Chunky books and shrinking new issue premiums were everywhere in Europe's high grade corporate bond market on Tuesday, as some investors said the market felt like it had found solid ground again after huge moves in recent weeks.
The high grade corporate bond market is bursting with deals on Tuesday, with recent record flows prompting some to expect issuers to move down the capital structure and into hybrid deals from next week.
Companies in sectors without government support packages in place are having to weigh moving fast for a costly private sector rescue capital against dragging their feet and hoping governments extend existing bail-out or liquidity schemes.
Several of Europe's biggest corporate bond issuers have yet to fund in the market this year, despite the flood of deals as companies hoover up cash to see them through the coronavirus crisis.
Schuldschein bankers are working out what pricing is fair during the Covid-19 crisis, as investors observe sharp widening in euro bond spreads.
Some M&A bankers are planning to pull the trigger on deals after the summer if the coronavirus pandemic continues to be contained, though lenders warn that internal credit analysis has become more stringent.
UBS has promoted Barry Donlon to run its debt capital markets business for Europe, the Middle East and Africa, alongside several other job changes.
UPDATED 8 April 12.45pm GMT The news from Italy continues good, with only 3,039 new cases on Tuesday, the lowest figure since March 13.
European corporates found a strong bond market on Monday after raising a record amount of bond funding last week, as the European Central Bank pours money into high grade debt.
According to data from the European Securities and Markets Authority, new trade receivables securitizations are still being regularly financed by banks through their asset-backed commerical paper conduits, with market participants saying that lenders remain open for business — for existing clients only.
Sanofi, the French pharmaceutical company, has followed the example of Danaher by reopening bonds priced in the last few weeks - it raised another €500m on Monday, at pricing well inside where it had priced the original bonds at the end of March.
BP, the UK oil and gas company, has set up a new $10bn revolving credit facility, as oil companies look to shore up their cash positions in response to the twin maladies of Covid-19 and a drop in oil prices.
Adani Transmission has raised a further $90m US private placement, according to market sources, after it became earlier this year the first Indian company to raise debt in the market since 2007.
Investors see the rapid wave of downgrades in response to the coronavirus crisis as evidence that ratings agencies are "doing their jobs" compared to their response in the 2008 financial crisis, where they were roundly criticised.
The corporate bond market made a blazing start to Monday with deals for Repsol, Naturgy and LafargeHolcim on screens, as issuers cram what they can into a shortened week.
This week's intense spate of corporate bond issuance in Europe continued into Friday, though at a slightly more moderate pace, and the broadening of access continued, with the first sub-benchmark deal, for Red Electrica, the Spanish power grid. However, a Leaseplan green bond did not fly.
The UK government has moved to bridge the gap between its two financial support schemes for businesses hampered by the coronavirus: one aimed at investment grade firms and one for small companies with revenue less than £45m.
Investment banking revenue in March was lower than normal as the coronavirus pandemic sapped risk appetite — but it was far from a total wipeout.
T-Mobile became the latest US company to cash in on the extraordinary boom in dollar bond issuance as it priced an increased $19bn deal on Thursday that attracted $72bn of demand.
Daimler has signed a €12bn one year loan with four banks, to strengthen its cash position for the pandemic’s stormier days. It joins a host of borrowers agreeing new credit lines with relationship banks, rather than drawing down existing facilities. Bankers say the borrowers hope to enter the bond markets down the line.
High grade companies poured into the bond market this week as participants weigh up whether this is a redux of 2009’s record year or if the unprecedented central bank spending and high bank liquidity mean that this is a unique market where borrowers raise cash even if they do not really need it.
Dollar high yield and convertible bond buyers dived straight into the riskiest possible end of the market on Wednesday, snapping up rescue issues for cruise operator Carnival Corporation, a firm at the centre of the coronavirus storm. Carnival pledged nearly all its ships to back bondholders’ investments, while convert investors spied a chance to double their money — if the cruise industry can bounce back. Aidan Gregory, Jon Hay, Sam Kerr and Owen Sanderson report.
Having dropped off in early March, Swiss franc issuance has bounced back in the last fortnight, buoyed by returning investors flocking to low investment-grade rated borrowers, like triple-B rated cement manufacturer LafargeHolcim, and piling into a record-breaking foreign covered bond.
Private sector insurance companies have written extensive guarantees for the purchase of new aircraft from Boeing and Airbus in the past two years, filling a gap in the market left by the retreat of US Eximbank and European export credit agencies. But with aircraft around the world grounded and airlines slashing capital expenditure, these insurance firms could be stuck with the risk.
There was little let up in the high grade corporate bond market on Thursday, but the growing importance that investors are putting on individual borrowers' perceived exposure to corona risk over more traditional measures of creditworthiness like credit ratings was on full display.
Mandates are rolling in for high grade corporate issuers, as syndicate bankers disagree about whether the blistering pace of the market can last.
As the coronavirus eats into the global economy, most companies are putting their share buy-back programmes on hold — but there are exceptions. ContourGlobal, which generates power in emerging markets, has launched a new buy-back programme, while Philips is using an unusual derivative technique to adapt its plan to crisis conditions.
Dollar high yield buyers showed up in force for the largest priming debt opportunity provided so far by the coronavirus crisis, Carnival Corporation’s $4bn rescue offering, priced alongside a convertible and an equity capital raising on Wednesday. The package provides funds for the stricken cruise operator until November, but even if the company can’t start sailing again this year or next, investors in the new issue are first in line for the firm’s $38bn of assets.
Oil firms burst into the corporate bond market on Thursday with BP, Royal Dutch Shell and OMV opening books on multi-tranche trades, as comments from US president Donald Trump sent oil prices rocketing.
Dyson has become the first UK company to sell private placements in the past month, as the coronavirus complicates primary issuance and the market instead focuses on amendments to existing deals. Sources said the UK manufacturer succeeded because it was realistic over the price it would have to pay.
The high yield bond leg of the rescue package for cruise company Carnival is flying off the shelves in the dollar market, leading the company to increase it from $3bn to $4bn, cut pricing, and drop the planned euro tranche entirely — but the equity capital raising is proving tougher and has been shrunk by $500m.
The power of central bank buying and fund redemptions are evident this week in the European investment grade corporate bond market, where issuers have been squeezed into a narrow range of maturities as they search for cash.
Aircraft lessors have become popular borrowers in the US private placement market but coronavirus pandemic has thrown up a whole new magnitude of risk for the industry and many will be looking to amend the terms of their deals. Many market participants predict that the conversations between borrowers and investors will be tricky.
Equipment rental firm Loxam has signalled that it plans to shore up its liquidity by tapping the French government’s loan guarantee scheme — an option off the table for leveraged companies elsewhere.
Extraordinary times call for extraordinary capital markets activity. The North American corporate bond market funded a staggering record $194bn of investment grade issues in March while Europe has also been busy — shaking up the league tables and yielding a surprise windfall for the very largest investment banks.
Spain’s Red Eléctrica Corporación has hired banks to run a series of fixed income investor calls for a debut five year senior unsecured deal, in the first European corporate roadshow since stringent social distancing measures were implemented across the continent.
The primary corporate bond market in Europe threw up another blistering day on Wednesday, with seven issuers on screens by mid-morning, bringing the number of deals so far this week to 18, though bond syndicate desks are hesitant to compare this crisis market with the record-breaking issuance in 2009.
Indian debt issuers are starting to feel the impact of the Covid-19 pandemic, which has forced a country-wide lockdown for three weeks. With dollar bonds slumping in the secondary market and downgrades coming fast, the outlook for borrowers is bleak.
Conor Hennebry has been promoted from head of European debt capital markets and syndicated lending to global DCM head, following the appointment of Rafael Noya as head of global debt finance.
If Europe's corporate bond lead managers have been learning that it is possible to bring new issues even on a day when stock markets are falling and credit spreads widening, they still know a bullish day when they see one, and Tuesday was one.
Carnival Cruises, the world’s largest leisure travel company, is rolling the dice on a coronavirus rescue package, launching a $1.25bn underwritten rights issue, $1.75bn convertible bond, and a $3bn dual currency high yield bond.
Investment grade companies have rushed back to the bond market, while syndicate bankers in riskier and more complex asset classes are wondering when their turns will come. Yum Brands reopened US high yield on Monday, leaving European high yield desks hoping a bold issuer would try this side of the Atlantic. Euro buyers were teased a piece of Carnival's rescue package, but lost out to a strong dollar market.
The loans market has been one part of the capital markets that has perhaps unsurprisingly taken to working from home easier than most. Some loans bankers even see a world after the pandemic where one or two days a week working out of the office becomes the norm.
Airbus, the European aircraft manufacturer, opened books for a three tranche bond issue on Tuesday, just over a week after raising €15bn from banks, on the assumption, its CFO said then, that there would be "no issuance in capital markets, such as commercial paper".
Whitbread, the UK hotel and restaurant company behind Premier Inn, has amended a clause in its debt documentation which could have left it liable for technical default. One source said several companies may have to go through a similar amendment process.
Public bond investors in Europe received on Monday their first new issue from the car industry since the coronavirus crisis went global. The paper was not from an industrial company but Volkswagen Financial Services, its leasing division, which does not rely on VW producing new cars to repay its debt, but rather on customers who are legally obliged to keep paying their leases. The price was wide, but VWFS showed it had market access.
The Norwegian government’s support package for large companies goes beyond that announced in other jurisdictions, in actively buying bonds from companies deep in sub-investment grade territory, helping the country's vital oil exploration, shipping and oil services firms to access financing.
A string of well rated companies are preparing to issue bonds in the coming days, as syndicate desks are heartened by the continued ample demand from investors. Anheuser-Busch InBev, Volkswagen Financial Services and Thermo Fisher Scientific raised a total of €7.85bn in euros today, despite a rocky market.
BMW has raised €200m from a single investor in the Schuldschein market, according to several market sources. Arrangers are talking with Schuldschein investors to gauge appetite for German auto manufacturers as the Covid-19 pandemic wreaks havoc on corporate earnings.
The new pattern that investment grade companies will dare to issue bonds in the European market, even on days when stockmarkets are falling, was confirmed today when Anheuser-Busch InBev launched a three tranche bond that will be at least €4bn, while Volkswagen has brought the first car company bond since the crisis intensified, although it is from its financial services arm, which is backed by loans.
UBS has promoted Barry Donlon to run its debt capital markets business for Europe, the Middle East and Africa, alongside several other job changes.
UPDATED 8 April 12.45pm GMT The news from Italy continues good, with only 3,039 new cases on Tuesday, the lowest figure since March 13. In Spain, the trend in the last two days has been up again, with 6,180 on Tuesday, but this is still below the average over the previous fortnight. In the US there were over 40,000 new cases on Monday, by far the most yet.
Several of Europe's biggest corporate bond issuers have yet to fund in the market this year, despite the flood of deals as companies hoover up cash to see them through the coronavirus crisis. Vodafone, Electricité de France, Enel and Bayer are among firms yet to issue.
Schuldschein bankers are working out what pricing is fair during the Covid-19 crisis, as investors observe sharp widening in euro bond spreads.
UPDATED 8 April 12.45pm GMT The news from Italy continues good, with only 3,039 new cases on Tuesday, the lowest figure since March 13. In Spain, the trend in the last two days has been up again, with 6,180 on Tuesday, but this is still below the average over the previous fortnight. In the US there were over 40,000 new cases on Monday, by far the most yet.
The high grade corporate bond market is bursting with deals on Tuesday, with recent record flows prompting some to expect issuers to move down the capital structure and into hybrid deals from next week.
| Rank | Lead Manager | Amount $bn | No of issues | Share % |
|---|---|---|---|---|
| 1 | JPMorgan | 75.33 | 272 | 8.61% |
| 2 | BofA Securities | 74.23 | 254 | 8.48% |
| 3 | Citi | 56.58 | 224 | 6.47% |
| 4 | Goldman Sachs | 43.83 | 132 | 5.01% |
| 5 | Barclays | 38.97 | 159 | 4.45% |
| Rank | Lead Manager | Amount $bn | No of issues | Share % |
|---|---|---|---|---|
| 1 | BNP Paribas | 12.65 | 61 | 6.91% |
| 2 | BofA Securities | 12.18 | 42 | 6.65% |
| 3 | Barclays | 10.60 | 36 | 5.79% |
| 4 | Citi | 10.50 | 39 | 5.73% |
| 5 | JPMorgan | 10.08 | 36 | 5.50% |
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