Rating: A2/A-/A
Amount: Eu3bn Inhaberschuldverschreibung series 122
Maturity: December 5, 2002
Issue price: 100.033
Fixed re-offer price: 99.983
Coupon: three month Euribor plus 10bp
Spread at full fees: Euribor plus 13.5bp
Launched: Monday November 27
Joint books: ABN Amro, Deutsche Bank, Dresdner Kleinwort Benson
Bookrunners' comments:
ABN Amro - This was a good deal for us to be involved in because the market is still looking for short dated floaters so this instrument is one of the best sellers at the moment. The deal has sold well to the usual Inhaberschuldverschreibung market bases.
We participated with Deutsche and Dresdner as joint leads. There was no other syndicate, and so took an equal ticket of Eu1bn each.
AHB is a quality name in the market, has good name recognition, and offers our investors a lot in terms of liquidity and performance.
Deutsche - This was designed for a certain group of investors and came at an opportune time. There have been a couple of redemptions in the market and so demand was there from investors looking to reinvest in unsecured mortgage bank paper.
The deal was fairly cheap compared to secondary levels, but it has had a healthy performance. We placed almost three quarters of the paper in Germany and the remainder went to France and the Benelux countries.
Dresdner KB - This was a very nice transaction and has been placed very steadily. We had Eu1bn to sell, so sales will take a while in small tickets.
We have sold the paper well within fees and seen strong demand for short dated bank floaters from investment and money market funds. AHB is an established borrower and will use the funds for ongoing liquidity management.
We were pleased to be awarded the mandate with ABN Amro and Deutsche and the other joint books have seen good demand as well. The all-in level was Euribor plus 13.5bp and we sold the paper in the 12bp-13bp area.
* Banca Popolare di Milano
Rating: A3/A-/A-
Amount: Eu50m (increase to Eu300m issue launched 22/11/00)
Maturity: December 13, 2010
Issue/re-offer price: 99.958
Coupon: three month Euribor plus 100bp until 13/12/05; three month Euribor plus 160bp thereafter
Call option: at par from 13/12/05
Launched: Monday November 27
Joint books: Banca IMI, Merrill Lynch
Joint lead: Dexia
* Banca Popolare dell'Etruria e del Lazio SCarl
Amount: Eu100m lower tier two debt
Maturity: December 15, 2010
Issue/re-offer price: 99.577
Coupon: three month Euribor plus 190bp until 15/12/05; three month Euribor plus 250bp thereafter
Spread at re-offer: Euribor plus 200bp
Call option: at par from 15/12/05
Launched: Friday November 24
Joint books: Mediobanca, UniCredit Banca Mobiliare
Bookrunner's comment:
Mediobanca - This was the latest installment in this borrower's funding programme and the bank is readying a securitisation of non-performing loans for launch in mid-December.
The book filled up quickly, as the attractive pricing on this unrated offering interested investors. We kept the syndicate small and gave the members only Eu2m each.
There was strong demand from Italian institutions, as well as some accounts in Germany and France, and the transaction is now (Thursday) all sold.
* Bank of Scotland Treasury Services plc
Guarantor: Bank of Scotland
Rating: Aa3/A+/AA
Amount: Eu50m
Maturity: December 1, 2003
Issue/re-offer price: 100.05
Coupon: three month Euribor plus 10bp
Launched: Tuesday November 28
Sole mgr: CDC Marchés
* Credito Valtellinese SCarl
Rating: A- (Fitch)
Amount: Eu250m
Maturity: December 19, 2003
Issue/fixed price: 99.738
Coupon: three month Euribor plus 30bp
Spread at full fees: Euribor plus 43bp
Launched: Monday November 27
Joint books: Caboto, Royal Bank of Scotland
Bookrunners' comments:
Caboto - The deal has been pretty successful, although we had to make a concession in the spread level when the borrower was put on negative watch by Fitch. From initial talk of a plus 38bp re-offer spread, the level widened to plus 41bp and the pricing has attracted a lot of demand.
Around 80% of the paper has been sold, with 70% bought by non-Italian accounts.
RBS - The transaction went well. We were able to find good demand and place a significant portion of the bonds, with investors in southern Europe particularly keen on the paper.
Credito Valtellinese was in the market last year so has paper outstanding and we saw repeat buyers coming in for this bond. All our tickets were for cash.
We went through a marketing period on the transaction, which helped to move the deal off the book and progress well. Sales were made at 41bp over, comfortably inside the all-in spread of 43bp.
Credito Valtellinese is a small to medium sized bank based in northern Italy, but also has operations in Sicily.
* Endesa SA
Rating: Aa3/A+/AA-
Amount: Eu50m
Maturity: December 1, 2003
Issue/re-offer price: 100.05
Coupon: three month Euribor plus 16.5bp
Launched: Wednesday November 29
Sole mgr: CDC Marchés
* Meliorbanca SpA
Rating: BBB+ (Fitch)
Amount: Eu50m (fungible with Eu75m issue launched 03/07/99)
Maturity: July 28, 2003
Issue/re-offer price: 99.75
Coupon: three month Euribor plus 40bp
Launched: Monday November 27
Joint leads: Unicredit Banca Mobiliare (books), Meliorbanca
* Sogefi SpA
Amount: Eu80m
Maturity: December 22, 2005
Issue/re-offer price: 99.566
Coupon: three month Euribor plus 90bp
Spread at re-offer: Euribor plus 100bp
Launched: Thursday November 30
Joint leads: Caboto (books), Deutsche Bank
* Unilever plc
Guarantor: Unilever NV
Rating: A1/A+
Tranche 1: Eu500m
Maturity: December 18, 2002
Issue/re-offer price: 99.981
Coupon: Eonia plus 20bp
Spread at re-offer: Eonia plus 21bp
Tranche 2: £100m
Maturity: December 19, 2001
Issue/re-offer price: 100.00
Coupon: Sonia plus 20bp
Launched: Wednesday November 29
Joint books: BNP Paribas, HSBC CCF
Bookrunners' comments:
HSBC CCF - This included the first sterling transaction to be priced over the sterling overnight indexed average (Sonia).
Sonia is the weighted average rate of all interbank overnight sterling trades that go through London brokers between midnight and 3.30pm. The rate is released at 4.30pm on Sonia 1 on Reuters and Sonia Index HP for historical rates on Bloomberg.
The Sonia swap market has been well established for many years. It is used by bank money market traders and by some market funds, and is regulated by the Wholesale Markets Brokers Association.
Investors who are long sterling cash have to invest that cash every single day in the overnight market. At the moment, they could place funds at 9am when the rate is, say, 6% and the volatility is such that overnight the rate could go up to 7% or 8%.
The appeal of a bond like Unilever being linked to Sonia is that investors know that they are getting the average of the daily volume plus the margin of 20bp. It is particularly interesting for funds whose benchmark is to beat Sonia. They know they will get a better rate than the index.
I think Sonia has not been used before because, unlike in France and the US where there is more of a tradition of short term paper in the money markets, in the UK it is more common to place short term deposits with a bank.
Obviously the return is better than investing overnight cash at a bank's bid and - although it is not as liquid as overnight deposit and investors are taking one year credit risk on Unilever - they are getting a margin for that credit risk expressed as a margin over the overnight rate.
One of the initial concerns about using Sonia was that there was no regime to calculate the accrual on the bonds. There were similar concerns with the earlier Eonia deals, so to make investors feel comfortable with the product we have created HSBC Sonia 1 on Reuters plus HSBC Sonia 2, which is the calculation of accrual. In the same way, Eonia is quoted on CCF Eonia 1 and 2.
We have also created spreadsheets to help investors calculate accrual on their investments and we have worked hard in giving them documentation to explain how the calculation is made so that they can get approval from their internal audit departments.
At the time of launching the issue, not everyone was able to get all the boxes ticked, but certainly interest was in excess of the £100m that Unilever printed and we are confident that this is a market that will grow in the future.
Unilever wanted to have a successful deal. Their objective was to do the last little bit of incremental funding they had told investors they were going to do this year.
They were not prepared to issue in a manner that would upset their existing investors and therefore tried to tap new sources of funds. By targeting the cash market and money market accounts, they have achieved that.
In some cases, the bonds will have been bought by the same institution but a completely different fund, or by a new institution altogether.
The sterling tranche has been placed entirely with sterling cash funds or cash players.
Market appraisal:
"...a 100% pot deal. The euro tranche aroused a lot of demand from French investors, particularly from money market funds, and it looks as if investors are getting more used to the instrument.
The paper was attractively priced, yielding plus 21bp, representing a pick-up of around 15bp for investors after swapping into Euribor. This compares well with similar deals, which trade a couple of basis points tighter.
The Sonia linked tranche was fairly small, but it will still be interesting to see where the demand is, as it is a typically defensive instrument. Unilever is a strong credit that receives good support from the market, so the deal should go well."
* Union Bank of Norway
Rating: A2/A/A+
Amount: Eu100m (fungible with Eu500m issue launched 31/10/00)
Maturity: November 16, 2005
Issue/re-offer price: 99.892
Coupon: three month Euribor plus 15bp
Launched: Tuesday November 28
Joint books: ABN Amro, UBS Warburg
