NatWest Markets

Europe’s small and medium sized enterprises fear dark days ahead, as treasurers complain of banks withdrawing support and express concerns that central bank bond buying programmes favour the biggest and best capitalised companies. Mike Turner reports.

Guarantor: Federal Republic of Germany

Wessex Water, the UK utility, and National Grid this week proved that there is still demand for sterling corporate paper in a post-Brexit world, with both issuers seeing chunky oversubscriptions for their trades.

Europe’s corporate bond market was teeming with life again on Thursday after a brief pause for public holidays as German pharmaceutical company Bayer and UK energy company National Grid drummed up bulging order books in euros and sterling.

Wessex Water, the UK utility, proved that there is still demand for sterling corporate paper in a post-Brexit world, achieving almost five times oversubscription for its 15 year bond.

KfW and Swedish Export Credit Corporation (SEK) achieved strong results in sterling on Tuesday despite extremely volatile conditions in the currency as a result of uncertainty around the impact of Brexit and the rising cases of coronavirus in the UK, which has affected swap spreads and the cross-currency basis swap for non-UK borrowers.

Wessex Water, the Malaysian-owned UK utility, will become the first corporate borrower to hit the sterling bond market since the transition period for Brexit ended. Bankers expect a strong reception.

The European Investment Bank became the first borrower to tap the sterling market in 2021 on Monday, while KfW is set to follow on Tuesday. While the opening deal went well, the issuers had to contend with some sharp volatility.

Trig, the London-listed renewable infrastructure investment firm, has signed a £500m loan with its margin linked to Sonia rather than Libor, as loans bankers try to encourage borrowers look at their loan documents soon to avoid bottlenecks next year.

InterContinental Hotels Group has negotiated a waiver and relaxation on its loan covenants for the second time in 2020, as its leverage threatens to plunge its rating into junk territory.

Gaurav Arora has joined Credit Suisse to work in its emerging markets sales team.

The launch this week of the Climate Transition Finance Handbook has propelled the sustainable debt market towards a new era, in which the emphasis moves from a labelled security to the issuer itself, writes Jon Hay.