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'Pipeline? What pipeline?' ask corporate bond investors

By Dan Alderson, Max Bower, Robert Cooke, Ross Lancaster, Victor Jimenez
27 Jan 2016

Another week, another dearth of primary issuance in the European corporate bond market.

“Pipeline? What pipeline?” retorted one investor, asked to comment on deals that might be coming over the horizon in European high yield.

The closest thing to a high yield issue in euros in the past seven days has been Best in Parking’s €75m seven year senior unsecured deal at the wide end of the initial 3.25% to 3.5% yield range.

The deal from the Austrian parking facilities developer was unrated, but the notes have high yield-style covenants including a change of control clause and dividend restrictions.

So weak is corporate bond supply, however, that Best in Parking’s ambiguously unrated status also makes it a candidate for the only investment grade deal of the week. Many potential issuers have been in earnings closed periods, which slightly mitigates the alarming sight of a second consecutive week of quiet primary issuance.

Bankers on the Best in Parking deal said the market felt “frozen” and they needed to go “back and forth” from investors to issuer more times than they had expected for such a small bond. Too small, in fact, to infer from it anything meaningful about the state of the markets, a banker away from the deal said.

And yet Best in Parking can be compared with another borrower that chose similar tactics at a difficult time in the market, but did rather better. During the height of the Greek debt crisis, an unrated Belgian issuer, Ghelamco, managed to insulate itself from eurozone volatility by targeting its domestic investor base for a successful €77m bond. That volatility has crept into such deals this time is worrying.

But some positivity is creeping back into sentiment. Corporate bond traders are finding more stability in the secondary market as more buyers return. And in primary, investors and issuers are getting more used to the idea of unpredictable windows of issuance, say bankers.

But nerves are still sensitive. Market participants want a good three to four days of stability before playing. And as this year has shown, such situations are far from guaranteed to arrive.

Meanwhile, a backlog is building, as issuers push January mandates into next month. Maybe syndicate desks should relax while they can.

The investment grade loan market has not yet gathered speed either, as bankers continue to pitch for deals.

Trafigura and Glencore have launched refinancings, but some bankers are predicting that the smaller commodity traders will have a tougher time raising funds as banks seek safety in the big names. Nidera is in the market to refinance a one year loan, but two of its 2015 bank group said on Monday that they would not lend this time.

On Tuesday, a banker predicted that pharmaceutical company Shire would have no trouble filling the orderbook for its $18bn loan syndication, citing its track record of completing deals and the deal’s generous pricing. The one year facility pays a margin of 125bp over Libor.

The European leveraged loan market continues to defy wider market conditions, however. Action, the Benelux discount non-food retailer, has a bank meeting for a €1.2bn all-senior dividend recapitalisation to 3i, its majority owner.

Euro Garages’ £640m senior loan package was oversubscribed after last week’s meeting and is due to be allocated this week. Other deals in the market include B&B Hotels, which had bank meetings on Tuesday to back its acquisition by PAI Partners, and LGC’s £265m-equivalent euro term loan. LGC has accelerated its deadline to Thursday and is due to price the deal at the tight end of 475bp-500bp talk.

Kurt Geiger, which has been called the UK’s biggest shoe retailer by sales, has also scheduled bank meetings for a £150m loan backing its acquisition by Cinven from Sycamore Partners.

And Lima, the Italian orthopaedics manufacturer, has launched a €321m senior buyout loan to early birds, to back its acquisition by EQT.


Dan Alderson, syndicated loans and derivatives editor +44 207 779 7311

Max Bower, leveraged loans +44 207 779 8964

Robert Cooke, investment grade loans +44 207 779 8124

Jon Hay, corporate finance editor +44 207 779 7321

Victor Jimenez, high yield +44 207 779 7379

Ross Lancaster, corporate bonds editor +44 207 779 7322

Elly Whittaker, senior loans reporter +44 207 779 8361


Top Corporate Financing stories this week

Best in Parking's ‘friendly’ €90m bond printed at wide end

Cardiff University mandates for debut sterling bond

Banks retreat from Nidera refi as smaller traders feel the bite

B&B Hotels checks in with banks on PAI buyout loans

LGC tightens price, accelerates deadline on KKR buyout loan


By Dan Alderson, Max Bower, Robert Cooke, Ross Lancaster, Victor Jimenez
27 Jan 2016