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Winning deals show corporate bond market at its best

By Mike Turner
17 Dec 2020

The corporate sector took the heaviest hit from the coronavirus pandemic, with entire industries pushed to the edge of the abyss almost overnight. Luckily, the bond markets barely missed a beat, because of the heft of central bank bond buying. The deals below are remarkable for having taken advantage of even the most volatile conditions.



$2.5bn 4.375% perpetual non-call 2025

$2.5bn 4.875% perpetual non-call 2030

€2.5bn 3.25% perpetual non-call 2026

€2.5bn 3.625% perpetual non-call 2029

£1.25bn 4.25% perpetual non-call 2027

Global coordinators: BNP Paribas, Bank of America (structuring agents), Citigroup, Goldman Sachs 

Dollar tranches: JP Morgan, Morgan Stanley

Euro and sterling tranches: Crédit Agricole, Société Générale

After the initial panicked rush for senior debt liquidity in March and April, the 2020 corporate bond market was characterised by hybrid issuance. Borrowers of every type were printing subordinated debt to try to protect their credit ratings in the face of an unprecedented collapse in earnings.

No company printed hybrid debt this year more impressively than BP in its $12bn-equivalent debut outing in the structure. In a single outing, the oil major built a curve in euros and dollars, while giving a sizeable data point in the belly of the curve for sterling.

As well as being well timed to capture a strong market, BP’s debut hybrid was perfectly timed to offset troubles in the company’s core business. The trade came days after BP wrote off up to $17.5bn in assets after slashing long-term oil and gas price forecasts, a move that would have sent the company’s debt to equity ratio rocketing. The crisis in ratios was neatly averted by BP’s canny capital markets manoeuvring.



€1bn 0.75% September 2030

BBVA, BNP Paribas, Commerzbank, Crédit Agricole, SEB, UniCredit

German car maker Daimler’s debut was unquestionably the standout in a busy green bond market, with the borrower redefining spread expectations between green and conventional bond pricing. Daimler, rated A3/BBB+/BBB+, refined guidance twice during bookbuilding for the 10 year trade, as investors showered the deal with money. The final deal was launched at 105bp over mid-swaps from €5.6bn of demand, after orders peaked at around €8.4bn earlier in the process. At that spread, the transaction landed 20bp inside where the company could have expected to print conventional debt.



€850m 2.875% September 2025

Barclays, BNP Paribas, Citigroup

No industry was more directly or worse affected by the coronavirus pandemic than airlines. So it is extraordinary that in the midst of the worst crisis the industry has ever faced, Irish budget airline Ryanair managed not only to sell an €850m bond, but to price it inside fair value.

The BBB/BBB rated name was the first European airline to come to the market after the pandemic began in March. Demand for the trade hit €4.4bn and the coupon landed inside the psychologically significant 3% mark, at 2.875%. The borrower planned its route back to the bond market expertly, printing debt a week after it raised €400m from the equity market. This bump in equity liquidity soothed some nerves in the fixed income investor crowd.



$3bn 3.5% April 2025

$4bn 3.75% April 2027

$7bn 3.875% April 2030

$2bn 4.375% April 2040

$3bn 4.5% April 2050

Barclays, BNP Paribas, Commerzbank, Crédit Agricole, Deutsche Bank, Credit Suisse, Goldman Sachs, Morgan Stanley, RBC Capital Markets, TD Securities, Wells Fargo

M&A usually has the ability to create eye-popping bond issues, but telecoms company T-Mobile’s $19bn multi-tranche trade grabbed the market’s attention in some style. The deal was used to refinance a loan, drawn just days before the issue, that financed an around $66bn acquisition of US telecoms rival Sprint.

It was the second largest bond offering of the year, but it was not just size that made the deal exceptional. T-Mobile is rated Ba2/BB/BB+, but the company secured the bond against some of its assets. This was enough for rating agencies to nudge the rating of the bonds up to investment grade, at Baa3/BBB-/BBB-.

Investors were desperate to pick up some of the debt, with a staggering $65bn of orders pouring into the books.



£500m 1% October 2027

Barclays, Bank of America, BNP Paribas, Citigroup, Crédit Agricole, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Natixis, Société Générale

Enel, the Italian energy company, has long championed the sustainability-linked bond market, last year winning a GlobalCapital award for inventing the structure. The company, rated Baa2/BBB+/A-, has not slowed down in its drive to make sustainability-linked bonds part of the capital markets lexicon and this year brought the structure to the sterling market for the first time.

Sterling is known as being trickier than its neighbouring euro market. Demand is not as deep, investors can be less flexible, the pockets of liquidity are more defined. Nonetheless, Enel drummed up £2.8bn of orders, or more than five times the deal amount, for the first ever sterling sustainability-linked trade.


Carnival Corp senior secured notes

$4bn 11.5% 2023 non-call life

99 OID

JP Morgan, Goldman Sachs, Bank of America

2020 was not a year to count the last basis point, and certainly not in late March. But it was a year when capital markets showed that, for the right price, they would take a step into the unknown and finance industries at the epicentre of the pandemic.

Carnival Corp, the world’s largest cruise line, moved decisively to raise cash from the market, launching a multi-pronged attack on the high yield, convertible and equity markets in late March, and pledging almost its entire cruise fleet to back its new funding.

The deal was cheap, starting at 12% area, but it’s pointless to ask what Carnival might have left on the table — what it gained was a shot at survival, delivered in style, and for that reason it is GlobalCapital’s High Yield Bond of the Year.

By Mike Turner
17 Dec 2020