Rhodia signed its euro1.5 billion ($1.38 billion) programme on May 25 this year and within a week it had launched its euro500 million five-year inaugural. Since then it has also sold a euro300 million two-year structured trade. For a triple-B rated company and an unknown name French chemical company Rhodia has done well to make an impression in the market. And though dealers say times are hard for corporate funding, Rhodia is confident that the market can meet its expectations. Bear Stearns and UBS Warburg were joint bookrunners off Rhodia's inaugural. According to the dealers, the trade, issued on May 31, was oversubscribed and over 50% of the paper sold outside France. One of the lead managers says: "The trade stood out because it was a unique offering. No other European chemicals company has issued in euros and no other triple-B issuer from the industry sector was looking to do something of that size." Rhodia knows that in a difficult market environment issuers must be receptive. Elisabeth Teyssier is head of financial services at Rhodia. She says the company has to be open to as many different types of trade as possible depending on market trends. She says: "Rhodia is flexible and will adapt to whatever market conditions are like. We've had success in euros but we want in the future to issue in yen or dollars. To do this we would look at both public and private markets." Rhodia's second trade was brought to the market by Natexis Banques Populaires (Natexis). The euro300 million yield-linked deal was issued on July 3. But Alain Gallois, head of debt origination at Natexis, points out that as a lower-rated issuer Rhodia has to be realistic about the tenor of notes it can achieve. He says: "Rhodia was very pleased with the price it achieved for the trade. I think it was more difficult getting a good price for its benchmark issue because it was longer-dated." But though Rhodia has got off to a flying start it could face tricky times ahead. Following its announcement last week that it plans to acquire US chemical maker ChiRex by August, Moody's has placed the issuer's Baa1 long-term rating on review for possible downgrade. Standard & Poor's has also placed its BBB+ long-term rating for the borrower on CreditWatch negative. And with more dealers reporting that the market has been less willing to look at lower-rated names, Rhodia could come up against some problems. Gallois at Natexis has this advice for corporates: "The market can be a little bit expensive and the targets of issuers are often very tight. It is made worse by the fact that many issuers don't realize the market isn't the same as it was six months ago." Yet Julia Ward, director, head of Euro-MTN origination at Lehman Brothers, arranger off Rhodia's programme, is more optimistic. She says: "The private market can be difficult for unknown new names, especially if they intend to be infrequent borrowers. However, corporates shouldn't have problems getting the funding they want as long as they are marketed correctly, supported by the necessary credit research and have realistic expectations as to what the market can offer." Rhodia's speciality chemicals are used in cosmetics, clothing, food and agricultural and health products. It began operations in January 1998 after the merger of parent company Rhone-Poulenc and Hoechst. It gained full independence from Rhone-Poulenc in 1999. Teyssier in the treasury believes one of the main reasons behind the success of Rhodia's inaugural was its extensive roadshow in Europe. The issuer felt that as a new company, not only to the market but to the business world, it was vital that it met with investors and got its name known. Teyssier says: "For Rhodia the roadshow was essential because it is not a well-known name. As a new company and being new to the market many credit investors did not know the name before we did the roadshow. We found the exercise was very worthwhile." Yet Rhodia is less confident it could find opportunities in Japan in the current market. Teyssier says: "For the time being we have not considered doing a roadshow to meet Japanese investors. As an unknown name and in difficult market conditions it would not be very successful right now." But other traders are optimistic about Rhodia's selling potential: "Though Rhodia is a French-based company it has operations globally. Like any company it will look to diversify its funding base and I don't see any reason why it couldn't be successful in Japan," says one dealer. Rhodia also acquired US chemicals producer Albright and Wilson in March this year, increasing its dominance within the sector. Rhodia has a four-strong treasury team and two people can give the go-ahead for trades. Teyssier emphasizes that the team has very quick response times. And the issuer wants to be as flexible with its pricing as possible within the company's limits: "We aim to be a very flexible issuer but we do have some internal rules regarding the cost of our funding. We can be flexible within the limits of the internal restrictions," Teyssier says. Though the corporate has no fixed target to raise this year and says it is cash-rich, Teyssier hopes Rhodia will come to the market again in 2000 since she believes it is important for the name to be visible. She says: "We intend to issue a minimum of two or three times a year to keep our name out there in investors' minds."
September 15, 2000
