Corporate bond deals of the year
Despite the continuation of the ECB’s corporate sector purchase programme in 2018, global political and economic worries caused heightened volatility in the corporate bond market throughout the year. All issuers who executed their deals in 2018 will be happy with their work. However, a handful of transaction stood out for specific congratulations as the winners of our awards this year.
CORPORATE BOND DEAL OF THE YEAR
€1bn three month Euribor +15bp March 2020
€500m 0% March 2020
€1.75bn 0.5% March 2023
€1.5bn 1% March 2026
€2bn 1.375% March 2030
€1.25bn 1.875% March 2038
BNP Paribas, Citi, Crédit Agricole, HSBC, ING, JP Morgan, RBC Capital Markets, Santander, Société Générale, UniCredit
Size does not guarantee a trade wins an award, but French pharmaceuticals firm Sanofi’s €8bn six-tranche transaction was not only about being the largest corporate bond deal of 2018. Sanofi needed to raise $11.6bn for its acquisition of Bioverativ and €3.9bn to buy Abylnx. This deal not only proved the euro market can provide the majority of funding for that size of requirement, but that it can also be achieved with single digit new issue premiums and in a market where the positive momentum evident at the end of 2017 had started to erode. The A1/AA rating certainly helped the issuer, but a €21bn order book meant there was no “orphan tranche” and, as one lead manager said, “there was hardly any relevant investor not involved”.
CORPORATE BOND OF THE YEAR BY A NON-EUROPEAN ISSUER
Petróleos Mexicanos — Pemex
€600m 2.5% November 2022
€650m three month Euribor +240bp August 2023
€650m 3.625% November 2025
€1.25bn 4.75% February 2029
BBVA, Deutsche Bank, Santander, Société Générale
Petróleos Mexicanos is a regular user of global bond markets and had issued larger deals than the €3.15bn it sold in May 2018. However, this time it had to overcome a combination of headwinds that may have caused bigger headaches had the deal not been carefully planned. The state-owned oil company roadshowed in April and while it was able to wait to launch the deal, every day it waited was a day closer to Mexico’s presidential election on July 1. But the work on the road and careful tranching was repaid with €5.7bn of orders and final new issue premiums of between 20bp-30bp on all four tranches.
STERLING CORPORATE BOND OF THE YEAR
University of Cambridge
£300m 2.35% June 2078
£300m 0.25% June 2068
Barclays, HSBC, Morgan Stanley
Six years after its inaugural corporate bond issue, The University of Cambridge returned with a new twist on inflation-linked bonds. The 60 year bullet attracted £900m of demand, but it was the £800m of demand for the first private sector UK inflation-linked bond which referenced the consumer price index rather than the retail price index that made this trade stand out. The issuer paid a 15bp premium over regular bonds for the linker, which was seen as attractive for the issuer. It is expected that Cambridge has started a trend that other issuers are likely to follow.
DEBUT DEAL OF THE YEAR
€550m 1.125% September 2025
£400m 2.75% September 2033
$525m 3.5% September 2023
$500m 3.875% September 2028
Citi, Commerzbank, Credit Agricole, DBS, Deutsche Bank, JP Morgan, Société Générale, Standard Chartered, UniCredit
Luxury goods company Richemont’s €3.75bn triple-tranche debut was very close to winning this award, but the breadth of Japan Tobacco’s approach just sneaked this award ahead of Richemont. The fact that Japan Tobacco not only debuted in both sterling and euros at the same time, but that it did so while also selling two Reg S dollar tranches, swayed the vote. Both European tranches were tightened by 20bp from initial price thoughts, but final order books still weighed in at €2.8bn and £1.3bn.
MOST INNOVATIVE DEAL OF THE YEAR
€1.25bn 3% Perpetual non-call December 2023
€1bn 3.875% Perpetual non-call September 2026
BBVA, BNP Paribas, Citi, HSBC, Mizuho, NatWest Markets, Société Générale, UniCredit
Spanish telecoms operator Telefónica was the first corporate issuer of any scale to use the revision of Standard & Poor’s criteria on buying back hybrid bonds before five years after the issuance date. The sale of €2.25bn of new hybrids while buying back €1.78bn of existing stock, allowed the company to maintain its equity credit with the rating agency, reduced the cost of its hybrids by around 100bp and extended the average non-call tenor by around 18 months.
HIGH YIELD BOND OF THE YEAR
€650m 6.75% October 2025
€650m three month Euribor +625bp October 2025
Crédit Agricole, Credit Suisse, Deutsche Bank, Intesa Sanpaolo, Jefferies, Natixis, Société Générale, UBI Banca, UniCredit
CVC-backed vehicle Rossini’s €1.3bn dual-tranche offering was used to pay for the acquisition of a stake in Italian pharmaceuticals business Recordati. Italy’s political situation made it difficult for all issuers from the country to sell bond deals since the election in March, but after roadshowing the syndicate were faced with sudden volatility as global equity markets suffered a severe sell-off. The bankers and the issuer faced the challenge head on however, widened pricing from initial guidance, but priced the size the company required and, for that alone, all involved earned this award.