Hard work has paid off for AT&T Corp. The US issuer brought its $6 billion Euro-CP programme to the market in June 2001 and last month it scooped MTNWeekÆs Best new Euro-CP borrower award. But success has not come easily for the issuer. James Hodge is assistant treasurer at AT&T and he believes that the recognition they have received is the product of intense preparation. He says: ôWe invested a great deal of time with our banks to prepare our entry into the Euro-CP market. The best thing you can do is your homework. We spent a lot of time in Europe and that is important. As a US issuer you cannot just sit here in the States and hope everything is going to be all right - you have to understand the dynamics of the European market.ö And it was time wisely spent. In the first week after the signing, AT&T raised nearly $3 billion off its facility and it went on to become the largest corporate Euro-CP programme of the year, with outstandings of $5.5 billion. But this did not surprise AT&TÆs arranger, Goldman Sachs. One dealer at the bank says: ôThe key to their success was the pre-marketing effort, which produced overwhelming investor demand. This was achieved during a period of stress for Telecom issuers, and with AT&TÆs rating on negative outlook.ö But Hodge, at AT&T, did not expect such huge demand. The issuer initially kicked off its programme with a $4 billion debt ceiling but increased this by $2 billion two months after signing. Hodge says: ôWe have not come up against any problems since we started the programme but we did have to increase the size. Had we known how great the appetite for our paper was going to be, then we would have gone with $6 billion from the gun.ö AT&T was initially rated A-1/P-1 at the time of signing its Euro-CP facility but it was downgraded to A-2/P-2 in October 2001. But this has not affected the issuer, which has been less reliant on the CP programme since the downgrade. The borrower tapped the market 23 times during October last year and, despite coming to the market 17 times in November, AT&T has only issued three times off its programme in 2002. And, although the issuer has only placed paper in yen and dollar this year, it has found opportunities in seven different currencies since June 2001. An active marketing programme in Japan uncovered significant appetite for its name with Japanese investors and over 50% of its volumes have been denominated in yen. But, with AT&T already achieving its funding targets for the Euro-CP programme, Hodge maintains that any further issues in Japan will be purely opportunistic. ôLast year some of our big lumpy trades came in yen,ö he says. ôBut we are indifferent as to where our funding comes from because everything gets swapped back into US dollar. How much more we tap in yen really depends on the Japanese investors. Japanese investors are obviously now a lot more conservative after being burnt in some of the high profile defaults and downgrades. But we will be patient û most of our funding for the rest of the year will come opportunistically.ö Lehman Brothers is one of the named dealers off AT&TÆs programme and, despite the issuerÆs inactivity off the programme this year, the dealer has the highest praise for the issuer. ôAT&T is a case study in itself for the ideal way to launch and run an ECP programme,ö says one dealer on the desk. But AT&T is not nonchalant about its success and Hodges acknowledges the key role his dealer panel has played. He says: ôIt is our programme and of course we can easily take the praise for the award and a successful year but you have to give a lot of credit to the banks. All of our dealers have served us very well and we know how important they have been for us.ö
May 03, 2002
