Corps rampant pre-Brexit even as premiums widen

The market has already priced €125bn in 2016, out of which more than €10bn were deals sold in the first two days of this week. And the cascade looks unstoppable.

Monday triggered the opening salvo of a slew of multi-tranche notes. These keep populating a market that bankers describe as already under the effect of Mario Draghi’s purchase plans. On March 10, the European Central Bank president said that the bank would start buying investment grade corporate bonds in June.

From the single-A ratings shelf, Shell Astra Zeneca and Airbus all issued over €1bn, with Fonciere des Région’s €500m 10 year green bond the only triple-B rated name of day.

Triple-B borrowers reigned on Tuesday, with bonds from Pernod Ricard, Kellogg Company, Abertis and Eni. A2/A rated Simon Property and crossover CNH Industrial also jumped in.

But the excellent issuer conditions in place courtesy of the European Central Bank may be waning, market participants warned on Tuesday. While the market remains overwhelmingly issuer friendly, the phase of negative new issue premiums appears to be over.

The average concessions on all six of Tuesday offerings moved into a 5bp-10bp range, said bankers.

On Wednesday, the flow of deals remained strong, with four new borrowers offering euros, including General Motors, Kraft Heinz Foods, Total — with virtually the first hybrid of the year — and Johnson & Johnson. Retailer Next is in the market with a 12 year note in sterling.

In the European leveraged finance market, conditions are auspicious for borrowers as the middle of the second quarter approaches. In the high yield bond market, five deals totalling nearly €2.3bn have either been launched or allocated since Friday.

CNH Industrial, rated Ba1/B+, printed €500m of 3% notes yesterday as double-B rated borrowers are increasingly benefitting from the ripple effect of the European Central Bank’s forthcoming corporate bond purchasing programme.

Other double-B names issuing bonds are Barry Callebaut, the Swiss wholesale chocolate supplier, with €350m of notes; WEPA, the German tissue manufacturer, with €450m of eight year notes and Volvo, the Swedish car producer, with €500m of notes.

Shandong Rui, the Chinese textile manufacturer, is alone in the single-B arena, with a €470m bond offering. That deal is split between a seven year floating rate note and a seven year fixed rate note. The debt backs the firm’s acquisition of French apparel retailer SMCP from KKR.

Barry and WEPA have roadshows finishing today (Wednesday), while Volvo and Shandong Rui wrap up on Thursday.

Borrowers in the leveraged loan market have launched two deals. These come after issuance has been anaemic throughout March and April, with a lack of leveraged buyouts and refinancings. As such, opportunistic offerings have constituted much of the primary market activity.

Cision, the Chicago-headquartered cloud based PR firm, is syndicating a €250m incremental euro tranche, after launching a $1.1bn acquisition term loan two weeks ago. The new loan has a 7.25% yield, given price guidance of 575bp over Euribor, offered at 98 with a 1% floor. Replies are due by Friday at 12pm UK time.

Meanwhile, Airbus’s defence and electronics unit has launched a €425m term loan ‘B’ backing its €1.1bn acquisition by KKR. The deal has been in the pipeline for several weeks and market participants are hoping that other mandated loans such as those for HotelBeds and Tipico come sooner rather than later.

Standing apart, the investment grade end of the loan market continues to advance at a snail’s pace. There is, however, at least a sprinkling of M&A business for the market to digest, with Stabilus, Evonik, FNAC and Sonova all announcing debt financing to fund their planned acquisitions.

The last of the commodity traders to refinance during the first half are also busy massaging their deals. Mercuria, Glencore and Noble are all in the market and seeking backing from their relationship banks. In the private market, British port London Gateway is set to top up its privately placed 30 year loan from £580m to £650m in a deal coordinated by Citi.

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