Europe

Europe’s leveraged finance market has survived another year without a downturn — indeed, spirits are remarkably buoyant going into 2019. The market is priced for perfection, however, and with rates starting to rise, issuers and investors have some serious forward planning to do. Victor Jimenez reports.

Caius Capital and UniCredit have settled a dispute over a hybrid capital instrument issued by the latter. Caius will pay the bank an undisclosed sum, after UniCredit sought around €90m of compensation for damages back in August.

Italian energy company Enel failed to notify investors it would call its 6.5% hybrid corporate bonds by the date required, due to a “procedural issue.” The company still intends to offer noteholders the opportunity to redeem the notes at par via a tender offer, but it may find few takers.

The result of the 2018 European stress test for insurers showed that firms are sensitive to both high and low yields, with some failing to meet their solvency capital requirement (SCR) under the tested scenarios. But natural catastrophes were less of a threat to balance sheets.

Hungary’s latest Panda looks, at least on paper, like a club deal rather than a genuine syndicated bond, with bankers disagreeing on how the deal might have played out in the market.

SSA euro issuance outstripped dollars this year, thanks to strong conditions in the first half and the vagaries of the basis swap. But the end of eurozone quantitative easing and political strife made it a trickier place later in 2018 — and those elements are unlikely to disappear in 2019.

Public sector agencies from the Nordic region are adapting to S&P Global Ratings’ overhaul of its rating methodology. So far, only KommuneKredit has been downgraded under the new rating criteria, but others could suffer similar fates.

Public sector borrowers are confident going into the euro bond market next year, with reinvestments from maturing bonds held by the European Central Bank likely to cap any spread widening from the end of quantitative easing. But political threats — from populists polling well ahead of European Parliament elections in May, Brexit probably in March and the Italian government’s stand-off with the European Commission over its budget plans — are likely to bring volatility, meaning timing will perhaps be more important than in 2018. GlobalCapital brought together European SSAs, investors and investment bankers to discuss what 2019 holds for the euro market — as well as the SRI sector and new technology.

Overall issuance volume in EMEA’s equity-linked market is finishing 2018 down 50% from 2017, with bankers saying it is the worst year in memory.

The Netherlands will look to issue around €4bn-€6bn with a maturity of at least 15 years in its debut green bond, which will be sold through a Dutch Direct Auction in the second quarter of 2019.

The European Central Bank fears that proposed changes allowing banks to use additional tier one debt to meet Pillar 2 capital requirements would weaken their resilience to stress and put smaller institutions at a disadvantage.

Telecoms firm Lebara is seeking further changes in its bond terms, including waivers on leverage covenants and a shorter maturity date, after it finally released group financial results which have been delayed since February.