* Bank of Scotland Treasury Services plc Guarantor: Bank of Scotland Rating: Aa2/AA Amount: £150m Maturity: February 6, 2004 Issue/re-offer price: 99.941 Coupon: 5.125% Spread at re-offer: 30bp over the 6.75% November 2004 Gilt Launched: Wednesday January 16 Sole mgr: Morgan Stanley * BNP Paribas SA Guarantor: Banque Nationale de Paris Rating: A1/A+/AA- Amount: £350m lower tier two capital Maturity: January 24, 2022 Issue/re-offer price: 99.875 Coupon: 5.75% Spread at re-offer: 95bp over the 8% June 2021 Gilt Launched: Wednesday January 16 Lead mgr: BNP Paribas * Landesbank Hessen-Thüringen Girozentrale Rating: Aaa/AAA/AAA Amount: £150m Maturity: March 12, 2012 Issue price: 101.181 Fixed re-offer price: 99.506 Coupon: 5.375% Spread at re-offer: 53bp over the 5% March 2012 Gilt Launched: Tuesday January 15 Sole mgr: RBC CM Bookrunner's comment: We brought Helaba in sterling at the end of last year on a shorter maturity, which went extremely well. As we were looking for a well priced triple-A issuer to hit the 10 year end of the market, Helaba was the natural choice. It has a sterling requirement, thereby avoiding the penalty of a basis swap, which enables more attractive pricing. Despite being a Landesbank, Helaba is a well liked credit, both with UK institutions and continental investors, so it is a name that works very well for us. Because of RBC's structure and placement specialisation, we see offers as soon as continental investors start buying sterling. This trend began at the end of last year, very much driven by the massive redemptions in December, particularly on December 7. Redemption flows from continental funds and smaller institutions were very good and that is why we brought the deal for Helaba last year. It was very successful, we increased it and that is what encouraged us to bring the new bond. It is possible that the continuing European demand is driven by the tail end of those redemptions, but there is also a new perception in the UK and Europe that, even if sterling joins the euro, it does not necessarily mean that it will need to fall very far in value before it does so. This view is driven by the appreciation that the services sector drives the UK economy and that sector is doing perfectly well with sterling at the current level. The industry that suffers dramatically from the level of sterling and complains about overvaluation is manufacturing, which actually is only a small part of the UK economy. As the UK economy is seen as being in marginally better health than the collection of economies that form the euro, the thinking is that there is no real reason for sterling to be under pressure. Also, the consensus now seems to be that, if sterling does join the euro, it won't be for several years. All this has resulted in some continental accounts weighting their sterling investments in their portfolios at a slightly higher level, creating a flow of demand into the sterling bond market. The reaction therefore to a value trade for Helaba was very positive. The fact that it came at 10 years, which is close to the hump of the curve, is another plus, and we have been selling bonds very steadily. * Marks & Spencer plc Rating: A3/A/A Amount: £50m Maturity: January 30, 2006 Issue price: undisclosed Coupon: three month Libor plus 55bp Launched: Monday January 14 Sole mgr: HSBC Transactions increased: * BAA plc Guarantor: Gatwick Airport Ltd, Heathrow Airport Ltd, Stansted Airport Ltd Rating: A1/AA- Amount: £200m (fungible with £700m issue launched 08/11/01) Maturity: December 10, 2031 Issue/re-offer price: 101.079 Coupon: 5.75% Spread at re-offer: 115bp over the 4.25% June 2032 Gilt Launched: Wednesday January 16 Sole mgr: RBS * Barclays Bank plc Rating: Aa1/AA/AA+ Amount: £150m (fungible with two issues totalling £400m first launched 14/08/01) Maturity: September 6, 2004 Issue price: 99.997 Coupon: three month Libor flat Launched: Wednesday January 16 Lead mgr: Barclays Capital Eurosterling secondary market Compiled by Stephanie Weedon, HSBC Bank plc, London Tel: +44 20 7336 3525 The Eurosterling market continued the strong pace of last week, with £1.55bn of new issuance and very brisk secondary trading. Spreads stalled slightly at the end of the week as secondary trading suffered a little on the back of investors focusing primarily on the new issue market. France Télécom 7.25% 2020s were 2bp wider on the week at 219bp mid. The financial sector and retailers did extremely well this week, tightening about 10bp across the board. Halifax 7.5% 2016s firmed 10bp to 106bp mid and Prudential 5.875% 2029s are now trading at Gilts plus 70bp. Sainsbury 6.5% 201s (A2/A) and Marks & Spencer 6.375% 2011s (A3/A) continued to tighten, to 86bp and 112bp mid, respectively. Tyco released solid second quarter results with sales and net income rising 25.4% and 32%, respectively. The stock price, however, continued to decline on risks of asbestos litigation and, furthermore, the $5.9bn of zero coupon convertibles that could be put back to the company in 2003. Tyco 6.5% 2011s and 6.5% 2031s (Baa1/A) underperformed the rest of the market, widening between 20bp and 25bp to 163bp and 183bp mid, respectively. The auto sector also suffered on the downgrade of Ford's senior debt rating from A3 to Baa1 by Moody's. Although this was priced into the market already to a certain extent, the bonds still pushed wider initially. The spreads then settled back to closing unchanged on the week, excluding Ford 7% 2005s, which widened 10bp to 190bp mid.
January 18, 2002
