Bank and Capital Markets New Issue Review - EY€¦ · Bank and Capital Markets New Issue Review 25...

Bank and Capital Markets New Issue Review

25 Aug – 29 Aug 2014, week 34

Capital & Debt Advisory

Contents Section 1 Market backdrop 2

Section 2 Bank loan market 3

Section 3 USD public bond market 5

Section 4 GBP public bond market 6

Section 5 EUR public bond market 8

Section 6 US Private Placement market 9

Contacts United Kingdom Luke Reeve Tel: +44 20 7951 6548 Email: [email protected]

Chris Lowe Tel: +44 20 7951 0826 Email: [email protected]

Gary Davison Tel: +44 161 333 2767 Email: [email protected]

Europe Olivier Catonnet Tel: +33 1 5561 0535 Email: [email protected]

Jonathan H.M. Harfield Tel: +420 731 627 155 Email: [email protected]

Britta Becker Tel: +49 40 36132 20781 Email: [email protected]

Asia Gaurav Ahuja Tel: +65 6309 8276 Email: [email protected]

US & Canada K.C. Brechnitz Tel: +1 704 335 4211 Email: [email protected]

Tony Ianni Tel: +1 416 943 3476 Email: [email protected]

Australia Sebastian Paphitis Tel: +61 2 9248 4773 Email: [email protected]

Jason Lowe Tel: +61 3 8650 7600 Email: [email protected]

Section 7 Credit ratings 11

Section 8 Glossary 12

@EY_UKI

EY Capital and Debt Advisory - New Issue Review 2

Market backdrop UK economic data announcements highlight slow down

► UK manufacturing data released showed export orders turned negative for the first time since 2013. Although overall output and orders remained positive, these were down from the previous quarter and the sector continues to slow down. A number of reasons have been proposed for this decline, including the weak Eurozone economy, instability in Ukraine and the stronger sterling exchange rate. The survey, by the EEF manufacturers’ association and BDO, compiled analysis from 298 companies, and follows on from official data released that shows reduced hope of the manufacturing sector leading the way in the recovery. Manufacturing remains 7 per cent below its peak output compared to the service sector, the only area to have exceeded its pre-recession peak.

► House prices in the UK increased significantly over the summer however data released suggests this may begin to dampen. The Land Registry and Nationwide Building Society reported a 1.7 per cent monthly rise between July and August, the largest increase since 2004. This data contrasts with mortgage approvals which fell by nearly 20 per cent between January and May before recovering slightly in June. The Royal Institution of Chartered Surveyors (RICS), reports that buyer interest is declining and momentum and growth will reduce.

► The Bank of England announced that lending to UK businesses fell in the second quarter of the year by £3.9 billion. The predominant reason for this related to the commercial property sector as they reduce their bank borrowings. Net lending to small and medium sized enterprises fell by £453 million, with lending to larger businesses down by £3.5 billion. Analysts are highlighting that the Funding for Lending Scheme has not done enough to fill the gap of lending to SME’s.

► France’s borrowing costs continue to slide as the country is expected to assemble a pro-reform government, something popular with fixed income investors. Yields on 10-Year government bonds fell to 1.24 per cent on Thursday, down from 1.37 per cent at the end of the previous week.

Section 1: Market backdrop

Tenor 3yr 5yr 7yr 10yr 30yr

UK swap rate 1.52 1.87 2.16 2.41 2.77

Gilt rate 1.24 1.63 2.04 2.34 3.08

Tenor 3yr 5yr 7yr 10yr 30yr

US swap rate 1.15 1.78 2.15 2.50 3.07

UST rate 0.93 1.63 2.04 2.34 3.08

Source: Bloomberg

Source: Bloomberg Source: Bloomberg

Source: Bloomberg

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Yiel

d (%

)

10-year Benchmark yields

10yr UST 10yr Gilt 10yr Bund

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2014 2016 2018 2020 2022 2024

Rat

e (%

)

3 month UK LIBOR forward rates

Current forward 3m UK LIBOR (-1 wk) fwd 3m UK LIBOR

2yr 3yr

4yr 5yr

7yr

10yr (14)(12)(10)

(8)(6)(4)(2)

0

Rat

e (b

ps)

Weekly change in UK SWAP

Bank loan market

EUR / GBP completed transactions greater than US$250m


► Loan markets in Russia and Eastern Europe continue to be rattled by the conflict in eastern Ukraine. Yet whilst August volumes were low, Russian borrower Gazprom Neft was in the market last week requesting bank proposals on 5-year money and Ukrainian soft commodities group Kernel secured a 1-year US$320 million export finance facility, proving that business can still be done.

► It was a quiet week in the European leveraged loan markets due to the summer break, however a slightly more positive macro backdrop in Russia / Ukraine, Iraq and the Middle East kick-started high yield fund inflows in Europe setting a more positive tone for when business resumes in September. Foncia, the French property management group, cut its pricing by 50bps on €597 million of existing LBO facilities and similarly German based retail conglomerate Douglas Holding is in the market to cut pricing on its €920 million LBO facilities by 50bps.

► Generale de Sante, the French private healthcare provider, allocated its €1.1 billion loan last week, cutting the margin by 25bps on its TLB. The book was reportedly still highly oversubscribed. The €1.1 billion facilities have been used to support the buyout of Generale de Sante by Australian private hospital operator Ramsay Healthcare.

Section 2: EUR/GBP bank loan market

Source: Loan Connector Source: Loan Connector

0

50

100

150

200

250

0

50

100

150

200

250

300

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

Num

ber

of d

eals

Vol

ume

(US$

bn)

Western Europe Loan Volumes

Lev - Vol. ($Bils.) IG - Vol. ($Bils.)Lev - No. of Deals IG - No. of Deals

0

20

40

60

80

100

120

140

Mar

gin

(bps

)

European pricing grid - multiyear drawn

AA A BBB

Signing date Issuer Tranche

rating Form Ccy Amount Maturity Margin (+bps) Sector Ctry Leads

28-Aug Fuller Smith & Turner NR, NR OTH GBP 180 2019 - Restaurants UK -

28-Aug GHD GesundHeits B2, NR RCF EUR 45 2020 E+375 Healthcare DE GS, JPM

28-Aug GHD GesundHeits B2, NR TL EUR 310 2021 E+375 Healthcare DE GS, JPM

27-Aug S-ryhman NR, NR OTH EUR 565 2019 - Retail FI Nordea, Pohjola

26-Aug HGHI Leipziger Platz NR, NR TL EUR 600 2024 - Real Estate DE BVK, BNP, DB

26-Aug Regus Group NR, NR OTH EUR 165 2017 - Business Services UK -

26-Aug Regus Group NR, NR OTH EUR 45 2019 - Business Services UK -

Bank loan market


Section 2: Bank loan market

USD completed transactions greater than US$250m

Signing date Issuer Tranche

rating Form Ccy Amount Maturity Margin (+bps) Sector Ctry Leads

30-Aug Hitachi Metals NR, NR TL USD 1,300 - - Manufacturing JP -

29-Aug Trafigura Beheer NR, NR RCF USD 400 2015 L+90 Transport NL ANZ, DBS, ICBC, OCBC, SCB, SUM, UOB, Westpac

29-Aug Trafigura Beheer NR, NR TL CNY 300 2015 H+130 Transport NL CTBC, ICBC

29-Aug Trafigura Beheer NR, NR TL USD 300 2017 L+130 Transport NL ANZ, DBS, ICBC, OCBC, SCB, SUM, UOB, Westpac

28-Aug Kernel Holding NR, NR RCF USD 320 2015 - Agriculture UA -

28-Aug Nielsen & Bainbridge NR, NR RCF USD 25 2019 - Construction US GE, Jefferies

28-Aug Nielsen & Bainbridge NR, NR TL USD 200 2020 L+500 Construction US GE, Jefferies

28-Aug Nielsen & Bainbridge NR, NR TL USD 90 2021 L+925 Construction US GE, Jefferies

25-Aug 7 Days Group NR, NR TL USD 300 2019 L+375 Hotels CN Various

25-Aug Archipelago NR, NR OTH USD 350 2015 L+500 Metal & Mining SG CS

25-Aug TCC International NR, NR RCF USD 350 2019 L+135 Construction TW ANZ, BNP, DBS, MICB

25-Aug TCC International NR, NR RCF USD 350 2019 L+135 Construction TW ANZ, BNP, DBS, MICB

25-Aug TCC International NR, NR TL USD 300 2019 L+135 Construction TW ANZ, BNP, DBS, MICB

25-Aug Vietnam Oil & Gas NR, NR TL USD 1,800 2021 - Oil & Gas VN -

25-Aug Vietnam Oil & Gas NR, NR TL USD 200 - - Oil & Gas VN DBS, SUM

USD public bond market


► No significant issuance in the US dollar public bond market during the week.

► Issuance volumes in August were down 22% compared to the same period in 2013, making it the slowest August since 2008.

Domestic

Section 3: USD public bond market

Source: Reuters Source: Reuters

Cross-border

Signing date Issuer Tranche rating

(M,S&P,F) Form Amount (GBPm) Coupon Maturity Spread

(T+bps) Sector Ctry Leads

No significant issuance in the week

0

50

100

150

200

250

Spre

ad (b

ps)

USD secondary public bond spread 10-year

Avg. AA USD 10yr spreads Avg. A USD 10yr spreads

Avg. BBB USD 10yr spreads

0

50

100

150

0

20

40

60

80

100

Num

ber

issu

ed

Vol

ume

(US$

bn)

Monthy US$ bond volumes

Domestic volume (US$) Cross-border volume (US$)Cross-border number issued Domestic number issued



(T+bps) Sector Ctry Leads


GBP public bond market


► No significant issuance in the sterling public bond market during the week.

Section 4: GBP public bond market


Domestic

Cross-border Signing date Issuer Tranche rating


(G+bps) Sector Ctry Leads




(G+bps) Sector Ctry Leads


0

1

2

3

4

5

6

7

01122334455

Num

ber

issu

ed

Vol

ume

(GBP

m)

Monthy GBP bond volumes

Volume (GBP) Number issued

0

50

100

150

200

Spre

ad (b

ps)

GBP secondary public bond spread 10-year

Avg. AA GBP 10yr spreads Avg. A GBP 10yr spreads

Avg. BBB GBP 10yr spreads

ORB retail bond market


In the market

Recent Issues

Date Issuer Ratings (M,S&P,F) Form Amount (GBPm) Coupon Maturity Sector Country

20-Aug Burford Capital NR, NR, NR SN 90 6.50% 2022 Finance UK

15-Jul Golden Lane Charity NR, NR, NR SN 11 4.47% 2021 Real Estate UK

9-Jun Ladbrokes NR, BB, BB SN 100 5.13% 2022 Leisure UK

30-Jan Paragon NR, NR, NR SN 125 6.13% 2022 Finance UK

6-Dec Premier Oil NR, NR, NR SN 150 5.00% 2020 Oil & Gas UK

21-Oct A2Dominion NR, NR, AA- SN 150 4.75% 2022 Real Estate UK

25-Jul Bruntwood NR, NR, NR SSN 50 6.00% 2020 Real Estate UK

25-Jun Helical Bar NR, NR, NR SN 80 6.00% 2020 Real Estate UK

8-May International Personal Finance NR, NR, BB+ SN 70 6.13% 2020 Finance UK

21-Mar Provident NR, NR, BBB SN 65 6.00% 2021 Finance UK

05-Mar Paragon NR, NR, NR SN 60 6.00% 2020 Finance UK

15-Feb EnQuest NR, NR, NR SN 145 5.50% 2022 Oil & Gas UK

19-Dec Alpha Plus NR, NR, NR SSN 49 5.75% 2019 Education UK

12-Dec UNITE NR, NR, NR SN 90 6.13% 2020 Real Estate UK

Date Issuer Ratings (M,S&P,F) Form Amount (GBPm) Coupon Maturity Sector Country


Section 4: ORB retail bond market

EUR public bond market


► No significant issuance in the euro public bond market during the week.

Section 5: EUR public bond market


Domestic

Cross-border Signing date Issuer Tranche rating


(+bps) Sector Ctry Leads




(+bps) Sector Ctry Leads


0

50

100

150

200

Spre

ad (b

ps)

EUR secondary public bond spread 10-year

Avg. AA EUR 10yr spreads Avg. A EUR 10yr spreads

Avg. BBB EUR 10yr spreads

0

10

20

30

40

50

60

70

0

5

10

15

20

25

Num

ber

issu

ed

Vol

ume

(EU

Rm

)

Monthy EUR bond volumes

Volume (EUR) Number issued

Private Placement market


► In the private placement market, with the pipeline for September growing, a number of issuers are preparing for issuance post the Labour Day weekend.

► AMETEK Inc (NAIC-2, BBB+), the global manufacturer of electronic instruments and electric motors, is currently in the market for a US$300 million deal that is being targeted at 10-, 12- and 15-year maturities.

► SourceGas Holdings (NAIC-2), which through its subsidiary provides natural gas transmission and distribution services, is looking to raise US$95 million of senior secured notes in 5- and 7-year maturities.

Section 6: US Private Placement market

Source: Private Placement Monitor Source: Bloomberg

Source: Private Placement Monitor Source: Private Placement Monitor

050

100150200250300350400450500

Spre

ad t

o U

S Tr

easu

ry/b

ps

NAIC-1 US Private Placement spreads (bps)

10yr High 10yr Low

050

100150200250300350400450500

Spre

ad t

o U

S Tr

easu

ry/b

ps

NAIC-2 US Private Placement spreads (bps)

10yr High 10yr Low

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Am

ount

(US$

b)

US Private Placement volumes

2011 2012 2013 2014

0.00.51.01.52.02.53.03.54.04.5

Yiel

d (%

) US Treasury benchmark yields

5yr UST 7yr UST 10yr UST 30yr UST

Date Issuer Ratings Form Amount (US$m) Coupon Maturity Spread

(T+bps) Sector Ctry

Aug-14 AMETEK NAIC-2 (BBB+) SN 300 - 10yr, 12yr, 15yr - Manufacturing US

Aug-14 GSA NAIC-1 CTL 30 - 20f/11avg +250/intp Government US

Aug-14 Home Depot NAIC-1 (A2/ A) CTL 29 - 23f/14.5avg +120-130 Retail US

Aug-14 NHL - - 250 - 7yr, 10yr, 12yr - Sport & Leisure US

Aug-14 SourceGas NAIC-2 SSN 95 - 5yr, 7yr - Utilities US

Aug-14 Tri-State Generation NAIC-1 (Baa1/A) - - - - - Utilities US


(T+bps) Sector Ctry

Aug-14 DEXUS NAIC-2 - - - - - Real Estate AU

Aug-14 Boral NAIC-2 - - - - - Construction AU

Aug-14 Powercor NAIC-1 - 150 - - - Utilities AU


(T+bps) Sector Ctry

Aug-14 Pernix Therapeutics - SSN 220 12% 6yr - Pharma US

Aug-14 Blue Cross & Blue Shield NAIC-1 (A+) CTL 166 4.09%

(mthly) 30f/18avg +140 Real Estate US

Aug-14 Cabot Oil & Gas NAIC-2 SN 100 575 250

- 7yr

10yr 12yr

+115 +125 +135

Oil & Gas US

Aug-14 Midcoast Energy NAIC-2 SN 75

175 150

3.56% 4.04% 4.42%

5yr 7yr

10yr

+190 +195 +200

Energy & Power US

Private Placement market Domestic: In the market


Domestic: Issued

Section 6: US Private Placement market

Cross Border: In the market

Cross Border: Issued Date Issuer Ratings Form Amount

(US$m) Coupon Maturity Spread (T+bps) Sector Ctry

Aug-14 Sydney Airport NAIC-2 (Baa2/ BBB) SSN A$100

A$280 - 14yr 14yr - Transport AU

Aug-14 Fonterra Cooperative NAIC-1 SN 250 250

3.40% 3.55%

12yr 15yr

+100/10yr +115/10yr Food & Beverage NZ

Aug-14 RPS Group - - 30 34

3.98% 3.84%

7yr 7yr - Business Services UK

Aug-14 CGI Group NAIC-2 -

45 350 300 €85

-

5yr 7yr

10yr 10yr

+135 +150 +150

-

Business Services CA

Credit ratings New and Notable from Ratings Agencies


Issuer Actions Agency

HP Pelzer Germany-based automotive supplier assigned B2 rating/ outlook stable Moody's

Aigues de Barcelona Spanish water supplier assigned Baa1 rating/ outlook stable Moody's

New ratings Nyrstar Belgium-based integrated zinc producer assigned preliminary B- rating/ outlook stable S&P

Travis Perkins UK-based building materials distributor assigned BB+ rating/ outlook stable S&P

Moy Park UK-based poultry producer assigned B rating/ outlook positive S&P

Issuer Actions / Comment Agency

Rating actions

SGL Carbon SE Germany-based manufacturer rating downgraded to B2 from B1/ outlook negtive Moody's

Standard Bank Plc UK-based bank rating downgraded to Baa2 from Baa1/ on review with direction uncertain Moody's

Ideal Standard Luxembourg-based manufacturer rating upgraded to CCC from RD (Restricted Default) following the successful debt exchange Fitch

VOLKSWOHL BUND LEBENSVERSICHERUNG (VBL) Germany-based life insurer rating downgraded to A+ from AA-/ outlook stable Fitch

Britax Group UK-based manufacturer rating downgraded to B- from B following significant drop in operating performance/ outlook stable S&P

Georgian Oil and Gas Corporation JSC

Georgia-based oil and gas supplier rating upgraded to B+ from B on sound operating performance/ outlook stable S&P

Global Blue Netherlands-based VAT refund operator rating upgraded to BB- from B+/ outlook stable S&P

Truvo Belgium-based digital directories publisher rating downgraded to CCC- from CCC on debt restructuring and liquidity risk S&P

Theme Comment Agency

Finance and market trends High-Yield Outstanding High-Yield volumes in Europe contrast favourably with US Fitch


Industry comment

EU EU has little chance of cutting reliance on Russian gas Fitch

Global reinsurers Global reinsurers' underwriting results profitable, but pressured as capital remains strong Fitch

European structured finance Seven years on, the cumulative default rate for European structured finance is only 1.6% Fitch

Russian structured finance Russia's new securitization laws could boost structured finance issuance S&P


Methodologies n.a

The above list highlights ratings developments that we believe are interesting or noteworthy. This list is not exhaustive.

Section 7: Credit ratings

Asset-backed securitization ABS Not rated NR

Commercial mortgage-backed securitization CMBS Other loan OTH

Credit tenant lease CTL Project bond (non-recourse) PB

Deep discount bond DDB Revolving credit facility RCF

Energy savings performance contract ESPC Senior note SN

First mortgage bonds FMB Senior secured note SSN

London interbank offered rate LIBOR Subordinated note SUB

Medium-term note MTN Term loan TL

ABN Amro ABN JP Morgan JPM

Bank of America Merrill Lynch BASML KBC Capital Markets KBC

Bank of Tokyo Mitsubishi UFJ BOTM Landesbank Baden-Wuerttemberg LBBW

Banco Santander SA SANT Lloyds Capital Services Ltd LCS

Bank of New York BNY Lloyds Banking Group LBG

Bank of Nova Scotia BNS Banca March MAR

Barclays Bank BAR Mitsubishi UFJ Financial MIS

Barclays Capital Barcap Mizuho Financial Group Inc MIZ

BayernLB BLB Morgan Stanley MS

BMO Capital Markets BMO Natixis NAT

BNP Paribas Group BNP Norddeutsche Landesbank GZ NLB

Calyon CAL Nomura NOM

Citi Citi PNC Capital Markets PNC

Commonwealth Bank of Australia CBA Rabobank RAB

Commerzbank AG CZB RBC Capital Markets RBC

Crédit Agricole CA RBS RBS

Credit Suisse CS Société Générale SG

Deutsche Bank DB Scotia Capital Inc SCA

DnB NORD DnB Standard Bank Plc SB

European Investment Group EIG Standard Chartered Bank STA

Fortis Securities Inc FOR SRM Robinson Humphrey SRH

Goldman Sachs & Co GS Sumitomo SUM

HSBC HSBC UBS UBS

ING Groep NV ING UniCredit Group UNI

Intesa Sanpaolo SA ISP U.S. Bancorp USB

Incapital LLC INC Wells Fargo Wells

Banca IMI IMI WestLB WLB

Glossary Technical abbreviations

Financial institution abbreviations

EY | Assurance | Tax | Transactions | Advisory

Ernst & Young LLP

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