat by Friday.
It is very difficult to get investors to commit to a deal before it is on screen these days, which is why we are seeing so many issues launched on one day and priced the next. People are curious as to what the final spread is going to be and only then will they take a serious look.
The move from spread talk of around 50bp over to 52bp over was a reflection of a widening in swap spreads. Swap spreads moved by about 4bp last Friday, so this actually came at a tighter Euribor level for the borrower.
After launch the discipline in the group was not very good, so we took bonds back wide of the re-offer. The issue is now bid at 54bp over.
The five year maturity is not a maturity that is too popular in France, so we couldn't rely on a French bid for the deal. It was important for us to find international accounts and the deal that Lafarge did last year really helped.
We sold about 30% to Germany, 20% to Italy, 30% to Switzerland and the Benelux, about 10% to France, and the rest elsewhere. Most of the paper went to mutual funds and retail intermediaries.
"...the pricing is a bit aggressive given the state of the market. Euribor plus 26bp or 27bp isn't absurd, but you can only really get away with it in a bullish market.
They did widen the pricing from the 48bp over to 50bp over price talk, which was sensible, but you shouldn't regard this like Bouygues and Casino.
This mandate was awarded for relationship reasons and the bids that the leads put in were always going to be more flexible than on some other issues.
They probably should have done the deal at 55bp over, where the issue widened to. Issuers and bookrunners seem to have a problem getting their heads around the idea of a new issue premium, like you see in the US.
At 55bp over they would have had a good reception, but the deal is languishing at 55bp over now and there is plenty of loose paper. We still have our bonds."
"...too tight. It came at 52bp over and has been trading at 55bp over. For a A3/A rated name, Euribor plus 29bp - which is where it now is - is still expensive. We are seeing some interest at 30bp over Euribor, but only from France.
They should have launched it at a wider price as if an issue widens it is difficult to attract investors. They'll just wait and see if it widens further. It's better to pay up from the start to make sure you get the deal away."
"...we made some money on this, but not full fees. There's probably still a fair amount of paper available as investors are reluctant to buy corporate paper at the moment because of the amount of supply there has been and is yet to come, and also the poor performance of many recent deals.
Ironically, the fact that Lafarge is better rated than some recent issues makes it more difficult to sell as investors don't see it as a juicy enough opportunity. They feel they can afford to let this one pass."
n Lehman Brothers Holdings plc
Guarantor: Lehman Brothers Holdings Inc
Maturity: July 12, 2001
Issue price: 101.043
Fixed re-offer price: 99.943
Spread at re-offer: 76bp over the 3% July 2001 BTAN
Launched: Tuesday June 29
Joint books: Banca IMI, Lehman Brothers
Banca IMI - We have been seeing a lot of demand for short term paper from institutional investors in Italy and were keen to bring a two or three year deal for a name which could offer investors a bit of spread.
With investors anxious about the direction of interest rates they are taking a more defensive view but still want some spread pick-up.
Lehman Brothers was the sort of credit we felt would offer value. At a spread of 65bp over Libor and 76bp over the July 2001 BTAN the deal offered an attractive pick up in yield.
We are now completely sold out having placed our bonds with funds and retail accounts both domestically and with accounts in Benelux and France.
The deal is trading at 100.05 having been launched at a re-offer price of 99.95.
Lehman Brothers - We went out on Monday talking about a possible Eu200m two year transaction. By launch we had Eu350m in orders and decided to print a Eu300m trade.
The deal was the result of a reverse enquiry from IMI and a couple of other banks for a short dated Lehman Brothers transaction which enabled us to price the deal at the fairly tight level of Libor plus 65bp which equated to a spread of 76bp over the July 2001 BTAN.
Lehman has a strong presence in Italy and has worked with IMI many times.
The bond issue was therefore a natural development of a good relationship and the strength of the Lehman name in the region.
Last week Lehman Brothers released very positive second quarter results which included an increase in our return on equity of 26.3% and record quarterly earnings of $330m.
The recent news of our alliance with Fidelity, the world's largest fund manager, boosted Lehman Brothers stock, and has further enhanced the Lehman name. We were delighted to be able to print this deal and take advantage of the momentum created by all this good news.
With demand in excess of $350m the allocation process went extremely well. The bond came at 76bp over at re-offer and is now bid at 74bp over.
"...this went pretty well. We saw demand from smaller accounts, rather than institutions. It wasn't pure retail that were buying, more private banking accounts buying Eu1m here and there.
Even if the 4% coupon could be seen as driving retail demand, the credit makes it something more for private banking accounts. We also saw some money market funds and bank funds buying. The maturity was also too short for most institutions."
"...I like the idea of a two year issue and the pricing was pretty fair. If clients are prepared to take on Lehman risk for two years, then it is easy to get them to buy.
The problem is that many investors aren't even prepared to buy Lehman in two years. However, we sold to banks, who have no problems with the credit."
For details of the Lloyds
transactions see the sterling
n Münchener Hypothekenbank
Amount: Eu100m Inhaberschuldverschreibung series 107
Maturity: July 6, 2000
Issue/fixed re-offer price: 99.55
Launched: Thursday July 1
Sole mgr: CDC
n Ville de Tours
Tranche 1: Eu16m
Maturity: July 30, 2023
Issue price: 101.241
Tranche 1: Eu19m
Maturity: July 30, 2024
Issue price: 101.25
Tranche 3: Eu22m
Maturity: July 30, 2025
Issue price: 100.979
Tranche 4: Eu23m
Maturity: July 30, 2026
Issue price: 100.792
Launched: Monday June 28
Lead mgr: CDC
n Xunta de Galicia
Maturity: July 14, 2009
Issue/fixed re-offer price: 100.20
Spread at re-offer: 37bp over the 4% July 2009 Bund
Launched: Thursday July 1
Joint books: Caixa Galicia, Dresdner Kleinwort
Dresdner KB - This deal has many domestic Spanish features but has been placed internationally with investors in Germany, France and Italy as well as Spain.
There is a great deal of demand for zero risk weighted assets, from investors such as German Landesbanks and mortgage banks, and this sort of product is much cheaper than other types of zero risk weighted paper such as sovereign bonds.
The deal was more or less preplaced. Most of the work was done before launch and the group was announced on the screen at the same time as the issue itself. All the syndicate members had agreed to be in the group in advance and the execution of the deal was fairly simple.
We decided to go ahead with this deal today because we are under the impression that there are a number of deals in the pipeline ready for launch now the FOMC meeting has come and gone. We took the opportunity to launch today to be ahead of the pack.
The original intention was to bring a Schuldschein bond, which is the format that most appealed to German investors but the region was keen to launch a public deal as other regions in Spain have done. The public Eurobond format has been readily accepted outside Spain and the deal has worked extremely well.
SG - One of the objectives of this deal was to achieve widespread distribution for the Galicia name in Europe. We feel very strongly that Galicia has been successful in that aim having, along with the other lead managers, found very strong demand for the bonds throughout euroland.
The main areas of demand were Germany, France, the Benelux and Spain. Some of the investors, such as those in the Benelux are buying the name for the first time. We placed the paper with institutional investors such as mutual funds and pension funds.
Galicia historically launches one or two deals a year but this is the first time that they have brought an internationally targeted public Eurobond, making it a rare and attractive name for those investors interested in sub sovereign debt.
Although these bonds have to be domestic by law and the issue has domestic features it has been placed internationally. The deal wasn't preceded by a roadshow but later in the year the borrower may carry out some presentations in Europe.
The region is a strong credit with solid fundamentals. It has reduced its budget deficit more than the European requirements for EU entry and right now it is in a very strong financial position.
The issue was re-offered at 37bp over and is trading between 35bp and 37bp over
"...this came slightly cheaper than was originally intended. The deal was launched at a spread of 1bp over Euribor but we had expected it come a few basis points through Euribor.
We had a Eu10m allotment which we have placed with two accounts in Spain. It would have been a much tougher sell at a tighter level.
Galicia has always done about one issue a year with either domestic issues or extremely expensive private placements such as Schuldscheine."
n The Dutch State Treasury has announced a new DSL exchange. The debt restructuring exercise will take place on July 15.
The move is the latest step in the Dutch treasury's attempt to attract more investors to its debt, and thereby reduce its spread over France and Germany, by making its debt more liquid.
The treasury has already reduced the number of new bonds issued per year to two and is concentrating issuance in three maturities.
The 8.25% February 2002 and 8.25% June 2002 DSLs are exchangeable for the 3% February 2002, while the 7% June 2005 and 6.75% November 2005 issues are exchangeable for the 7.75% March 2005. The exchange will take place through a Dutch uniform price tender via primary dealers.
n The German government yesterday (Thursday) announced that it will divest its remaining stake in Deutsche Siedlungs- und Landesrentenbank. The government plans an eventual merger of the bank with Deutsche Postbank, which is owned by Deutsche Post, following the transfer of its stake to Postbank at the at the end of November.
Following the move DSL could suffer downwards pressure on its rating as it will lose its public law entity status and will no longer be covered by Anstaltslast, the German support mechanism.
However, existing liabilities will be grandfathered and Fitch IBCA has already affirmed DSL's triple-A rating.
Euro Jumbo Pfandbriefe:
n BfG Hypothekenbank
Amount: Eu233.062m (fungible with two issues totalling Eu766.038m launched 14/07/98 and 05/08/98) Öffentlicher Pfandbrief series 251
Maturity: September 15, 2003
Issue price: 101.435
Fixed re-offer price: 101.28
Spread at re-offer:
16.5bp over the 6% September 2003 Bund
Joint books: BfG, Commerzbank, Deutsche, DG, Dresdner KB, LB Sachsen, WestLB, WGZ
Amount: Eu250m (fungible with two issues totalling Eu1bn launched 19/10/98 and 17/02/99) Öffentlicher Pfandbrief series 496
Maturity: October 26, 2004
Issue price: 98.58
Fixed re-offer price: 98.41
Spread at re-offer: 14bp over the Treuhand
Launched: Thursday July 1
Joint books: ABN Amro, Commerzbank, Deutsche, HypoVereinsbank, WestLB, WGZ
n Credit Suisse Group Finance (Guernsey) Ltd
Guarantor: Credit Suisse Group
Maturity: July 29, 2019
Issue price: 100.00
Fixed re-offer price: 99.80
Coupon: 82% of the 30 year CMS rate, with a floor of 5%
Launched: Tuesday June 30
Joint books: Caboto - Gruppo Intesa, Credit Suisse First Boston