Conﬂict of interest? Equity investors underwrite Banks to ...dl.magazinedl.com/magazinedl/IFR...

AUGUST 10 2019 ISSUE 2296 www.ifre.com

EQUITIES

China’s CGN Power taps strategic support for Rmb12.6bn IPO5

BONDS

Things get serious for Sirius as US$500m bond is pulled6

BONDS

Facing the music: HSBC’s ‘discos’ jump after Tier 2 volte-face8

PEOPLE & MARKETS

Hunt on for new HSBC chief exec after Flint is ousted8

Conflict of interest? Equity investors underwrite 44% of £3.8bn debt backing Merlin buyout

Banks to pocket US$100m of fees to underwrite WeWork’s US$6bn IPO-linked loan

US$66bn book for US$13bn bond as Occidental comes up big in turbulent markets

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Contents INTERNATIONAL FINANCING REVIEW

AUGUST 10 2019 ISSUE 2296

TOP NEWS 04LOANS Unusual Three equity investors are underwriting almost 44% of Merlin’s buyout

financing, raising concerns about potential conflicts of interest. 04

LOANS Commitment WeWork nets US$6bn in IPO-linked loans. Bank group will

pocket US$100m in fees from office space provider. 04

EQUITIES Hefty China’s CGN Power taps strategic support, with its IPO being the

biggest A-share listing in more than a year. 05

BONDS Volatile Occidental comes up big in turbulent market. US$13bn M&A bond

received US$66bn demand as investors dismiss troubles ahead. 06

Financing hole Things get serious for Sirius as US$500m bond is pulled. 06 Reverse HSBC changes tack on legacy debt, with AT1 supply now on the cards. 08 Change Hunt on for new HSBC CEO after Flint is ousted. 08 Risk aversion Asian primary issuance freezes as renminbi slumps. 10

PEOPLE & Slide European banks’ share of investment banking fees was just 21% in 15MARKETS July, the lowest on record, as Asian banks gained.

Scandal Goldman executives charged over the investment bank’s role as

underwriter and arranger for three bond offerings from 1MDB. 16 Negative Eurozone banks are charging corporates for deposits with their eyes

on the ECB given the potential for it to cut main borrowing rates even further. 17 Outsourcing Asset managers farm out trading to combat costs and complexity. 20 Compensation At half-time, 2019 trader bonus prospects look bleak. 21 Research Burford fights Muddy Waters ‘short attack’. 22

BONDS Rethink Issuers extend curves as yields tank. 25 Green QIC Shopping draws crowds. 26 Supply slows Issuers fall amid rough ride for junk bonds. 35

EMERGING Weak currency China’s bond market keeps calm. 47MARKETS Limited returns EM succumbs to negative yields. 47 Citgo New sanctions complicate Venezuela story. 50

LOANS Repayments Loan managers flush with cash. 53 Challenge Russian borrowers demand tougher terms. 60 Momentum Direct lenders go large. 64

EQUITIES Little backing Indian mutual funds shun recent IPOs. 69 Wind Ameren raises cash to fund acquisitions. 69 Biotech Allakos stock flares up. 77

STRUCTURED On a roll Snap impresses with US$1.1bn convertible bond. 80EQUITY Trials Clovis Oncology plugs funding hole. 80 Demand Convertible issuance heats up. 81


Top news Occidental comes up big 06 It’s serious for Sirius 06 HSBC’s ‘discos’ jump 08

WeWork nets US$6bn in IPO-linked loans Loans Bank group will pocket US$100m in fees from office space provider

BY MICHELLE SIERRA,

AARON WEINMAN

Workspace provider WEWORK has obtained commitments from at least 10 banks for US$6bn of syndicated loans that are contingent on the company’s ability to push through with its planned IPO later this year.

JP Morgan is leading the transaction, and Bank of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, Morgan Stanley, Wells Fargo and UBS have also been

At least 10 banks had committed either US$500m or US$750m each to the loans by August 5. An

additional 10 or 11 banks have been invited to provide smaller commitments by August 19, and a further retail syndication will follow. The full bank group will pocket US$100m in fees.

The loans include a US$2bn letter of credit facility and a US$4bn delayed-draw term loan. Pricing on the delayed-draw loan is 475bp over Libor and will come with a three-year maturity after the completion of the IPO.

The delayed-draw facility will be structured as a “warehouse

drawn upon if the company successfully raises at least US$3bn in its planned IPO.

The US$4bn tranche is expected

to include a mechanism that will

Term Loan B to be sold to institutional investors or a high-yield bond after the IPO takes place.

“A warehouse delayed-draw term loan is an interesting concept that we haven’t seen

delayed-draw facility includes a minimum liquidity covenant, while the letter of credit is contingent on the company maintaining at least US$1bn in cash.

Banks are expected to support the richly priced loan, which,

allow banks to cash in fees and

Based in New York, WeWork announced its plans to list shares last December. The offering is expected to come after the September 2 US Labor Day holiday.

The IPO will have an aggressive

early investors, such as founder Adam Neumann, to keep the tax savings of a partnership, thus reducing corporate taxes.

WeWork and JP Morgan declined to comment.

COMMITTED LINES

While credit facilities have previously been tied to IPOs, the additional contingencies of

that the company has been compelled to provide additional

Equity investors provide Merlin debt Loans Three investors underwrite nearly 44% of financing, raising concerns about potential conflicts of interest

BY CLAIRE RUCKIN

Three equity investors behind the £5.91bn take-private buyout of UK theme park and attraction operator MERLIN ENTERTAINMENTS are also underwriting just under half of the £3.8bn-equivalent debt, uniting the interests of parties that have traditionally been separate.

Blackstone, Lego’s founding family KIRKBI Invest and Canada’s CPPIB Credit Investments have underwritten £1.66bn-equivalent of debt, or

and fee pool, in addition to their equity commitments.

Equity investors underwriting senior debt is unusual and highlights the fact that banks are now having to compete with alternative capital providers for a limited fee pool. It also raises concerns about potential

run into trouble.“It is unusual. You don’t often

have people in the equity and

syndicate head said.“Equity investors taking 43% of

the debt, or almost half the fees, should be unacceptable but banks are caving in and they are either missing the point or don’t have the

The deal was originally underwritten by Bank of America Merrill Lynch and Deutsche Bank, which originally provided £1.9bn-equivalent each.

The £1.66bn commitment from the three equity providers far outweighs £78m-equivalent commitments each from Barclays, HSBC, Mizuho and UniCredit. BAML and Deutsche Bank’s commitments are now £947.4m-equivalent each.

Blackstone is intending to syndicate its £680m-equivalent underwriting, which is its largest to date, along with its commitment to the buyout of REFINITIV.

In 2018 a Blackstone-led consortium bought 55% of

in a deal that valued the

company at US$20bn. Last month the London Stock Exchange agreed to buy

company of IFR, for US$27bn.Blackstone has been

underwriting loans since 2013,

has an interest in. Some of the Merlin debt may be sold to GSO, Blackstone’s credit arm.

including KKR, also arrange and syndicate loans.

KIRKBI is intending to hold its £774m-equivalent commitment to the senior facilities and interim facilities, which amounts to 20% of the loans and

also hold its £210m-equivalent.

UNUSUAL MOVE

While equity investors have provided subordinated debt to portfolio companies, only a handful can provide senior debt and undrawn revolving credits, particularly in size.

Some banks view the move positively, as underwriting senior debt aligns equity investors’ interests with senior lenders, which can make it easier to syndicate the deals.

“We will see a growing trend of buyers that are going to want to underwrite their own deals, as

“If Blackstone is underwriting a deal I don’t see how Blackstone equity would ever allow Blackstone’s underwrite to lose

ownership of different parts of companies’ capital structures as a

the debt is syndicated, if

line for repayment in stressed and distressed situations and usually negotiate hard with equity holders and can force painful equity injections and debt-to-equity swaps and even


For daily news stories visit www.ifre.com@

Hunt for new HSBC CEO 08 Asian primary freezes 10 BAML’s push for private capital 12

WeWork’s business model – leasing to tenants under shorter-term contracts and renting buildings under longer-term leases – has been questioned as it could be vulnerable to an economic downturn.

The workspace provider, however, is concentrating on attracting longer-term teams from corporations, alongside

occupancy levels.Pressure mounted on a

potential WeWork IPO after Japanese conglomerate and investor SoftBank Group in January scrapped a planned US$16bn investment.

“As part of the IPO strategy, they’re looking to improve valuation by saying that the next amount of cash capital has been committed and won’t further

close to the transaction said.The company, valued at

US$47bn, disclosed losses of US$1.9bn in March and revenues of US$1.8bn.

Though facing different uncertainties, ride hailing transport start-ups Uber Technologies and Lyft, two of this year’s larger IPOs, were scrutinised for heavy losses at the time of their stock offerings. Both currently trade below issue price, despite the market’s high expectations prior to the launch.

WeWork has a US$650m revolving credit in place that expires in 2020. In April 2018, it raised US$700m via high-yield bonds with a coupon of 7.875% that matures in 2025.

JP Morgan also arranged the existing bank loan and has already been mandated as a bookrunner on the IPO.

CGN Power taps strategic support

Equities IPO will be the biggest A-share listing in more than a year

BY KAREN TIAN, FIONA LAU

CGN POWER, China’s largest nuclear power producer, is set to raise Rmb12.6bn (US$1.79bn) from the biggest A-share listing in more than a year with the help of strategic investors, as US-China trade tensions continue to weigh on markets.

The Hong Kong-listed company priced the Shenzhen IPO last Friday at Rmb2.49 per share. It plans to sell 5.05bn A-shares, or about 10% of the enlarged capital, in the offering.

CGN has chosen to sell 50% of the IPO shares to strategic investors, who will be subject to lock-up periods of 12 to 36 months.

“This is good for the stability of

to the deal. “We have already found enough strategic investors

Big IPOs in China are often seen as a potential threat to broader markets, especially now that they are already under pressure from the trade war, as they may drain liquidity from secondary markets.

As of last Thursday, China’s CSI300 blue-chip index was down 4.3% in the past month.

The strategic portion is large compared with recent sizeable domestic IPOs. China Railway Signal and Communication, for example, sold 30% of its Rmb10.5bn Shanghai tech board IPO to strategic investors in July.

If the CGN deal comes to fruition, it will be the largest A-share IPO since the Rmb27.1bn Shanghai listing of Foxconn Industrial Internet in June 2018. It will also be the biggest IPO in the

CGN H-shares rose 0.5% to HK$2.12 on Friday, despite a 0.7% drop in the Hang Seng Index.

MARKET-ORIENTEDA market-oriented approach was used to price the IPO. In traditional

A-share IPOs issuers give an exhaustive breakdown of the intended use of proceeds, as well as the total number of shares to be sold, which essentially means that the issue price will be the total value of proceeds divided by the number of shares.

Instead, CGN only put a number on part of the proceeds, saying it plans to use Rmb11bn to build four nuclear power units in Guangdong and Guangxi provinces. But it did not say how much it will raise for working capital purposes, leaving investors to guess and put a value on the company.

“This deal is a test for a more

ECM banker.More than 3,900 accounts

managed by 2,702 institutional investors joined the price consultation. After eliminating invalid bids and the top 10% of bids by value, the weighted average of the remaining bids was around Rmb2.49, the same

This deterred most of the bidders, leaving only 442 institutional investors with valid bids. These investors aim to subscribe to 24.4bn shares, 13.9 times the shares available in the institutional tranche.

Excluding the strategic tranche, institutional and retail investors will take 70% and 30% of the remaining shares respectively. About 70% of the shares in the institutional tranche will be locked up for six months.

Bookbuilding for the deal will run for a day on August 12.

CICC is the sponsor and joint bookrunner with China Development Bank Securities, China Securities and Minsheng Securities. Guotai Junan and BOC International (China) are the junior bookrunners.

The issuer will pay 1.23% of the fundraising amount in sponsor and underwriting fees.

take the keys of companies that are seriously underperforming.

“If something goes wrong and senior lenders form a committee to work out what demands to place on the equity, they will be sitting around the table with the equity, which may cause some

POST SUMMER SALE

is expected to launch after the August holiday period. A ticking fee is likely to be offered on the loans, which will be syndicated before the outcome of the public-to-private process.

equivalent of loans including a seven-year Term Loan B1, split between a euro-equivalent £562m tranche and a US dollar-equivalent £925m tranche, paying an initial 375bp over Euribor and 350bp over Libor, respectively.

There is also a seven-year Term Loan B2 comprising a €770m tranche and a US$420m tranche with the same pricing as the Term Loan B1. Pricing on the Term Loan B facilities has three 25bp step-downs for each

net leverage below 4.9 times.A one-year bridge loan

comprises two £392.5m-equivalent tranches in euros and US dollars paying 650bp over Euribor and 562.5bp over Libor, respectively. On maturity, the outstanding bridge loan will term out into an eight-year unsecured term loan.

A US$172.5m seven-year delayed draw term loan is also included, which pays 350bp over Libor with a commitment fee of 50% of the applicable margin for

the applicable margin thereafter.The deal also includes a

£400m 6.5-year multi-currency revolving credit facility, which pays an initial margin of 300bp over Libor with a commitment fee of 30% of the applicable margin on undrawn amounts.

Pricing on the RCF has four 25bp step-downs for each 0.25

leverage below 4.9 times.Madame Tussauds owner

Merlin listed in 2013, and operates Legoland theme parks globally and the Alton Towers Resort in Britain.

Additional reporting by Alasdair Reilly


Top news

It’s getting Sirius, as bond is postponed Bonds Pulled bond could leave hole in Sirius’s mine financing

BY ELEANOR DUNCAN, YORUK BAHCELI

Market volatility stymied an attempt by SIRIUS MINERALS to raise a time-sensitive US$500m high-yield bond - seen as crucial to the development of a polyhalite mine in North Yorkshire.

The company said on Wednesday it was suspending the proposed offer of senior secured notes due 2027 due to current market conditions. The bond had been set to price early last week.

A spokesperson for Sirius said: “with markets in turmoil after an escalation in the trade war between the US and China potential investors were more focused on

Sirius said it intends to revisit the market if conditions improve later this quarter, but the timing of the company’s Woodsmith mining project could be in doubt, as the notes

need to be sold before it can access a credit facility.

The bond was part of a second-

which includes a US$2.5bn credit facility, a US$425m equity raise and a US$507m convertible bond.

In addition, Sirius currently does not generate any revenue

That means time is running out: Sirius will probably need to land the deal in September, according to research notes from two analysts.

The company previously said that its cash will last until the end of September, although there may be scope to extend slightly longer

against that deadline, according to a note from Richard Knights, an equity analyst at Liberum.

“The convertible bond funds in escrow and the RCF commitment letter are

effectively valid until the end of October, which we would consider a hard stop for Stage 2

ROCKY WEEK

Last week was already tough for global markets, with investors scurrying to safe assets in the wake of China’s decision to let the renminbi breach the psychologically important level of seven per US dollar for the

And US dollar high-yield bond spreads widened after an escalation in China/US trade war rhetoric.

“I still think [Sirius’s] deal has got a good chance to get done

Knights said in a call with IFR.“It’s clearly been the worst

possible week of the year to issue a high-yield bond. It does make sense to come back when,

hopefully, conditions have

A RISKY BUSINESS

The bond has long been seen as

risk appetite, with the trade offering a rare level of yield due to high execution risk.

Sole lead JP Morgan set initial price thoughts on the US$500m senior secured 7.5-year bullet trade at 13.5% area late on August 1.

According to IFR data, only two other bonds have offered higher yields to US dollar investors in recent times: Neiman Marcus’s recent junk bond backing a restructuring, and a deal from Buena Vista, which funded a casino development by a Native American tribe in California.

Both of those deals carried Triple C ratings, whereas Sirius is rated B-/B (S&P/Fitch).

Occidental comes up big in turbulent market

Bonds US$13bn M&A bond received US$66bn demand as investors ignored troubles ahead

BY WILLIAM HOFFMAN

Coming into last week, OCCIDENTAL PETROLEUM saw clear skies ahead for its announced bond to fund the cash portion of its US$38bn acquisition of ANADARKO.

But, come Monday, US President Donald Trump announced a new US$300bn round of tariffs on Chinese goods in a move that widened credit spreads and sent the Dow Jones Industrial Average lower by more than 800 points for one of the worst trading days of the year.

The Us$13bn bond was postponed but needed to come on Tuesday if it was going to be

acquisition’s scheduled Thursday close – unless Occidental was

willing to take the hit and draw from its bridge loan.

“With the improvement in the tone on Tuesday and the narrow window prior to closing,

syndicate banker close to the deal said.

“If they had not done the bond deal this week they wouldn’t have had the proceeds to cover the cash component of the

Occidental tentatively announced the 10-part M&A bond offering with a mouth-watering 50bp–70bp of new issue concessions over where the company’s curve was trading just to make sure it could reach

Given the volatility, bookrunners Bank of America Merrill Lynch, Citigroup, JP Morgan

and Wells Fargo were somewhat taken aback when order books came in at US$66.1bn – more

second-largest order book of the year after a deal from Saudi Aramco.

rate tranches were tightened 35bp–50bp from initial price thoughts, but still offered a much sought after 10bp–13bp premium, according to IFR calculations, in a market starved of yield.

Several syndicate bankers viewed that pricing as even richer than it appears given that all secondary corporate spreads had widened out some 10bp on Monday on tariff fears.

“The bankers on the deal were probably saying, ‘Spreads are skittish, markets are volatile and

we need to make this big deal

income strategies at Fiduciary Trust Company International.

“They were probably surprised by the appetite they

Strong investor demand for a jumbo bond like this goes a long

the markets, sources noted.To that effect, 15 more issuers

came to the market in the days following the Occidental trade recognising that the falling Treasury rate provided a strong bid to lock in low coupon rates.

“The buyside interest has not

“Investors have a lot of money and they need to spend it



Alteryx doubles up with US$700m CB

Structured Equity Data specialist pays for 150% premium

BY STEPHEN LACEY

ALTERYX, a fast-growing software data analytics provider, blasted into the market last week with a US$700m two-part convertible bond that lays the groundwork for continued expansion.

seven-year CBs at coupons of just 0.5% and 1%, respectively, and conversion premiums on both of 50%, the highest conversion premium on any CB sold this year and tying

LIVE

NATION ENTERTAINMENT on the US$550m, 2.5% exchangeable it sold in March 2018.

Alteryx spent US$76m of the money raised on a call spread to offset dilution recognition to share prices 150% above reference on the CB, among the highest-ever elevations seen on a call spread.

The company also bought back US$145m principal of its existing 0.5% CBs that are deep in-the-money for US$145m in cash and 2.2m shares, equating to roughly US$420m of total consideration.

“We tried to make the repurchase as delta-neutral as

involved in the underwriting said.

The quick recap allows CB holders to convert at prices above US$189.36 and the company to offset dilution to prices above US$315.60 – Alteryx, for perspective, went public in March 2017 at US$13.00 a share.

“This is a bit of a perfect

interest rates, a very volatile stock, and a company with high top-line growth and a strong balance sheet.

“Alteryx spent a lot on the

investor engagement, both from “outright and technical

banker.Alteryx shares rose 0.7%

over the one-day marketing on Wednesday and another 2.9% on Thursday to US$129.94.

Alteryx’s CB is the proverbial win, win, win.

Goldman Sachs, JP Morgan and Morgan Stanley, joint books on the deal, are doing a victory lap, along with the company and investors.

EARLY DAYS

proliferation of data on the cloud and the need for

of that data. By all accounts, it is still early days in adoption of the company’s products.

Alteryx delivered a strong beat-and-raise in the second quarter that saw it generate non-GAAP income from operations of US$800,000 on revenue of US$82m, the latter representing 59% year-on-year growth and above US$76.6m consensus.

The company bumped revenue guidance for the full year to US$370m–US$375m, with management characterising entry into Asia and Latin America as “very

Extrapolate operating leverage inherent to software over the long term and earnings growth is potentially explosive.

On consensus forecasts, Alteryx’s revenues are expected to grow to US$374m this year, US$498m next year, and to US$675m in 2021, while Ebitda is expected to grow from US$41.9m, to US$71.1m, and US$142.5m,

On the 2021 expectations, Alteryx now trades at 11.6 times EV-to-sales.

A banker away from the deal questioned why the bond had been left open over the weekend.

“The deal should have had strong anchoring already in

“If it was that crucial to the company, and had such high risk and execution, you’d have wanted to have the book already covered and to get in and out of the market as quickly as possible. They may have been blindsided by volatility, but the general approach is to assume

NORTHERN POWERHOUSESirius’s Woodside project had been pegged to be one of the largest mines to be built in Britain for years, and had been touted by ex-PM Theresa May as the kind of

scheme to boost investment and jobs in the north of England.

Sirius had been in discussions to get government backing for the project in January, but uncertainty over timing meant

the company ended up turning to the market for a more expensive debt package.

due to higher-than-expected construction costs and now due to the more costly debt structure.

The maximum yield permitted on the bond by Sirius’s RCF agreement is 15%,

Finance International.Still, some analysts do not yet

think that all is lost.“The company has a broad

array of high-quality, large-scale

Knights said.“The value of these

investments [is] dependent on completion of the US$500m bond. We would be surprised if the US$1.6bn of equity invested would be wholly put at risk because US$500m of senior high-yield debt couldn’t be

A spokesperson from JP Morgan declined to comment.

CREDIT RISKS REMAINInvestor demand was also strong enough to overcome credit deterioration at Occidental.

Shortly after the bond deal was announced, Moody’s cut Occidental’s long-term credit rating by three notches to Baa3 from A3. S&P and Fitch, which currently rate the company Single A, are expected to follow suite.

CreditSights estimates Occidental’s leverage will increase to 2.7 times, up from one times prior to the acquisition.

The large debt load is also concerning given Occidental’s reliance on volatile oil prices, Moody’s noted in its report.

The company sought to mitigate those concerns by offering short-dated notes that can be paid off quickly through various asset sales.

Occidental already successfully sold Anadarko’s African assets to Total Capital for US$8.8bn, as well as a 45% stake in the 97,000 Midland

acres Occidental controls to Ecopetrol for US$1.5bn.

Half of the tranches in the new deal mature in three years or less for US$7.5bn in funding.

CreditSights said that size indicates Occidental might look to sell its full 55% stake in Western Midstream Partners, valued at US$8bn, in the near future to help pay off those short-dated notes.

Three of those short-dated

just last week the Federal Reserve cut rates by 25bp in a move that typically diminishes demand for that structure.

But bankers said there is still

Libor is offering higher yields than US Treasuries.

“The question is, is that bid strong enough for a Triple B

said.

buyers tend to be state funds and they have ratings limitations and prefer higher-quality Single A


Top news

HSBC’s ‘discos’ jump after volte-face Bonds HSBC changes tack on legacy debt, with AT1 supply now on the cards

BY HELENE DURAND, TOM REVELL

Prices on some of HSBC’s legacy Tier 2 bonds jumped last week after the bank said it would change the securities’ regulatory treatment, reversing a decision it had made just over a year ago.

HSBC took the market by surprise last May when it said securities that were previously partly recognised by HSBC Holdings in its consolidated capital as Tier 2 capital under transitional arrangements (so-called grandfathering) would be recognised as fully eligible Tier 2 instruments.

The decision caused some upset among the bondholder community at the time, given than some had hoped that the bank would either call the bonds – including four discount

securities) – or conduct a liability management exercise.

But in a volte-face last Monday, HSBC said that US$9bn notional of Tier 2 securities that it had previously considered fully eligible would now be grandfathered only as far as June 2025.

It added that US$1.7bn of notional securities it had previously designated as grandfathered as Tier 2 would no longer be included in Tier 2 capital for the group.

One of the discos, a US$750m perpetual, jumped by almost 5.5

data, to be quoted at a 73.69 cash price, with the other grandfathered Tier 2 bonds following a similar pattern.

The move follows the formation of an ad hoc bondholder group last year that

had questioned HSBC’s

Holders of 27% of the aggregate principal amount outstanding of the discos,

Gump, had written to the bank in 2018 highlighting various concerns, in particular in light of the introduction of capital requirement regulations in January 2014.

These included “inconsistency and lack of transparency regarding the basis on which HSBC determined that it was now [four

years after the CRR came into effect] appropriate to redesignate the discos as fully eligible Tier 2

BLUE-SKY THINKING

But while the decision to change

Hunt on for new HSBC CEO after Flint is ousted People & Markets CEO out after just 18 months with chairman unhappy at pace of change

BY THOMAS BLOTT, STEVE SLATER

HSBC last week ousted its chief executive John Flint after only 18 months in the job and said it will cut thousands of jobs, surprising investors and showing the bank wants to speed up cost cuts in a challenging environment.

It leaves vacant one of the biggest jobs in global banking, running a complex

238,000 staff and a presence in 65 countries and territories.

The shortlist of candidates could include Lloyds Banking Group chief executive Antonio Horta-Osorio, DBS chief Piyush Gupta, and Tidjane Thiam, the Credit Suisse boss who previously worked with HSBC chairman Mark Tucker.

Flint was ousted because the pace of change was not as quick as Tucker demanded, especially as costs need squeezing as revenues face headwinds, people familiar with the matter said. They said Flint did not appear to be enjoying the role and the

and opted to wield the axe alongside a relatively decent set of results.

That showed a ruthlessness that has not often been the hallmark of HSBC, which has in the past been criticised for slow decision making and having too many senior executives who have been with it since joining as graduates.

to be appointed chairman when he joined in October 2017. He arrived with a no-nonsense reputation.

Tucker said there was no personality clash or disagreement on strategy with Flint, but indicated execution was too slow. It was a unanimous decision of non-executives, the bank said.

“Where we got to was an environment that was becoming increasingly complex and challenging in a macro-economic sense and a geopolitical sense and a competitive sense. It was felt that to make the most of the opportunities ahead of us, that

told reporters on a conference call.

“We’ve acted clearly and decisively. We’re doing this from a position of strength, ie, good results, clear strategy and good bench strength. It’s the right

JOBS GO

HSBC is also cutting up to 2% of jobs, although it will continue to add in higher-return areas,

said. That indicates up to 4,700 jobs could go. The bank declined to provide further details of the cuts.

Stevenson said HSBC will incur US$650m–$750m of charges for the cuts in 2019 but should save a similar amount in annual costs from next year. That equates to about 4% of staff costs.

Source: Eikon Refinitiv

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Price

HSBC PUTS THE MUSIC BACK ON

HSBC PERPETUAL US$750m ‘DISCO’

“Whether they count as Tier 2 or not is a bonus for the bank. I am not sure they will call them given it’s still such unbelievably cheap funding”

“We’ve acted clearly and decisively. We’re doing this from a position of strength, ie, good results, clear strategy and good bench strength”



provided some balm to their trading performance, Lloyd Harris, a fund manager at Merian Global Investors, said he doubted whether it changed anything about the prospect of the bonds either being called or being included in a liability management.

“This is still very cheap

The above-mentioned US$750m disco pays a coupon of six-month Libor plus 25bp, for example.

“They may call them in

said. “Whether they count as Tier 2 or not is a bonus for the bank. I am not sure they will call them given it’s still such unbelievably cheap funding. I don’t really get the investment thesis on these bonds. I think it’s blue-sky thinking to think that they’ll be taken out by

He added that while there may be an outside chance that HSBC will tender the bonds, it was likely do so only when the market was weak.

His view was echoed by Jackie Ineke, a strategist at Morgan Stanley.

“We believe banks will treat discos linked to their value as cheap perpetual funding, rather than whether it has Tier 2 or TLAC/MREL value. With most paying ~10bp, where banks have any need for market funding, these make sense to

a note.By last Friday, the discos had

retraced some of their gains, with the US dollar bond quoted at 73.

The jump in price in HSBC’s old Tier 2 bond contrasted with that of a similar Barclays US$600m priced in 1985, that was up one point compared with Friday’s close, quoted at

the minimal chance that it will be called.

AT1 NEXTWith its second-half results now out, HSBC also reiterated its intention to raise Additional Tier 1 debt, adding that a newly

announced share buy-back would not prevent it from selling AT1 notes.

The lender said it would buy back up to US$1bn of shares, set to begin shortly, with the UK issuer yet to get started on its 2019 AT1 issuance target.

HSBC was at times last year blocked from issuing AT1s while conducting share buy-backs and has in the past cited technical rules as preventing it from being in the market with AT1s and buying back shares at the same time.

bank said it is now comfortable issuing AT1s while conducting an ordinary share buy-back on the back of updated legal guidance.

The UK bank continues to expect its 2019 AT1 issuance to be in the low single digits, US dollar equivalent.

So far this year, the only benchmark issuance from HSBC Holdings – the group’s issuing entity for external AT1, T2 and loss-absorbing senior – has been in holdco senior format, of which it has issued US$8.1bn-equivalent.

The cash price of the bank’s most recent AT1, a £1bn 5.875% perp non-call September 2026 issue, was quoted at 104.45 last Friday.

The broader AT1 market has also been under pressure, caught up in the more general credit market weakness that took a turn for the worse in recent days as trade tensions between US and China escalate and Brexit-related headlines take their toll on spreads.

The Bank of America Merrill Lynch CoCo index jumped to 4.96% last week, off the 4.65% 2019 low it hit in early July.

“You should read into that that it’s targeted at more senior ranks in the

reporters. That is likely to include hundreds of staff in global banking and markets, which employs 48,700 staff.

Stevenson said the majority of affected staff had been told. Natural attrition, which is 5%–10% annually in most parts of the bank, will also play a role.

QUINN INHSBC has appointed Noel Quinn, who has run the commercial banking arm since 2015, as interim CEO.

Quinn, who is 57 and been at HSBC for 32 years, could be in the hot seat for some time: the search for an internal or external replacement is expected to take up to a year.

Several investors and analysts expect Tucker to turn to an external candidate to continue the shake-up of culture at HSBC.

Horta-Osorio, 55, has led Lloyds since January 2011 and freed the bank from UK government part-ownership

keeping to a clear, focused strategy on the UK market. The Portuguese boss has limited experience of working in Asia, however.

Gupta, 59, has won praise for his running of Singapore’s

DBS for almost a decade, and the Indian will have few equals regarding HSBC’s Asian heartland.

Thiam, 57, has stabilised Credit Suisse but is still in the process of turning it around. He also knows Tucker well – Thiam was lured from a rival

Prudential in September 2007, when Tucker was CEO. When Tucker left two years later, Thiam stepped into his shoes.

Internal candidates are likely to be led by Quinn and Stevenson.

Tucker said Quinn had a strong track record and has brought “pace, ambition and

commercial bank – attributes the chairman said he would like in the permanent CEO.

HSBC said it had no plans to change the strategy set out by Flint last year, although it warned the outlook had turned darker.

“On the geopolitical side, you can choose where – Europe, Brexit, the Middle East, Russia, Asia, China, trade or Mexico. There’s no shortage of geopolitical challenges at this

GBM STRUGGLESFlint’s exit was announced

results from HSBC, although the investment bank had a weak second quarter.

rose 16% to US$12.41bn, but

second quarter plunged 44% from a year ago to US$1.1bn as revenues fell 13% to US$3.6bn. Revenues from

commodities in Q2 fell 14% from a year ago, equities revenues dropped 18% and global banking was down 11% – all weaker than the average performance across the big

European rivals. Source: Eikon

600

700

800

1/8/

17

1/2/

18

1/8/

18

1/4/

19

HSBC TREADING WATER THIS YEAR;

LONDON SHARE PRICE IN PENCE

“We believe banks will treat discos linked to their value as cheap perpetual funding”


Top news

Credit derivative volumes surge as

bond liquidity concerns persist People & Markets Total return swap increase comes amid growing interest in credit indices

BY CHRISTOPHER WHITTALL

Trading activity in total return swaps linked to credit indices has hit a record high this year, as a growing number of investors embrace these credit derivatives to take views and hedge their corporate bond portfolios.

Volumes in total return swaps on iBoxx bond indices reached

of the year, according to IHS Markit, roughly double the volumes over the same period three years ago.

The uptick is the latest sign of traders turning to products based on broad credit indices to shift risk, as

buying and selling individual corporate bonds has become harder.

Volumes in credit-default swap indices averaged around US$326bn per trading day in

according to the DTCC, up

By way of comparison, average daily trading volumes in US corporate bonds was US$36bn over the same period, according to MarketAxess. Meanwhile, average daily trading volumes in global

funds have increased to US$14.2bn this year, according to BlackRock, the largest provider of such funds, up

roughly 70% from 2018. That

ETFs have surpassed US$1trn this year.

Nick Godec, index product manager at IHS Markit, said the number of banks quoting TRS on iBoxx bond indices has grown from three in 2012 to 10 today. At the same time, a wider range of investors have entered the market, with asset managers joining the hedge funds that historically were the most active in this space.

“We think it’s at [an]

to continue growing given the number of market makers and

investors, he said.

PRECISE MATCHING

Total return swaps are a type of derivative that give investors exposure to an underlying asset like a high-yield bond index. That allows investors to match the risk in their bond portfolio more precisely than a CDS index, while enjoying the

such as decent liquidity and the ability to lever up positions. One downside to TRS is they currently aren’t cleared by central counterparties, potentially leaving the investor vulnerable if their bank trading partner defaults.

Market liquidity or the ease of buying and selling securities remains a major focus for

Asian primary issuance freezes Emerging Markets New offshore offerings pause as renminbi slump triggers Asian bond sell-off

BY DANIEL STANTON

Asian offshore bond issuance ground to a halt early last week, as a sudden decline in the renminbi and a further worsening of US-China relations shook global markets.

On Monday morning, China allowed its currency to drop below Rmb7 to the US dollar, its lowest level since the global

other emerging market currencies such as the Indian rupee, Indonesian rupiah and South Korean Won to sell off in response.

That added to growing risk aversion after the US on August 1 announced it would impose a 10% tariff on an additional US$300bn of Chinese goods from September.

The Asian offshore primary bond pipeline froze for the

and secondary spreads widened on risk-off price

action. The US 10-year Treasury yield tightened 12bp to 1.72% on Monday, down more than 90bp since the start of the year and at its lowest level since October 2016, according to Tradeweb.

investment-grade CDS index widened to 71bp on Tuesday, having ended the previous week at 62bp.

CDS widened 10bp on Tuesday to 56bp after the US labelled the country a currency manipulator – even though it does not meet the US Treasury’s own criteria and has in fact been supporting the renminbi for years.

“The absolute yield in investment-grade bonds in the Asian USD space has only moved marginally higher; we see a bigger correction in the high-yield space at the

income investment director at Aberdeen Standard Investments. “We see some opportunities in high-yield property names and some other industrial names in

Recent issues from the likes of Sinopec and China Great Wall AMC International had underperformed even before last week’s volatility, and widened further early in the week. Great Wall’s 2024 bonds had widened 17bp to Treasuries plus 157bp by Tuesday’s close, while Sinopec’s 2024 bonds were seen at Treasuries plus 103bp on Monday, 15bp wider than pricing on August 1, before they regained some ground later in the week.

Chinese high-yield property bonds were most affected, with many issues dropping two points or more from Monday to Tuesday as a weaker renminbi made it more expensive for them to repay dollar debt.

KWG Property Holdings’ 2024 bonds were down 2.2 points by Tuesday to a cash price of 95.4 bid, implying a yield of 8.6%.

Logan Property Holdings’ 2023 bonds had dropped 2.5 points by Tuesday to 96.5, yielding 7.5%, having been priced at par in early July.

Property bellwether China Evergrande Group saw its 2025 bonds drop 2.7 points to 84.9 bid, for a yield of 12.4%, in the

SMALLER PIPELINE

High-yield bonds looked to have bottomed out on Wednesday, but issuance could be tricky in the coming weeks.

“The pipeline for China high-yield looks smaller now as most of it has gone through the

said a DCM banker. “We might see some opportunistic deals, but I don’t expect a huge



GE frees up US$1.5bn from Wabtec sale

Equities Company fast-tracks exit but gets lower price

BY ANTHONY HUGHES

Struggling industrial conglomerate GENERAL

ELECTRIC’s turnaround efforts took another step forward with the sale of its remaining 11.8% stake of rail locomotive and parts maker WABTEC via a US$1.6bn follow-on stock sale.

The proceeds add to GE’s liquidity as it looks to simplify its business, pare net debt and deal with legacy liabilities.

After a day of marketing on Wednesday, a syndicate led by Goldman Sachs, Bank of America Merrill Lynch, Citigroup and Morgan Stanley sold 20.5m Wabtec shares held by GE to investors at US$72.50 each, a 3.7% discount to last sale and a 0.9% all-in discount.

Assuming exercise of a 10% greenshoe and along with May’s sale of another US$1.8bn of Wabtec stock, GE has now reaped US$3.4bn in cash from selling stock inherited after it merged its transportation unit with Wabtec in February.

Though Wabtec shares traded up while the deal was being marketed, they stumbled in Thursday’s aftermarket, trading as low as US$70.99 before closing at US$71.83 or below the offering price.

Cowen analysts said that while there was solid demand from new and existing investors and removal of the overhang was favourable, Wabtec shares could remain volatile in the aftermath of the deal.

GE had to settle for a lower price than it achieved from its initial Wabtec sell-down in May.

At that time, GE sold an upsized 22m Wabtec shares at

offer discount after a day of marketing and a 2.1% discount to last sale.

The original terms of the Wabtec/GE Transportation merger also saw GE shareholders receive Wabtec shares equivalent to a 24.3% stake, in addition to the 24.9% that GE took directly.

GE had agreed to a staged sale through early 2022, but is now out two and half years earlier than that timetable.

The latest sell-down came just a week after Wabtec (on July 30) released second-quarter earnings that beat expectations and raised its full-year earnings forecast.

The sale would be

company said.“GE alluded to a desire to

get out of the position, so the sell-down was fairly well

one ECM banker said.The Wabtec disposal is just

one leg of new GE CEO Larry Culp’s plans to revive the company’s prospects by selling non-core assets, cutting costs and shrinking its troublesome GE Capital unit, and came just days after he upped the GE’s full-year

forecasts in a sign of progress.GE, whose shares remain

stuck under US$10, or just one-third of their levels as recently as late 2016, is still to close the US$21bn sale of its biopharma unit to Danaher (Culp’s former employer).

GE is also looking to make a further dent in its stake of

services provider Baker Hughes.GE sold a US$3.6bn stake in

Baker Hughes in November and the remaining stake came out of 180-day lock-ups in May.

Weak oil prices mean the stock is trading only a little above the US$23.00 price at which it sold down in November, making it less attractive to GE to sell at current levels.

investors. Nearly 70% of respondents to an investor survey released by Greenwich Associates in 2018 said bond market liquidity had continued to decline in the previous three years. Almost 60% had increased their usage of bond ETFs over that period, while 45% of European investors and 30% of

derivatives such as CDS and TRS.

Fraser Lundie, head of credit at Hermes Investment Management, said the zero to negative yielding environment should increase investors’ focus on trading costs, encouraging the use of credit indices.

Lundie, who uses CDS indices and index options as well as government bond futures.

“The only way to be dynamic and opportunistic is through

added.Many banks have reacted to

the increased demand by setting up index-focused groups within their credit-trading units. JP Morgan launched such a group several years ago, appointing its then head of European credit trading to run it.

“Most banks are thinking

head of credit trading.

Only DONGXING SECURITIES, rated Baa2/BBB/BBB+, and CHANGDE ECONOMIC CONSTRUCTION

INVESTMENT GROUP, rated Ba1 by Moody’s, were brave enough to come to market, pricing

US$200m three-year bond offerings, respectively, on Thursday.

PROTESTS HEAT UPEscalating protests in Hong Kong, which were originally targeted against a planned law that would allow extradition to mainland China but have since grown in scope, had made it practically impossible to conduct bond offerings on Monday in any case.

Protesters had called for a general strike on Monday, and while plenty of bankers and

some either chose not to go or could not attend as public transport was severely disrupted

cancelled.“They managed to stop the

banker at one foreign institution, who said that some

investors had not come into work.

Another banker estimated that 25%–30% of people in the

to work on Monday, while some bankers elsewhere in the region cancelled planned trips to Hong Kong.

Since the Hong Kong government shows no inclination to make concessions, there appears to be no end in sight to the protests, which could continue to cause

centre.A DCM syndicate banker said

he expected Asian G3 primary issuance to be scarce for two or three weeks, much like last summer.

“When markets did get going last year, it was earlier than usual, at the end of August, and some of those deals had cracking

banker. “Cash had built up over June, July and August.

into these markets and when they do reopen it’s going to be

Source: IHS Markit

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H119

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iBOXX TOTAL RETURN SWAP

VOLUMES


Top news

NBFC crisis spreads to property Emerging Markets Lodha faces more than US$1bn of debt repayments in coming year amid funding squeeze

BY KRISHNA MERCHANT,

DANIEL STANTON

India’s shadow banking crisis is spreading to the property sector after the US dollar bonds of LODHA DEVELOPERS INTERNATIONAL, one of the country’s largest real estate developers, dropped to an all-time low in the wake of a rating cut and liquidity concerns.

Lodha, which renamed itself Macrotech Developers earlier this year but still uses the old name for branding and announcements, was downgraded to B3 from B2 by

funding conditions onshore as a result of the crisis at non-

The developer’s US$325m of 12% bonds due in March 2020 were trading at a cash price of 75 to yield 70% last Thursday,

after touching a record low of 72 to yield 83% on August 2 following the downgrade. The bonds, rated B by Fitch, have

dropped more than 20 points since April.

Moody’s has a negative outlook on Lodha’s rating as there is uncertainty over how it will deal with more than US$1bn of debt maturing over the next 12 months.

“The company does not have

upcoming debt maturities, which exposes it to heightened

said in a note on August 6.The property developer has a

£250m (US$304m) construction loan that matures in December for its Lincoln Square project in London, US$324m of bonds due in March 2020 and Rs26.7bn (US$381m) of domestic debt maturing in the next 12 months.

Lodha intends to repay the Lincoln Square construction loan out of collections from sales at the property. The domestic debt is expected to be rolled over given Lodha’s past track record and its large unencumbered land bank at Palava City in western India,

which could be pledged to raise additional debt, Moody’s said.

REFINANCING RISK

US$325m of bonds from equity stake sales in London projects is now uncertain. Moreover, the progress on commercial asset sales in India has been slower than expected and is subject to further delays. While Lodha expects collections of Rs90bn–Rs95bn in FY 2020, so far it has made collections of just

putting it behind schedule.“We have never had a day of

delay in servicing the US$325m bonds. The speculation by certain agencies/media on how we will repay the bond in March 2020 is

spokesperson for Lodha in an email. The spokesperson said that the price of its bonds did not

the notes are very thinly traded, with average quarterly volume of less than US$10m.

In January, Lodha announced it would buy back up to US$65m of its 2020 bonds via JP Morgan, but does not appear to have repurchased any of the notes since then.

Lodha is planning an Indian IPO of up to US$1bn, which

situation, but it put the plans on hold last year because of weak market conditions.

The property developer said it has various plans in place for the repayment of dollar bonds, including an agreement with one of its existing lenders to underwrite the entire

same will be in place in the next 8–10 weeks, well in advance of

spokesperson said.However, Moody’s is

concerned that the loan

and executed.

NBFC CRISIS

The problems at Lodha can be traced to the credit squeeze at

BAML and its rivals shake up push for private capital fees

People & Markets Capital raised in private markets nears level for public companies

BY STEVE SLATER

Bank of America Merrill Lynch has rejigged its coverage of

up in how big banks are trying to win business from a growing and deepening pool of private capital.

BAML is not alone. UBS has created a dedicated private capital markets group. JP Morgan has set up an ECM private placements team in Europe. And others are ramping up their efforts to win business from the various pools of private capital.

This is partly because many companies are choosing to stay private for longer, meaning there are bigger and more

traded. That trend has eaten into the money banks get from handling lucrative IPOs, but it can provide plenty of fundraising and advisory fees if banks get their pitch right for

The deals include debt

to single or groups of investors, mid-sized M&A and more complex structured

And, if successful, many of the

future IPOs or other capital markets deals.

Bankers estimate the capital being raised in private markets is now approaching amounts raised in public markets. The trend has been in place for two decades, and been shown by a steady decline in publicly listed US companies.

“Over that time we’ve been dealing with an increasingly large and active supply of private capital as an alternative to the public

BAML’s head of EMEA

investment banking and head of EU corporate and investment banking.

“CRITICAL COMPONENT”

BAML chiefs recently told staff that tapping providers of private capital is a “critical

bank strategy.Its changes in recent weeks

include setting up a new emerging growth and regional coverage unit to cater for growing, mid-sized companies in the US, led by Brendan Hanley in New York. There’s also a push for fast-growing companies overseas.



India’s shadow banks, which has choked funding for developers and also hurt demand for housing.

Last month, Goldman Sachs warned that a liquidity crisis at NBFCs has led to solvency issues for developers, as NBFCs avoid fresh lending and have stopped disbursing loans already committed to the sector.

“With slower project completions and the resulting

slower sales, developers are facing the loss of equity value

Goldman analysts in a note on July 9. It estimates there is a US$7bn stock of ready but unsold units that could hit

The real estate sector has already seen some consolidation, with reportedly four out of 10 developers going out of business and another

three likely to exit given the

warned.According to media

reports, Indiabulls Housing Finance had to auction off

luxury housing complex in Mumbai, at a cut-down price because property developer Shree Ram Urban Infrastructure defaulted on a payment.

Lodha Developers, however, dismissed concerns that the housing glut could lead to a slowdown in sales.

“We continue to sell our apartments and continue to collect payment in line with our

said. “More than 50% of our sales come from affordable housing where the impact of the economic slowdown is

BAML also appointed Woody Boueiz in June to lead and build up its global sovereign wealth funds team, and Andreas

banker, to head global private

banking. Both are based in London. And last month Laurent Dhome and Vijay Ralhan were

sponsors for EMEA.To coordinate coverage across

the landscape, BAML has also set up a global private capital council. It will have 13 senior bankers and be led by Karim Assef, chairman of investment banking.

BAML ranked fourth for

of Goldman Sachs, JP Morgan and Morgan Stanley, according

Credit Suisse, Barclays and Citigroup.

Those rankings only capture private equity fees, however. Sovereign wealth funds, pension and infrastructure funds and increasingly

grown the private capital pie and have huge amounts of

years of low interest rates, they are also increasingly chasing similar assets.

“Those worlds are increasingly competing for similar assets, but they are also increasingly co-operating in providing capital as an alternative to a traditional IPO

said.Last month’s £5.9bn deal to

Merlin private showed that, according to BAML, which advised on the deal and

buying consortium included

Blackstone, the Canada Pension Plan Investment Board and Denmark’s Kirkbi - spanning

teams.

“VALUE CREATION SHIFT”UBS said the trend for more companies staying private for longer was part of the reason it has set up a private capital markets group to service companies before they go public.

It will focus on last-stage pre-

private credit, infrastructure investments and allowing insiders to monetise equity holdings. Part of its role will be to connect UBS’s high net-worth client base to private alternatives.

“There has been a value creation shift from public to private markets, with the global

net asset value of private equity growing twice as fast as public market capitalisation since

investment banking Piero Novelli and Rob Karofsky said in a memo to staff.

The team will have three co-heads: Alan Felder will run the Americas, Isabelle Toledano-Koutsouris will run EMEA and Nicolo Magni will lead in Asia.

JP Morgan last month cited the same trends as fuelling a rise in equity private placements across all sectors and set up an ECM private placements group for EMEA. It is headed by Francesco Rossi Ferrini and Aloke Gupte and joined by Rahul Bhandari, who previously worked in its ECM and DCM teams.

is majority owned by a consortium including Blackstone and CPPIB.

For more information on the various advertising and sponsorship opportunities available within IFR,

email: [email protected]

Reach the people who matterAdvertising and sponsorship opportunities in IFRThe most senior professionals in the world’s capital markets rely on IFR for authoritative and

independent news, data and analysis – and have done for more than 40 years.

IFR provides an unrivalled opportunity for advertisers to reach the people who drive and shape the industry

and gives them the chance to associate their company with the world’s number one source of global capital

markets intelligence.

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LPC is the premier global provider of information on the syndicated loan markets. Our first-to-

the-market news and comprehensive real-time and historical data help industry players stay

informed about market trends and facilitate trading and investment decisions.

LPC’s publications, end-of-day valuations, online news, analysis, and interactive databases are

used every day by banks, asset managers, law firms, regulators, corporations and others to drive

valuation, syndication, trading, research and portfolio management activities.

CONNECT TO THE GLOBAL SYNDICATED LOAN MARKET WITH LPC.

LOOKING FOR A WIDER VIEW OF THE GLOBAL SYNDICATED LOAN MARKET?LOOK TO LPC

FRONT STORY MARKETS

As Europeans slip, Asian banks take shareEuropean banks’ share of IB fees 21% in July, lowest on recordEuropean banks had their lowest market share of global investment banking fees in the

The trend also appears to be getting worse:

UBS DEUTSCHE BANK BNP PARIBAS and CREDIT

AGRICOLE have all lost ground in the last MIZUHO FINANCIAL GROUP

MITSUBISHI UFJ FINANCIAL GROUP and BANK OF CHINA BUOYANT DCM, LOANSEuropean banks’ annual growth for

MIND THE GAPJP MORGAN

GOLDMAN SACHS

half and BANK OF AMERICA MERRILL LYNCH was

MORGAN

STANLEY and CITIGROUP

CREDIT SUISSE BARCLAYS and HSBC have all nudged up the rankings in

SUMITOMO

MITSUI FINANCIAL GROUP have also gained

CITIC is

Steve Slater


&Markets Richard Gnodde and

16 other current and former Goldman Sachs staff are charged in Malaysia over 1MDB

Bankers’ bonuses for

2019 look like being flat at best, and probably down up to 15% for traders, after a tough first half

Negative ECB interest rates

prompt eurozone banks to start charging corporate clients for deposits parked with them

Source: Refinitiv

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2019

Global Fees 1H Global Fees 2H

Americas Banks European Banks Asian Banks

GLOBAL IB FEES WITH FIRST-HALF FEE SHARE

EARNED BY BANK REGION

US$BN %

Source: Refinitiv

9

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European Banks Americas Banks Asian Banks

DCM FEES BY BANK REGION


BANK OF AMERICA MERRILL LYNCH has hired James Palmer from Credit Suisse as chairman of equity capital markets for the EMEA region. Palmer will report to Sam Losada, head of EMEA ECM, and Jim O’Neil, head of EMEA corporate and investment banking.

Palmer will start in November, just a year after he joined Credit Suisse as vice chairman of investment banking and capital markets in EMEA. He spent the previous two decades at UBS in the US, including heading ECM for the Americas.

INSTINET, the electronic trading platform owned by Nomura, has hired Seema Arora as head of execution sales for EMEA, a newly created role based in London. Arora will head a team responsible for selling all Instinet execution products in the region and report to Richard

Parsons, CEO of Instinet Europe. Arora joined Instinet after 10 years at Kepler Cheuvreux. She previously spent six years at JP Morgan and five years at Dresdner Kleinwort Benson.

Who’s moving where…

DENNIS KELLEHER, CEO OF BANK WATCHDOG BETTER MARKETS, P21

Goldman executives charged over 1MDBGOLDMAN SACHS

as underwriter and arranger for three

Richard Gnodde

Michael SherwoodArchie

ParnellJohn

Michael Evans

fraudulent misappropriation of billions in

Brian Robin Vince Claes Dahlback Oliver

Ronald Lee

and

“VIGOROUSLY DEFENDED”

The spokesperson said the bank was not

underwriter and arranger for the three

responsible for managing the relationship

Citi slashes high-yield researchCITIGROUP

The 1MDB case has shaken Goldman, which is also being probed by the US Justice Department for its role as underwriter and arranger for the three bond offerings totalling US$6.5bn


&Markets

Michael Cummings has stepped down as head of Latin America debt capital markets at CREDIT SUISSE and will be replaced by Dennis Eisele, who has joined from Deutsche Bank. Eisele worked with the German bank for 19 years, most recently as its head of EM syndicate and DCM

for Latin America. Cummings worked with CS for 14 years, although he had a brief stint at UBS during that period.

DEUTSCHE BANK has appointed Anurag Singhal as head of financing coverage in Europe within its global financing and credit trading unit, as part of its recent widespread restructuring. Singhal is responsible for coordinating origination and

distribution of risk opportunities across ABS, credit solutions, direct lending, portfolios, real estate and transportation infrastructure, and energy. Singhal will also help coordinate public-side coverage for Deutsche’s financing business in Europe.

[email protected]

Thomas Blott

that would keep banks from bundling

Under rules adopted in Europe

Philip Scipio

Eurozone banks charging corporates for deposits

borrowing rate even further from the

COMMERZBANK

BNP PARIBAS is understood to have

“TOUGH TIME”UBS

rates again then it will be hard for those

UNICREDIT last week

Christopher Spink

Bellwether: n. From the practice of placing a bell around the neck of a castrated ram so that it might lead its flock

Bellwether


Who’s moving where… REDDING RIDGE

ASSET MANAGEMENT has hired John D’Angelo as a collateralized loan obligation portfolio manager, sources said. He is set to join the firm, which oversees about US$6.7bn in assets, in the newly created position in New York in September. Redding Ridge, which manages

both US and European CLOs, was established and seeded by Apollo Global Management in 2016 in response to Dodd-Frank risk-retention requirements. D’Angelo will join Redding Ridge from Pretium Partners where he served as a senior portfolio manager.

Former Evercore banker Amy Lissauer has joined BAML to head its activism and raid defence. Lissauer will continue working to defend against activists and join BAML in the late fall.

MITSUBISHI UFJ FINANCIAL GROUP has hired three corporate finance bankers to build out its US restaurant practice. Christopher Addison, Shawn Janko and Jake Nash have all joined as managing directors in Atlanta.

Reinhard Haas has been appointed global head of the newly formed syndicated and leveraged finance unit at COMMERZBANK, a source said. Commerzbank merged its loans and leveraged finance divisions last month, and the new unit sits within the new capital markets

division. Haas was global head of DCM loans for nearly four years and has worked at Commerzbank since 2011. He will report to the head of the capital markets division, Roman Schmidt.

Tucker’s passion, after all, is Chelsea Football Club. And Chelsea set a precedent for management U-turns in June 2013 by rehiring Jose Mourinho, six years after The Special One had left


[email protected]

&Markets

COMMERZBANK’s

Greater China bonds

head Daz Zhang has

left the bank. Zhang,

who was most recently

a director based in

Hong Kong, joined

Commerzbank in 2014

as the Singapore-

based head of DCM

syndicate for Asia.

Raymond Gatcliffe has joined CITIGROUP as head of commercial

banking for EMEA.

Gatcliffe, who joined

Citi in 1994, will be

based in London. He

will report to Sunil

Garg, head of Citi’s

commercial bank, and

David Livingstone,

head of EMEA.

HSBC has appointed

Michael Rossiter as

head of its leveraged

and acquisition finance

team in Australia.

Rossiter will be

responsible for driving

the syndicated loan

business and work on

event-driven financings

for corporate, financial

institution and private

equity clients.

Marilyn Fung has

joined STANDARD CHARTERED as a

director in the Asian loan

syndicate and

distribution team. She is

based in Singapore.

Fung previously spent

eight years at DBS Bank,

where her most recent

position was senior vice

president in the

syndicated finance team.

JP MORGAN has

strengthened its ECM

teams in Japan and

Korea after hiring Yuka Uehara in Tokyo and

Jinsoo Ha as head of

ECM for Korea. Uehara

joined from Mizuho,

where she was head of

ECM for Japan. She

reports to Yoshihiro

Katsumura, head of

ECM for Japan at JP

Morgan. Ha has

worked for Korean

investment bank NH

Investment and

Securities for 12 years.

She reports to Daniel

Darahem, head of

ECM and the strategic

investors group for

Asia Pacific.

Credit Suisse hires Mizuho banker as Saudi CEOCREDIT SUISSE has hired

its investment banking business in the Davide Barbuscia

Citi picks Truscott to co-head UK investment bankingCITIGROUP has promoted to

than a quarter of the region’s investment

Steve Slater

CS equities chairman exitsCREDIT SUISSE

Philip Scipio


Asset managers farm out trading to combat costs and complexity

burgeoning demand for outside help from

“GIANT SWITCH”

WELLS FARGO BTON FINANCIAL and Arnold’s MERAKI GLOBAL ADVISORS

INTL FCSTONE FILLMORE ADVISORS to

prompting some big banks and brokerages

NORTHERN TRUST and JEFFERIES FINANCIAL

GROUP

GROWING POPULARITY

manager’s equities trader is handling less

London-based EdenTree Investment

US$8bn PER TRADERFor the banks and brokerages who are

regulation and are grappling with

Thyagaraju Adinarayan, Helen Reid

US RESEARCH FIRM MUDDY WATERS, P22


&Markets

At half-time, 2019 trader bonus prospects look bleak

ADVISORY ON PAR

That average revenue was dragged down

Philip Scipio

Critics pan research questioning Volcker Rule

one last push to get regulators to loosen rules that ban the largest US banks from

the views in the paper are those of the

NO RELIEF

writing the rules that put the meat on the

for offering too little relief and perhaps

VOLCKER = HIGHER COSTS

The paper said the rule has done little to

The paper said the market share of the

dealer trades in this market was one of the

that did was limited to a small segment of the

same time that Trump’s deregulators are

Philip Scipio



German economy hurts CommerzbankCOMMERZBANK

GROWING LOANS

UNICREDIT last week reported revenues of

Christopher Spink

Burford fights Muddy Waters ‘short attack’questionable valuations at litigation funder BURFORD CAPITAL

“INVESTORS BAMBOOZLED”

investors via a series of four bond issues

“NO COMPLICITY”

and it was funding various strands of

overseen in line with our robust investment

Christopher Spink

BENJAMIN ARNOLD, WHO HAS LAUNCHED AN OUTSOURCED TRADING FIRM, P20


Morgan Stanley to take China JV stake to 51%MORGAN STANLEY RULES RELAXED

Thomas Blott

Australia's AMP plans overhaul after record lossAMP

transformation plan as the beleaguered part for revelations unearthed during the

It also said it would look at divesting its

plans as it said it was waiting until the sale

opportunities between banking and wealth

a writedown of the goodwill of its wealth

Thomas Blott

&Markets

WANTED: ADVISERGermany is looking for an external adviser

to evaluate options for its €1bn stake in

COMMERZBANK, a public tender offer showed.

Berlin, through the Federal Finance Agency,

which oversees state investments, posted

a public offer to find a financial expert for

“consulting regarding Commerzbank stake”.

The German government is by far the bank’s

biggest shareholder with a stake of just over

15%.

IN CONTEMPTA US appeals court has upheld a ruling that

found three Chinese banks in contempt for

refusing to comply with subpoenas in a probe

into North Korean sanctions violations. The

decision raises the possibility of at least one

of the three banks losing access to US dollar

funding at a time when US-China relations are

already at their lowest ebb in years.

In May a US district judge ruled the three

banks were in contempt for failing to comply

with demands to hand over documents related

to an investigation by the US Department of

Justice into possible sanctions violations.

Neither the district court nor the appeals

court ruling identified the banks involved,

although the details provided in both are similar

to a civil forfeiture case in 2017 involving BANK

OF COMMUNICATIONS, CHINA MERCHANTS BANK and

SHANGHAI PUDONG DEVELOPMENT BANK.

JAVID SCRUTINYBritain’s opposition Labour Party has called for

new Prime Minister Boris Johnson to investigate

his finance minister Sajid Javid’s role in financial

misconduct during his previous career as a

banker at DEUTSCHE BANK before entering politics.

Labour’s finance spokesman John McDonnell

said he had written to Johnson to reconsider

Javid’s fitness for the job and should look into

three areas of concern relating to the minister’s

18-year finance career during which time he

worked for Deutsche Bank. These included

Deutsche’s activities in the run-up to the global

financial crisis while Javid was working at the

bank.

MARGIN PRESSURECOMMONWEALTH BANK OF AUSTRALIA reported a 5%

drop in annual profit as margin pressure and

costs related to the country’s Royal Commission

inquiry hurt results. Australia’s biggest lender

said cash profit was A$8.5bn (US$5.7bn) for

the fiscal year to the end of June, down from

A$8.9bn a year earlier.

It followed a 5% fall in profit in 2017/18, and

marked the first time CBA had recorded a fall in

cash profit for two consecutive years.

IN BRIEF

Clarity, increased.For over 40 years, IFR has been clarifying the complex global capital markets by providing intelligence on current deals and new opportunities, along with reliable data and trusted opinions.

A new IFR website is coming, featuring more content, improved search capabilities, expanded navigation, powerful personalization tools and a more intuitive layout. It combines all of IFR’s industry-leading content from across all the global capital markets asset classes onto a single, consolidated platform.

When you’re looking for clarity on the global capital markets, look to the new IFR.

ifre.com/new-ifr-website

FRONT STORY SSAR/CORPORATES

Issuers extend curves as yields tank Longer tenors to take centre stage

Bulk of IG bonds now yielding below zero

European issuers and investors are rethinking their market approach in the face of the unprecedented level of negative-yielding bonds, according to bankers.

For many, this means they are looking at ultra-long euro maturities to overcome the side effects of the European Central Bank’s policies.

SCHLESWIG-HOLSTEIN, for example, extended its curve by 10 years with an August 2039

grade benchmark to test the depth of demand for longer tenors this month.

The German issuer had previously opted for shorter tenors of up to 10 years.

“Given the lack of yield anywhere else, there has been demand for names that offer positive mid-swaps levels, especially considering where Germany is,” said a syndicate lead on the deal.

The Friday before last, the entire German government bond yield curve turned

And the rest of the eurozone sovereigns are going in the same direction: 62.84% of the outstanding mid-yields had submerged below zero by the end of July, compared with 38.17% at the end of December.

At the same time, the percentage of European investment-grade corporate bonds carrying a negative yield has virtually quadrupled to 42.9%, up from 10.91% in

December, according to data from Tradeweb.As a result, the short end of the curve has

fallen out of fashion among investors over the last two or three weeks and the names that have opted to tap the markets during the summer lull have gone for the longer end.

“It has become a very tough part of the curve. All the focus is at the long end,” said Ioannis Rallis, head of European SSA DCM at JP Morgan.

Apart from the benchmark deal from Schleswig-Holstein, SNCF RESEAU printed a €100m August 2119 last week, solely arranged by HSBC. That century-long deal, which was off the issuer’s EMTN programme, pays a 1.425% annual coupon.

“People are really looking at 15-year-plus now to get positive yield, additional spread pick-up and steepness. But not every investor can invest in the long end, because of their mandate or because they do not need long duration,” Rallis said.

“Likewise, also a lot of issuers are restricted on how long they can issue. The

for sub-10-year securities,” he said.In the corporate investment-grade market,

however, a syndicate banker said negative yields would not change anything for most investors.

“If it costs you 40bp or 50bp to hold cash but only negative 20bp to buy a corporate bond, then you are going to do that all day,” he said.

MORE TO COME

Schleswig-Holstein, bankers say, is just the

down its benchmark curve. But success may require investors to further capitulate on their yield targets.

“With the bulk of outstanding investment-grade securities having transitioned into negative-yielding territory, the big question for investors is what they are going to do if they still have restrictions on buying negative-yielding securities,” said a second syndicate banker.

“They would pretty much not be able to buy any euros in the high-grade space,” he said.

For now, the approach seems to be working. Books for Schleswig-Holstein’s deal closed in excess of €600m, which allowed leads DekaBank, Deutsche Bank, DZ Bank, LBBW

and NatWest Markets to size it at €500m - in keeping with the issuer’s previous outings.

The bonds priced at 4bp over mid-swaps, in line with guidance, and it is the only positive yield point on the issuer’s curve. Its previous longest outstanding was a €500m 0.125% June 2029 that was bid on Tradeweb at 7.8bp through swaps ahead of the new issue pricing.

“People are thinking about where deposit rates are going in the short to medium term. But to issue seven, 10 or even longer deals won’t be materially different,” said the second syndicate banker.

DIVERSIFICATION

In the face of negative yields, bankers believe frequent issuers will look to diversify their funding plans by tapping into a different array of currencies.

“Issuers will use the many tools they have in their kits,” said the second syndicate banker, with reference to KfW and EIB’s diverse funding programmes.

Both, he said, have raised about 75% of their funding needs for the year using a combination of different tenors and currencies.

“For them, this is not an immediate problem, as they can access different markets and issue in different tenors,” he said. “The bigger question is: what are they going to do next year?”

For JP Morgan’s Rallis, the fact that most frequent issuers have completed the bulk of their funding programmes has left them feeling less pressure.

“There is going to be less anxiety amongst issuers, but I think they will have to adjust. The level of adjustment, however, will depend on

once the market reopens end of August. It is not clear yet, but I do not expect them to continue as before,” he said.

For the time being, bankers expect issuance will remain sparse for the rest of the summer.

“August is quiet. Everyone is waiting to see what is next for the ECB, if they will resume quantitative easing or not, keep the deposit rate. There are so many things that could or might not even happen. The good news is that now everyone is in the same negative boat,” said the second syndicate banker.Priscila Azevedo Rocha, Eleanor Duncan


BONDS SSAR 27 Corporates 27 FIG 31 Covered Bonds 34 High-Yield 35 Structured Finance 37

Source: Tradeweb

0

5

10

15

20

25

30

35

40

45

50

%

Jan

17

Mar

17

May

17

Jul 1

7

Sep

17

Nov

17

Jan

18

Mar

18

May

18

Jul 1

8

Sep

18

Nov

18

Jan

19

Mar

19

May

19

Jul 1

9

OUTSTANDING EUR CORPORATE BONDS WITH

NEGATIVE MID-YIELDS AT MONTH END


QIC Shopping draws the crowds Aussie property firm broadens Green bond patch with local sale

Socially responsible investing continues to expand in Australia, where QIC SHOPPING

CENTRE FUND, rated A– (S&P), accessed the

Wednesday with an upsized A$300m (US$201m) six-year issue.

The dual-tranche sale, which raised double the indicative minimum issue size

enabling joint leads CBA and NAB to price

QSCF’s interpolated standard secondary curve.

property landlord globally garnered a A$30m cornerstone investment from the Clean Energy Finance Corp and clearly

for these assets in Australia.“The QSCF Green bond attracted new

investors with green and environmental, social and governance [ESG] investment mandates to the fund from across Asia and Australia,” said Michael O’Brien, managing director of QSCF parent company QIC GRE.

Responsible investments under management in Australia rose 13% last year to A$980bn, or 44% of the A$2.24trn total assets professionally managed in the country at year-end, according to the Responsible Investment Benchmark Report 2019 Australia.

The level of demand for QSCF’s rare

times oversubscription for Woolworths’s

bond in April, which funded solar panels and in-store LED lighting.

offering by an Australian retailer, was priced 10bp below its guidance range.

“Issuing a Green bond is an important milestone for QSCF and the retail property sector globally, and is an endorsement of QIC GRE’s progress and ongoing focus on sustainability,” O’Brien said.

“For QIC GRE, delivering sustainability initiatives such as upgrades and the intelligent automation of centre plant and

equipment, and installing LED lighting, generates strong commercial outcomes, as well as reducing our environmental footprint.”

Brisbane-based QSCF is one of QIC

interests in retail assets across Australia valued at circa A$15bn as of June 2019.

SCALING NEW PEAKS

QSCF’s Green debut takes year-to-date Australian SRI issuance, including Aussie dollar and offshore deals, up to A$5.3bn-equivalent, well placed to surpass the record A$8.4bn-equivalent sold in 2018.

The Australia bond market was a slow starter in the global SRI revolution, selling just A$1.0bn, A$1.4bn and A$1.1bn in 2014 to 2016, but it has subsequently made great strides, beginning with a jump to A$5.2bn-equivalent of issuance in 2017.

Supranationals and sovereign agencies are the most frequent visitors Down Under, with the Asian Development Bank, Inter-American Development Bank, European Investment Bank, KfW and BNG Bank raising a combined A$2.9bn from seven Kangaroo SRI transactions this year.

Outside the SSA and corporate segments, Queensland Treasury Corp

consumer lender Flexigroup issued A$90.9m of ABS, while Pepper sold €200m (A$335m) of RMBS notes in Europe in 2019.

tranche was priced at 99.383 for a yield of 2.11%, much tighter than 140bp area guidance at asset swaps plus 127bp. A

at par, 127bp wide of three-month BBSW.The bonds will fund initiatives to

enhance the environmental performance for three QSCF retail assets, including

building management systems, LED lighting, heating and cooling systems, and a potential solar rooftop programme.

QSCF is the third property-related Green bond issuer in the Australian dollar market following a A$150m seven-year

and a A$100m 10-year by sister company Investa Commercial Property Fund a month later.

Stockland previously accessed the Eurobond market in October 2014 with a €300m 1.5% seven-year green sale.John Weavers

WEEK IN NUMBERS

US$75bn PEAK ORDER BOOK ON OCCIDENTAL

PETROLEUM’S US$13bn 10-TRANCHE

M&A BOND BACKING ITS ACQUISITION OF

ANADARKO

38bp DROP IN THE YIELD ON THE 10-YEAR

TREASURY NOTE FOLLOWING PRESIDENT

TRUMP’S ANNOUNCEMENT OF FURTHER

TARIFFS ON CHINESE GOODS

13.5% IPTs ON SIRIUS MINERALS’ US$500m

7.5-YEAR HIGH-YIELD BOND BEFORE THE

SALE WAS POSTPONED AS A RESULT OF

MARKET VOLATILITY

-0.58% YET ANOTHER RECORD LOW YIELD

ACHIEVED BY 10-YEAR BUNDS LAST WEEK,

ONCE AGAIN ON THE BACK OF TARIFF

TALK

4.5pts JUMP IN PRICE ON HSBC’S

US$750m TIER 2 “DISCO” BOND AS THE

PENDULUM SWUNG TOWARDS IT BEING

CALLED

1.5

1.6

1.7

1.8

1.9

2.0

2.1

9/8/197/8/195/8/191/8/1930/7/19

-0.60

-0.58

-0.56

-0.54

-0.52

-0.50

-0.48

-0.46

-0.44

-0.42

-0.40

-0.38

9/8/197/8/195/8/191/8/1930/7/19

%

%

Responsible investments under management in Australia rose 13% last year to A$980bn

SSAR

NON-CORE CURRENCIES

SSAS RAISE A$400m

ASIAN DEVELOPMENT BANK (Aaa/AAA/AAA)

Thursday via joint lead managers Citigroup, JP Morgan and RBC Capital Markets.

The 1.1% August 15 2024s were priced at 99.855 for a yield of 1.13%, some 35bp wide of asset swaps and 44bp over the April 2024 ACGB.

A day earlier Dutch agency NEDERLANDSE

WATERSCHAPSBANK (NWB), rated Aaa/AAA (Moody’s/S&P), tapped its 3.3% May 2 2029 Kangaroo for A$50m to increase the outstanding amount to A$695m.

JP Morgan was sole lead for the reopening, which was priced at 115.436 to yield 1.58%, or 57.5bp and 61.9bp wide of asset swaps and the 2029 ACGB.

ACT TO OPEN MAY 2025 LINE

AUSTRALIAN CAPITAL TERRITORY, rated AAA (S&P), has mandated ANZ, UBS and Westpac for a new May 22 2025

bond issue.ACT previously issued A$675m of

2.25% 10-year bonds on May 15 priced 65bp wide of EFP (10-year futures contract) and 66.2bp over the April 2029 ACGB.

CORPORATES

US DOLLARS

GLOBAL PAYMENTS FUNDS TOTAL SYSTEM MERGER WITH US$3bn BOND

GLOBAL PAYMENTS launched a US$3bn three-part bond on Wednesday to complete funding for the third M&A deal in the quickly consolidating payment technology space.

Proceeds will be used to fund and

US$21.5bn merger with credit card processor Total System Services.

This is the third such deal in the space, following on from Fiserv’s US$22bn acquisition of First Data and Fidelity National Information Services’ US$34bn buyout of Worldpay.

US investors were disappointed when Fiserv and FIS issued most of their bonds in European markets earlier this year. Global Payments, however, stuck to the US.

Bookrunners Bank of America Merrill Lynch and JP Morgan tightened spreads 15bp from initial price thoughts.

and the US$750m 30-year priced at Treasuries plus 115bp, 155bp and 195bp, respectively.

Global Payments (Baa3/BBB-) was recently upgraded to the Triple B space following the news of the acquisition as it is expected to quickly make it a leading company in the industry with US$8.5bn in revenue, according to a Moody’s report.

“The complementary end market vertical strengths and similar distribution strategies of the two companies create opportunities to both enhance revenue growth and

Moody’s noted in the report.Global Payments is targeting leverage of

3x, according to Moody’s, which said it expects prompt deleveraging following the close of the acquisition.

The company has no bonds outstanding, but compared with its peers in the same space, Global appeared to pay up quite a bit.

The FIS 3.75% 2029 (Baa2/BBB/BBB) was trading 41bp tighter than the new Global Payments 10-year note.

Likewise, the Fiserv 4.40% 2049 (Baa2/BBB) was trading 33bp tighter than the new 30-year note from Global Payments.

“There is no Global Payments curve, so there’s a lot of price discovery happening,” said one banker away from the trade.

“A lot of the issuance is getting push-back” in the current market, the banker said.

“Still, they tightened 15bp from where they started and that’s pretty decent in this market, where you’re seeing a lot of issuers receive more push-back than that.”

UTILITY COMPANIES LOCK IN LOW COUPONS AS RATES SLIDE

A strong rally in Treasuries, an increasingly dovish interest rate environment and Green bond demand helped PUBLIC SERVICE CO OF

COLORADO price last Tuesday a 30-year bond with one of the lowest ever coupons for a utility company in that tenor.


BONDS SSAR/CORPORATES

EUROPEAN SOVEREIGN BOND AUCTION RESULTS WEEK ENDING AUGUST 7 2019

Pricing date Issuer Size Coupon (%) Maturity Average Yield (%) Bid-to-cover

Aug 6 2019 UK £3bn 0.625 Jun 7 2025 0.367 2.14

Aug 7 2019 Germany €2.646bn 0.000 Oct 18 2024 –0.790 1.18

Source: IFR

ALL INTERNATIONAL BONDS (ALL CURRENCIES)BOOKRUNNERS: 1/1/2019 TO DATE

Managing No of Total Share

bank or group issues US$(m) (%)

1 JP Morgan 790 194,184.48 7.7

2 Citigroup 723 172,919.21 6.8

3 Barclays 599 153,959.75 6.1

4 BAML 592 139,572.96 5.5

5 HSBC 692 136,959.71 5.4

6 Goldman Sachs 479 119,797.48 4.7

7 Deutsche Bank 553 117,402.26 4.6

8 BNP Paribas 475 110,423.96 4.4

9 Morgan Stanley 418 97,452.02 3.9

10 Credit Agricole 344 78,380.73 3.1

Total 3,635 2,526,598.76

Including Euro, foreign, global issues. Excluding equity-related debt,

US Global ABS/MBS.

Source: Refinitiv SDC code: J1

ALL BONDS IN EUROS BOOKRUNNERS: 1/1/2019 TO DATE


bank or group issues €(m) (%)

1 BNP Paribas 265 61,529.76 7.3

2 JP Morgan 188 52,446.41 6.2

3 SG 189 52,000.80 6.2

4 Deutsche Bank 225 48,817.82 5.8

5 Barclays 175 48,343.13 5.8

6 Credit Agricole 209 48,137.94 5.7

7 HSBC 237 48,096.60 5.7

8 UniCredit 214 43,330.95 5.2

9 Citigroup 151 36,744.99 4.4

10 Goldman Sachs 134 35,363.90 4.2

Total 1,095 839,402.05

Including Euro-preferreds. Excluding equity-related debt,

US Global ABS/MBS.

Source: Refinitiv SDC code: N1

ALL INTERNATIONAL GREEN BONDSBOOKRUNNERS: 1/1/2019 TO DATE



1 HSBC 49 6,612.10 7.8


3 BNP Paribas 30 5,247.25 6.2

4 Citigroup 34 4,757.94 5.6

5 BAML 26 4,738.84 5.6

6 JP Morgan 30 4,434.16 5.2

7 SG 15 2,876.88 3.4

8 UniCredit 14 2,865.33 3.4

9 Barclays 19 2,788.18 3.3

10 Deutsche Bank 21 2,457.54 2.9

Total 168 84,725.60

Excludes social bonds and mixed use of proceeds.

Source: Refinitiv SDC code: JG1

The company was followed into the market on Wednesday by two other utilities that also found investors receptive despite a slightly trickier market backdrop.

“It is the perfect environment (for utilities) right now because of the low natural gas prices and low interest rates,” said Andrew DeVries, a senior utilities analyst with CreditSights.

Public Service Co of Colorado, a subsidiary of electric and natural gas delivery company Xcel Energy, sold a US$550m SEC-registered

of 3.20% on Tuesday.Spreads were tightened from initial price

thoughts of 115bp-120bp over Treasuries to

100bp over.

quality and a demand for yield and long duration, high-quality bonds with stable decent spreads are going to do quite well,” said Gregory Staples, head

DWS Group.Staples pointed to investor demand for

stable, highly rated companies amid a mild risk-aversion seen from investors in

the credit market. The company is rated A3/A-/A-.

The Green bond aspect also added to the attraction of the name, he said.

expenditures.Interest from dedicated green investors as

well as regular investment-grade accounts swelled order books to US$2.1bn, before

according to one of the leads.The notes offered a 9bp concession to the

issuer’s curve, according to IFR calculations.Barclays, Citigroup, PNC and TD were joint

bookrunners on the deal.

CHEAPER DEBTOther utility names WISCONSIN PUBLIC SERVICE and NISOURCE and also emerged with bonds last Wednesday, raising US$300m and US$750m, respectively.

Wisconsin Public Service, rated A2/A-/A+ priced a 30-year note with a slightly higher 3.30% coupon last Wednesday afternoon.

Lead banks Bank of America Merrill Lynch, MUFG, PNC and Wells Fargo brought pricing

in to 112bp over Treasuries, from initial price thoughts of 125bp-130bp area and guidance of 115bp area.

“These companies are replacing old legacy utility 30-year bonds with 5%, 6% and 7% coupons with new coupons in the 3% range,

interest rates,” said DeVries.Baa2/BBB+/BBB rated NiSource sold a 10-

year senior unsecured bond that was upsized from US$500m to US$750m and priced with a coupon of 2.95%, offering a spread of 130bp over Treasuries.

Treasury yields continued to drop last week, helping borrowers lock in low coupons. The 10-year Treasury yield dropped to 1.63% from over 2% the previous week, while the 30-year tightened to 2.15% from 2.58% at the start of the week before.

But market conditions were a little tougher on Wednesday, with equity markets gyrating after a positive day on Tuesday.

“The market is a little more choppy today,” said a lead on the Public Service Co of Colorado deal ahead of pricing. But with Treasury yields still dropping, “coupons are going to keep coming tighter,” he said.


ALL US DOLLAR FIXED-RATE GLOBALS BOOKRUNNERS: 1/1/2019 TO DATE

Managing No of Total Share bank or group issues US$(m) (%)

1 JP Morgan 160 44,164.07 10.0

2 Citigroup 139 43,114.57 9.8

3 Barclays 108 35,122.77 8.0

4 BAML 131 31,702.27 7.2

5 Goldman Sachs 104 30,215.71 6.9

6 Morgan Stanley 86 26,654.58 6.0

7 RBC 79 20,231.66 4.6

8 Wells Fargo 102 19,216.39 4.4

9 Deutsche Bank 51 15,548.80 3.5

10 BNP Paribas 51 15,487.55 3.5

Total 305 440,858.50

Excluding equity-related debt, ABS/MBS.

Source: Refinitiv SDC code: O5

ALL SOVEREIGN BONDS IN EUROSBOOKRUNNERS: 1/1/2019 TO DATE

Managing No of Total Share bank or group issues €(m) (%)

1 JP Morgan 21 14,977.16 11.3

2 BNP Paribas 18 12,104.66 9.1

3 SG 16 11,029.51 8.3

4 HSBC 13 10,217.96 7.7

5 Citigroup 17 9,785.90 7.4

6 Goldman Sachs 16 9,501.14 7.2


8 Barclays 11 7,386.62 5.6

9 Deutsche Bank 11 5,370.92 4.1

10 UniCredit 5 5,025.59 3.8

Total 46 132,492.25

Excluding ABS/MBS.


ALL INTERNATIONAL US$ BONDSBOOKRUNNERS: 1/1/2019 TO DATE


1 JP Morgan 536 125,922.04 9.4

2 Citigroup 524 119,655.26 9.0

3 BAML 428 91,868.05 6.9

4 Barclays 359 83,841.71 6.3

5 Goldman Sachs 337 75,901.15 5.7

6 Morgan Stanley 312 71,591.46 5.4

7 HSBC 317 60,302.01 4.5

8 Deutsche Bank 282 54,027.08 4.0

9 Credit Suisse 283 53,958.16 4.0

10 Wells Fargo 242 47,547.61 3.6

Total 1,660 1,335,115.70

Including Euro, foreign and global issues. Excluding equity-related debt,

US Global ABS/MBS.

Source: Refinitiv SDC code: O1

ALL SUPRANATIONAL BONDS IN EUROS BOOKRUNNERS: 1/1/2019 TO DATE


1 JP Morgan 14 4,796.07 11.0

2 HSBC 11 4,206.64 9.6

3 Barclays 7 3,988.11 9.1

4 Goldman Sachs 6 3,474.65 8.0

5 BAML 11 3,262.52 7.5


7 Deutsche Bank 4 2,402.93 5.5

8 UniCredit 3 2,378.53 5.4

9 BNP Paribas 4 2,236.40 5.1

10 Citigroup 5 2,137.58 4.9

Total 40 43,661.43

Excluding ABS/MBS.


ALL AGENCY BONDS IN EUROSBOOKRUNNERS: 1/1/2019 TO DATE


1 JP Morgan 23 8,405.23 10.2


3 BNP Paribas 26 6,688.06 8.1

4 Goldman Sachs 18 5,951.23 7.2

5 Deutsche Bank 21 5,565.61 6.8

6 NatWest Markets 9 4,932.72 6.0

7 Commerzbank 12 4,560.99 5.5

8 SG 14 4,503.21 5.5

9 Barclays 20 4,443.65 5.4

10 BAML 11 4,331.74 5.3

Total 112 82,400.07

Excluding equity-related debt. Including publicly owned institutions.


MUNICIPAL, CITY, STATE, PROVINCE ISSUES IN EUROS BOOKRUNNERS: 1/1/2019 TO DATE


1 UniCredit 28 7,140.83 16.8

2 DGZ-DekaBank 26 4,002.58 9.4

3 LBBW 23 3,632.06 8.6

4 HSBC 25 3,472.96 8.2

5 Barclays 11 2,206.55 5.2

6 Deutsche Bank 16 1,798.61 4.2

7 Nord/LB 13 1,733.90 4.1

8 DZ Bank 14 1,660.47 3.9

9 BayernLB 14 1,639.32 3.9

10 TD Securities 10 1,475.42 3.5

Total 89 42,446.03

Excluding ABS/MBS.


CVS MANAGES LARGE DEBT STACK WITH US$3.5bn BOND

CVS HEALTH returned to the US investment-grade market on Thursday with a US$3.5bn

largest corporate bond of all time last year to fund the acquisition of Aetna.

Since the US$40bn bond funding priced last year, CVS’s paper has consistently remained among the most liquid in the secondary market.

But investors have been waiting for the company to attend to its growing debt stack, and Thursday’s new issuance goes some way towards achieving those goals.

manager announced a three-part bond to

issued by the company and inherited from its mergers with Coventry Health Care and Aetna.

year, US$750m seven-year and US$1.75bn 10-year at spreads of Treasuries plus 120bp, 140bp, and 165bp, respectively.

While some deals struggled through price progression on Wednesday amid volatility in the markets, CVS managed to tighten spreads 25bp-30bp from initial price thoughts for a new issuance concession of just 2bp-3bp of new issue concessions.

The 10-year tranche, for example, came with a 2bp concession to the curve, where the existing 4.30% 2028 bond had been trading at a G-spread of 160bp on Wednesday, according to IFR calculations.

Proceeds will be used to pay down a US$2bn CVS 3.125% 2020 note and the remaining proceeds will help tender the US$2bn remaining on legacy Aetna 4.125% 2021s and Coventry Health Care 5.45% 2021s.

CVS has US$12.9bn in outstanding bonds coming due between this year and 2021,

Year-end lease-adjusted leverage is expected to remain high in the 4.7 times range, with the goal of reaching 3.5 times by year-end 2020, according to CreditSights.

But deleveraging is expected to accelerate, especially after CVS reported higher-than-

the year of US$10.1bn-$10.6bn, according to the company’s second-quarter earning report released last week.

“Our strong cash projection includes the improvement to our underlying business

our initiative to reduce pharmacy inventory in our retail stores,” Eva Boratto, executive

CVS, said on the earnings call.

use US$4.5bn-US$4.9bn for debt paydowns this year, which includes the US$3.5bn term loan the company paid down during the second quarter.

“Since the close of the Aetna transaction, we have repaid approximately US$6.6bn of debt, and we are focused on continuing to delever and remain on track with the plans we outlined,” Boratto said.

HIGH-GRADE BORROWERS RECEIVE MIXED PERFORMANCE AMID VOLATILITY

Despite widening credit spreads and a down stock market, borrowers rushed to the US investment-grade bond market on Wednesday to lock in low coupons.

The 10-year Treasury rate hit a yearly low of 1.62%, allowing corporate issuers to achieve cheap funding despite the sell-off in the secondary market.

Utilities in particular were reaping the

WISCONSIN PUBLIC SERVICE priced a US$300m 30-year note with a coupon of 3.30%, just a tick off the lowest rate ever for a utility at that tenor.

That record belongs to PUBLIC SERVICE CO OF

COLORADO, which just the day prior priced a

US$550m note with the lowest 30-year utility coupon ever at 3.20%.

“It is the perfect environment (for utilities) right now because of the low natural gas prices and low interest rates,” said Andrew DeVries, a senior utilities analyst with CreditSights.

Likewise, MCDONALD’S priced a 2.625% 10-year and 3.625% 30-year at US$1bn a piece with spreads of Treasuries plus 100bp and 150bp, respectively.

Both bonds came with coupons nearly a full percentage point lower than McDonald’s existing 3.80% 2028 and its 4.45% 2048 notes, which were changing hands at 91bp and 152bp over Treasuries, respectively, according to MarketAxess.

But despite the attractive coupon rates, deals struggled through price progression.

More than half of the seven high-grade

midway through pricing, which tends to be a sign that investor demand is low and bookrunners are unable to tighten spreads any further.

At least three issuers priced with double-digit new issue concessions, according to IFR calculations.

For example, LLOYDS BANK was in the market as one of two European banks last week to access the deep US investor base, but gave up 10bp of new issue concession to do so. The US$1.5bn Lloyds bond came with just a US$1.8bn order book. (see separate story for more.)

M&A issuance is proving to be the most successful in this market environment.

On Tuesday, OCCIDENTAL PETROLEUM sold US$13bn to fund its US$38bn acquisition of ANADARKO.

The bond received US$66.1bn in investor orders and tightened in 35bp-50bp from initial price thoughts.

Occidental still gave up 10bp of new issue premium, but the bonds were tightening in the secondary Wednesday by as much as


BONDS CORPORATES

ALL INV-GRADE US CORPORATE BONDSBOOKRUNNERS: 1/1/2019 TO DATE


1 JP Morgan 47 10,426.03 10.5

2 BAML 52 10,076.77 10.1

3 Citigroup 37 10,047.32 10.1

4 Wells Fargo 48 8,489.82 8.6

5 Barclays 23 6,465.18 6.5

6 Morgan Stanley 36 5,937.04 6.0

7 MUFG 23 4,904.12 4.9

8 Goldman Sachs 24 4,689.79 4.7

9 RBC 26 4,578.34 4.6

10 Mizuho 20 3,630.54 3.7

Total 112 99,295.52

Excluding equity-related debt, ABS/MBS, all foreign issues, global issues

and non corporates.

Source: Refinitiv SDC code: F6a

ALL US INVESTMENT GRADE CORPORATE DEBT

(EXCLUDING SOLE SELF FUNDED DEALS)BOOKRUNNERS: 1/1/2019 TO DATE


1 JP Morgan 295 69,556.97 10.2

2 Citigroup 239 62,351.80 9.2

3 BAML 263 57,026.01 8.4

4 Morgan Stanley 194 51,792.24 7.6

5 Goldman Sachs 179 47,541.24 7.0

6 Barclays 152 43,230.83 6.4

7 Wells Fargo 181 36,089.41 5.3

8 MUFG 109 30,165.51 4.4

9 Mizuho 111 26,186.37 3.9

10 Deutsche Bank 82 23,621.70 3.5

Total 594 679,068.53

Source: Refinitiv SDC code: F09a

ALL CORPORATE BONDS IN EUROSBOOKRUNNERS: 1/1/2019 TO DATE


1 Barclays 64 20,008.05 8.2

2 BNP Paribas 118 18,296.08 7.5

3 Deutsche Bank 79 15,593.14 6.4

4 BAML 58 14,263.53 5.9

5 SG 78 14,155.42 5.8

6 Citigroup 72 13,841.97 5.7

7 JP Morgan 71 13,328.50 5.5

8 HSBC 79 11,900.94 4.9


10 UniCredit 67 10,224.78 4.2

Total 309 242,623.79

Excluding equity-related debt. FIGs, ABS/MBS.


7bp from pricing levels, according to MarketAxess data. (see Top News for more.)

Payment technology company GLOBAL

PAYMENTS followed on that success with a US$3bn bond to help fund its US$21.5bn merger with credit card processor TOTAL

SYSTEM SERVICES.Books were undisclosed, and with no

outstanding bonds there was no clear comparable. Yet, spreads still tightened 15bp from initial price thoughts and one syndicate said the deal received less push-back than others in the market.

“Based on Occidental, the demand for large, bellwether issuers is ruling the

storm,” said Scott Kimball, portfolio manager at BMO Global Asset Management. “The demand is overwhelming.”

The high-yield market, which was on a

year Treasuries declined by 31bp over the past two weeks, according to a JP Morgan report.

This has resulted in Triple B debt

creating a spread gap of 231bp, its highest level since the US presidential election in November 2016.

“High-yield bond investors tend to be more focused on yields than spreads,” JP Morgan noted in the report.

“Hence, this move lower in yield has a

credit market compared to the high-grade market.”

EUROS

QE FAILURE INVESTORS’ TOP FEAR

Credit investors’ top fear is the potential failure of quantitative easing to kick-start the economy, according to Bank of America Merrill Lynch’s August survey, which returned the most bearish responses the bank has seen for some time, it said.

Of the investors BAML surveyed, 33% said “quantitative failure” was their biggest fear - the largest reading ever for this answer, analysts said, and up from 13% in July.

“Investors are fretting that, after 700+ rate cuts and more than US$10trn of asset purchases in the wake of Lehman, central banks’ monetary store cupboard is running bare,” analysts wrote.

Investors’ central fret is negative-yielding assets.

Almost US$13trn of global assets are now negative-yielding, according to BAML - up US$1trn since last month.

Around €865bn of corporate bonds carry a negative yield - nearly a third of the sector in Europe - while 13 10-year sovereign bond

markets are yielding less than their respective bank policy rates.

European investment-grade investors are expecting gold to be the most popular response to the phenomenon, followed by US Treasuries, BAML said.

High-yield investors are more likely to seek duration, analysts said. Many 10-year government bonds are already trading below their respective central bank policy rates.

“The risk with more extreme monetary policy measures is that it ultimately drives ‘fearful saving’ by households and corporates, rather than the desired ‘animal spirits’,” analysts wrote.

The biggest open question in the euro IG market is whether or not investment-grade credit will be included in the new ECB stimulus package, JP Morgan analysts wrote in a report last Monday.

A recent Reuters report said ECB governors had misgivings about buying more corporate bonds because of the risks they entail.

But despite the headlines, technicals in investment-grade remain strong, with a seasonal slowdown in primary markets,

many other options for getting positive

Morgan analysts wrote.The average investment-grade bond

spread was at 74bp on Thursday August 8, 8bp wider than the week prior, according to iBoxx data.

STERLING

NEXT GROUP SELLS £50m RETAINED 2025 BOND

After a long drought in the investment-

activity on Wednesday when UK retailer NEXT GROUP sold a £50m retained bond.

Wednesday’s bond was retained from a £250m August 2025 note that NEXT priced in April. The outstanding paper was seen trading at 186bp pre-announcement.

Sole bookrunner NatWest Markets opened books with initial price talk of Gilts plus 200bp. Demand of £100m allowed the bank to cut the spread to a pricing level of 195bp.


ALL INVESTMENT-GRADE BONDS IN EUROSBOOKRUNNERS: 1/1/2019 TO DATE


1 BNP Paribas 212 51,719.81 7.3

2 JP Morgan 149 46,541.48 6.6

3 SG 150 45,204.47 6.4

4 Barclays 151 44,595.57 6.3


6 HSBC 195 41,539.18 5.9

7 Deutsche Bank 176 39,888.35 5.7

8 UniCredit 166 37,238.32 5.3

9 Citigroup 110 29,704.65 4.2

10 Goldman Sachs 95 28,481.07 4.0

Total 866 704,110.34

Excluding ABS/MBS, equity-related debt.


ALL CORPORATE BONDS IN STERLINGBOOKRUNNERS: 1/1/2019 TO DATE

Managing No of Total Share bank or group issues £(m) (%)

1 Barclays 20 2,128.76 14.5


3 JP Morgan 9 1,213.45 8.3

4 HSBC 12 1,196.57 8.2

5 Santander 10 909.98 6.2

6 BNP Paribas 9 883.13 6.0

7 Lloyds Bank 9 831.01 5.7

8 Morgan Stanley 6 801.49 5.5

9 RBC 8 784.62 5.4

10 Goldman Sachs 7 773.11 5.3

Total 41 14,634.63

Source: Refinitiv SDC code: N8a

ALL SWISS FRANC BONDS INCLUDING

SECURITISATIONSBOOKRUNNERS: 1/1/2019 TO DATE

Managing No of Total Share bank or group issues SFr(m) (%)

1 Credit Suisse 84 10,045.74 31.4

2 UBS 73 8,158.61 25.5

3 Verband Schweizerischer 17 3,964.63 12.4

4 ZKB 41 2,962.10 9.3

5 Raiffeisen Schweiz 26 2,010.21 6.3

6 BNP Paribas 10 1,182.93 3.7

7 Basler KB 13 885.58 2.8

8 Commerzbank 9 792.77 2.5

9 HSBC 3 650.00 2.0

10 Deutsche Bank 4 433.63 1.4

Total 159 31,950.03

Including preferreds. Excluding equity-related debt.

Source: Refinitiv

ALL INTERNATIONAL STERLING BONDS

EXCLUDING SECURITISATIONSBOOKRUNNERS: 1/1/2019 TO DATE

Managing No of Total Share bank or group issues £(m) (%)

1 HSBC 67 11,014.03 12.8

2 Barclays 68 10,787.62 12.6


4 RBC 44 7,205.82 8.4

5 Citigroup 29 6,215.34 7.2

6 BAML 32 5,310.45 6.2

7 JP Morgan 23 4,144.99 4.8

8 Deutsche Bank 19 3,913.27 4.6

9 TD Securities 22 3,862.92 4.5

10 Lloyds Bank 30 3,663.86 4.3

Total 178 85,861.49

Including preferreds. Excluding equity-related debt.

Source: Refinitiv SDC code: K05a

YEN

CORNING PUTS ON LONG-DISTANCE GLASSES

CORNING last Tuesday priced a ¥37.2bn (US$350m) dual-tranche Global yen deal at the wide ends of initial guidance as the escalating US-China trade war fuelled global market volatility.

Unlike its two previous Global yen issues, which included seven and 10-year tranches, the US specialty glass manufacturer offered only tenors above 10 years.

As a result, the deal size was lower than the ¥78bn raised from a triple-trancher in August 2017 and ¥65.5bn from another three-part deal in May 2018.

The company nevertheless sought to maximise the proceeds by pricing a ¥31.3bn 1.153% 12-year tranche at the wide end of initial guidance of 100bp–115bp over yen mid-swaps and a ¥5.9bn 1.513% 20-year portion at the wide end of 120bp–133bp guidance.

While these coupons were lower than its previous ones, the spreads were wider. Its previous 12-year note issue carried a 1.219% coupon to give 88bp over mid-swaps. The previous 1.583% 20-year bonds offered in 2017 were priced at 94bp over.

The 12-year tranche attracted life insurers, asset managers, regional banks, shinkin banks and other accounts, including foreign investors. The 20-year tranche was bought by lifers and asset managers both at home and overseas.

investors paid off through greater participation from regional investors in the shorter tranche.

“We are glad that our name recognition is growing and think it is appropriate to have a diversity of investors,” said Beth Dann, Corning’s corporate communications director. She said Corning had sought to meet regularly with Japanese investors over the last three years and held business updates in Tokyo in March and July this year.

Foreign investors also joined in for reasonable amounts.

“To do a decent-sized deal in tenors longer than 10 years, it was essential to bring in foreign investors, as the domestic investor base in the ultra long-end sector isn’t enough, unfortunately,” said a banker on the deal.

To encourage participation, the books were left open until noon New York time on Monday, as opposed to the usual noon Tokyo time.

The trade war between the US and China escalated during marketing but Corning went ahead as planned. The deal was priced as yen rates were dropping after the US decided to label China a currency manipulator.

“There was ongoing communication between Corning, our banks and investors throughout the process,” Dann said. “And we remained

Prior to the deal, Corning reported second-quarter results on July 30 that showed year-on-year growth across all businesses. But its shares fell as it lowered the annual sales forecast for its optical communications unit, and the lower forecast was another reason investors called for wider spreads.

Morgan Stanley, MUFG Securities EMEA and SMBC Nikko were joint bookrunners on the deal, rated Baa1/BBB+ (Moody’s/S&P).

NON-CORE CURRENCIES

NEXCO CENTRAL EXPANDS ROUTES

CENTRAL NIPPON EXPRESSWAY (Nexco Central), rated A1/AA+/AAA (Moody’s/R&I/JCR),

and New Zealand currencies, albeit in small volume, helping it to further diversify its funding sources and investor base.

The Japanese expressway operator priced

on July 25. Mizuho was a lead manager.On August 1, the issuer printed NZ$50m

Daiwa. The coupon was 92.75bp over the local benchmark money rate.

Both the Dim Sum and New Zealand dollar notes are listed on the Singapore Exchange.

Nexco Central began to expand its funding sources and investor base in 2013

10-year issue in 2016, a rare offering of four-year notes in Hong Kong dollars last year,

offering in February this year.As the issuer is a Japan-based company,

the proceeds are swapped back into yen, so swap levels are key when it tries to issue bonds in foreign currencies.

Nexco Central is a frequent issuer in yen. Last Friday, it priced ¥88bn (US$830m) of

FIG

US DOLLARS

UBS AND LLOYDS RESTART STAGNANT YANKEE BOND ISSUANCE

Two European banks saw an opportunity to issue in US dollars last week amid high volatility in the market.

Their moves come as Yankee bank issuance is down 32% year-over-year, according to IFR data.

LLOYDS BANK launched a US$1.5bn three-year US dollar bond at the opco level on Wednesday, a day after UBS GROUP priced a US$1.5bn 11-year non-call 10 at the holdco level.

The two banks issued in the same size but with very different structures.

Lloyds sought to achieve the cheapest pricing possible from the higher-rated opco level (Aa3/A+/A+).

UBS (A–/A+) went long-dated to secure an ample amount of volume eligible for total loss-absorbing capacity needs. And the bank attracted a US$3.8bn book for its TLAC-eligible bond, while locking in a low 3.126% coupon.

The UBS bond performed well in the secondary market as well, tightening 2bp from pricing to change hands at Treasuries plus 138bp, according to MarketAxess.

Lloyds could have achieved some TLAC-eligibility for a three-year bond given that UK banks have a 2021 deadline in place to

away from the trade said.But, instead, it simply looked to achieve

best rates it could get.Lloyds tightened through price progression

by 10bp to Treasuries plus 85bp, but, like much of the issuance on Wednesday, guided straight to the number rather than area in a sign of low investor demand.

totalled just US$126.36bn, down from US$186.52bn for the same period in 2018, according to IFR data.

July and August have been active months for the FIG sector in recent years as issuers come out of Q2 earnings blackout and look to the US for their funding needs while European markets go quiet on holiday, one syndicate

Even with credit spreads widening and the Dow Jones index trading down as much as 600 points on Wednesday, US bonds still look attractive to investors seeking yield.

“The US dollar market is just more open for business at the moment,” said CreditSights analyst Simon Adamson.

Expensive hedging costs from US dollars back to euros has kept European banks away from the market so far this year. However, they may have no choice but to reach out to the deeper US investor base.

“I am guessing that those banks need fresh investors as the local base in Europe is probably over-allocated to the names already,” said Scott Kimball, portfolio manager at BMO Global Asset Management. “Hedging back to euros is expensive right now, so it probably isn’t valuations.”


BONDS FIG

EUROS

PERIPHERAL LENDERS PLAY IT COOL ON TLTRO III

Peripheral banks are generally playing it cool on the ECB’s imminent third round of

operations, with better-positioned lenders foreseeing limited participation.

Peripheral lenders, including Italian

last iteration of the ECB’s TLTROs that provided cheap multi-year loans to Eurosystem banks.

TLTRO III money will be in September, in

of which has a maturity of two years.In the run-up, some peripheral banks

have hinted at their intentions while announcing results. Pieced together, these hints create a sense that lenders will not rush in. Some may not participate at all.

UNICREDIT chief executive Jean Pierre Mustier told analysts last Wednesday that the bank’s funding plan “is not based on

participation in the new TLTRO, and is based only on self-aid”.

The levels offered by TLTRO III are subject to whether the ECB cuts the deposit rate in September as is widely expected.

Jaime Saenz de Tejada Pulido, chief BANCO BILBAO VIZCAYA

ARGENTARIA, articulated thoughts seemingly

participate, as the bank must wait to assess the programme’s precise terms.

“Those terms will change depending on what happens with the interest rate environment after the summer, and how our liquidity-generation capacity evolves in the next six months,” he said.

“We would probably not draw during 2019, although that decision is not yet

all, will take place in 2020.”TLTRO III will allow banks that reach the

ECB’s benchmark for net lending to borrow from it at a rate 10bp above its deposit rate, which is currently minus 0.40%. Those that do not can borrow at

currently at 0.0%.

An expected 10bp cut to the deposit rate in September would make it neutral for banks that meet the lending benchmark to roll over from TLTRO II to TLTRO III.

Eurozone banks still hold some €689bn of TLTRO II borrowings, although analysts do not expect that all to be rolled over.

LENDERS LESS NEEDYIn total, banks took €740bn from TLTRO II, with Italian lenders borrowings peaking at some €254bn.

It was feared that some would face a

drawings with more costly funding, especially when borrowings nearing maturity began to lose their value in net stable funding ratio calculations from June 2019.

When TLTRO III was announced in March, many billed it as a lifeline for smaller banks in countries such as Italy or Portugal.

Yet, even smaller institutions are still pondering whether they will participate or not.

BANCO BPM does not expect to borrow as much as it did from previous TLTRO rounds, for example, and does not expect to take

“Also, because if we start the new one, we have to reimburse the old one, which maybe is not a good arbitrage,” said CEO Giuseppe Castagna.

UNIONE DI BANCHE ITALIANE could wait to observe other banks’ behaviour, according to CEO Victor Massiah. INTESA SANPAOLO CEO Carlo Messina said the bank is likely to participate for reasons of funding costs and

from a liquidity standpoint.In Spain, banks are also emphasising their

improved liquidity positions.BANCO SABADELL said outright that it is not

planning to participate.SUPPLY SEEN RESILIENTLower participation this time around

would probably translate to increased levels of primary bond market activity, where the low-yield environment has in recent months helped peripheral issuers win strong demand at attractive levels.

Banks are now generally better positioned than they were when TLTRO II was offered and focusing on building up loss-absorbing debt buffers.

Even with the promise of new TLTRO cash to come, Italian lenders have already issued €22.7bn-equivalent of public bonds year-to-date, compared with €13.9bn-equivalent in the whole of 2018.

The impact on supply going forward should therefore be more limited.

“If any, this may impact preferred senior unsecured supply more that covered bond supply,” said Maureen Schuller, head of


ALL FINANCIAL INSTITUTION BONDS IN EUROSBOOKRUNNERS: 1/1/2019 TO DATE


1 BNP Paribas 59 14,319.39 9.1

2 SG 41 12,739.61 8.1


4 Deutsche Bank 50 9,908.01 6.3

5 HSBC 57 9,389.80 5.9

6 JP Morgan 44 8,490.46 5.4

7 Natixis 29 7,969.20 5.0

8 Goldman Sachs 42 6,766.42 4.3

9 UniCredit 31 5,585.28 3.5

10 Barclays 34 5,230.48 3.3

Total 262 158,085.89

Including banks, insurance companies and finance companies. Excluding

equity-related and covered bonds. Excluding publicly owned institutions.


ALL SUBORDINATED FINANCIAL INSTITUTION

BONDS (ALL CURRENCIES)BOOKRUNNERS: 1/1/2019 TO DATE


1 Barclays 14 6,844.72 12.3


3 Citigroup 25 3,743.95 6.7

4 HSBC 25 3,720.61 6.7

5 JP Morgan 23 3,167.99 5.7

6 BAML 18 2,802.96 5.0


8 Goldman Sachs 16 2,471.22 4.4

9 UBS 20 2,454.08 4.4

10 BNP Paribas 19 2,099.73 3.8

Total 93 55,806.73

Source: Refinitiv SDC code: J3a

ALL GLOBAL AND EUROMARKET YEN BONDSBOOKRUNNERS: 1/1/2019 TO DATE

Managing No of Total Share bank or group issues ¥(m) (%)

1 Mizuho 12 204,983.38 21.6

2 Sumitomo Mitsui Finl 11 199,658.40 21.1

3 Daiwa Securities 7 110,116.67 11.6

4 Mitsubishi UFJ MS 5 103,733.40 10.9

5 Nomura 6 99,941.67 10.5

6 MUFG 4 58,375.02 6.2

7 BNP Paribas 2 40,050.00 4.2

8 SG 1 32,066.67 3.4

9 BAML 1 21,575.00 2.3

10 Natixis 1 15,525.00 1.6

Total 23 947,428.20

Excluding equity-related debt. Including preferreds.

Source: Refinitiv SDC code: K10

ALL SAMURAI BONDSBOOKRUNNERS: 1/1/2019 TO DATE

Managing No of Total Share bank or group issues ¥(m) (%)

1 Mizuho 31 339,126.67 23.9

2 Daiwa Securities 30 310,060.00 21.9


4 Nomura 21 203,100.00 14.3

5 HSBC 5 89,626.67 6.3

6 Mitsubishi UFJ MS 10 89,483.33 6.3

7 Natixis 5 40,900.00 2.9

8 Citigroup 3 32,500.00 2.3

9 BNP Paribas 4 18,460.00 1.3


Total 36 1,416,800.00

Excluding equity-related debt.

Source: Refinitiv SDC code: K11

senior issuance tends to focus on the two/three-year area and therefore has the strongest overlap with the characteristics of the TLTRO III.”

SWEDISH SNP POISED TO GO MAINSTREAM

Swedish banks are at last set to make headway on issuing senior non-preferred debt in the second half of 2019, but the market’s opening may be tentative while Swedbank’s money-laundering clouds continue to cast a shadow.

Swedish regulation enabling banks to sell SNP entered into force in December 2018 - banks’ MREL targets must be met by 2022 - but none have yet issued in a major currency. They have instead watched peers, including those in Finland and Denmark, race ahead in building up loss-absorbing buffers of senior debt.

Bankers say issuers are waiting for clarity on the scale of their buffer requirement and the long shadow cast by anti-money laundering (AML) headlines involving SWEDBANK, one of the country’s biggest lenders.

The wait is expected to come to an end in the second half of 2019, though issuers still do not appear to be in a hurry.

In an earnings call on July 17, Swedbank’s head of investor relations, Gregori Karamouzis, said the bank plans to look at the markets after the summer but can afford to wait due to its strong liquidity position.

This year has been tough for the lender, after its Estonian business was caught up in money-laundering allegations in February that have also affected Nordic peer Danske Bank.

Swedbank’s share price is down almost 36% year-to-date and it has lost its chief executive and chairman due to the scandal.

Swedbank’s only euro benchmark issuance this year has come in the covered bond market, where its spreads have been resilient.

Karamouzis told IFR the AML situation and related investigations are one of many factors Swedbank is taking into account while deciding when to issue SNP.

FALL FROM GRACEIn normal times, Swedbank would be considered a good candidate to open the Swedish SNP market, but market participants expect the bank to allow one of

have to pay an AML premium.This marks a big shift for an institution

that twice issued the tightest post-crisis euro

benchmark senior unsecured bank bond, snatching the jointly-held crown from its country peers Svenska Handelsbanken and SEB in the process.

Swedbank’s €500m 0.25% November 2022 Green bond, priced at 7bp over mid-swaps in October 2017, still holds the record, according to IFR data.

But the AML scandal has weighed on Swedbank’s senior spreads.

That Green bond is currently bid at plus 35.5bp, and Swedbank now trades well back of its larger peers across the senior preferred curve.

“The situation around Swedbank is still clouded, and I suspect SEB and Handelsbanken would prefer if Swedbank

not what the market wants,” said a syndicate banker.

HANDELSBANKEN, SEB POISEDA spokesperson at Handelsbanken said the bank expects to start issuing SNP this year.

It is also possible that SEB will enter the market this year, a spokesperson told IFR.

The AML headlines will not affect SEB’s funding strategy, she said. She noted that during the spring, AML headlines had some impact on Nordic funding spreads, but said spreads have since tightened in.

“At present, it does not feel as if there is a ‘AML premium’ to be paid for banks that have not been in the headlines during the spring,” she said.

There is also MREL-eligible issuance to come from six of Sweden’s mid-sized banks.

Among them, SBAB Bank got started with a SKr3bn (US$314m) SNP Green bond on June 13.

SBAB also aims to issue SNP in euros. Emma Holmberg, head of investor relations,

timing of future issuance as that will depend on market conditions and the actions of its peers.

She said that Swedbank’s AML issues had no impact on SBAB’s pricing.

“When discussing with the rating institutes et cetera, they all agree with this being an issue on an institute level, not the whole sector level,” she said.

Swedish banks have received their MREL requirements, but some uncertainty

Nevertheless, issuance is expected to be sizeable. ING analysts expect €23bn of supply by 2022, while Nordic Credit Rating analysts foresee around €30bn over the same period.

Banks are expected to focus on local currencies such as Swedish kronor or the euro to begin with, but issuers also cite US dollars or sterling as options, depending on pricing.

SNP OR AT1?Issuers will also likely weigh up their

their Additional Tier 1 debt. Swedbank, SEB

quarter of 2020, a topic that has very much been in focus bankers said.

“The question is: when do you go?”, the DCM banker said. “Issuers have a September, November and February window, and given we’ve seen AT1 paper move so violently, I wouldn’t be surprised if we saw two or three Scandi issuers pile into the market.”

UBI READY FOR AT1 BUT SEES PRICE TOO HIGH

UNIONE DI BANCHE ITALIANE is ready to issue inaugural Additional Tier 1 notes, but prices in the sector are currently prohibitive, according to the bank’s chief executive.

In a second-quarter earnings call on August 2, UBI CEO Victor Massiah said the bank would deserve a better price than is currently available in the AT1 market.

“When the market [decides] that – thanks to the fact that we have the highest CET1 [and] that we are dropping and accelerating the decrease of our NPEs – we deserve a better price, we could think about that,” he said.

bank could be ready from an organisational and legal standpoint to issue AT1, but not at the current price, given AT1 issuance would

cost of institutional funding.She said UBI had not issued AT1 before.Three Italian issuers have sold AT1 notes

this year. The last was Fineco Bank, whose inaugural €300m perpetual non-call December 2024 was priced at 5.875% on July 11. The deal was last week quoted at 5.69%, according to Tradeweb.

However, Massiah added that UBI does not have a pressing need for AT1 issuance as its MREL buffer is “already in line with what it should be”.

UBI has already completed its issuance plan for Tier 2 debt through to the end of 2020. It hit its target with a €300m 10-year non-call

trade in the same format in February.The 4.375% deal priced at 475bp over mid-

swaps in July and was quoted at 459bp.Massiah also said UBI was still considering

auction of the ECB’s third round of targeted

III) in September.He said the bank could wait to see the

behaviour of other banks and take part in a later auction. He stressed UBI is not dependent on the TLTRO.


BONDS FIG

ABN AMRO TO JOIN SNP RANKS

ABN AMRO is lining up an inaugural senior non-preferred before the end of the year, joining the growing ranks of issuers using the instrument to bolster their layers of loss-absorbing debt.

The bank said in its quarterly report last week that it was aiming to have an MREL ratio of 29.3% of risk-weighted assets by the end of the year and that an inaugural SNP issuance was expected towards year-end 2019.

In the statement, the bank also

broadly in line with the same quarter last year.

ABN will become the fourth Dutch bank to issue SNP, after Rabobank, NIBC and Aegon Bank.

print SNP in benchmark size last year, printing a €1bn 0.75% August 2023 from a chunky €4.7bn book. The bond, priced at 55bp over mid-swaps, was bid at 39.4bp last week with a yield of –0.08%, according to Tradeweb.

Since its inaugural trade, Rabobank has raised €2.25bn and US$1.25bn of SNP, according to IFR data.

For Aegon Bank, the trade was not only its

wholesale funding outside of covered bonds.It emerged in June, with the €500m

in orders. The deal was last week bid at 52.5bp over swaps, 37bp tighter than where it priced. The yield is barely positive at 0.90%, according to Tradeweb.

STERLING

CO-OP FEELS THE PINCH FROM TIER 2 ISSUE

CO-OPERATIVE BANK is feeling the pinch from an important but costly Tier 2 trade sold earlier this year as the UK lender contemplates further MREL-eligible issuance in the second half of 2019.

In April, Co-op got a £200m 10NC5 Tier 2

2015, that enabled the bank to raise half of its £400m MREL-eligible issuance target for 2019.

But while the bond helped the bank bolster its balance sheet – raising total capital to £1.27bn – it came at a hefty price,

to Co-op’s bottom line.

said the reduction in net interest income was principally due to three factors, including the higher interest charges in

2019 following the issuance of Tier 2 debt in April, which it put at £3m.

treasury NII stood at £6.5m, down from £11m year-on-year.

It also blamed the dip on lower MBS balances after selling off such assets.

That contributed to a 7% year-on-year fall in the group’s net interest income, from £173.9bn to £161.3bn.

The high price for the Tier 2 was to be expected, given the bank’s chequered history.

Rated B by Fitch and Moody’s, it is one of the most challenged UK banks. It came close to collapse in 2013 after the revelation of a £1.5bn CET1 capital shortfall, and is still on its way to recovery after a restructuring.

Similar to other UK banks, the issuer’s bond has suffered in the recent sell-off and the Tier 2 is now bid at a yield of 9.98%, according to Tradeweb.

Co-op is not the only issuer that has paid a high price this year for subordinated debt.

Other lenders with chequered pasts – and in some cases uncertain futures – such as National Bank of Greece, Piraeus Bank and Banca Monte dei Paschi di Siena, have bitten the bullet and paid chunky coupons for euro Tier 2 in recent months, though how this has impacted on their bottom lines has yet

Market conditions have been conducive for such higher-beta issuance as investors have sought higher yields.

Co-op still aims to print a further £200m of MREL-eligible debt in the second half of the year.

NON-CORE CURRENCIES

HSBC BENEFITS FROM RBNZ CUT

HSBC, NEW ZEALAND BRANCH (Aa3/AA–/AA–), raised NZ$300m (US$194m) from last Friday’s domestic dual-tranche, three-year

unsecured note offering.The NZ$200m three-year FRN priced at

the tight end of three-month BKBM plus 65bp–70bp guidance. The NZ$100m 1.835%

of mid-swaps plus 85bp–90bp guidance.ANZ, HSBC and Westpac were joint lead

managers.HSBC New Zealand is paying rather less

for the notes than it would have expected when the transaction was announced on Wednesday morning, just before the Reserve Bank of New Zealand stunned the

cut in the overnight cash rate to 0.5%.The surprise move (a 25bp reduction was

widely assumed) came a day after the

unemployment rate fell to decade lows. The

economy.HSBC New Zealand previously issued two

NZ$300m three-year FRNs in March and November last year.

ASB BANK READIES FIVE-YEAR MTN

Kiwi major ASB BANK (A1/AA–/AA–) has mandated its Australian parent CBA as lead

expected to launch this week.The obvious comparable is the NZ$100m

HSBC New Zealand (Aa3/AA–/AA–) on August 9, which priced at mid-swaps plus 85bp.

COVERED BONDS

NON-CORE CURRENCIES

ING COVERS SECOND BASE

ING BANK AUSTRALIA (A3/A/A) became the second bank to access the Australian

backed by local mortgages, with last Thursday’s A$750m (US$508m) dual-tranche

Fitch).

was priced at 99.976 for a yield of 1.455%, in line with guidance at asset swaps plus 67bp

priced at par, 67bp wide of three-month BBSW.

ING and NAB were co-arrangers and joint bookrunners with Deutsche Bank, RBC Capital Markets and Westpac.

The only previous covered issuance in


ALL COVERED BONDS (ALL CURRENCIES)BOOKRUNNERS: 1/1/2019 TO DATE


1 HSBC 47 9,201.30 6.5

2 UniCredit 63 9,114.14 6.4

3 LBBW 46 8,266.50 5.8

4 Natixis 34 6,907.38 4.9


6 Deutsche Bank 33 6,389.46 4.5

7 Barclays 29 6,056.96 4.3


9 ING 26 5,231.75 3.7

10 BNP Paribas 26 5,046.90 3.6

Total 197 142,107.14

Source: Refinitiv SDC code: J15a

2019 was the A$1bn three-year print on July 25 by Canadian Imperial Bank of Commerce, Sydney branch, that was secured by Canadian mortgages.

ING Bank Australia debuted in the domestic covered market in August last year

sale.It became the sixth Australian bank and

only the second non-major lender, after Suncorp, to issue local currency covered bonds, though Bank of Queensland and Macquarie have both sold them in euros.

HIGH-YIELD

UNITED STATES

ISSUERS FALL BY WAYSIDE IN ROUGH RIDE FOR JUNK BOND MARKET

A wild ride in the broader market stemming from the escalating US/China trade war and rising worries about a recession claimed two victims in the high-yield primary market as the pace of supply slowed last week.

UK fertiliser company SIRIUS MINERALS and auto components manufacturer US

FARATHANE both threw in the towel on deals as investors quickly lost their appetite for

This came as US high-yield funds saw some US$4.072bn exit the asset class last week,

since October 2018, according to Lipper.Average high-yield bond spreads also

widened 59bp over the last 10 days ended August 7, according to ICE BAML data, as US Treasury curve inversion raised fears over a recession in the US.

“People are more worried about the

economic growth,” said an investor.“The US economy may be doing better

[than the rest of the world], but it is hard to imagine that being sustainable and that has got credit and equity markets spooked.”

Blaming tough conditions, Sirius said it intends to take another run at the market later this quarter after talking an eye-watering 13.5% area on the 7.5-year bullet.

Sirius is racing against the clock, however, as it has to raise bond funding if it wishes to access a US$2.5bn credit facility,

project in Yorkshire. (See Top News for more.)

US Farathane, meanwhile, was tainted by its association with an auto sector that will feel the pain from any tariff escalation with China and a downturn in the economy.

“There is buying of names you like but there is some hesitancy about lower-rated credits and cyclical sectors,” said a second investor.

SOME SUCCESSNCR was one credit that slid past the

volatile day in the market, raising US$1bn

Both tranches – US$500m eight-year non-call three and US $500m 10-year non-call four – priced in line with talk, at 5.75% and 6.125%, respectively.

Like many companies, the hardware and software company focused on ATMs and other self-service solutions in banking and hospitality is taking advantage of ultra-low rates to clean up its balance sheet.

Its gross and net leverage is expected to drop to 3.2 and 2.9 times, respectively, after

bond, according to CreditSights.CLEAR CHANNEL, the outdoor advertising

company, also looked to be gaining traction on a US$1.26bn secured eight-year non-call three bond, which was also part of a broader

The deal, which was set to price on Friday, saw price talk tighten from the 5.5% area

setting guidance at 5.25%–5.5%.Including Clear Channel’s deal, weekly

supply hit just US$2.26bn, far short of the US$6.555bn seen the week before.

That leaves the visible pipeline empty for now and investors do not exactly see the market as a screaming buy even after the sell-off

“We haven’t seen that big of a move,” said Will Smith, a portfolio manager at AllianceBernstein. “We are talking about a world that hasn’t appreciably changed, but

than a week ago.”And despite recession fears, many on the

buyside are not predicting a major economic downturn in the US any time soon. And nor are secondary spreads predicting such an outcome.

Average high-yield spreads hit a wide last week of 453bp, far off the seven-year wide of 887bp seen in February 2016, when the crash in oil prices rattled the high-yield market.

“If we are going into a recession, and I don’t believe we are, 450bp, or even 500bp, is not a wide enough spread for a recessionary environment,” said Ken Monaghan, co-director of high-yield at Amundi Pioneer.

FRONTIER COVENANT CONCERNS RETURN OVER ASSET WRITEDOWN

covenant violation and event of default on

the debt of FRONTIER COMMUNICATIONS after it recognised a US$5.85bn asset impairment on its latest quarterly report.

The report adds to concerns regarding the troubled telecoms company, which has already faced questions over its debt covenants and is seen by some investors as a possible repeat performance of the Windstream case.

Windstream, another communications company, fell foul of activist hedge fund Aurelius Capital, which successfully argued it had technically defaulted on its bonds - a move that pushed it into bankruptcy in February.

“As with Windstream, where everyone was betting it was heading in one direction and it went the other way, you want to hedge your bets,” said one investor.

While Frontier’s bond language is ambiguous, the company could have exceeded a cap on secured debt by about US$400m because of that asset impairment, JP Morgan said in a report last week.

The secured debt limit is determined by an asset-based calculation, but Frontier’s covenant language makes it unclear whether this is a common incurrence test or a maintenance test, a violation of which could lead to a default.

Adding to the uncertainty, the covenants include a carve-out that allows additional secured debt for asset purchases, which JP Morgan said was equally ambiguous.

Frontier management has already said it can access unused secured capital through a revolver, JP Morgan said.

“That means that, depending on the legal interpretation of the covenant and the carve-out, FTR could be challenged for an event of default by legacy bondholders,” the bank said.

“It is our view that the company and its legal counsel see the carve-out as allowing for additional secured debt and would argue no event of default has occurred.”

Whether or not creditors hold the company to task over the possible covenant violation, the situation further exacerbates concerns over any legal fallout and a possible debt restructuring.

“That will likely lead to lower bond prices for non-legacy and short-dated bond as coupon and exchanges become more uncertain,” the bank said.

Frontier’s 10.5% 2022 was trading close to four points lower early on Wednesday afternoon at a dollar price of 53.625, in what was largely a down day for most corporate bonds, according to MarketAxess data.

Its 8% 2027 were in better shape at 104.625, or an eighth of a point lower on the day.

CFO Sheldon Bruha said in an earnings call last week that the goodwill impairments


BONDS HIGH-YIELD

continued revenue declines due to pressures on its business and a lower outlook for the sector.

In June, S&P downgraded Frontier’s senior unsecured debt to CCC from CCC+, with Moody’s following a few days later with its own cut to Caa1 from B3.

Both agencies cited the increased potential for a distressed debt exchange or default ahead of sizeable debt maturities starting in 2022.

As of June 30, the company had total liquidity of around US$786m in the form of cash balances and undrawn amounts in a revolving credit facility, he said.

On the earnings call, Bruha said Frontier was looking at “negotiating capital markets

strategic alternatives”, and pledged to

For some investors, that means a likely debt restructuring or an exchange, with perhaps an equity component attached to it.

“They may ultimately push to do some sort of restructuring and probably an out-of-court one,” the investor said.

CLEAR CHANNEL STEPS OUT ON ITS OWN WITH NEW JUNK BOND

CLEAR CHANNEL OUTDOOR HOLDINGS stepped out into the high-yield bond market last week

company with its former parent iHeartMedia earlier this year.

Outdoor advertising company CCOH approached investors with a US$1.26bn secured eight-year non-call three bond, which, along with a US$2bn term loan and cash on hand, will redeem just over US$3bn of unsecured debt maturing in 2020 and 2022 with coupons of 6.5% and 8.75%, according to investors.

The new bond was expected to price on Friday and appeared to be gaining decent traction after bookrunners JP Morgan and Morgan Stanley tightened pricing from the 5.5% area to 5.25%-5.5%.

The company has been chipping away at its massive US$5bn debt load, which it inherited as part of a bankruptcy restructuring and separation in May from iHeartMedia.

Holders of the existing bonds like the deal, as they can swap unsecured debt trading at a relatively high dollar price for secured paper that will be priced closer to par.

The senior secured bond is backed by a

assets and those of its guarantors.Even so, investors are being offered lower-

yielding paper and there has been some price sensitivity around talk.

“We like the industry and the business, but will not play if it comes too tight,” said one investor. “It is about pricing expectations, not whether we like the name … and I think they will try to squeeze it.”

Ratings agencies largely see the

earlier this month raising CCOH’s credit rating to B- from CCC+ as the transaction will reduce interest expense and extend maturities.

Fitch said last week that it “views positively the company’s proactive efforts to manage the balance sheet and improve the

a standalone company”.CCOH is also using the US$350m raised in a

recent stock sale to pay down costly debt, and Fitch expects Clear Channel’s annual cash interest burden to drop by about US$30m and leverage to fall to around 8.5x from 9x.

of the world’s largest outdoor advertising companies with diverse operations and a business that is somewhat insulated from the competitive pressures elsewhere in the media sector.

“It is a company people have known for a long time and you are covered with these

types of (secured) bonds,” said a second investor.

It can also now focus on growth instead of providing liquidity to its former parent company, which had resulted in several

Nevertheless, management still has some heavy lifting ahead as it tries to reduce leverage.

will turn positive by the end of 2020, it

materially over the next two years.

EUROPE/MIDDLE EAST/ AFRICA

SWISSPORT REJIGS REFI IN FAVOUR OF LOANS

SWISSPORT has downsized the bond portion of

attractively priced term loan, a transaction that emerged against renewed volatility in European credit markets.

The Term Loan B offering launched as

€850m from €730m at the expense of the


ALL US$ DENOMINATED HIGH-YIELD BONDS BOOKRUNNERS – 1/1/2019 TO DATE


1 JP Morgan 132 17,840.77 8.8

2 Citigroup 118 14,501.54 7.2

3 BAML 116 13,647.82 6.8

4 Credit Suisse 108 13,152.18 6.5

5 Morgan Stanley 102 12,504.78 6.2

6 Goldman Sachs 103 12,156.76 6.0

7 Deutsche Bank 111 10,875.89 5.4

8 Barclays 97 9,115.22 4.5

9 RBC 62 7,205.75 3.6

10 Wells Fargo 67 7,181.53 3.6

Total 354 201,909.51

Including US domestics, Euro, foreign, globals. Excluding equity-related debt.

Source: Refinitiv SDC code: B5

ALL NON-DOLLAR DENOMINATED HIGH-YIELD BONDS1/1/2019 TO DATE


1 Deutsche Bank 22 3,214.46 8.0

2 Goldman Sachs 25 3,168.59 7.9

3 JP Morgan 22 3,009.37 7.5

4 BNP Paribas 23 2,568.06 6.4

5 Citigroup 18 2,459.97 6.2


7 HSBC 21 1,985.12 5.0

8 Barclays 16 1,805.25 4.5

9 BAML 13 1,382.72 3.5

Total 82 39,976.14


Source: Refinitiv SDC code: B6

ALL ASIAN HIGH-YIELD ISSUERS1/1/2019 TO DATE


1 Credit Suisse 41 4,615.21 8.0

2 Haitong Securities 67 3,823.27 6.6

3 Deutsche Bank 48 3,451.25 6.0

4 Citic 48 3,150.50 5.5

5 UBS 40 2,779.70 4.8

6 HSBC 41 2,663.62 4.6

7 JP Morgan 19 2,648.68 4.6


9 Goldman Sachs 16 2,353.16 4.1

10 Guotai Junan Securities 56 2,182.52 3.8

Total 145 57,662.70


Source: Refinitiv SDC code: B06d

ALL EUROPEAN HIGH-YIELD ISSUERS1/1/2019 TO DATE


1 Citigroup 27 5,282.86 9.4

2 JP Morgan 25 3,848.72 6.9

3 Deutsche Bank 21 3,826.47 6.8

4 BNP Paribas 26 3,685.27 6.6

5 Goldman Sachs 24 3,634.15 6.5

6 HSBC 22 2,818.30 5.0

7 Barclays 16 2,493.93 4.5


9 Credit Suisse 17 2,289.48 4.1

10 ING 15 2,220.68 4.0

Total 91 55,969.49


Source: Refinitiv SDC code: B06c

two notes (B2/B–) were downsized by €90m to €410m, while the unsecured 5.5-year non-call twos (Caa2/CCC) were downsized by €30m to €250m.

The senior secured notes were priced at the tight end of the 5.25%–5.50% range set on Thursday, while the unsecured notes were priced in line with 9% area talk. The loan was priced at the tight end of the 475bp–500bp range over Euribor with a 99 OID range set at the end of July when marketing for the deal started.

The addition of secured debt will raise leverage at the secured level to 3.8 times, while net total leverage remains unchanged at 4.8 times.

While analysts at CreditSights and Lucror Analytics saw talk on the secured bonds inside fair value, the unsecured bonds are coming fairly wide.

“In our view, a more risk-off sentiment this week has led to stronger investor interest in the senior secured notes, compared with the unsecured notes,” Lucror analysts said in a note on Friday.

The unsecureds, for example, are the lowest rated bonds the European high-yield market has seen since Perstorp’s subordinated notes issued in December 2017, according to IFR data.

They were priced as one of the widest euro deals this year, with only a highly risky deal from property developer Consus Real Estate pricing wider thanks to a business model based on staggered payments from clients.

Swissport marketed its deal amid the turmoil of US President Donald Trump announcing additional tariffs on China last Friday to take effect from September 1. The

bond roadshow started on Tuesday.Its closest peer, Worldwide Flight

Services’ €400m 6.75% senior secured bond issue due August 2023, has lost about two points since the start of the month, and was last week bid at around 90.50, according Tradeweb. This was thanks to the trade tensions, according to an investor.

CreditSights analysts said they see a weak short-term outlook for the cargo handling services market, citing the US-China tension as well as Brexit.

However, they stressed that Swissport’s focus on passenger handling services rather than cargo makes it more resilient than WFS. Indeed, Swissport’s unsecureds are still coming inside the WFS debt – which is secured but has higher leverage at that level than Swissport – currently yielding 9.90%.

HNA FEARSBeyond macroeconomics, the other key risk facing potential investors is HNA’s ownership.

The company has offered related-party loans to HNA since 2017, raising concerns that these loans could be used to divert assets away from Swissport.

Just over €300m of such debt remains outstanding, according to the notes’ prospectus. The company says it plans to transfer the loan out of the restricted group that has to comply with the bond terms through in-kind repayments.

But an over-ride provision has been added

improves the restricted payments covenant versus the existing notes, according to Covenant Review, which limits the payments Swissport can make to HNA.

Ironically, another safeguard for investors is portability, which allows the bonds to be transferred rather than paid back when a company is sold, something bondholders typically oppose given uncertainty around the new owner.

considered disposing of Swissport last year via an IPO on the SIX Swiss Exchange but shelved those plans in April 2018, citing market conditions.

potential sale to a different owner“The message that has been fairly clearly

communicated is that this is still a business for sale and there is an interested buyer for it,” a source familiar with the deal told IFR.

The bonds will become portable with a very small fall in leverage – to 4.75 times from the current 4.8 times – but in this case,

bondholders.”HNA has created lot of negative noise

around Swissport in recent years … and a change of shareholder for Swissport would most likely be a positive event in our view,” Spread Research analysts said in a client note.

This echoes a deal for hotels chain Radisson last year, which was also HNA-owned.

Investors were disgruntled to hear that HNA was exploring a sale of the chain hours after it priced a debut high-yield bond issue, as this had not been disclosed during the roadshow. However, the eventual exit was seen as a positive and the bonds traded up on the news after being priced at a discount.

ASIA-PACIFIC

PALADIN SEEKS MALAWI MINE SALE

Australia-based uranium miner PALADIN

ENERGY is seeking consent from bondholders to allow it to sell its stake in Paladin (Africa) to HYLEA METALS.

Bondholders who approve waivers permitting the sale will receive a payment equivalent to 1% of the face value of their notes.

Paladin initially sought consent in July, but decided to introduce a payment to consenting bondholders and extended the voting deadline by 15 days to August 27. It needs either consent from a majority of bondholders by principal amount, or approval from 75% by principal amount from noteholders present at a meeting.

The offer applies to Paladin’s US$115m senior secured PIK toggle notes due 2023, which have a coupon of either 9% in cash or 10% in deferred payment-in-kind interest. The issuer must pay a cash coupon if

cash hit certain levels.The bonds were issued last year, following

a restructuring of Paladin’s convertible bonds due 2017 and 2020.

Paladin is seeking to sell its 85% stake in the Kayelekera uranium mine in Malawi for A$5m in cash and shares, plus up to A$5m in future royalties and the return of A$10m used to issue an environmental performance bond to the Malawi government.

STRUCTURED FINANCE

EMEA ABS

Q2 BOOM REINVIGORATES ABS - TWENTYFOUR AM

Busy and diverse supply in late H1 is helping 2019 keep pace with last year’s record issuance of European securitisations. This increased diversity alongside an increasing number of capital management trades by lenders and some compelling spread levels support a positive outlook, according to TwentyFour AM.

Despite the delayed implementation of STS regulation dampening activity at the start of the year, the second quarter was bustling with activity, taking this year’s total to €58bn and marking Q2 out as the third busiest quarter post-crisis.

One of the highlights in the asset manager’s year has been the noticeable increase in the number of European deals offering the full capital structure, including sub-investment-grade bonds.

The far richer range of deals, by asset type and jurisdictions, has helped TwentyFour AM’s selective approach, allowing it to turn down deals which do not represent good value.

Another emerging theme is the increased use of ABS as a capital management tool by


STRUCTURED FINANCE


lenders, reducing risk-weighted assets by taking portfolios off their balance sheet, instead of as a pure funding activity.

TwentyFour notes that the UK remains the largest market, with six new issuers in 2019, amid the new presence of challenger banks, and that all bank treasurers are beginning to consider their funding options after QE.

TLTRO still dominates funding for most continental European bank lenders, and so their issuance has been limited. However,

gap. TwentyFour states that almost half of the 34 European deals so far this year have been from “non-traditional lenders/non-banks”.

On spread performance the piece observes that ABS missed the rates-based

“but some primary ABS deals are still clearing wider than levels at the start of the year and look compelling”.

Looking forward, TwentyFour expects activity in the market to be quick out of the starting gates after August, “with a pipeline likely to be building already”. And with spreads attractive compared to broader credit, “ABS feels more comfortably positioned to weather persistent market

BANCA POPOLARE DI BARI RETAINS ITALIAN SME ABS

BANCA POPOLARE DI BARI has issued and retained an Italian SME securitisation, called 2019

POPOLARE BARI SME. NatWest Markets was the arranger.

The deal is a restructuring of a deal closed in May, which will be repaid in full. The new issue will securitise assets from that deal as well as a new portfolio.

to SMEs and other small borrowers. Mortgage-backed loans make up 65.5% and the rest are unsecured.

According to DBRS, the top three sector exposures are building and development, lodging and casinos, and farming and agriculture, at 36.3%, 7.2% and 6.2%.

The deal’s €681.4m Class A1 is rated Aa3/AA (Moody’s/DBRS) and pays three-month Euribor plus 40bp, and the €66.4m Class A2 is rated A3/A and pays 70bp over. The €396.3m and €57.8m Classes J1 and J2 are unrated.

NEW ASSET–BACKED SUMMARY DETAILS: WEEK ENDING 9/8/2019

Issuer Amount (m) WAL Coupon (%) Bookrunner(s) Rating Asset type

BRAVO 2019-1 US$257.405 1.75 2.666 Credit Suisse/BAML/Nomura NR/NR/AAA RMBS

BRAVO 2019-1 US$18.64 1.75 2.892 Credit Suisse/BAML/Nomura NR/NR/AA RMBS

BRAVO 2019-1 US$19.127 1.75 2.996 Credit Suisse/BAML/Nomura NR/NR/A RMBS

BRAVO 2019-1 US$10.05 3.21 2.997 Credit Suisse/BAML/Nomura NR/NR/BBB RMBS

BRAVO 2019-1 US$9.564 3.21 4.006 Credit Suisse/BAML/Nomura NR/NR/BB RMBS

BRAVO 2019-1 US$4.7 3.21 5.689 Credit Suisse/BAML/Nomura NR/NR/B RMBS

CFII 2019-2 US$280.1 1.99 1.950 JP Morgan/CIBC/MUFJ/RBC CM Aaa/NR/AAA ABS

CFII 2019-2 US$90 1.99 1mUSL+48bp JP Morgan/CIBC/MUFJ/RBC CM Aaa/NR/AAA ABS

CFII 2019-2 US$11.34 3.70 2.050 JP Morgan/CIBC/MUFJ/RBC CM Aaa/NR/AAA ABS

CFII 2019-2 US$9.28 3.70 2.270 JP Morgan/CIBC/MUFJ/RBC CM A2/NR/A ABS

CFII 2019-2 US$9.28 3.70 2.710 JP Morgan/CIBC/MUFJ/RBC CM Baa2/NR/BBB ABS

CGCMT 2019-GC41 US$11.821 2.73 1.953 Citigroup/Deutsche Bank/Goldman Sachs NR/AAA/AAA CMBS



CGCMT 2019-GC41 US$210 9.9 2.620 Citigroup/Deutsche Bank/Goldman Sachs NR/AAA/AAA CMBS




CGCMT 2019-GC41 US$69.299 9.97 3.199 Citigroup/Deutsche Bank/Goldman Sachs NR/NR/AA CMBS

CGCMT 2019-GC41 US$50.819 9.97 3.502 Citigroup/Deutsche Bank/Goldman Sachs NR/NR/A CMBS

CNART 2019-1 US$87.57 0.82 2.740 Deutsche Bank NR/NR/NR ABS




DROCK 2019-1 US$650 2.92 1.96 Barclays NR/AAA/AAA ABS

FREMF 2019 K-F65 US$748.733 9.6 1mUSL+52bp Wells Fargo/Barclays NR/NR/NR CMBS

FREMF 2019 K-F65 US$20.798 9.6 1mUSL+240bp Wells Fargo/Barclays NR/NR/NR CMBS

FREMF 2019 Series K-I04 US$$452.789 2.33 1mL+36bp JP Morgan/Goldman Sachs NR/NR/NR CMBS

GCAR 2019-3 US$225.4 .9 2.580 Wells Fargo/Citigroup NR/AA/NR ABS

GCAR 2019-3 US$62.8 2.52 2.720 Wells Fargo/Citigroup NR/A/NR ABS

GCAR 2019-3 US$48 3.40 2.960 Wells Fargo/Citigroup NR/BBB/NR ABS

GCAR 2019-3 US$37.8 4.00 3.840 Wells Fargo/Citigroup NR/BB-/NR ABS

GMALT 2019-3 US$180 0.30 2.20 BAML/Citigroup/Mizuho/SMBC Nikko NR/A1+/F-1+ ABS

GMALT 2019-3 US$265 1.03 2.090 BAML/Citigroup/Mizuho/SMBC Nikko NR/AAA/AAA ABS

GMALT 2019-3 US$75 1.03 1m+27bp BAML/Citigroup/Mizuho/SMBC Nikko NR/AAA/AAA ABS

GMALT 2019-3 US$280 1.77 2.030 BAML/Citigroup/Mizuho/SMBC Nikko NR/AAA/AAA ABS

GMALT 2019-3 US$81.15 2.20 2.030 BAML/Citigroup/Mizuho/SMBC Nikko NR/AAA/AAA ABS

GMALT 2019-3 US$47.55 2.38 2.160 BAML/Citigroup/Mizuho/SMBC Nikko NR/AA/AA ABS

GMALT 2019-3 US$44.28 2.49 2.350 BAML/Citigroup/Mizuho/SMBC Nikko NR/A/A ABS

HALST 2019-B US$144.7 0.30 2.18 BAML/Citigroup/SMBC Nikko/SG/TD Securities P1/A1+/NR ABS


STRUCTURED FINANCE

US MBS

BANKS STEER NEW CMBS THROUGH MARKET DESPITE RATE MOVES

A sharp drop in Treasury rates after the US escalated tariffs on China made for a challenging backdrop for two conduit CMBS that were out in the market last week, though both were able to cross the line with concessions on spreads.

Wells Fargo and Barclays’ US$804.589m WFCM 2019-C52 conduit deal and Citigroup, Deutsche Bank and Goldman Sachs’ US$1.092bn CGCMT 2019-GC41 deal were both priced last Monday, having originally been slated to come the previous week.

Both saw pricing widen from guidance. The senior 10-year, Triple A rated last

priced at 92bp over interpolated swaps, having been indicated at 82bp-83bp over during marketing.

The same A5 tranche in the WFCM 2019-C52 deal was sold at 93bp over, wide of 87bp area guidance.

That is wide of the low 80bp area seen last month but inside the high 90bp-100bp area seen on comparables deals in June.

Volatility in the rates market proved a tricky backdrop for the deals.

The 10-year Treasury yield, which forms a component of the all-in yield of CMBS bonds, dropped from 2.06% when the deals were announced on July 30 to 1.74% last Monday, after the escalation of tariffs on

China last week spooked credit investors and drove a rush to safe assets.

“There has been a tremendous rally in Treasuries just as banks were marketing to investors, and so it’s tough for spreads not to widen based on that,” said Darrell Wheeler, securitisation strategist at Cantor Fitzgerald.

“Still, during this volatility almost US$2bn of bonds is getting done and that is a positive.”

CMBS spreads also moved in sympathy with the widening in corporate bonds, an investor said.

Barclays, UBS and Societe Generale are marketing another US$835.403m conduit deal, BBCMS 2019-C4. The banks are out on a deal roadshow through Wednesday.

Deutsche Bank, Cantor Commercial Real Estate Lending, Citigroup and MUFG are also

NEW ASSET–BACKED SUMMARY DETAILS: WEEK ENDING 9/8/2019 (CONTINUED)

Issuer Amount (m) WAL Coupon (%) Bookrunner(s) Rating Asset type

HALST 2019-B US$369.12 1.15 2.080 BAML/Citigroup/SMBC Nikko/SG/TD Securities Aaa/AAA/NR ABS



HALST 2019-B US$47.634 2.48 2.130 BAML/Citigroup/SMBC Nikko/SG/TD Securities Aa1/AA+/NR ABS

HGVT 2019-A US$34.26 3.01 2.857 Deutsche Bank Securities/Barclays/BAML/Wells Fargo NR/A-/BBB ABS

HGVT 2019-A US$50.26 3.01 2.557 Deutsche Bank Securities/Barclays/BAML/Wells Fargo NR/AA/A ABS

HGVT 2019-A US$215.48 3.01 2.357 Deutsche Bank Securities/Barclays/BAML/Wells Fargo NR/AAA/AAA ABS

OBP 2019-OBP US$902.500 10.07 2,516 BAML NR/NR/NR CMBS

NRMLT 2019-4 US$416.528 3.16 3.500 Wells Fargo/Pierpoint Securities/Deutsche Bank/JP Morgan Aaa/NR/NR RMBS

PROG 2019-SFR3 US$159.145 5.07 2.271 Morgan Stanley/Barclays/Deutsche Bank Aaa/NR/NR ABS

PROG 2019-SFR3 US$45.646 5.07 2.571 Morgan Stanley/Barclays/Deutsche Bank Aa3/NR/NR ABS

PROG 2019-SFR3 US$18.506 5.07 2.721 Morgan Stanley/Barclays/Deutsche Bank A3/NR/NR ABS

PROG 2019-SFR3 US$24.674 5.07 2.871 Morgan Stanley/Barclays/Deutsche Bank Baa3/NR/NR ABS

PROG 2019-SFR3 US$83.89 5.07 3.369 Morgan Stanley/Barclays/Deutsche Bank NR/NR/NR ABS

PROG 2019-SFR3 US$48.114 5.07 3.867 Morgan Stanley/Barclays/Deutsche Bank NR/NR/NR ABS

SEMT 2019-3 US$265.94 5.0 3.500 Wells Fargo/Morgan Stanley Aaa/NR/NR RMBS



SEMT 2019-3 US$36.708 4.96 3.500 Wells Fargo/Morgan Stanley Aa1/NR/NR RMBS

SOFI 2019-C US$351.253 1.49 2.130 JP Morgan/Deutsche Bank/Goldman Sachs/Mizuho NR/AAA/NR ABS

SOFI 2019-C US$275.842 5.67 2.370 JP Morgan/Deutsche Bank/Goldman Sachs/Mizuho NR/AAA/NR ABS

SOFI 2019-C US$37.905 8.67 3.050 JP Morgan/Deutsche Bank/Goldman Sachs/Mizuho NR/AA/NR ABS

TAOT 2019-C US$250.8 1.02 2.000 JP Morgan/Credit Agricole/Mizuho Aaa/AAA/NR ABS

TAOT 2019-C US$150.1 1.02 1m+20bp JP Morgan/Credit Agricole/Mizuho Aaa/AAA/NR ABS



VERUS 2019-3 US$381.586 2.03 2.784 Credit Suisse/Nomura/Barclays NR/AAA/NR RMBS

VERUS 2019-3 US$34.146 2.03 2.938 Credit Suisse/Nomura/Barclays NR/AA/NR RMBS

VERUS 2019-3 US$67.155 2.03 3.040 Credit Suisse/Nomura/Barclays NR/AA-/NR RMBS

VERUS 2019-3 US$40.975 3.95 3.139 Credit Suisse/Nomura/Barclays NR/BBB-/NR RMBS

VERUS 2019-3 US$16.789 3.95 4.043 Credit Suisse/Nomura/Barclays NR/BB/NR RMBS

WFCM 2019-C52 US$26.626 2.67 1.987 Wells Fargo/Barclays Aaa/NR/AAA CMBS




WFCM 2019-C52 US$177 9.79 2.643 Wells Fargo/Barclays Aaa/NR/AAA CMBS


WFCM 2019-C52 US$93.4 9.99 3.143 Wells Fargo/Barclays Aa3/NR/AAA CMBS

WFCM 2019-C52 US$45.012 9.99 3.375 Wells Fargo/Barclays NR/NR/AA- CMBS

WFCM 2019-C52 US$34.254 9.99 3.561 Wells Fargo/Barclays NR/NR/A- CMBS


understood to be working on another conduit, CD 2019-CD8.

Bank of America Merrill Lynch also sold a US$950m single-asset CMBS backed by the

where BAML is headquartered. The US$902m Triple A rated A class of notes was sold with a 2.5193% yield.

Bank of America Merrill Lynch analysts said on Monday that the “path of least resistance” was for CMBS spreads to widen from here.

“We are currently neutral regarding CMBS spreads, but depending on the magnitude of the President’s trade war escalation and the extent to which upcoming data releases continue to indicate economic weakness, we could envision a move to underweight,” they said.

And how the market shapes up could also depend on whether investors look to put money to work before another potential rate cut.

That is hard to say, according to Wheeler.“Even until mid-summer, some investors

were holding off, hoping for higher yields, so this recent rally should have left them a little less inclined to buy,” he said.

“Yet, the recent rates rally has caused many to give up on calling the direction in rates, and so many are just looking at how corporates and REITS sold off and deciding recent CMBS widening seems appropriate.”

US ABS

RATE CUT SEEN AS POSITIVE FOR CONSUMER CREDIT

July’s interest rate cut is seen as a positive for consumer ABS fundamentals, as lower rates will increase the affordability of debt and help lenders maintain origination volumes without relaxing underwriting standards, according to investors and analysts.

Against a potentially volatile backdrop of trade wars and uncertainty over future rate cuts, consumer ABS is well positioned due to the strength of consumer credit fundamentals and lower issuance volume this year, they said.

The unemployment rate remained at 3.7% in July, according to the Department of Labor, close to the 50-year low of 3.6% seen in May, while wage growth rose by 3.2%.

These trends are expected to drive a healthy performance in bonds backed by consumer debt, according to analysts.

“To date, consumers have not felt direct pain from tariffs and remain healthy as

beats from the top consumer lenders, even as recession risks are looming,” said JP

Morgan analysts in a report published on August 2.

“ABS offers attractive structural protections and relatively better spread stability against these uncertainties,” they said.

The interest rate cut should help lessen the strain on debt affordability for consumer borrowers and also help originators maintain their loan volumes without compromising on credit or underwriting credit quality, said Moody’s analysts in a report.

This should all be positive for consumer ABS fundamentals for the time being.

“The US consumer remains very healthy. That’s the biggest driver of ABS underlying performance,” said Eric Souza, senior portfolio manager at Silicon Valley Bank. “We’re seeing incomes continue to do well and jobless claims continue to be near 50-year lows. Overall, from a credit fundamentals standpoint, this bodes very well.”

New deal volumes are also down on last

technical support for the market. According to IFR data, US$145.182bn of new ABS had been sold as of August 2, compared with US$162.005bn in the same period last year.

But expectations of further rate cuts may prompt investors to target longer-duration bonds compared with last year, according to Souza.

“In 2018, you wanted shorter maturities and to be defensive on duration, to have the opportunity to reinvest at higher yield,” he said. “The theme for 2019 is lower rates going forward. In that environment, you want to look to add duration and extend maturities.”

Spreads may also come under pressure as the escalation of US-China trade disputes pushes credit spreads generally wider, but consumer ABS should still outperform higher yielding sectors because consumers are on a more stronger footing than commercial sectors, according to Bank of America Merrill Lynch analysts.

Sectors such as aircraft, container and railcar ABS may be more heavily impacted by trade tensions and concerns over the global economy, they said.

CHILDCARE, PET STORES BROUGHT TO WHOLE BUSINESS ABS MARKET

store franchise are the latest in an increasingly eclectic line of companies being brought by private equity owners to the US whole business securitisation market to lower their cost of funding.

ROARK CAPITAL, one of the most active sponsors of whole business securitisation, is

bringing a US$275m deal this week to

Schools, a national US franchising platform for early childhood education and childcare. Roark acquired the business in 2008.

Barclays and Credit Suisse have been mandated to arrange the new deal, holding a roadshow through to the end of last week.

On offer is a US$265m Triple B rated A-2 tranche with a 6.7-year weighted average life, rated BBB by Kroll.

Speciality pet retailer PET SUPPLIES PLUS is also looking to raise US$355m with a whole business securitisation this week, PSP FUNDING

2019-1. The franchise is owned by private

Barclays is also sole structurer and active bookrunner on PSP Funding with Credit Suisse as passive joint bookrunner, according to a Kroll pre-sale report. The deal is expected to be announced this week.

tranche with a 4.83-year weighted average life and BBB/BBB ratings from Kroll and Morningstar.

Both deals will use the proceeds to

distribution to equity holders.By wrapping the majority of the business’

assets into a bankruptcy-remote securitisation structure, companies can get a better credit rating than they would be able to obtain on an unsecured bond offering.

The asset class has grown in recent years from a core of franchised restaurant chains to include gyms, auto repair centres and massage chains, with investors across corporate bond and securitisation markets showing interest in new exposures in the asset class.

Roark Capital is a regular sponsor in the market, having securitised franchise systems including restaurants such as Jimmy John’s, Arby’s, CKE Restaurants, Sonic and FOCUS Brands, as well as auto

chain Massage Envy.

ALL INTL ISSUERS (EXCLUDING SELF-FUNDED)BOOKRUNNERS: 1/1/2019 TO DATE


1 Credit Suisse 82 16,971.18 10.1

2 Citigroup 81 14,941.37 8.9

3 BAML 61 13,787.63 8.2

4 JP Morgan 67 13,731.22 8.2

5 Barclays 62 12,064.11 7.2

6 Wells Fargo 49 10,228.05 6.1

7 Deutsche Bank 59 9,169.85 5.4

8 Goldman Sachs 44 8,337.23 5.0


10 Nomura 33 7,742.87 4.6

Total 350 168,262.80

Includes securitisations, PFI bonds and credit-linked notes. Excludes US

global ABS/MBS, CDOs and self funded issues.

Source: Refinitiv SDC code: J10d


STRUCTURED FINANCE

The week before last, the market saw another new kind of business tap the market, with performance rights organisation SESAC pricing a US$530m Triple B rated note at 5.25%, inside guidance of 5.5% area. Guggenheim was sole lead.

ISSUERS PUSH US$5.7bn OF ABS THROUGH PRIMARY MARKET

A drop in Treasury yields helped securitisation issuers lower their overall cost of funding despite offering wider spreads last week, although the move in rates may put pressure on demand for short-dated bonds.

Issuers sold just over US$5.7bn of new ABS through Thursday last week, and as many as nine mandates are in the market as the pipeline grows for this week.

So far, issuers have been able to shrug off a volatile rates backdrop to keep deals moving through the primary market.

ELEMENT FLEET MANAGEMENT sold a US$400m

year notes priced at EDSF plus 48bp, in the middle of guidance range.

The notes offered a yield of 1.967% - a percentage point lower than the 2.966% the same tranche offered in its previous deal, a US$1bn transaction sold in March.

“If issuers were lined up to do a deal and then rates move, it makes sense to take advantage and do it – your all-in funding costs are going to be low even if spreads do widen,” said one ABS analyst.

On Tuesday, other auto sector issuers such as TOYOTA, GENERAL MOTORS and HYUNDAI all priced ABS with spreads on senior tranches around 5bp-15bp wide of their previous deals, but between 64bp-85bp tighter on an all-in yield basis, according to IFR data.

“There’s no shortage of cash at the front end of the market,” said one securitisation investor. “We’re seeing pretty substantial

concessions on new issues compared with secondary levels and that is driving a lot of demand.”

However, some in the market expect the move in Treasury yields, with the curve steepening at the short end, to put pressure on demand for senior, short-dated ABS tranches going forward.

The inversion of the curve increases the yield on shorter-dated products.

“If you’re an ABS investor that’s traditionally at the two to three-year end of the yield curve and you start seeing other alternatives yielding more, like three-month Libor, you might start questioning your dedication to that market,” said a structured product portfolio manager.

Among this week’s offerings are three sub-prime auto loan deals, from AMERICAN

CREDIT ACCEPTANCE, FLAGSHIP CREDIT ACCEPTANCE and SANTANDER CONSUMER USA.

Two debut whole business securitisations, from PRIMROSE SCHOOLS and PET SUPPLIES PLUS, are also being readied, while online lender FUNDING CIRCLE is set to launch a debut US small business loan ABS.

ASIA-PACIFIC MBS

CBA TO REFINANCE 2014-2 CLASS A1 NOTES

Price guidance has been released at one-month BBSW plus 85bp area for the MEDL

2014-2 A1-R

A$1.023bn (US$680m) Class A1 MEDL 2014-2 under the Medallion RMBS programme.

Mortgage originator Commonwealth Bank of Australia is marketing the new notes, which have a 2.6-year weighted-average life and 16.1% credit support.

ASIA-PACIFIC ABS

Q CARD TRUST ABS NETS NZ$300m

FLEXIGROUP issued an upsized NZ$300m (US$197m)

instalment receivables, Q CARD TRUST, that

maturing soft-bullet notes.Westpac New Zealand was arranger and

joint lead manager with BNZ for last Friday’s issue, which had an indicative size of NZ$250m.

The NZ$111.6m of Class A1 and NZ$83m of Class A2 notes, with soft bullet tenors of 2.0 and 3.0 years, were priced at the tight end of respective one-month BKBM plus 110bp–115bp and 120bp–125bp guidance ranges.

The NZ$16.6m of Class B and NZ$11.5m of Class C notes, both with 4.7-year tenors,

were priced in line with guidance at one-month BKBM plus 215bp and 300bp.

The NZ$27m of Class D, NZ$29.75m of Class E and NZ$10.5m of Class F notes, all with 5.0-year tenors, were priced 375bp, 550bp and 775bp over one-month BKBM, matching guidance in each case.

Respective credit support for the Class A to F notes is 35.5%, 25.5%, 18.5%, 13.5%, 8% and 6%.

The transaction was completed by NZ$10.05m of seller notes.

Card Trust ABS notes maturing on February 15 with new NZ$89.5m of Class A notes, NZ$37.5m of Class B notes and NZ$26.25m of Class C notes.

Q Card is a continuous issuer because,

dates, credit card balances are revolving in nature.

Credit card ABS are typically sold out of master trusts, which purchase eligible receivables from the sellers on a revolving basis, and tend to have soft bullet maturities rather than weighted average lives.

MTF PRINTS FIFTH AUTO ABS

MOTOR TRADE FINANCE

securitisation last Thursday, the NZ$280m (US$184m) MTF RAMBLER TRUST 2019, arranged by CBA and Westpac.

The NZ$249m of Class A notes and NZ$10.2m of Class B notes, with 2.82-year and 3.41-year weighted average lives, were priced at the tight end of their respective one-month BKBM plus 120bp–125bp area and 210bp–215bp area guidance ranges.

The NZ$8m of Class C, NZ$4.2m of Class D and NZ$3.8m of Class E notes, all with 3.41-year WALs, were priced 270bp, 360bp and 550bp wide of one-month BKBM versus high 200s, mid-to-high 300 area and mid-to-high 500 area price talk.

Respective credit support for the Class A to E notes is 11.07%, 7.43%, 4.57%, 3.07% and 1.71%.

The issue was completed by NZ$4.8m of seller notes.

MTF’s four previous auto-loan securitisations, issued between between 2012 and September 2017, totalled NZ$740m. The last of these was the NZ$220m MTF Sierra Trust 2017 trade.

MTF, which offers vehicle loan, car

services in New Zealand, is one of only four non-RMBS issuers to have accessed the Kiwi

Q Card is another regular visitor, while Eclipx Group and Latitude have both accessed the market once, with NZ$224.4m auto loan and NZ$200m credit card securitisations in June 2017 and Decmber 2018, respectively.

GLOBAL STRUCTURED FINANCE IN US$ BOOKRUNNERS: 1/1/2019 TO DATE


1 JP Morgan 147 48,424.52 12.0

2 Citigroup 160 46,964.16 11.7

3 Wells Fargo 131 45,097.90 11.2

4 Credit Suisse 140 41,740.27 10.4

5 BAML 113 35,173.98 8.7

6 Barclays 103 25,644.80 6.4

7 Morgan Stanley 72 24,500.21 6.1

8 Goldman Sachs 84 20,195.63 5.0

9 Deutsche Bank 83 16,746.70 4.2

10 Nomura 54 12,471.90 3.1

Total 755 402,433.93

Including securitisations (Euro, foreign, global and domestics, excluding

CDOs) and PFI bonds.

Source: Refinitiv SDC code: B16b


SSAR

EUROS

Aug 5 2019 Lower Saxony €750m Feb 14 2022 0 - - -

Aug 6 2019 EIB €250m incr

(€1.65bn)

Sep 13 2047 0.875 114.538 MS-3 / B+35.9 0.332

Aug 7 2019 Schleswig-Holstein €500m Aug 15 2039 0.2 98.658 MS+4 / B+57.2 0.269

Aug 8 2019 Hamburg €300m Feb 15 2022 6mE+70 - - -

Aug 9 2019 Brandenburg €100m incr

(€350m)

May 8 2023 3mE+50 102.185 - -

SWISS FRANCS

Aug 6 2019 Basler KB SFr250m Aug 23 2034 0 100.866 MS+11 / Eidg+54 -0.058

NON CORE

Aug 5 2019 KfW NKr1bn incr

(NKr2bn)

Apr 3 2024 1.625 100.785 - 1.445

Aug 6 2019 KfW NKr1bn incr

(NKr5.5bn)

Oct 12 2021 1 99.007 - 1.469

Aug 7 2019 NWB A$50m incr

(A$630m)

May 2 2029 3.3 109.431 ASW+53 /

ACGB+64.6

2.235

Aug 8 2019 ADB A$350m Aug 15 2024 1.1 99.855 ASW+35 /

ACGB+44

1.13

CORPORATES

US DOLLARS

Aug 5 2019 Mid-America Apartments U$250m Mar 15 2029 3.95 107.827 T+125 2.985

Aug 6 2019 Occidental Petroleum U$500m Feb 8 2021 3mL+95 100 3ml+95 -

Aug 6 2019 Occidental Petroleum US$1.5bn Aug 13 2021 2.6 99.912 T+105 2.645

Aug 6 2019 Occidental Petroleum U$500m Aug 13 2021 3mL+125 100 3mL+125 -

Aug 6 2019 Occidental Petroleum US$2bn Aug 15 2022 2.7 99.893 T+120 2.737

Aug 6 2019 Occidental Petroleum US$1.5bn Aug 15 2022 3mL+145 100 3mL+145 -



Aug 6 2019 Occidental Petroleum US$1.5bn Aug 15 2029 3.5 99.506 T+185 3.559

Aug 6 2019 Occidental Petroleum U$750m Aug 15 2039 4.3 99.481 T+210 4.339

Aug 6 2019 Occidental Petroleum U$750m Aug 15 2049 4.4 98.539 T+225 4.489

Aug 6 2019 PPG Industries U$300m Aug 15 2024 2.4 99.827 T+90 2.437

Aug 6 2019 PPG Industries U$300m Aug 15 2029 2.8 99.732 T+110 2.831

Aug 6 2019 Public Service Co of

Colorado

U$550m Mar 1 2050 3.2 98.672 T+100 3.296

Aug 6 2019 UDR U$400m Aug 15 2031 3 99.71 T+130 3.029

Aug 7 2019 BMW Finance NV U$750m Aug 12 2022 2.25 99.925 T+75 2.276

Aug 7 2019 BMW Finance NV U$500m Aug 12 2022 3mL+79 100 3mL+79 -

Aug 7 2019 BMW Finance NV U$500m Aug 14 2024 2.4 99.902 T+90 2.421

Aug 7 2019 BMW Finance NV U$500m Aug 14 2029 2.85 100 T+115 2.85

Aug 7 2019 Global Payments US$1bn Feb 15 2025 2.65 99.975 T+115 2.655

Aug 7 2019 Global Payments US$1.25bn Aug 15 2029 3.2 99.686 T+155 3.237

Aug 7 2019 Global Payments U$750m Aug 15 2049 4.15 99.744 T+195 4.165

Aug 7 2019 McDonald’s US$1bn Sep 1 2029 2.625 99.264 T+100 2.709

Aug 7 2019 McDonald’s US$1bn Sep 1 2049 3.625 98.075 T+150 3.732

Aug 7 2019 NiSource U$750m Sep 1 2029 2.95 99.826 T+130 2.97

GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 9/8/2019

Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)


BONDS SUMMARY DETAILS

- - - -/-/AAA Uni -

- - - Aaa/AAA/AAA JPM -

MS+4 area 0 >€600m -/-/AAA Deka/DB/DZ/LBBW/NatWest Ger 84.6%, Switz 4.2%, Belg 3.8%, Denk

3.6%, Korea 2.4%, Fr 1.2%, UK 0.2%. Ins

69.6%, AM/FM 18.2%, Bks 12%, Other 0.2%.

- - - -/-/AAA Deka/NordLB/Uni -

- - - Aaa/AAA/AAA NordLB -

MS+11 - - -/AA+ KBBS -

- - - Aaa/AAA/Scope

AAA

DNB -

- - - Aaa/AAA/Scope

AAA

DNB -

- - - Aaa/AAA Nom -

ASW+35 - - Aaa/AAA/AAA Citi/JPM/RBC -

T+135bp area 9 U$500m Baa1/BBB+/BBB+ Citi/Jeff/JPM/USB/WFS -

3mL+135 area,

3mL+105 area

- US$2.6bn Baa3/A/A BAML/Citi/JPM/WFS -

T+145 area,

T+115 (+/-5)

10 US$2.8bn Baa3/A/A BAML/Citi/JPM/WFS -

3mL+165 area,

3mL+135 area

- US$3bn Baa3/A/A BAML/Citi/JPM/WFS -

T+160 area,

T+130 (+/-5)


3mL+185 area,

3mL+155 area

- US$3.5bn Baa3/A/A BAML/Citi/JPM/WFS -

T+180 area,

T+150 (+/-5)


T+205 area,

T+170 (+/-5)


T+220 area,

T+195 (+/-5)

13 US$12bn Baa3/A/A BAML/Citi/JPM/WFS -

T+260 area,

T+220 (+/-5)


T+270 area,

T+235 (+/-5)

10 US$10bn Baa3/A/A BAML/Citi/JPM/WFS -

T+95/100,

T+95 (+/-5)

5 U$750m A3/A-/A- BNP/JPM/PNC -

T+125 area,

T+115 (+/-5)

5 U$600m A3/A-/A- BNP/JPM/PNC -

T+115/120,

T+105 (+/-5)

9 US$1.7bn A1/A/A+ Barc/Citi/PNC/TD -

T+150 area,

T+135 (+/-5)

13 - Baa1/BBB+ BAML/JPM/WFS -

T+80/85,

T+75

8 U$800m A1/A+ Barc/Citi/Miz/SG/TD -

3mL+equiv,

3ml+79

- U$650m A1/A+ Barc/Citi/Miz/SG/TD -

T+95/100,

T+90 (#)


T+120/125,

T+115 (#)


T+130 area,

T+120 (+/-5)

- - Baa3/BBB- BAML/JPM -

T+170 area,

T+160 (+/-5)


T+210 area,

T+200 (+/-5)


T+115 area,

T+105 (+/-5)

5 US$2.3bn Baa1/BBB+/BBB BAML/Citi/JPM/MUFG/SG -

T+165/170,

T+155 (+/-5)

6 US$2.9bn Baa1/BBB+/BBB BAML/Citi/JPM/MUFG/SG -

T+130/135,

T+130 (#)

11 US$1.3bn Baa2/BBB+/BBB Citi/CS/Miz/USB -

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution


GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 9/8/2019 (CONTINUED)


Aug 7 2019 Wisconsin Public Service U$300m Sep 1 2049 3.3 99.885 T+112 3.306

Aug 8 2019 CVS Health US$1bn Aug 15 2024 2.625 99.485 T+120 2.736

Aug 8 2019 CVS Health U$750m Aug 15 2026 3 99.887 T+140 3.018

Aug 8 2019 CVS Health US$1.75bn Aug 15 2029 3.25 99.097 T+165 3.357

Aug 8 2019 EPR Properties U$500m Aug 15 2029 3.75 99.168 T+210 3.851

Aug 8 2019 The Hartford Financial

Services Group

U$600m Aug 15 2029 2.8 99.68 T+112 2.837

Aug 8 2019 The Hartford Financial

Services Group

U$800m Aug 15 2049 3.6 98.877 T+142 3.662

Aug 8 2019 Humana U$500m Aug 15 2029 3.125 99.898 T+140 3.137

Aug 8 2019 Humana U$500m Aug 15 2049 3.95 99.634 T+170 3.971

Aug 8 2019 Magellan Midstream

Partners

U$500m Mar 1 2050 3.95 99.91 T+172 3.955

Aug 8 2019 Paccar Financial U$300m Aug 15 2024 2.15 99.779 T+67 2.197

Aug 8 2019 Public Service Electric & Gas U$400m Aug 1 2049 3.2 99.275 T+98 3.238

Aug 8 2019 Welltower U$450m Mar 15 2024 3.625 104.774 T+95 2.494

Aug 8 2019 Welltower U$750m Jan 15 2030 3.1 99.816 T+140 3.121

YEN

Aug 6 2019 Corning ¥31.3bn Aug 14 2031 1.153 100 MS+115 1.153

Aug 6 2019 Corning ¥5.9bn Aug 12 2039 1.513 100 MS+133 1.513

STERLING

Aug 7 2019 NEXT £50m (of

retained)

Aug 26 2025 3 103.949 G+195 2.252

NON CORE

Aug 7 2019 QIC Green A$200m Aug 15 2025 2 99.383 ASW+127 2.11

Aug 7 2019 QIC Green A$100m Aug 15 2025 3mBBSW+127 100 3mBBSW+127 -

FINANCIALS

US DOLLARS

Aug 6 2019 UDR U$400m Aug 15 2031 3 99.71 T+130 3.029

Aug 7 2019 AerCap Ireland Capital DAC

/ AerCap Global Aviation

Trust

U$750m Aug 14 2024 2.875 99.654 T+147 2.95

Aug 7 2019 Lloyds Banking Group US$1.5bn Aug 14 2022 2.25 99.677 T+85 2.362

NON CORE

Aug 9 2019 HSBC New Zealand NZ$200m Aug 16 2022 100 3mBKBM+65 -

Aug 9 2019 HSBC New Zealand NZ$100m Aug 16 2024 1.835 100 MS+85 1.835

COVERED BONDS

SWISS FRANCS

Aug 5 2019 MunHyp SFr50m incr

(SFr250m)

Jun 24 2028 0.5 109.235 MS+2 / Eidg+36.8 -0.521

NON CORE

Aug 8 2019 ING Australia A$500m Aug 20 2024 1.45 99.976 ASW+67 1.455

Aug 8 2019 ING Australia A$250m Aug 20 2024 3mBBSW+67 100 3mBBSW+67 -

Aug 9 2019 LF Hypo SKr250m incr

(SKr3.1bn)

Nov 28 2023 3mS+75 - - -

HIGH YIELD

US DOLLARS

Aug 8 2019 NCR US$500 Sep 1 2027 (Sep 2022) 5.75 100 T+408 5.75

Aug 8 2019 NCR US$500 Sep 1 2029 (Sep 2024) 6.125 100 T+439 6.125

EUROS

Aug 9 2019 Swissport (SSN) €410m Aug 15 2024 (Aug 2021) 5.25 100 - 5.25

Aug 9 2019 Swissport (SN) €250m Feb 15 2025 (Aug 2021) 9 100 - 9


BONDS SUMMARY DETAILS


T+125/130,

T+115 (+/-3)

8 U$950m A2/A-/A+ MUFG/BAML/PNC/WFS -

T+150 area,

T+125 (+/-5)

3 US$7.4bn Baa1/BBB+ Barc/GS/JPM(a)/BAML/WFS(p) -

T+170 area,

T+145 (+/-5)


T+190 area,

T+170 (+/-5)


T+230 area,

T+210 (#)

10 US$1.1bn Baa2/BBB-/BBB- Citi/BarcS/BAML/RBCCM -

T+135/140,

T+115 (+/-2)

5 US$2.5bn Baa2/BBB+ CS/JPM -

T+165/170,

T+145 (+/-3)

5 US$2.75bn Baa2/BBB+ CS/JPM -

T+165 area,

T+145 (+/-5)

0 US$3.5bn Baa3/BBB+/BBB BAML/Barc/WFS -

T+195 area,

T+175 (+/-5)

0 US$3.2bn Baa3/BBB+/BBB BAML/Barc/WFS -

T+190/195,

T+175 (+/-3)

3 US$2.1bn Baa1/BBB+ Barc/PNC/STRH/TD/WFS -

T+75 area,

T+70 (+/-3)

5 U$400m A1/A+ MUFG/RBC/USB/WFS -

T+115 area,

T+100 (+/-2)

3 US$1.3bn Aa3/A MUFG/Scotia/WFS -

T+115 area,

T+95 (#)

1 US$1.2bn Baa1/BBB+/BBB+ Citi/GS/Key -

T+160 area,

T+145 (+/-5)

4 U$2,300m Baa1/BBB+/BBB+ Citi/GS/Key -

MS+100/115,

MS+107/115

- - Baa1/BBB+ MS/MUFG/SMBC Nikko -

MS+120/133,

MS+130/133

- - Baa1/BBB+ MS/MUFG/SMBC Nikko -

G+200 area,

G+195/200

- >£85m Baa2/BBB NatWest -

ASW+140 area - - -/A- CBA/NAB -

3mBBSW+140 area - - -/A- CBA/NAB -

T+150 area,

T+135 (+/-5)

13 - Baa1/BBB+ BAML/JPM/WFS -

T+155/160,

T+147 (#)

9 US$1.1bn Baa3/BBB-/BBB- BNP/Citi/CA-CIB/RBC/TD -

T+95 area,

T+85 (#)

9 US$1.8bn Aa3/A+/A+ Citi/JPM/Lloyds/WFS -

3mBKBM+65/70 - Aa3/AA-/AA- ANZ/HSBC/WBC -

MS+85-90 - Aa3/AA-/AA- ANZ/HSBC/WBC -

MS+2 area - - Aaa CS -

ASW+67 area - - Aaa/-/AAA ING/NAB/DB/RBC/WBC -

3mBBSW+67 area - - Aaa/-/AAA ING/NAB/DB/RBC/WBC -

- - - Aaa/AAA HCM -

- - - B2/BB WFS/BAML/JPM/MUFG/PNC/RBC/

STRH/Capone/FTS

-

- - - B2/BB WFS/BAML/JPM/MUFG/PNC/RBC/

STRH/Capone/FTS

-

5.25%/5.5%,

5.25%

- - B2/B- Barc -

9% area,

9%

- - B2/B- Barc -


GLOBAL DEBT: SOVEREIGN FOREIGN CURRENCY LONG-TERM RATINGS (9/8/2019)

1 Moody’s Government Bonds

2 Moody’s Country Ceilings

3 S&P Government Bonds

4 S&P Transfer and

Convertibility Assessments

5 Fitch Government Bonds

6 Fitch Country Ceilings

p Positive outlook/on watch

for upgrade

n Negative outlook/on watch

for downgrade

N New rating

W Rating withdrawn

SD Selective default

* Taken off positive watch/

outlook

** Taken off negative watch/

outlook

Improvement in ratings,

outlook or watch status

Deterioration in ratings,

outlook or watch status

Moody’s S&P Fitch Sovereign 1 2 3 4 5 6

Moody’s S&P Fitch Sovereign 1 2 3 4 5 6

Abu Dhabi Aa2 AA AA+ AA AA+

Albania B1 Ba2 B+ BB

Andorra W BBB AAA BBB p A–

Angola B3 B1 B– n B– B B

Argentina B2 n B1 B B+ B n B

Armenia B1 p Ba2 B+ p BB–

Aruba BBB+ ** BBB+ BBB– n BBB

Australia Aaa Aaa AAA AAA AAA

Austria Aa1 Aaa AA+ AAA AA+ p AAA

Azerbaijan Ba2 Ba2 BB+ BB+ BB+ BB+

Bahamas Baa3 n Baa1 BB+ BB–

Bahrain B2 Ba3 B+ BB– BB– BBB–

Bangladesh Ba3 Ba2 BB– BB– BB– BB

Barbados Caa1 Caa2 SD B-

Belarus B3 B3 B B B B

Belgium Aa3 Aaa AA AAA AA– AAA

Belize B3 B1 B– B–

Bermuda A2 Aa3 A+ p AA+

Bolivia Ba3 Ba2 BB– BB– BB– BB–

Bosnia Herzegovina B3 B3 B BB–

Botswana A2 Aa3 A– A+

Brazil Ba2 Ba1 BB– BB+ BB – BB

Bulgaria Baa2 A3 BBB– A– BBB A–

Cambodia B2 B1

Cameroon B2 Ba2 B n BBB– B BB+

Canada Aaa Aaa AAA AAA AAA AAA

Cape Verde B BB– B B+

Cayman Islands Aa3 Aa2

Chile A1 Aa1 A+ AA A AA

China A1 Aa3 A+ A+ A+ A+

Colombia Baa2 A3 BBB– BBB+ BBB n BBB+

Congo (DR) B3 n B3 B- BBB-

Congo (Rep) Caa2 n B2 CCC+ p CCC+ CCC BB-

Cook Islands B+ AAA

Costa Rica B1n Ba2 B+n BB B+n BB–

Cote d’Ivoire Ba3 Baa3 B+ BBB–

Croatia Ba2 p Ba3 BBB BBB+ BBB- BBB+

Cuba Caa2 Caa2

Curacao BBB+ BBB+

Cyprus Ba3 p A3 BBB- AAA BBB – A

Czech Rep A1 Aa2 AA– AA+ AA- AAA

Denmark Aaa Aaa AAA AAA AAA AAA

Dominican Rep Ba3 Ba1 BB– BB+ BB– BB–

Ecuador B3 n B2 B– B– B –n B –

Egypt B2 B1 B B B+ B+

El Salvador B3 B1 CCC+ AAA B– B

Estonia A1 Aaa AA– AAA A+ p AAA

Ethiopia B1 B1 B B B B

Fiji Ba3 Ba3 B+ B+

Finland Aa1 Aaa AA+ AAA AA+ p AAA

France Aa2 p Aaa AA AAA AA AAA

Gabon B3 n Ba3 B BB+

Georgia Ba2 Baa3 BB– BB+ BB BBB–

Germany Aaa Aaa AAA AAA AAA AAA

Ghana B3 B1 B B+ B B

Greece B3 p Ba2 B+ p AAA BB- BBB-

Guatemala Ba1 Baa3 BB– BB+ BB BB+

Honduras B1 Ba2 BB– BB

Hong Kong Aa2 Aaa AA+ AAA AA+ AAA

Hungary Baa3 Baa1 BBB A– BBB A

Iceland A3 A3 A A A A+

India Baa2 Baa1 BBB– BBB+ BBB– BBB–

Indonesia Baa2 A3 BBB BBB BBB BBB

Iraq Caa1 B3 B– B– B– B–

Ireland A2 Aaa A+ AAA A+ AAA

Israel A1 Aa3 AA- AA+ A+ AA

Italy Baa3 Aa3 BBB n AAA BBB n AA

Jamaica B3 Ba3 B p B+ B+ BB-

Japan A1 Aaa A+ p AA+ A AA

Jordan B1 Ba1 B+ BB

Kazakhstan Baa3 Baa2 BBB– BBB– BBB BBB+

Kenya B2 Ba3 B+ BB– B+ BB–

Kuwait Aa2 Aa2 AA AA+ AA AA+

Kyrgyzstan B2 Ba3

Latvia A3 Aaa A AAA A– AAA

Lebanon Caa1 B2 B– n B+ B– B–

Lesotho B+ BB+

Liechtenstein Aaa AAA AAA

Lithuania A3 Aaa A AAA A– p AAA

Luxembourg Aaa Aaa AAA AAA AAA AAA

Macau Aa3 Aa2 AA AAA

Macedonia (FYR) BB– BB BB p BB+

Malaysia A3 A1 A– A+ A– A

Maldives B2 Ba3 B+ BB–

Malta A3 p Aaa A– p AAA A+ p AAA

Mauritius Baa1 A2

Mexico A3 n A1 BBB+ n A+ BBB A–

Moldova B3 B2

Mongolia B3 B1 B B+ B B+

Montenegro B1 Ba1 B+ AAA

Montserrat BBB– BBB–

Morocco Ba1 Baa2 BBB– n BBB+ BBB– BBB

Mozambique Caa3 n Caa2 SD CCC RD B–

Namibia Ba1 n Baa2 BB+ BBB–

Netherlands Aaa Aaa AAA AAA AAA AAA

New Zealand Aaa Aaa AA p AAA AA AAA

Nicaragua B2n B1 B-n B- B- n B-

Nigeria B2 B1 B B B+ B+

Norway Aaa Aaa AAA AAA AAA AAA

Oman Baa3 n Baa2 BB n BB+ BB+ BBB-

Pakistan B3 n B2 B– B– B– B–

Panama Baa2 p A3 BBB+ AAA BBB A

Papua New Guinea B2 n B1 B BB–

Paraguay Ba1 Baa3 BB BB+ BB+ BB+

Peru A3 A1 BBB+ A BBB+ A–

Philippines Baa2 A3 BBB+ A- BBB BBB+

Poland A2 Aa3 BBB+ A A– AA–

Portugal Ba1 p A1 BBB AAA BBB AA

Qatar Aa3 n Aa3 AA– AA AA– AA

Ras al–Khaimah A AA+ A AA+

Romania Baa3 A3 BBB– A– BBB– BBB+

Russia Baa3 Baa2 BBB- BBB BBB– p BBB–

Rwanda B2 B1 B p B B+ B+

St Vincent & Gren B3 Ba3

San Marino BBB– BBB+

Saudi Arabia A1 A1 A– A A+ AA

Senegal Ba3 Baa1 B+ p BBB–

Serbia Ba3 Ba1 BB p BB+ BB BB+

Seychelles BB– BB

Singapore Aaa Aaa AAA AAA AAA AAA

Slovakia A2 p Aaa A+ AAA A+ AAA

Slovenia Baa1 p Aa1 AA– AAA A– AAA

Solomon Islands B3 B2

South Africa Baa3 A3 BB BBB– BB+ n BBB–

South Korea Aa2 Aa1 AA AAA AA– AA+

Spain Baa1 Aa1 A– p AAA A– AAA

Sri Lanka B2 Ba2 B B B B

Suriname B2 Ba3 B B+ B–

Sweden Aaa Aaa AAA AAA AAA AAA

Switzerland Aaa Aaa AAA AAA AAA AAA

Tanzania B1n Ba3

Taiwan Aa3 Aa2 AA– AA+ AA–

Thailand Baa1 p A2 BBB+ A BBB+ p A–

Trinidad & Tobago Ba1 Baa3 BBB BBB+

Tunisia B2 n Ba2 B+ BB–

Turkey B1n B3 B+ BB- BB– n BB–

Turks & Caicos BBB+ AAA

Uganda B2 Ba3 B B B+ B+

Ukraine Caa1p B3 B– B– B– B–

UAE Aa2 Aa2

UK Aa2 Aaa AA n AAA AA n AAA

USA Aaa Aaa AA+ AAA AAA AAA

Uruguay Baa2 A2 BBB A– BBB– n BBB+

Venezuela C Ca SD CC RD CC

Vietnam Ba3 Ba2 BB BB BB p BB

Zambia B2 B1 B n B- CCC B –

EM succumbs to negative yields Investors having to search harder for returns

With yields rapidly shrinking across the globe, emerging markets are feeling the effect, with the volume of negative-yielding bonds from CEEMEA sovereigns touching €55bn-equivalent.

POLAND currently has close to €28bn of negative-yielding debt outstanding, according to data provided by Tradeweb. The country’s €2bn 4% March 2021 is currently bid at a yield of -0.39%.

SLOVAKIA has €676.9m of outstanding negative-yielding debt and its yield curve is negative out to 10-years, according to Eikon data, while BULGARIA’s curve is negative out to one year.

One banker observed that with negative yields creeping into EM, investors in the sector will have to become increasingly selective as they look for yield.

Richard Hodge, manager of the Nomura Global Dynamic Bond Fund, said in a note on Friday that those searching for yield should look at “selected emerging market bonds, credits and sovereign bonds”.

Poland, the Czech Republic, Latvia and Bulgaria account for the bulk of the CEEMEA negative-yielding debt.

Outside of CEEMEA, SOUTH KOREA, INDONESIA and MEXICO all have negative-yielding debt, according to Tradeweb.

And yet, the negative-yielding phenomenon should not detract from the unease in emerging markets that were buffeted by renewed trade and currency wars.

Citigroup analysts argue that the market will see the continuation of a sell-off in credit spreads even though they have already widened 40bp in August.

“While spreads have indeed widened

some degree, we think the weakness can persist in the absence of a positive catalyst and also worsened by poor liquidity,” the analysts wrote.Edward Clark

FRONT STORY ASIA-PACIFIC

China’s bond market keeps calm Domestic bonds steady but Panda issuance expected to decline

China’s onshore bond market stayed on course after the renminbi sank to its lowest level

crisis, even though this added to investors’ concerns about economic headwinds and the escalating US-China trade war.

The Chinese currency last Monday

time since 2008 after the daily reference rate was set at Rmb6.9225 to one dollar, allowing the currency to move by 2% up or down from that rate.

As of midday on Friday, the renminbi had lost 1.6% against the dollar since Monday at Rmb7.0512, marking its worst weekly loss since June 2018.

The People’s Bank of China is “probably trying to set a new range/level, but not a new rate of depreciation”, wrote Cliff Tan, East Asian head of global markets research at MUFG, noting that Chinese authorities have generally tried to ensure that exchange rate movements are gradual.

The impact on the onshore bond market was negligible. The 10-year China Development Bank yield tightened by 3bp to 3.45% on Monday, according to Wind Info data.

“There was not much panic in the onshore market, as people did not regard the event as a malignant devaluation,” said a bond trader.

Soon after the currency fell, the PEOPLE’S

BANK OF CHINA said it planned to issue Rmb30bn (US$4.25bn) of Dim Sum bills in Hong Kong in two tranches this Wednesday.

The central bank’s offshore Dim Sum issues have been widely regarded as a policy signal that the government intends to stabilise market expectations, as offshore renminbi funding costs often surge right after the government announce such a plan.

“The government sent a signal that shorting the currency would be expensive,”

Administration of Foreign Exchange.As for future moves, he said the

government would closely monitor how the market reacts, and will look at how well subscribed the bills offering is.

In June, the PBoC received a tepid response from investors for its fourth issue of Dim Sum bills since November 2018. Subscription was only 2.85 times, lower than all previous issues.

ENDANGERED PANDAS

Despite the turbulence last week, German automaker DAIMLER, rated A2/A/AAA (Moody’s/S&P/China Bond Rating), still kept to its plan to sell Rmb5bn (US$709m) of dual-tranche Panda bonds, which it priced near the tight ends of guidance.

“Apart from Daimler that has already set up the schedule, the expectation of currency depreciation does affect the appetite of Panda bond issuers,” said a banker close to the deal. “Some issuers who expressed their willingness before now hope to wait.”

Panda issuance has already declined this

reached Rmb25bn, down 50% compared with the same period last year, according to Golden Credit Rating data.

“Some possible deals may come from issuers from nations involved in the Belt & Road Initiative, but the overall scale is expected to decline this year,” said Stella Chang, head of international business with Golden Credit.

Though breaking through Rmb7 was eyebrow-raising, the market had expected the renminbi to depreciate, mainly driven by escalating trade tensions and a slowing economy, according to Huang Wentao, chief economic analyst with China Securities.

In a Politburo meeting held in July, the central government reinforced its intention to move away from relying on real estate to stoke the economy, while introducing measures such as boosting domestic demand in rural regions.

dilemmas as they can hardly stimulate the economy in the short run,” said Huang. “Coupled with external pressure as the United States threatens to impose higher tariffs, all these factors push investors to chase safe assets.”

As a result, China Securities’ research team has revised down its near-term forecasts for the 10-year China Development Bank yield from 3.4% to 3.0%–3.1%, and the 10-year government yield from 3.0% to 2.6%–2.7%.Yanfei Wang, Daniel Stanton


EMERGING MARKETS China 48 Singapore 49 South Korea 50 Turkey 51 Mexico 51

ASIA-PACIFIC

CHINA

CECIG MAKES DOLLAR BOND DEBUT

CHANGDE ECONOMIC CONSTRUCTION INVESTMENT

GROUP has priced a US$200m debut three-year senior unsecured bond offering at par to yield 6.6%, inside initial 6.8% area guidance.

The Reg S issue has an expected Ba1 rating from Moody’s, on par with the company.

of the Changde municipal government in China’s Hunan province plans to use the proceeds for project construction, to repay onshore debt and supplement working capital.

Sinolink Securities (Hong Kong), Haitong International, CMBC Capital, CNCB HK Capital and Industrial Bank Hong Kong branch were joint global coordinators, as well as joint lead managers and joint bookrunners with CCB International, BoCom International, Tensant Securities, Acer King Securities and Central Wealth Securities Investment.

CECIG is mandated by the Changde municipal government to take on urban infrastructure construction, land development, policy-based property development such as shanty-town renovation, affordable housing and public rental housing projects, and the operation of some public services, according to Moody’s.

DONGXING SEC PRICES US$400m BOND

DONGXING SECURITIES has priced US$400m of

Treasuries plus 180bp, inside initial 210bp area guidance.

The notes will be issued by wholly owned subsidiary Dongxing Voyage and the Shanghai-listed parent company will provide a guarantee.

The Reg S notes have expected ratings of Baa2/BBB/BBB+, on par with the guarantor.

The Chinese brokerage plans to use the

business development purposes.Final statistics were not available at the

time of writing but orders were said to be

guidance, including US$1.43bn of interest from the leads.

Bison Bank, Credit Suisse, Dongxing Securities (Hong Kong), Mizuho Securities, Standard Chartered Bank and Haitong International were joint global coordinators. They were also

joint bookrunners and joint lead managers with ANZ, Bank of China, Bank of Communications Hong Kong branch, China Citic Bank International, China Minsheng Banking Corp Hong Kong branch, China Securities International, CMB International, CMB Wing Lung Bank, Huatai Financial Holdings (Hong Kong), ICBC International, Industrial Bank Hong Kong branch, Shanghai Pudong Development Bank and Target Capital Management.

Beijing-headquartered Dongxing Securities is 52.7%-owned by China Orient Asset Management and plays an important role in supporting the parent’s distressed asset management business.

It reported total assets of Rmb75bn (US$10.6bn) at the end of 2018, according to Moody’s.

EXCELLENCE MARKETS THREE-YEAR DEAL

EXCELLENCE COMMERCIAL PROPERTIES was marketing three-year US dollar senior unsecured bonds at initial price guidance of 7.20% area last Friday.

Excellence Commercial Management is the issuer of the Reg S unrated notes and Excellence Commercial Properties is the guarantor.

The deal was not yet priced at the time of writing. The Chinese property developer plans to use the proceeds for debt

Guotai Junan International and Haitong International are joint global coordinators, as well as joint bookrunners and joint lead managers with Bank of East Asia, CM Financial, ABC International, China Minsheng Banking Corp Hong Kong branch and CCB International.

FUJIAN ZHANGLONG PLANS BOND ISSUE

FUJIAN ZHANGLONG GROUP, rated BB+ (stable) by Fitch, has hired banks for a proposed offering of US dollar senior unsecured notes, subject to market conditions.

Guotai Junan International and Industrial Bank Hong Kong branch are joint global coordinators, as well as joint bookrunners and joint lead managers with BoCom International, China Citic Bank International, Chiyu Banking Corp and HSBC, on the Reg S issue.

The company will meet investors in Singapore and Hong Kong, starting August 13.

The proposed notes have an expected BB+ rating from Fitch.

Zhanglong Group, a local government

eastern Fujian province, is active in trading, water supply, real estate and construction.

KAISA ANNOUNCES TENDER OFFER RESULT

KAISA GROUP HOLDINGS, rated B1/B/B, said US$161.3m in principal amount or 53.77% of its US$300m 12.00% 365-day senior notes due December 14 2019 has been validly tendered.

Under the tender offer, the Hong Kong-listed Chinese real estate company will pay US$1,030 per US$1,000 in principal amount of the validly tendered notes, plus US$18 per US$1,000 of accrued interest.

After completion of the offer, Kaisa will arrange to cancel the purchased notes.

ORIENT SEC PLANS DUAL-CURRENCY DEAL

Shanghai and Hong Kong-listed Chinese brokerage ORIENT SECURITIES, also known as DFZQ, has hired banks for a proposed offering of senior unsecured Reg S notes denominated in US dollars and euros, and met investors in Hong Kong last week.

Orient Securities (Hong Kong), Citigroup, ICBC, CMB Wing Lung Bank, Shanghai Pudong Development Bank and China Citic Bank International are joint global coordinators, as


ALL INTL EMERGING MARKETS BONDSBOOKRUNNERS: 1/1/2019 TO DATE

Asia-Pacific


1 HSBC 208 21,206.41 8.9

2 Standard Chartered 136 12,273.00 5.2

3 Citigroup 112 12,230.65 5.1

4 Bank of China 133 10,101.25 4.2

5 UBS 91 8,452.00 3.6

6 JP Morgan 69 8,339.35 3.5

7 Credit Suisse 77 8,122.53 3.4

8 Haitong Securities 138 7,152.00 3.0

9 Mizuho 75 6,851.13 2.9

10 Deutsche Bank 74 6,848.01 2.9

Total 549 238,028.87


Source: Refinitiv SDC code: L4



1 Citigroup 192 35,667.74 8.1

2 HSBC 259 34,144.95 7.8

3 JP Morgan 146 32,234.11 7.3


5 BNP Paribas 97 17,710.40 4.0

6 Goldman Sachs 65 15,986.67 3.6

7 Deutsche Bank 98 14,587.62 3.3

8 Morgan Stanley 90 14,395.85 3.3

9 BAML 93 13,894.26 3.2


Total 788 439,012.88



well as joint bookrunners and joint lead managers with Industrial Bank Hong Kong branch, ABC International, Bank of Communications and Bank of China for both tranches. Nomura is also a joint bookrunner and joint lead manager for the US dollar tranche.

The tenor of the euro bonds will be three years, while that of the US dollar tranche has not yet been disclosed.

The proposed notes, if issued, have expected ratings of Baa3 by Moody’s, on par with the company.

TIBET LEASING EYES US$300m DEBUT

TIBET FINANCIAL LEASING, rated Ba2 by Moody’s, is looking to raise up to US$300m from a debut offering of US dollar senior unsecured bonds as early as this week, subject to market conditions.

In an update sent to investors last Thursday, the Beijing-headquartered Chinese leasing company said it was considering issuing notes with a tenor of up to three years. It is now seeking feedback after meetings with investors.

The proposed bonds have an expected rating of Ba2 from Moody’s.

Established in May 2015, Tibet Financial Leasing is 48.5%-owned by Tunghsu Group and 29.3% by the Government of the Tibet Autonomous Region via the Tibet

Autonomous Region Investment Co, Bank of Tibet, and Tibet Autonomous Region State-owned Assets Management Co, according to Moody’s.

China Securities International and BNP Paribas are joint global coordinators, as well as joint lead managers and joint bookrunners with Haitong International, China Everbright Bank Hong Kong branch, Tensant Securities, Tellimer and Soochow CSSD Capital Markets (Asia) on the Reg S issue.

SINGAPORE

UTICO SETS HYFLUX DEADLINE

The United Arab Emirates’ UTICO has given struggling HYFLUX a deadline of August 26 to agree to its offer of investment.

The Singaporean water treatment company is in talks with Utico about a potential S$400m (US$292m) investment, split into S$300m in equity and a S$100m shareholder loan, which would give Utico an 88% stake.

moratorium on legal proceedings against it to September 30 while the talks proceed. The moratorium was due to expire on August 2, having already been extended.

The water treatment company is also in talks with Mauritius-based Oyster Bay Fund

about a potential S$500m investment, as

S$900m of preference shares and perpetual bonds as well as S$271m in senior unsecured bonds held by institutional and high-net-worth investors.

Justice Aedit Abdullah granted the moratorium extension, which was shorter

High Court on August 2. “If it doesn’t work out in the next few months [with potential investors], I think I’ll pull the plug,” said Justice Aedit, according to the Straits Times.

2, a working group of unsecured creditors advised by Borrelli Walsh had in May offered to sell the business to Utico for S$200m through the judicial management process.

Lum said that that under that process, holders

have recovered nothing, while unsecured bank lenders and bondholders would have received about S$150m after taking into account the costs of the JM process. Liquidation would recover about S$63m–$133m, Lum said.

The group of unsecured creditors comprises Mizuho, KfW IPEX, Bangkok Bank, BNP Paribas, CTBC and Korea Development Bank, according to a statement issued by the Securities Investors Association (Singapore).


EMERGING MARKETS ASIA-PACIFIC

Southern Energy’s US dollar bond plan in doubt

CHINA Bond issue unlikely in the near term after share price plunge, rating downgrade and shareholding change

SOUTHERN ENERGY HOLDINGS GROUP’s plan to issue

US dollar bonds is likely to be put on ice after its

controlling shareholder sold most of his stake

following a plunge in the stock price and a rating

downgrade by Moody’s.

In a stock exchange filing on August 8, the

Hong Kong-listed Chinese anthracite coal miner

said it was informed by executive director and

chairman Xu Bo that he had sold 227.126m

shares, or a 31.63% stake, on the open market

from August 5 to August 7.

Following the disposal, Xu’s stake in the

Chinese company fell to just 1.94% from 33.57%.

He informed the company that he is not aware of

the identity of the purchaser as the disposal was

on the open market.

Southern Energy held roadshows in Singapore

and Hong Kong in June via CMB International and Standard Chartered Bank for a proposed

debut Reg S US dollar senior bond offering, but

a deal has not materialised.

Moody’s on August 7 downgraded the

company’s corporate family rating to B3 from B2

and changed the outlook to negative from stable

less than two months after it had given a first-

time rating on June 20.

The downgrade followed a steep drop in the

company’s share price and its announcement on

August 5 that a proposed acquisition of a stake

of about 20% by Bijie City Anfang Construction

Investment (Group) from Xu had been cancelled.

The share price plunged 89% on August

2 after a trading resumption on a report

by Emerson Analytics that questioned the

company’s revenue and output figures. Southern

Energy denied the allegations in the report but

the share price continued to fall for the next two

trading days, before it started to rebound on

August 7.

The shares were up 20% at HK$0.67 at

10:20am Hong Kong time on August 9, but still

about 93% lower than the last closing price of

HK$9.73 on July 29 before the release of the

Emerson Analytics report.

Moody’s said its action reflected its concern

that the company’s access to funding will be

significantly impaired.

“Amid an increasingly challenging operating

environment, such a weakening in the

company’s fundraising capability will likely

reduce its cash buffer and increase liquidity

risks,” said Shawn Xiong, a Moody’s assistant

vice-president and analyst.

The company, formerly named China

Unienergy Group, had said it planned to use

the proceeds from the proposed bond issue

for debt refinancing and general corporate

purposes.

Headquartered in Guizhou, it had three

producing mines with an annual nameplate

production capacity of around 1.35m tonnes as

at end-2018, according to Moody’s.

Carol Chan

FTI Consulting is representing an informal steering committee of bondholders, and SIAS is representing perp and pref share holders.

MICLYN GRANTED EXTENSION

MICLYN EXPRESS OFFSHORE has been granted an extension of its moratorium to November 5 as it continues to negotiate a restructuring of its offshore bonds.

The moratorium had been due to expire on August 5, and had already been extended from May 5.

The Singapore-headquartered offshore oil and gas services provider was unable to repay US$150m of 8.75% senior secured bonds when they matured on November 25 2018, nor repayments on certain senior secured loan facilities due the same month.

In November last year, Miclyn said it had received written offers from potential investors who wanted to put in US$70m–$100m of new funds, but it has reported no progress since then. It said the moratorium extension would allow negotiations to continue between the company, its senior lender and noteholders.

SOUTH KOREA

KEXIM MAKES ITS MARK IN MEXICO

EXPORT-IMPORT BANK OF KOREA has issued Ps7bn

credit agency has issued in the Mexican local bond market.

The bonds were priced at par to yield 7.93%, which Kexim said was equivalent to Libor plus

84bp after the dollar swap. Total orders were over Ps11.5bn, with high demand from investors in Latin America following two trips to meet Mexican investors in recent months.

The issue helped meet Kexim’s objective to diversify and broaden its investor base.

bonds denominated in Mexican pesos. In 2008 it sold bonds in the currency, and last year sold Mexican peso bonds to Japanese investors in an Uridashi transaction.

Kexim is rated Aa2/AA/AA– internationally and has Mexican ratings of Aaa/AAA (Moody’s/HR Ratings). It was granted sovereign status by Mexican authorities.

HSBC and Morgan Stanley were placement facilitation agents for the 144A/Reg S offering, which was priced on August 1.

The benchmark senior unsecured bonds are listed in Mexico and Singapore.


Aug 8 2019 Dongxing Securities US$400m Aug 15 2024 3.25 99.47 T+180 3.366

Aug 8 2019 Changde Economic

Construction Investment

Group

US$200m Aug 15 2022 6.6 100 - 6.6

Aug 8 2019 Unifin Financiera US$200m Aug 12 2022 7 100 - 7

GLOBAL EMERGING MARKETS BOND DETAILS: WEEK ENDING 9/8/2019


New sanctions complicate Venezuela debt story VENEZUELA Freeze on government’s US assets seen protecting Citgo

Sweeping US sanctions against VENEZUELA last

week further complicated the country’s bond

saga as opposition members celebrated the move

as blocking creditors from seizing assets of Citgo,

the US unit of state-owned oil company PDVSA.

An executive order issued by US President

Donald Trump on Monday essentially put a

freeze on all Venezuelan government assets

in the US, a move designed to topple the

government of President Nicholas Maduro.

“With this measure, Citgo and all its assets

are protected,” Juan Guaido, the US-backed

opposition leader, tweeted on Monday.

CITGO is seen as a valuable asset both for Guaido

and his government-in-waiting, as well as for creditors

seeking compensation for losses on investments in

the beleaguered South American country.

So valuable was Citgo to the Maduro

government that, until recently, it stayed current

on the only bond on which it had not defaulted -

the 8.5% 2020 issued by PDVSA and backed by

Citgo shares.

And the Guaido administration was quick to

take the baton when it took over the company

this year and installed its own board, finding

the funds needed to make a US$71m coupon

payment due in April.

However, it is far from clear whether the

opposition will be able to cobble together the

approximately US$1bn or so needed to make

an amortisation and coupon payment due in

October.

And last week’s sanctions were seen providing

Guaido some relief and perhaps a negotiating

tool with the holders of the PDVSA 2020s as the

October payment approaches.

“The executive order is a very clear signal that

the US government isn’t going to permit that

Venezuelan assets will be lost (while the Maduro

government is in power), tweeted Alejandro

Grisanti, a director of PDVSA’s ad hoc board

“This order will allow us to have an orderly

debt restructuring.”

For some, the executive order supersedes

the US Treasury’s response to questions about

its general licence 5, saying 2020 bondholders

are allowed to exercise their rights to the Citgo

collateral in the event of default.

“The executive order says that all the

licences preceding these licences are no longer

good,” said Russ Dallen, managing partner at

investment banking boutique Caracas Capital.

Not everyone agrees with this interpretation,

however.

“We don’t see why the 2020 holder position

has changed at all,” said a source close to

Venezuelan debt holders. “The frequently asked

questions (FAQs) that allowed them to foreclose

on the pledge hasn’t changed.”

Jorge Piedrahita, CEO of Gear Partners, a

consultancy firm based in New York, agrees.

As it stands, 2020 holders are allowed to

exercise their rights to the Citgo collateral,

unless the US government now issues another

order to block such a move, said Piedrahita.

That latter scenario could unfold in two ways,

he added.

Either bondholders are allowed to monetise

the Citgo shares and the proceeds are put in

an interest-bearing account until the executive

order is lifted. Or the auction is prohibited

altogether until the ending of sanctions.

Either way, both sides may be forced together to

find a solution, and there has already been talk that

holders of 2020s have been thinking about options

- such as a new money bond - to help the Guaido

government get over the amortisation hump.

Paul Kilby

EUROPE/AFRICA

TURKEY

SOVEREIGN ESCAPES RATINGS CHOP

There was some moderately good news for TURKEY

sovereign’s B+ credit rating with a stable outlook, forecasting that the Turkish economy would post 3% growth next year.

Analysts expect the Turkish economy will contract by 0.5% in 2019.

S&P added that its ratings could be lowered if it sees an increased likelihood of systemic distress in the banking system.

“Our ratings on Turkey remain constrained by what we view as weak institutions,” analysts said in a report published on Monday.

“We believe there are limited checks and balances between government bodies, raising questions about Turkey’s ability to address the challenging environment for

Indeed, just four days later, the Turkish Central Bank dismissed its chief economist Hakan Kara and some department managers as part of a reorganisation ordered by the bank’s assembly.

“This move will further weigh on concerns around erosion of institutional

strength at the CBRT,” said Timothy Ash, senior EM sovereign strategist at BlueBay.

Ash called Kara’s departure a “huge, huge loss to the CBRT”, calling him the backbone of the bank’s research effort. He said it was hard to understand.

The cuts are happening just a month after President Tayyip Erdogan sacked the bank’s governor Murat Cetinkaya, saying he failed to follow instructions on interest rates and

Cetinkaya’s dismissal prompted Fitch to downgrade the sovereign to BB- in July, saying the move heightened doubts over the authorities’ tolerance for a period of sustained below-trend growth.

This time around, up to 10 people have been dismissed. That includes the bank’s research and monetary policy general manager, Pinar Ozlu, markets general manager, Orhan Kandar,

manager, Yavuz Yeter.

against the dollar after the latest central bank move on Friday. The yield on Turkey’s most recent foreign currency bond - a US$2.25bn 6.35% August 2024 - had been barely moved since the open, bid at 6.09% according to Tradeweb.

While there has been some turnaround since the currency crisis in August 2018, the Turkish private sector still has to annually roll over foreign debt amounting to over 20% of GDP.

The US Federal Reserve’s looser monetary policy is expected to ease matters there -

despite the lack of a proactive policy response from authorities so far.

S&P analysts wrote on Monday that in spite of budgetary stimulus earlier this year,

manoeuvre, given comparatively low net general government debt.

currency sovereign credit rating on Turkey at B+ and its local currency sovereign rating at BB-.

AMERICAS

MEXICO

UNIFIN RAISES US$200m THROUGH PRIVATE PLACEMENT

UNIFIN FINANCIERA raised US$200m last week when it issued a three-year bond in a privately placed transaction, according to sources.

The note, which matures on August 12 2022, was priced at par to yield 7% and was led by Barclays, Santander and Scotiabank.

market earlier this summer, raising US$450m through an 8.375% 2028 bond in July.

It has been an active year for the issuer, which prior to its July bond had not raised dollars since February 2018.


EMERGING MARKETS EUROPE/AMERICAS

T+210 area - - Baa2/BBB/BBB+ Bison/CS/Dongxing/Miz/StCh/

Haitong/ANZ/BoC/BoCom/CNCBI/

CMBCHK/CSI/CMBI/Wing Lung/

Huatai/ICBCI/Industrial/SPDB/

Target

-

6.8% area,

6.6%

- - Ba1 Haitong/CMBC Cap/CNCB HK/

Industrial/CCBI/SinolinkHK/Acer

King/BOCOMI/Tensant/Central

-

- - - BB/BB Barc/Santan/Scotia -



Latin America



1 JP Morgan 30 8,312.66 12.7

2 Citigroup 25 7,155.00 10.9

3 BAML 22 6,365.36 9.7

4 Santander 22 4,026.57 6.1


6 HSBC 15 3,522.26 5.4

7 Scotiabank 14 3,137.64 4.8

8 Barclays 9 2,466.05 3.8

9 Goldman Sachs 11 2,446.76 3.7

10 BNP Paribas 9 2,383.39 3.6

Total 85 65,605.16




Europe/Africa



1 JP Morgan 31 9,926.28 15.1

2 Citigroup 34 9,561.09 14.5

3 BNP Paribas 14 5,361.97 8.1

4 VTB Capital 8 4,110.26 6.2


6 Gazprombank 6 3,944.36 6.0

7 HSBC 10 2,871.77 4.4



10 SG 10 2,144.38 3.3

Total 72 65,828.09




Middle East




2 HSBC 25 5,834.58 9.9

3 Citigroup 14 5,287.99 9.0


5 JP Morgan 8 4,113.25 7.0


7 BNP Paribas 8 3,640.55 6.2

8 Natl Comml Bank Saudi Arabia 3 3,586.97 6.1



Total 60 59,045.23



THE FIRST STEP IN CLO ANALYSIS:DETAILED, ACCURATE, AND TRANSPARENTLPC COLLATERALLPC COLLATERAL OFFERS CLO INVESTORS, MANAGERS & TRADERS A COMPETITIVE EDGE

CLO market professionals use LPC Collateral to run market value coverage analysis on CLO tranches and to compare holdings, asset breakdowns and overlap across CLOs.

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CONNECT TO THE GLOBAL SYNDICATED LOAN MARKET WITH LPC

[email protected]

www.loanpricing.com


LOANS Australia 54 China 54 Hong Kong 56 Japan 56 Singapore 57 Belgium 58 Germany 58 Netherlands 59 UAE 60

UK 61 United States 62 Mexico 62 Leveraged Loans 62 Restructuring 68

FRONT STORY US LEVERAGED MARKET

Loan managers flush with cash Huge influx of repayments coincides with low deal supply

Fund managers will look to recycle capital among higher-rated borrowers

Billions in loan repayments are set to leave

FIRST DATA

LAS VEGAS SANDS

TALE OF TWO LOANS

CLEAR CHANNEL OUTDOOR

CLAIRE’S STORES

Morgan Stanley Deutsche Bank JP Morgan

Aaron Weinman

“These prepayments are high-quality paper, which large mutual funds, ETFs, and CLOs to a lesser extent will need to replace”

“These loan repayments are relatively good credits, so as an investor you can’t just buy any credit. There are other factors like ratings constraints”


ASIA-PACIFIC

AUSTRALIA

CIMIC PICKS SEVEN FOR REFI

CIMIC GROUP

ANZ Bank of ChinaCommonwealth Bank of Australia Mizuho BankMUFG National Australia Bank SMBC

CHARTER HALL PRIME OFFICE WRAPS DEBUT

CHARTER HALL PRIME OFFICE FUND

SMBC

Agricultural Bank of China Bank of China Industrial & Commercial Bank of China Sumitomo Mitsui Trust Bank Metrics Credit Partners China Construction Bank Bank of CommunicationsTai Fung Bank Bank of East Asia

E.Sun Commercial BankChina Merchants Bank First Commercial BankHua Nan Commercial Bank Mega International Commercial Bank Shinsei Bank Taiwan Business Bank Taishin International Bank Taiwan Cooperative Bank Bank SinoPac

CPOF FINANCE

CHINA

TENCENT MULLS LOAN MARKET RETURN

TENCENT HOLDINGS

BAIC DRIVES IN WITH €2.2bn LOAN

BEIJING AUTOMOTIVE GROUP

ASIA-PACIFIC LOANS BOOKRUNNERS – FULLY

SYNDICATED VOLUME (INCLUDING JAPAN)BOOKRUNNERS: 1/1/2019 TO DATE


1 Mizuho 290 58,616.13 18.5

2 MUFG 428 38,834.23 12.2


4 Bank of China 137 21,215.88 6.7

5 Bank of Comms 57 12,595.88 4.0

6 HSBC 53 9,753.12 3.1

7 ANZ 46 8,277.95 2.6


9 Ag Bank of China 21 6,969.87 2.2

10 State Bank of India 4 5,138.71 1.6

Total 1,646 317,393.84

Proportional credit

Source: Refinitiv SDC code: S3a


LOANS ASIA-PACIFIC

Bank of China Luxembourg branchCredit Agricole CIB DBS Bank Natixis Hong Kong branch

ENVISION LAUNCHES US$150m LOAN

Credit Suisse Singapore branch

ENVISION

ENERGY (HONG KONG)

CGNPC WRAPS UP GREEN LOAN

CHINA GENERAL NUCLEAR POWER CORP

ANZ Bank of China Credit Agricole CIB Industrial & Commercial Bank of China (Asia)

China Development Bank Shanghai Pudong Development Bank CGNPC Huasheng Investment Limited Nanyang Commercial Bank OCBC BankAgricultural Bank of China China Construction Bank Commerzbank Export-Import Bank of China Bank of Communications China Minsheng Banking Corp Hang Seng Bank Industrial and Commercial Bank of China Tokyo branch

KDB Asia Tai Fung Bank China Guangfa Bank

CGNPC INTERNATIONAL

April Intl joins RGE units in A&E drive

SINGAPORE/CHINA RGE seeks to simplify collateral on existing facilities

APRIL INTERNATIONAL ENTERPRISE, a unit of RGE

Group, is seeking amendments to US$1.1bn

of loans signed earlier this year and in 2015,

joining other affiliates that embarked on similar

exercises a few months back and adding to its

self-arranged US$650m deal launched last

month.

April International Enterprise is seeking

majority consent to change the security agent

on the loans and to expand the borrower’s

scope of business beyond its existing upstream

operations to include downstream paper and

pulp businesses.

The borrower sent the requests in late May to

amend a US$1bn multi-tranche loan signed in

February and a US$100m five-year outstanding

portion of a US$1.1bn multi-tranche facility

completed in October 2015.

April International Enterprise, formerly known

as Heliosity Consulting (Singapore), is also

seeking consent from all lenders on the two

loans to cancel vendor agreements between the

guarantors and other RGE Group companies that

were pledged for the financings.

Responses from lenders for the amendment

exercises were originally due by late June, but

have been delayed as banks are still processing

them.

The US$1bn deal was originally closed at

US$835m in January and increased to US$1bn

via accession deeds, according to LPC data.

The US$1.1bn loan from October 2015

included a US$1bn three-year term loan tranche

that was repaid at maturity last year.

Meanwhile the amendment and extension

exercise for a US$800m two-year loan signed in

September 2017 for AAA Oils & Fats, another RGE

Group entity, is expected to be completed soon.

AAA Oils & Fats launched the A&E exercise

in May to extend the deal’s secured revolving

Tranche A and amend seven other terms in the

facility agreement, which require consent from

either the majority of or all Tranche A lenders, or

the majority of lenders for the entire facility.

The three amendment exercises are part

of RGE Group’s broader plan to simplify the

collateral of its existing loans.

In February, Asia Symbol China Holdings,

another RGE Group entity, won consent from all

lenders to amend the collateral of a US$740m

six and seven-year loan signed in November

2017. It followed a consent it won last October

from the majority of lenders to pre-pay three

instalments due in 2019.

Separately, April International Enterprise

last week launched a US$650m borrowing,

comprising a US$100m three-year bullet Tranche

1, a US$350m five-year amortising Tranche 2

and a US$200m seven-year amortising Tranche

3. The tranches pay interest margins of 200bp,

215bp and 240bp over Libor, respectively, and

top-level fees of 80bp, 85bp and 105bp.

RGE Group is a privately owned integrated

resource-based industrial group in Asia-Pacific.

The group owns pulp and paper mills, palm oil

mills and refineries, and speciality cellulose and

cellulosic fibre mills.

Apple Lam, Evelynn Lin


HONG KONG

LENDERS RETAIN NANJING CEC EXPOSURE

NANJING CEC PANDA FPD TECHNOLOGY

Agricultural Bank of China Hong Kong branch Bank of China (Hong Kong)

RIGHT LANE PRE-FUNDS PART OF LOAN

WELL FAITH MANAGEMENT

CMB Wing Lung Bank

TEN JOIN KINGBOARD LOAN

KINGBOARD HOLDINGS

DBS Bank, Hang Seng Bank Standard Chartered Bank

Bank of Communications, Bank of East Asia, Mizuho Bank, MUFG SMBC

Industrial & Commercial Bank of China (Asia) China Construction Bank (Asia) HSBC

Korea Development Bank (Asia) Nanyang Commercial Bank

INDIA

HDFC RETURNS WITH US$200m LOAN

HOUSING DEVELOPMENT FINANCE

CORP

First Abu Dhabi Bank Korea Development Bank Standard Chartered Sumitomo Mitsui Trust Bank

Bank of China

INDONESIA

BNI TO LAUNCH US$750m LOAN

BANK NEGARA INDONESIA

CTBC Bank MUFG Standard Chartered SMBC United Overseas Bank

JAPAN

DUO BACKS TAKAMATSU`S ASUNARO BUY

TAKAMATSU CONSTRUCTION GROUP

Mizuho Bank Resona Bank


LOANS ASIA-PACIFIC

SANKEI RAISES LOAN FOR PROPERTY BUY

SANKEI REAL ESTATE

Mizuho Bank SMBC

MCUBS MIDCITY EXTENDS ¥15bn FACILITY

MCUBS MIDCITY INVESTMENT

Mizuho BankMUFG Sumitomo Mitsui Trust Bank

SINGAPORE

ESR-REIT SEEKS LOAN AFTER DELAYED IPO

ESR CAYMAN

Credit Agricole CIB

Taiwanese capex lending takes a hit ASIA-PACIFIC Government woos companies back home with cheap financing

A government drive to lure overseas-based

Taiwanese companies back home with

favourable loans is threatening to hurt its project

financing and syndicated loans market as the

island braces for a boom in capital expenditure.

The Ministry of Economic Affairs has already

approved nearly a hundred applications with

investment valued at more than NT$500bn

(US$16bn) from Taiwanese firms returning home.

These companies are planning to borrow up to

NT$400bn from domestic banks through the

government-mandated programme launched

in January.

The incentives are aimed at Taiwanese

companies, especially those with operations in

China amid its trade war with the US.

They include easier access to bilateral bank

loans bearing interest rates no higher than 50bp

over the two-year post office savings rate, which

is currently at 1.095%, and a tenor no longer

than 10 years.

While it is not mandatory for Taiwanese banks

to provide such loans, not many are likely to pass

up the opportunities even if it means earning lower

returns than what such capex financings would

offer in the PF and syndicated loans market.

“Local companies are turning to the bilateral

loans to fund their capital expenditure plans

and top-tier borrowers with strong bargaining

power can even get the pricing below 1%,” said

a syndicated loan banker at a top-tier domestic

bank in Taipei.

Typically NT dollar syndicated loans carry

interest-rate floor mechanisms that protect

lenders from downsides. The lowest pre-tax

interest rate floor is set at 1.7%. Syndicated

capex financings offer higher margins and pay

a premium of 40bp–50bp over similar plain-

vanilla loans, proving popular with domestic

lenders because of the higher returns.

In January, Winbond Electronics, a maker of

integrated circuits and related components,

closed Taiwan’s largest capex loan this year.

The NT$42bn seven-year term facility saw

participation from 19 banks and offered interest

margins tied to its after-tax net profit margins

ranging from 95bp to 115bp over Taibor. The

loan’s pre-tax interest rate floor was set at 1.8%.

CAPEX WAVEWith most of the borrowings for the new capex

expected to come through bilateral loans under

the incentive programme, domestic lenders are

trying to come up with alternatives that could

boost their returns.

“We are looking to find a way out to structure

deals that combine the incentives into syndicated

loans as the National Development Fund has

promised to subsidise 0.1% of bank commissions

for those borrowing more than NT$10bn under

the plan,” a second loan banker said.

Any volume that filters through to the

syndicated loan market will add to the

US$4.26bn in capex loans already raised in the

first half of 2019. In comparison, 2018 transacted

only US$1.35bn in capex financings.

Given the rising friction between the US and

China, and in light of the new incentives from

the government, companies returning home

to set up new operations include bellwethers

such as Yageo, the world’s largest manufacturer

of chip resistors, and Pegatron, the world’s

second-largest electronics original equipment

manufacturer.

Yageo plans to invest NT$16.5bn to expand

its manufacturing facilities in Taiwan, while

Pegatron is establishing a research and

development facility in Taipei and expanding

existing production lines in Taoyuan.

“The government wants to turn the threat of

the US-China trade war into an opportunity to

encourage its companies to relocate in Taiwan,”

said a third Taipei-based loan banker.

In the second quarter of this year, Taiwan’s

economy grew by a stronger than expected

2.4% year on year, thanks in part to orders

shifting to Taiwan from China and the start

of the peak season for the technology sector.

The plan to return home would further help

boost the island’s economic development and

manufacturing upgrades during the second half

are expected to translate into more than 43,900

new jobs in Taiwan.

Another government drive to install offshore

wind farms has already kicked off and is

generating multi-billion dollar loans as well as

jobs. Loans for up to NT$235bn combined are

currently in the market for wind farm developers,

including Danish fund manager Copenhagen

Infrastructure Partners and German wind energy

developer Wpd.

Evelynn Lin


VIETNAM

MONG DUONG FIRES UP LOAN

AES-VCM MONG

DUONG POWER

Citigroup HSBC

SMBC Standard Chartered Bank

EUROPE/MIDDLEEAST/AFRICA

BELGIUM

FAGRON GOES SUSTAINABLE

FAGRON

ING, BNP Paribas Fortis KBC

Commerzbank HSBC

DENMARK

SCANDLINES RAISES I-GRADE FINANCING

SCANDLINES

GERMANY

DUERR PIONEERS WITH €750m LOAN

DUERR


LOANS EMEA

BNP Paribas Commerzbank Deutsche Bank UniCredit

Bank of China DZ Bank HSBC ING JP Morgan KfW IPEX-Bank LBBW Mizuho Bank

Santander

SIEMENS LINES UP LOAN

SIEMENS

HEALTHINEERS

AKKA SIGNS €300m LOAN

AKKA TECHNOLOGIES

BNP Paribas HSBC FranceKBC Societe Generale

IRELAND

KERRY GOES SUSTAINABLE

KERRY GROUP

Allied Irish Banks Bank of America Merrill Lynch Bank of Ireland Barclays BNP Paribas Citigroup Danske Bank Deutsche BankGoldman Sachs HSBC JP Morgan Mizuho BankRabobank Ulster Bank

NETHERLANDS

GRANDVISION NETS SUSTAINABLE RCF

GRANDVISION

ABN AMRO BNP Paribas INGRabobank BECM BRED Credit Agricole CICLCL LBBW

BBVA HSBC JP Morgan Lloyds Bank SEB

DIGI SIGNS €150m LOAN

DIGI COMMUNICATIONS

Citigroup ING UniCredit

EMEA LOANS BOOKRUNNERS – FULLY

SYNDICATED VOLUMEBOOKRUNNERS: 1/1/2019 TO DATE



2 BNP Paribas 97 23,380.20 7.1

3 BAML 45 21,097.67 6.4

4 UniCredit 89 17,339.26 5.3

5 Deutsche Bank 58 15,264.34 4.6

6 SG 76 14,775.96 4.5

7 Citigroup 58 14,197.81 4.3

8 Commerzbank 77 13,817.46 4.2

9 JP Morgan 49 12,833.44 3.9

10 ING 77 10,938.62 3.3

Total 451 329,377.85

Proportional credit

Source: Refinitiv SDC code: R17


SOUTH AFRICA

NEDBANK RAISES US$350m

NEDBANK

Bank of America Merrill Lynch Standard Chartered

Bank of China Bank of Taiwan Commerzbank First Abu Dhabi BankHSBC Industrial & Commercial Bank of ChinaING JP Morgan MUFG Mizuho Bank State Bank of India SMBC AfrAsia Bank

TURKEY

ING TURKEY CLOSES LOAN

ING BANK AS

Standard Chartered Mizuho Bank

Barclays Doha BankGoldman Sachs JP Morgan Standard Chartered Bank SMBC Sberbank (Switzerland) Sberbank Europe

UAE

EMIRATES NBD UPS LOAN TO US$500m

EMIRATES NBD

Mizuho Bank Korea

Development Bank State Bank of India Taishin International Bank

Mega International Commercial Bank Bank of Taiwan Chang Hwa Commercial Bank Hua Nan Commercial BankLand Bank of Taiwan Taiwan Cooperative Bank

Russian borrowers demand tougher terms RUSSIA Reduction in pricing making it hard for banks to lend

Russian borrowers are demanding increasingly

aggressive terms on potential syndicated

loans, making it even more challenging for

international banks to lend to them.

Green issues, pricing and the size of the grace

periods being demanded by borrowers have all

impacted banks’ ability to do deals for Russian

corporates. This is in addition to the limitations

on lending to them already put in place by the

sanctions imposed on Russia by the West in

2014.

Two borrowers - iron and steel producer

METALLOINVEST and mining company SIBERIAN

ANTHRACITE - are considering raising new loans,

but could face some difficulty gaining appetite

from international banks.

Coal miner SUEK’s recently closed US$800m

pre-export financing had been in the market

since January. The deal pays a margin of around

170bp over Libor, 130bp lower than its previous

2014 deal, making it hard for some banks to

participate.

A number of banks also had to step away

under the carbon neutrality initiative, which

says they can no longer lend to certain energy

companies for environmental reasons.

This downward pressure on pricing is

continuing, and one banker said that he would

not participate in a new loan for Metalloinvest.

“We have turned it down - we can’t make the

pricing,” he said.

The situation is compounded by Russian

corporates, including Metalloinvest, that are

looking for increasingly long grace periods on

the repayment of loans.

“These deals are usually five-year amortising

loans, normally with a six-month grace period

on repayments,” the banker said. “Metalloinvest

is now looking for a three-and-a-half-year grace

period, after which it would probably look to

refinance it. That was a deal-breaker for us. It is

no longer an amortising loan: it would just be

like a four-year bullet.”

However, the banker did say the company is

still likely to be able to raise the loan from some

lenders.

LOOKING FOR EUROS

Siberian Anthracite is looking to do a euro-

denominated pre-export financing. This follows

Russian potash producer URALKALI introducing

a €650m tranche into its latest US$1.44bn loan

refinancing that closed in June, in order to secure

cheaper pricing.

As a coal producer, Siberian Anthracite

will face the same problems faced by SUEK

regarding environmental issues, the banker said.

“It’s coal again - unless they really pay up it

will be difficult,” he said.

“The business case for doing these deals is getting

weaker and weaker. There is no ancillary business. It’s

a struggle to get them through credit committee. It’s

bad enough for an existing client – taking on a new

coal client would be impossible,” he said.

Lending to Russian borrowers could be

further impacted by the latest round of sanctions

recently imposed on Russia by the US.

Economic sanctions were first imposed on

Russia by the West after March 2014 following

Russia’s annexation of the Crimea.

The latest round of sanctions will prohibit

multilateral banks such as the World Bank and

International Monetary Fund lending to Russia,

and prevent US banks from participating in non-

rouble bonds issued by the Russian sovereign or

lending non-rouble-denominated funds to the

sovereign.

Sandrine Bradley


LOANS EMEA

Woori Bank Taiwan Fubon Commercial Bank Bank of Kaohsiung Gunma Bank Joyo Bank

UK

BAT TAPS FOR £745m

BRITISH AMERICAN TOBACCO

PHOENIX NETS £1.25bn REFI

PHOENIX GROUP

HELICAL AGREES £400m REFI

HELICAL

Barclays HSBC NatWest Wells Fargo

RPS CLOSES £100m REFI

RPS

GROUP

Lloyds HSBC NatWest

SAVILLS ADDS ACCORDION TO RCF

SAVILLS

OPTIVO NETS £200m

OPTIVO

BNP Paribas

Barclays First Abu

Dhabi Bank

G4S GETS £300m BRIDGE

G4S


NORTH AMERICA

UNITED STATES

BROADCOM LINES UP US$15.5bn

BROADCOM

LATIN AMERICA

MEXICO

AMERICA MOVIL SNARES 19 BANKS

AMERICA MOVIL

Intesa Sanpaolo BBVABNP Paribas Santander Citigroup

LEVERAGED LOANS

UNITED STATES

ANCESTRY.COM SEEKS US$2.4bn

ANCESTRY.COM

Morgan Stanley JP Morgan

Goldman Sachs Deutsche Bank KKR BarclaysBank of America Merrill Lynch RBC UBS

ASCEND PERFORMANCE MATERIALS

Bank of America Merrill Lynch Goldman SachsHSBC JP Morgan Wells Fargo

THE SEMINOLE TRIBE OF FLORIDA

BAML Fifth Third US Bank Capital One PNC Citizens Bank

WESTJET WRAPS US$1.96bn TLB

WESTJET AIRLINES

AMERICAS LOANS BOOKRUNNERS – FULLY

SYNDICATED VOLUMEBOOKRUNNERS: 1/1/2019 TO DATE


1 JP Morgan 584 187,697.05 12.3

2 BAML 632 185,011.46 12.1

3 Wells Fargo 497 126,505.88 8.3

4 Citigroup 341 116,079.79 7.6

5 MUFG 187 81,958.19 5.4

6 RBC 196 59,091.72 3.9

7 Barclays 204 54,758.84 3.6

8 Morgan Stanley 91 47,862.94 3.1

9 Scotiabank 156 40,090.62 2.6

10 BNP Paribas 111 39,199.60 2.6

Total 2,491 1,527,251.76

Proportional credit

Source: Refinitiv SDC code: R7


LOANS LEVERAGED LOANS

Barclays Morgan Stanley RBC Citigroup UBS

BMO Capital Markets Scotiabank TD Securities

CITYMD

Credit Suisse Goldman Sachs Bank of America Merrill Lynch Jefferies Keybanc ING SunTrustRegions Houlihan Lokey

Loan investors ask for higher minimum returns as Libor falls

US Borrowers have added 1% Libor floors to loans to appease investors

Investors are seeking additional protection in

volatile credit markets by asking companies

to increase guaranteed minimum returns on

leveraged loans, as fears grow that falling US

interest rates could drag Libor lower, hitting their

returns.

Floating-rate loans pay an interest margin

plus Libor, but investors’ returns are falling

as Libor rates tumble. Three-month Libor has

dropped more than 60bp this year to 2.18% on

August 8 and the one-month rate is down more

than 30bp to 2.2%.

Consulting firm TENEO, WESTJET AIRLINES and

urgent care provider CITYMD added Libor floors of

1% to boost guaranteed minimum returns on their

leveraged loans, and protect investors against

further drops in Libor as US interest rates fall.

Most recent US loans have been issued

with 0% Libor floors to avoid negative interest

rates, but investors are seeking more protection

in volatile markets and are asking for 1%

Libor floors, as work continues to replace the

benchmark.

“With markets so volatile, Libor floors look

more like a good insurance policy,” said Jennifer

Daly, a partner in the finance group at law firm

King & Spalding.

The US Central Bank in July cut rates for the

first time in more than 10 years, and volatility

is rising as the US-China trade war escalates,

which is prompting managers to seek more

protection on their investments, as falling Libor

rates eat into returns.

The Dow Jones Industrial Average dropped

767 points on August 5, as investors fled risky

assets, but subsequently rallied. The 100 most

widely held loans tracked by Refinitiv LPC

dropped to 97.76 on Wednesday from 98.15 on

August 2.

Libor floor rates are also being increased to

make struggling credits more attractive and some

investors will not join deals without them. Middle

market investors used to Libor floors in private

credits may also demand that minimum levels are

set when buying broadly syndicated loans.

“As Libor falls to new lows, [Libor floors are]

something we are paying more attention to,”

Mike Terwilliger, a portfolio manager at Resource

Alts, said.

WestJet Airlines and CityMD increased Libor

floors from 0% to 1% on a US$1.955bn term loan

and a US$900m loan respectively last week, to

make the loans more attractive to investors.

Libor floors reappeared during the financial

crisis, when three-month Libor fell more than

80% to less than 1% in May 2009.

This guaranteed that investors would be paid

the rate of the Libor floor, even if the actual rate

was lower, and in effect removed the floating-

rate nature of loans by fixing interest payments

at the level of the floor plus the coupon.

As Libor began to rise, Libor floors were cut

to 75bp and loan investors began to debate

whether they were still required.

In early 2016, pet supplier PETCO ANIMAL

SUPPLIES was the first issuer to add a tranche

without a Libor floor to a financing backing its

purchase by CVC Capital Partners and Canada

Pension Plan Investment Board, and more

companies followed suit.

LIBOR FLOOR PUSHBACKYears of low interest rates and strong investor

demand has allowed companies to pile on

debt with loose documents and little lender

protection, but investors are pushing for better

terms as money continues to flow out of mutual

funds while US rates fall.

Investors are finding that companies are

more amenable to adding Libor floors than

other requests, including restrictions on issuing

additional debt.

Adding a Libor floor is “a little more

achievable and the market will start paying

attention” to that request, Terwilliger said.

Discussions have been complicated by the

fact that Libor is set to be phased out by the

end of 2021. Andrew Bailey, chief executive

officer of the UK’s Financial Conduct Authority,

in 2017 said there were insufficient transactions

underpinning the rate after accusations bankers

manipulated the benchmark.

The Fed recommends shifting to the Secured

Overnight Financing Rate (SOFR), a broad

measure of the cost of borrowing cash overnight

collateralised by US Treasury securities. The loan

market has been slow to adapt as there are no

SOFR term options like one-month and three-

month Libor to peg loan payments to.

Although Libor is falling, it may not fall far

enough to trigger Libor floor payments before it

is replaced.

“The market may see the demise of Libor

before it reaches the level of any floor,” an

investor said.

Kristen Haunss


US FOODS MARKETS TLB

US FOODS

JP Morgan Bank of America Merrill LynchCitigroup Wells Fargo

MYEYEDR

Jefferies Credit Suisse Nomura Golub CapitalKKR Macquarie

Direct lenders go large PRIVATE DEBT MARKETS New Media has agreed US$1.79bn TL from Apollo Global Management

Direct lenders with deep pockets and increasing

scale are stepping up to provide billion dollar-

plus commitments to fund large sized mergers

and acquisitions, in a sign that the private debt

markets are now open to large as well as middle

market companies.

NEW MEDIA INVESTMENT GROUP said last week

that it had lined up a US$1.79bn five-year senior

secured term loan from alternative investment

firm Apollo Global Management to finance

its US$1.4bn acquisition of USA Today-owner

Gannett. The loan will pay interest at a rate of

11.5%.

Earlier in the summer Goldman Sachs Private

Credit and HPS engaged Irish software firm ION

GROUP to provide a US$1.25bn unitranche loan

to fund the company’s takeover of financial

media and data firm Acuris.

“The trend in the last two to three years has

seen direct lenders breaking through the US$1bn

mark and we’ll continue to see that as they are

able to diversify the funding base,” a lawyer

representing direct lenders said.

Direct lenders have raised record amounts

of capital over the last several years, which has

diversified and deepened their sources of capital.

The rapid and expansive growth has vastly

increased the scale of direct lending and private

credit platforms, and their ability to commit to

bigger deals has also grown.

“In addition to raising bigger funds, many are

managing multiple funds, so there is no issue on

reaching the 10% concentration limit on large

deals,” the lawyer said.

In another recent deal, Golub Capital said the

firm was sole lead arranger and administrative

agent on a US$950m unitranche loan for

E2OPEN’s acquisition of supply chain cloud

software company Amber Road. E2open, a

portfolio company of Insight Partners, provides

cloud-based supply chain management services.

Large direct lending deals are also surfacing

in Europe. Ares Management Corp said funds in

its European Direct Lending group acted as sole

lender on a £1bn loan for telecommunications

provider DAISY GROUP in February, in one of

Europe’s biggest private credit deals.

GAINING MOMENTUM

Private credit and direct lending first gained

traction in the aftermath of the financial crisis

and cemented its position when alternative

capital providers stepped in to fill the void left by

traditional bank lenders hamstrung by stricter

regulatory oversight, including 2013’s Leveraged

Lending Guidance.

Alternative debt capital providers initially lent

to small and mid-sized companies. But as credit

investors attracted capital and new entrants

flocked to the space, the profile of private credit

has grown amid intense competition, opening

the door for bigger borrowers to consider the

direct lending option.

“As other sources of capital crop up, it creates

competition,” said Lee Shaiman, executive

director of the Loan Syndications and Trading

Association. “I don’t think it’s necessarily a bad

thing or good. It creates options for borrowers.”

The scale of direct lending loans has

increased since private equity firm Thoma Bravo

made waves three years ago with a US$1.075bn

unitranche loan backing its US$3bn take-

private acquisition of data analytics firm QLIK

TECHNOLOGIES.

At the time it was the largest such loan ever

provided by a business development company,

a type of direct lending platform, and was

seen heralding more loans of that size from

alternative capital providers.

Ares Capital led the Qlik loan with joint

arrangers Golub Capital, TPG’s credit specialist

TSSP and Varagon Capital Partners. While

traditional investment banks passed on the

original deal, the loan was refinanced in the

broadly syndicated loan market less than a year

later, when the company took advantage of

investor demand to reduce borrowing costs.

This showed that private equity firms and

borrowers can and will move between the private

debt and broadly syndicated markets depending

on pricing, terms and which execution and

investor base serves their needs.

In the broadly syndicated market for example,

the investor base is largely comprised of CLO

funds, the largest buyers of leveraged loans, which

often require rated deals, unlike direct lenders who

have more flexibility to take on riskier credits.

Direct lenders can also move more quickly

compared to traditional underwriting banks, which

can significantly reduce turnaround time and serves

sponsors well during competitive bidding processes.

“Borrowers are economic animals and they are

going to access the market that best suits them at

that moment in terms of borrowing terms, speed

of execution and pricing,” Shaiman said.

Leela Parker DeoAdditional reporting by David Brooke and Aaron Weinman



DIGICERT MAKES CHANGES

DIGICERT

Credit Suisse Jefferies Macquarie UBSBarclays Deutsche Bank Golub Capital Antares

UGI CORP

Credit Suisse

ALBERTSONS SEALS REFI

ALBERTSONS

Credit Suisse

Credit Suisse DAVITA

Wells Fargo

SEDGWICK UPS PRICING

SEDGWICK

Bank of America Merrill Lynch Morgan Stanley

SunTrust Barclays Goldman Sachs Wells FargoCarlyle BNP Paribas Citizens Bank Credit Agricole Fifth Third Bank ING KCM MUFG

US LEVERAGED LOANS BOOKRUNNERS: 1/1/2019 TO DATE


1 BAML 320 56,437.69 11.6

2 Wells Fargo 241 48,688.10 10.0

3 JP Morgan 284 47,217.40 9.7

4 Citigroup 140 26,079.16 5.3

5 Barclays 122 22,386.17 4.6

6 Goldman Sachs 120 19,646.70 4.0

7 Deutsche Bank 112 17,997.57 3.7

8 Credit Suisse 98 17,834.10 3.7

9 RBC 85 14,727.96 3.0

10 PNC Financial 107 14,209.54 2.9

Total 1,230 488,476.36

Excluding Project Finance.

Source: Refinitiv SDC code: P2


SAVAGE ENTERPRISES

Morgan Stanley

CAMBREX BUYOUT BACKED WITH LOAN

CAMBREX

Royal Bank of Canada

Leveraged markets face cash influx from repayments

EUROPE More opportunistic and aggressive deals expected

Huge repayments from Italian mobile operator

WIND TRE and data company REFINITIV are

expected to support aggressive conditions

in Europe’s leveraged finance markets, as

investors remain under pressure to redeploy

capital despite rising political and late cycle

macroeconomic risks.

Leveraged loan and high yield bond investors

are facing an influx of capital after London Stock

Exchange Group launched a US$13.5bn bridge

loan to back its US$27bn purchase of Refinitiv

and CK HUTCHISON GROUP TELECOM said that it

will refinance mobile operator Wind Tre’s €10bn

high-yield debt.

“Cash in the non-investment grade world has

just gone up materially. LSE’s bid is taking out a

huge amount of leveraged finance and Wind will

repay a lot of risk capital,” a leveraged finance

head said.

Refinitiv’s new bridge loan will refinance

the leveraged loans and bonds that supported

the US$20bn acquisition of a majority stake in

Refinitiv ten months ago by a Blackstone-led

consortium. Refinitiv is the parent company of

IFR.

Refinitiv’s existing financing comprises

US$9.25bn-equivalent of loans and US$4.1bn-

equivalent of bonds and is one of the

largest-ever leveraged debt deals. Wind’s

€7.3bn-equivalent bonds, which were put in

place in October 2017, remain the largest euro-

denominated high-yield bond sale.

“Leveraged companies going to investment-

grade has caused a huge rally in spreads

and put money back in investors’ pockets’ to

redeploy,” the leveraged finance head said.

Investors have different strategies to deal with

the prospect of near-term repayment, including

selling in the secondary market, after Refintiv’s

loans rose to par and the bonds climbed over par

to call protection levels, in line with Wind’s notes.

“Some investors may decide to trade out now

to reinvest elsewhere, and some may want to

keep it until refinancing,” a leveraged finance

investor said.

Refinitiv’s existing debt is expected to be

repaid when the acquisition closes in the next

12-18 months and Wind’s bonds are expected to

be repaid this year.

SUPPLY AND DEMAND

The key issue for investors seeking to reinvest

is a lack of deals to invest in. The fresh influx

of cash is expected to further tilt the supply/

demand imbalance as too much cash chases

too few deals, which could sustain aggressive

market conditions despite multiplying risks in an

extended credit cycle.

“There was already shortage of assets before

these refinancing plans, and that could lead to

tighter spreads,” said another leveraged finance

investor.

European leveraged finance volume, including

loans and bonds, was 34% lower in the first six

months at US$112bn than a year earlier, due to a

lack of jumbo acquisitions and uncertainties created

by the lingering US-China trade war. The issuance

of CLOs, the largest buyer of leveraged loans, was

up 7.5% during the same period, however, creating

more buyers to chase fewer deals.

Analysts expect more opportunistic and

aggressive deals to come to the market in the

near term as private equity firms seek to take

advantage of the massive liquidity release

by paying themselves dividends and loading

businesses up with extra debt.

“I think the bigger impact might be arrangers

telling issuers they should tap markets now, so I

expect more dividend recaps and stretch senior

deals,” Edward Eyerman, head of European

leveraged finance at Fitch Ratings, said.

Several large financings backing public to

private buyouts totaling around €19bn-equivalent,

are set to reach the market in September, which

will provide some much-needed supply.

Deals include a £2.5bn loan backing Advent’s

£4bn purchase of UK defence and aerospace

group COBHAM; £3.8bn-equivalent of loans

backing an acquisition of UK theme park

operator MERLIN ENTERTAINMENTS; a £1.387bn

financing backing the buyout of car auctioneer

BCA MARKETPLACE; and €1.325bn of bonds

backing a takeover offer of German lighting

group OSRAM.

Public-to-private deals face more challenges

from potential rival bids, shareholders and

regulatory intervention and some may not

make it over the finishing line. Cobham is

facing opposition from its biggest shareholder,

Silchester International, which does not find the

takeover as compelling.

In May, banks dropped a €2.72bn leveraged

loan financing for German online classifieds

group SCOUT24 after it failed to obtain the

required level of shareholder support.

“It isn’t a very good year for us,” said the third

investor.

Prudence Ho



LIFE TIME FITNESS

Wells Fargo

HYLAND

SOFTWARE

Credit Suisse

JAGGAER

Goldman Sachs


SWISSPORT INCREASES REFI LOAN

SWISSPORT

Barclays

NEP NEARS US$100m ADD-ON

NEP GROUP

Barclays

EUROPEAN LEVERAGED LOANSBOOKRUNNERS: 1/1/2019 TO DATE



1 JP Morgan 28 6,047.37 8.3


3 Goldman Sachs 26 4,932.57 6.8

4 BNP Paribas 28 4,595.29 6.3

5 Deutsche Bank 28 3,908.18 5.4

6 Barclays 23 3,706.13 5.1

7 Natixis 22 3,199.59 4.4

8 ING 22 2,651.42 3.6

9 SG 14 2,629.24 3.6

10 HSBC 16 2,472.94 3.4

Total 114 72,728.91

Excluding project finance. Western Europe only included.


EMEA SPONSORED LOAN BOOKRUNNERS BY VOLUME: 1/1/2019 TO DATE

Europe, Middle East, Africa




2 Deutsche Bank 25 3,537.13 8.8

3 JP Morgan 16 3,225.00 8.1

4 Natixis 19 2,404.58 6.0

5 Goldman Sachs 16 2,283.03 5.7

6 BNP Paribas 17 2,014.75 5.0

7 ING 11 1,801.44 4.5

8 SG 11 1,747.32 4.4

9 Credit Suisse 9 1,426.46 3.6

10 BAML 10 1,307.75 3.3

Total 70 40,011.27

Excluding project finance.



IQVIA REPRICES TLBs

IQVIA

ASIA-PACIFIC

I-MED SEEKS A$150m ADD-ON

I-MED

Image Bidco

RESTRUCTURING


LENDERS TO TAKE SURVITEC

SURVITEC

BARTEC EYES ANOTHER RESTRUCTURING

BARTEC

IFR MARKETSGet the full depth of IFR Markets Real-Time Credit, Rates and Forex coverage, including Alerts, Customisable Landing Page, Search, and more ...

Available on Refinitiv Eikon and IFRMarkets.com

Request a Free Trial:

[email protected]

Indian mutual funds shun recent IPOs Sterling and Wilson undersubscribed while Spandana relies on foreign support

Most local mutual funds are staying away from Indian IPOs as seen from the response

STERLING AND WILSON

SOLAR and SPANDANA SPHOORTHY FINANCIAL.Foreign investors dominated the anchor

tranche of both IPOs and also bought shares in the non-anchor tranche.

“Mutual funds seem to think they can’t make any money out of IPOs in the current market conditions and aren’t backing them as they did in the past,” an ECM banker working on one of the deals said.

Bankers said that the lack of interest from local funds makes it harder to launch IPOs. “We need stabler markets for buying to be more broad-based,” the banker said.

The benchmark S&P BSE Sensex has fallen 6.6% in the quarter to-date, making it one of the worst-performing markets in Asia.

Even though Sterling and Wilson had already downsized its IPO to a maximum Rs31bn (US$438m) from the original Rs45bn target, the solar engineering procurement and construction company found demand for only 37m shares, including an 18m-share anchor tranche, instead of the up to 40.3m that were on offer.

The institutional tranche was subscribed 1.02 times, the high-net-worth investor tranche 89% and the retail portion 30%. However, under Indian stock exchange rules, an IPO comprising only secondary

shares can be successfully closed if the institutional tranche is covered once.

After pricing at the top of the Rs775–Rs780 range, the deal raised only Rs28.8bn. Controlling shareholders Shapoorji Pallonji & Company and founder and managing director Khurshed Daruvala were the vendors.

Analysts said not many investors were familiar with the solar engineering business and hence were cold towards the deal.

“In the past some institutions lost money buying shares of renewable energy companies and want to stay away from Sterling even though the company is in a totally different business,” a source with knowledge of the transaction said.

Axis Capital, Credit Suisse, ICICI Securities, Deutsche Bank, IIFL Holdings and SBI Capital are global coordinators, and bookrunners with IndusInd Bank and Yes Securities.

Nomura India Investment Fund, Schroder International, Abu Dhabi Investment Authority and Massachusetts Institute of Technology were among the foreign anchor investors. Reliance Mutual Fund and ICICI Prudential Life were among the local anchor investors.

NO LOCAL ANCHORS

fared slightly better and its Rs12bn IPO was covered 1.05 times.

The institutional tranche was covered 3.11 times, the high-net-worth investor tranche 55% and retail 9%, stock exchange data show.

The IPO is likely to price at the top of the Rs853–Rs856 range.

Foreigners dominated the anchor books with Wells Fargo, Florida Retirement System, Wastach International Opportunities and Citigroup Global Markets Mauritius among the investors. No local mutual funds participated as anchor investors although there was interest from domestic insurance companies.

The lender sold Rs4bn of primary and 9.36m of secondary shares, with the secondary tranche reduced from 13.1m. Originally, the IPO was expected to raise Rs15bn.

The vendors were Kangchenjunga, a subsidiary of Kedaara Capital, managing director Padmaja Gangireddy, founder Vijaya Siva Ramireddy, Valiant Mauritius, Helion Venture and Kedaara Capital Alternative Investment Fund.

Spandana recorded revenue of Rs10.4bn

Rs3.1bn from Rs1.9bn.Axis, ICICI Securities, IIFL Holdings and JM

Financial were the joint global coordinators and bookrunners with IndusInd Bank and Yes Securities.S Anuradha

Ameren raises US$561m to fund wind acquisitions Missouri power and gas supplier becomes latest utility to tap ECM

St Louis-based power and gas company AMEREN took advantage of the utilities sector’s outperformance so far this quarter thanks to falling interest rates to raise US$561m from a forward sale of equity.

Via an overnight block trade, sole bookrunner and forward counterparty Goldman Sachs borrowed and reoffered 7.55m shares at US$74.30, the bottom of a US$74.30-$75.00 and a 1% discount to the prior closing price of US$75.05.

The deal was notable for the relatively long settlement period of the forward.

Ameren has until March 31 2021, or more than 18 months, to decide whether to issue shares (physical settlement) or pay cash to settle the forward.

This allows Ameren to lock in a high share price now and defer share dilution until it has a use for the proceeds.

the table for a large portion of the US$1.2bn cost of two Missouri wind generation facilities it has agreed to buy in the fourth quarter of next year.

HEADS-UP

Ameren management played down the chances of an equity raise on its earnings call the previous Friday, but did not rule it out.

“In terms of accessing equity markets, we’re clearly aware of the ways that our peer utilities have approached equity markets,” Ameren CFO Martin Lyons said

“We’re monitoring market conditions and ultimately, we’ll move forward in a manner that we think is most appropriate given the funding needs. So I think that’s what we’ve got to say.”

picked up a 12 cents a share underwriting spread, equating to a US$905,000 fee for the offering.

Ameren, whose shares were up 15% so far this year ahead of the offering, expects to grow

years, driven by 8% compound rate base growth.On Thursday, natural gas utility South

Jersey Industries told investors it had no need to raise equity this year but expected to raise equity in 2020 to fund a “utility redundancy project”.Anthony Hughes


EQUITIES Australia 70 China 71 Hong Kong 72 India 72 Japan 72 South Korea 74 Egypt 74

Germany 74 Italy 74 UK 75 United States 75 Canada 78 Structured Equity 80

ASIA-PACIFIC

AUSTRALIA

AMP RAISES A$650m FROM PLACEMENT

Wealth management company AMP has raised A$650m (US$440m) through an institutional placement to fund business growth ahead of the sale of its life insurance unit.

The deal was supported by new and existing institutional investors.

In total, 406.3m new shares were sold at A$1.60, representing a 7.5% discount to the pre-deal close of A$1.73 on Wednesday.

price at A$1.50 to sell approximately 433m shares.

AMP shares resumed trading last Friday and climbed 11.6% to close at A$1.93. The stock is down 21.2% so far this year.

Separately, the company is offering a share purchase plan in which each eligible AMP shareholder can subscribe to up to A$15,000 of new shares from August 16 to September 5.

Proceeds will be used to support growth and manage risk in its wealth management business as well as subsidiaries AMP Capital and AMP Bank, realise targeted cost savings and provide balance sheet strength to absorb uncertainties ahead of the sale of AMP Life.

operations following scathing criticism during the Royal Commission inquiry into

exodus of funds under management. It is set to sell AMP Life to British insurer Resolution Life for A$3bn.

Credit Suisse and UBS are the lead managers and bookrunners.

TRANSURBAN COMPLETES PLACEMENT

Road network operator TRANSURBAN GROUP has raised A$500m (US$339m) from an institutional placement to purchase the remaining interest in a Sydney motorway.

The placement was strongly supported by existing shareholders and new investors, with the book well oversubscribed at the offer price of A$14.70, which represented a 3.48% discount to the pre-deal close of A$15.23 last Tuesday.

The company sold 34m new shares in the placement.

Transurban shares resumed trading and closed down 0.26% to A$15.19 last Thursday.

Separately, the company is raising up to A$200m from a security purchase plan that allows each eligible shareholder to subscribe to up to A$15,000 of new shares at A$14.70 each on August 15–30. The plan is not underwritten.

The company intends to use A$468m of the funds raised for the acquisition of 34.6% of M5 West, which will take its ownership to 100%. It will use the remainder for general corporate purposes.

Morgan Stanley and UBS are the lead managers and bookrunners.

VGI PREPARES ASIAN UNIT’S IPO

is preparing to list its Asian equity investments unit on the ASX to raise up to A$1bn (US$679m).

The IPO of VGI PARTNERS ASIAN INVESTMENTS, also called VG8, will be offered at A$2.50 per share.

VGI Partners intends to take a cornerstone shareholding in VG8 for A$20m. It also committed not to undertake any follow-on raising in VG8 for at least three years provided that the offering raises at least A$500m.

Existing investors in VGI Partners and new investors have been invited to take part on a 1-for-75 and 1-for-125 basis for VG8 shares respectively.


ASIA-PACIFIC EQUITIESBOOKRUNNERS: 1/1/2019 TO DATE



2 Goldman Sachs 31 5,570.82 5.6

3 UBS 40 5,134.37 5.1

4 JP Morgan 32 4,710.63 4.7

5 Citic 33 4,619.76 4.6

6 CICC 36 4,151.13 4.2

7 Citigroup 40 3,765.92 3.8

8 Credit Suisse 34 2,981.75 3.0

9 BAML 15 2,798.56 2.8

10 Nomura 34 2,794.35 2.8

Total 1,198 99,873.99

Including all domestic and international deals and rights issues

Source: Refinitiv SDC code: C4a1

ASIA-PACIFIC EQUITIES (EX-JAPAN)BOOKRUNNERS: 1/1/2019 TO DATE



2 Goldman Sachs 28 5,449.59 6.1

3 UBS 38 4,987.35 5.6

4 Citic 33 4,619.76 5.2

5 CICC 36 4,151.13 4.7

6 JP Morgan 31 3,913.52 4.4

7 Citigroup 38 3,736.62 4.2

8 Credit Suisse 32 2,703.83 3.0

9 BAML 13 2,529.15 2.8

10 China Securities 27 2,379.25 2.7

Total 1,111 89,169.92


Source: Refinitiv SDC code: C4a2

WEEK IN NUMBERS

Eight rounds BEIJING UNISOUND INFORMATION

TECHNOLOGY, HAS STARTED PREPARATIONS

FOR A SHANGHAI TECH BOARD IPO.

FOUNDED IN 2012, THE PROVIDER OF

ARTIFICIAL INTELLIGENCE-POWERED VOICE

SERVICES HAS BEEN THROUGH EIGHT

FINANCING ROUNDS AND HAS BEEN NAMED

AS ONE OF CHINA’S 32 UNICORNS, GIVING IT A

VALUATION OF AT LEAST US$1bn

110.5% SHARES IN ORPHAN DRUG DEVELOPER

ALLAKOS MORE THAN DOUBLED

FOLLOWING THE PRESENTATION OF

PHASE II TRIAL RESULTS. OFF A FRIDAY

AUGUST 2 CLOSE OF US$31, SHARES IN

ALLAKOS PUSHED UP TO US$65.25 BY THE

MONDAY CLOSE. ALLAKOS CAPITALISED

WITH A US$350m STOCK OFFERING

PRICED AT US$77, AN 18% FILE-TO-

OFFER PREMIUM, AND THE STOCK ROSE

FURTHER ON WEDNESDAY TO US$87.50.

ALLAKOS FLOATED LAST JULY AT US$18

2005 SOUTH KOREA’S ZINUS HAS FILED

TO RELIST ON THE KOREA EXCHANGE.

ESTABLISHED IN 1979, THE THEN TENT

MANUFACTURER, KNOWN AS JINWOONG,

LISTED ON THE KRX IN 1989, FELL INTO

DIFFICULTIES AND REBRANDED AS A

MATTRESS COMPANY IN 2004. ITS OVER-

THE-COUNTER SHARES IMPLY A MARKET

CAPITALISATION OF W1trn (US$823m)

20.4% SHARES IN HONG KONG-BASED AMTD

INTERNATIONAL DEBUTED UP 20% ON THE

NYSE ON MONDAY, HAVING RISEN AS MUCH

AS 34% DURING THE DAY. THE INVESTMENT

BANKING AND ASSET MANAGEMENT ARM

OF AMTD GROUP RAISED US$174m AND

WAS VALUED AT US$2.3bn ON MONDAY’S

CLOSE. THE COMPANY COMPLETED A PRE-

IPO FINANCING IN JUNE THIS YEAR AT A

VALUATION OF US$1.3bn

March 31 2021 US POWER COMPANY AMEREN IS

SELLING 7.55m SHARES VIA A US$561m

BLOCK STRUCTURED AS A FORWARD

SALE. THE FORWARD DOES NOT HAVE TO

SETTLE UNTIL MARCH 31 2021, PLENTY

OF TIME BEFORE HAVING TO ISSUE THE

STOCK RELATING TO PAYMENT FOR

TWO WIND GENERATION FACILITIES IN

MISSOURI TOTALLING US$1.2bn

The VG8 portfolio is weighted towards investments in stable economies such as Japan, South Korea, Hong Kong, Taiwan and Australia, and targets long-term investments in companies in monopoly, duopoly or

highly recognisable household brands.The company will not invest in countries

such as China, Thailand and the Philippines, said the statement.

Crestone Wealth Management, Commonwealth Securities, Ord Minnett, Taylor Collison and Wilsons Corporate Finance are joint lead managers.

VGI Partners went public on the ASX in June via a A$75m listing. The Sydney-based global equities manager focuses on US-listed and Australian stocks, including CME Group, Amazon, MasterCard and Medibank Private.

CHINA

VENUS MEDTECH DROPS STAR FOR HK IPO

Heart valve replacement developer VENUS

MEDTECH (HANGZHOU)

last Monday after dropping its plan for a Shanghai tech board listing.

Venus appointed banks in late 2018 for a Hong Kong IPO of about US$400m–$500m, but a disclosure to the China Securities Regulatory Commission in March showed that it had started working with CICC to prepare for a listing on the new Star board.

It is no longer pursuing the tech board listing, according to people close to the deal.

CICC is a joint sponsor of the Hong Kong IPO alongside China Merchants Securities, Credit Suisse and Goldman Sachs.

Venus posted a loss of Rmb138m

31 2019 on revenues of Rmb86m, compared with a loss of Rmb51m over the same period in 2018. Its full-year loss in 2018 was Rmb261m.

The company counts Goldman Sachs and Sequoia Capital among its shareholders, with the former owning a 9.9% stake and the latter 5.9%.

POLY PROPERTY BUILDS HK IPO

POLY PROPERTY DEVELOPMENT, the property management arm of Shanghai-listed Poly Developments and Holdings Group, plans to raise about US$400m–$500m from a Hong Kong IPO by the end of the year, said people close to the deal.

IFR reported in April that Poly Property planned to raise at least US$300m from a

a listing application last Tuesday.

The IPO will comprise not less than 15% of the enlarged share capital in the company. There will be a 15% greenshoe.

Poly Property was listed on the National Equities Exchange and Quotations from August 2017 to April 2019.

months of 2019, up 68% over the same

was Rmb336m.As at April 30 2019, Poly Property managed

817 properties in China, with an aggregate

million square metres.ABC International, GF Capital (Hong Kong) and

Huatai Financial are the joint sponsors.

CHENGDA BIOTECH EYES STAR IPO

NEEQ-listed LIAONING CHENGDA BIOTECHNOLOGY is exploring a possible Shanghai tech board listing after it dropped its Hong Kong listing plan, according to people familiar with the situation.

The company, a subsidiary of Shanghai-listed Liaoning Cheng Da, won listing approval from the Stock Exchange of Hong Kong in March, but said in an announcement on July 30 that it had decided against the listing because of changes in market conditions.

IFR reported in October 2018 that the company planned to raise about US$400m–$500m from the Hong Kong IPO. CLSA and GF Capital Hong Kong were joint sponsors.

Liaoning Cheng Da owns a 60.54% stake in Chengda Biotech, which develops, manufactures and markets vaccines.

The China Securities Regulatory Commission said in a document on the tech board in January that “a listed company that reaches a certain scale can legally spin off its

listing on the tech board” but no detailed rules have been announced since then.

Rmb283m (US$40.6m) for the six months ended June 30 2018, up 10% from Rmb257m a year earlier.

HUALI UNIVERSITY SEEKS APPROVAL

HUALI UNIVERSITY sought listing approval last week for a Hong Kong IPO of about US$100m–$150m. The company plans to start pre-marketing this week if approval is granted, said people close to the deal.

Based in South China, the private higher education and vocational education group offers applied science-focused and practice-oriented programmes.

For the six months ended February 28, the

(US$16m), up 20% from the same period of 2018.

As of February 28, it had more than 37,000 students enrolled at its three schools – Huali College, Huali Vocational College and Huali Technician College.

China Securities International is the sole sponsor.

9F OPENS BOOKS FOR NYSE IPO

9F has set the price range for a NYSE IPO that could raise up to US$84.5m, according to a term-sheet.

It is marketing 8.9m American depositary shares (76% primary/24% secondary) at an indicative price range of US$7.50–$9.50.

On an adjusted net income basis, the price range represents a 2019 P/E of 4.0–5.1 and a 2020 P/E of 3.0–3.8.

There is a 15% greenshoe.9F CEO Lei Sun is selling 2.1m secondary

shares.The IPO will be priced on August 14 after

the US market close.People close to the deal had said

previously that they expected it to raise US$100m–$150m.

9F brings together borrowers, investors, institutional and merchant partners,

services such as loans or wealth management.

Credit Suisse is leading the deal with Haitong International, CLSA, China Investment Securities International and 9F Primasia Securities.

CIMC VEHICLES BURNS THROUGH GREENSHOE

The greenshoe option in CIMC VEHICLES’ Hong Kong IPO of HK1.7bn (US$218m) lapsed on August 2.

It sold the IPO shares at HK$6.38 each in July and the stock has traded between HK$5.62 and HK$6.34 since then.

According to a company announcement, the trailer maker and subsidiary of Shenzhen-listed China International Marine Containers did not exercise the greenshoe option. Instead, stabilising agent Haitong International bought 39.7m shares, or 15% of the base deal, in a price range of HK$5.66–HK$6.33 each from the market during the stabilisation period.

After the lapse of the greenshoe option, the number of H-shares in public hands represents not less than 15.8% of the total issued share capital and the Stock Exchange of Hong Kong has granted a waiver for the

requirement, the company said.Haitong International was the sole sponsor,

and joint global coordinator and joint bookrunner with ICBC International and Nomura.


EQUITIES ASIA-PACIFIC

DUO GAINS OVER 300% IN STAR DEBUT

Two companies saw their shares soar more than 300% on August 8 on their trading debut on Shanghai’s Star market,

China’s new Nasdaq-style tech board.The shares of AMLOGIC SHANGHAI, which raised

Rmb1.58bn (US$224m) from an IPO at Rmb38.50 a share on July 31, jumped to Rmb160 while those of SHANGHAI FRIENDESS ELECTRONICS TECHNOLOGY, which raised Rmb1.71bn at Rmb68.58 on the same day, rocketed to Rmb275.

Amlogic Shanghai closed at Rmb143.36, up 272% on the day, while Friendess gained 256% to Rmb243.88.

The trading volume for both stocks on the

shares sold in the respective IPOs.Guotai Junan and Citic Securities are the

respective sponsors.There are no daily price limits during the

The shares are then allowed to rise or fall up to 20% in a day. On other Chinese bourses, price gains are capped at 44% on debut, and limited to 10% swings in either direction thereafter.

day with the biggest gainer up 400% and the weakest up 84%. Overall, prices have continued rising since, although with some big swings.

The average historical P/E multiple for the

SHENZHEN CHIPSCREEN BIOSCIENCES will make its debut on the tech board on August 12. The company raised Rmb1.02bn from the IPO and set the issue price at Rmb20.43 with a record P/E of 467.5 for the new board. Essence Securities was the sponsor.

HUAFENG TEST & CONTROL PLANS STAR IPO

BEIJING HUAFENG TEST & CONTROL TECHNOLOGY, a manufacturer of automated test equipment,

board IPO on August 7.The company plans to offer 15.3m shares,

or 25% of its enlarged capital. There is a 15% greenshoe.

Proceeds will be used to build a production base, R&D and marketing centres, and to replenish working capital.

CICC is the sponsor.Huafeng Test & Control’s application

brings the number of Shanghai tech board candidates to 151. Five companies have terminated their listing applications.

UNISOUND PREPARES TECH BOARD IPO

BEIJING UNISOUND INFORMATION TECHNOLOGY, a

voice services, has started preparations for a Shanghai tech board IPO.

The company has kicked off the IPO tutorial with CICC, according to the website of the Beijing bureau of the China Securities Regulatory Commission.

Founded in 2012, Unisound Info Tech completed a shareholding reform in June and increased its registered capital from Rmb22.1m (US$3.1m) to Rmb60m.

It was named as one of China’s 32 AI unicorns by CB Insights in February, meaning its valuation had reached at least US$1bn.

The company has completed eight rounds

Qualcomm and JD Digits (formerly JD Finance) are among the investors. CICC and

round in April.

ZHONGLIANG PARTLY EXERCISES GREENSHOE

ZHONGLIANG HOLDINGS GROUP has partially exercised the greenshoe on its Hong Kong IPO, lifting the total deal size to HK$3.2bn (US$412m).

It sold an additional 51.8m shares, or 9.77% of the base deal, at the offering price of HK$5.55 to raise HK$287m.

The base deal comprised 530m primary shares, or 15% of the enlarged share capital, rising to about 16.5% following the partial exercise.

CCB International is sponsor, joint global coordinator and joint bookrunner with Guotai Junan Internationalother joint bookrunners.

HONG KONG

AMTD COMPLETES US IPO

Hong Kong-based AMTD INTERNATIONAL has raised US$174m from a NYSE IPO after pricing the deal in the upper half of the indicative range.

The investment banking and asset management arm of AMTD Group sold 20.8m ADSs at HK$8.38 each, compared to the marketed range of US$8.10–$8.48 per share.

The issue price represents a 2019 P/E of 17.9 and a 2020 P/E of 14.3. It also translates into a 2019 P/B of 2.58 and a 2020 P/B of 2.17.

Books were multiple times oversubscribed with anchor orders led by Asian institutional investors and tycoon

institutional investors.The company’s shares soared 20% on their

trading debut last Monday, despite a 2.9% drop in the US stock market.

The stock rose as much as 34% at one point before ending the day at US$10.09.

is controlled by Calvin Choi, a former UBS investment banker.

It counts Morgan Stanley, Value Partners, Xiaomi, Tongcheng Elong, Sun Hung Kai & Co, Regal Hotels and David Tan, the chairman of Far East Consortium, among its investors.

The company will use the proceeds to invest in business and infrastructure expansion and fund potential acquisitions and investments. The remainder will be for general corporate purposes.

AMTD Global Markets and Loop Capital Markets led the transaction with MasterLink, Tiger Brokers and ViewTrade Securities.

INDIA

SEVEN BANKS BID FOR THDC INDIA IPO

Seven banks have submitted bids to manage the Rs10bn–Rs15bn (US$141m–$211m) IPO of THDC INDIA.

Elara, ICICI Securities, IDBI Capital, IDFC, ITI Securities, SBI Capital Markets and Yes Securities are the bidders. Up to four banks will be hired and the Department of Investment and Public Asset Management is likely to announce the winners later this month.

The government plans to sell up to the entirety of its 75% stake in the hydropower developer.

THDC India is a 75-25 joint venture of the government of India and the government of Uttar Pradesh state. It was incorporated in 1988 to develop, operate and maintain the 2,400MW Tehri hydro power complex and other hydro projects.

2018 on revenues of Rs22.3bn.

JAPAN

SANKEI SET TO LAUNCH FOLLOW-ON

TSE-listed SANKEI REAL ESTATE is set to open the books for a follow-on offering of units in the REIT to raise up to ¥12.7bn (US$119m), based on a minimum 2.5% discount to last Tuesday’s market close of ¥116,400.

The base deal of 111,619 units is being marketed in an indicative discount range of 2.5%–5% to the market close on the pricing day, after deducting expected distributions of ¥1,121 per unit.

There is a greenshoe option of 5,581 units, or 5% of the base size.

The deal is structured as a rinpo, a domestic offering with a dedicated overseas placement for institutional buyers but no English language


prospectus. Foreign buyers will be allocated 10% of the units. Domestic and retail institutions will be allocated 20% and 70% of the deal, respectively.

There is a 90-day lock up period on the issuer.

Books will be open on August 19–20. The deal will be priced on August 21–26.

Daiwa, Mizuho and Nomura are the joint lead managers and bookrunners.

SHINSEI BANK SHAREHOLDERS FOLLOW ON

Shareholders in Japan-based SHINSEI BANK are set to raise up to ¥62.6bn (US$590m) through a global follow-on offering, based on a minimum 3% discount to the market close of ¥1,627 last Thursday.

The base deal of 39.7m existing shares is being marketed in an indicative discount range of 3%–5% to the market close of the pricing day. There is a greenshoe option of 5.9m shares or 15% of the base size.

About 65% of the deal will be allocated to international investors and the rest to domestic buyers.

Selling shareholders include Saturn I Sub (Cayman) Exempt, Saturn Japan II Sub CV, Saturn Japan III, Sub CV, Saturn IV Sub LP, J Christopher Flowers and Thierry Porte.

Apart from Thierry Porte, the issuer and selling shareholders are subject to a 180–day lock-up.

International books will be open on August 14–19. The deal will be priced on August 20–23.

Merrill Lynch Japan Securities, Citigroup and Nomura are the joint global coordinators, bookrunners and lead managers.

NEW ZEALAND

NAPIER PORT PRICES IPO AT TOP

NAPIER PORT HOLDINGS has raised NZ$234m (US$158m) from a NZX IPO priced at the top of the indicative range.

New Zealand’s fourth-largest container port sold 90m shares,

per share, for a a market capitalisation of NZ$520m.

The price translates to a forecast Ebitda multiple of 12.5 for 2019 and 12.2 for 2020. It implies a 3.3% cash dividend yield, based on 2020 forecasts.

The shares are due to list on August 20.New Zealand’s Hawke’s Bay Regional

Council will hold 55% of the capital after the listing.

Proceeds will be used to repay debt, to enable the council to realise a portion of its

investment and to fund loans to eligible employees to purchase shares under the offer.

Apart from the institutional and retail broker tranche, local residents, ratepayers and eligible employees were able to subscribe under a priority offer.

The company expects to post a NZ$5.6m

the following year.Deutsche Craigs and Goldman Sachs were

joint lead managers on the deal.


EQUITIES ASIA-PACIFIC

Indian banks curtail share sales ASIA-PACIFIC Yes Bank downsizes QIP as Axis and ICICI Bank stay away from market

Indian banks are dialling down plans to raise

capital because of weak market conditions and a

lack of strong loan growth, despite efforts by the

Reserve Bank of India to revive the economy with

another rate cut.

Private sector lender AXIS BANK last week

cancelled meetings with potential investors for

a qualified institutional share placement of up

to Rs180bn (US$2.5bn), having hired banks to

handle the sale only last month.

The bank feels that current loan growth does

not require such a large capital raising, a person

working on the transaction said.

Meanwhile, private sector peer YES BANK finally

launched a QIP that had been in the works since

April at a much reduced size of Rs19bn, having

initially mulled raising as much as Rs70bn.

Yes is offering new shares at an indicative price

of Rs83.55 each, or a 6.3% discount to the pre-

deal close of Rs89.20.

Although the bank has shareholder approval

to raise up to US$1bn (Rs70bn at current rates),

investor concerns over how it will manage its

bad loan problem have constrained its room for

manoeuvre.

Weak earnings and rating downgrades have

pushed Yes Bank shares down 68% since the

end of March and repeatedly delayed the QIP’s

launch. The bank also tried to attract private

equity investors but balked at the large discount

they were asking for.

For its part, Axis Bank has told analysts it

plans to raise funds within a year of receiving

board approval for its QIP in July, but it had

already scheduled investor meetings for last

week before cancelling them.

POOR LOAN GROWTHOverall loan growth at Indian banks has fallen

because of a slowing economy. On Wednesday,

the central bank cut its policy repo rate by a

larger-than-expected 35bp to 5.4%, citing signs

of weakening domestic and external demand.

According to the RBI’s latest figures, Indian

banks’ loans rose 12.2% year-on-year during the

two weeks to July 19. At the end of last year, the

pace of increase was 15.1%.

Bank loan growth is expected to stay muted

because of lower demand for vehicles, homes

and consumer durables.

Axis Bank CEO Amitabh Chaudhry said in an

interview with a local newspaper that economic

growth was stalling and the slowdown in the

non-banking finance and real estate sectors had

hurt consumer spending.

“My worry is this slowdown will last longer

than anyone of us have anticipated. People are

saying one quarter … I don’t think so. It will get

much worse before it gets better,” Chaudhry said.

Reflecting the gloomy economic outlook, the

S&P BSE Sensex has fallen 6.6% in the quarter

to-date, making it the third worst performing

market in Asia after South Korea (down 9.5%)

and Hong Kong (down 8.4%).

Axis Bank’s share price had slumped from a

52-week high of Rs827.75 on June 4 to Rs660.10

as of last Thursday, leaving it up 6.5% in the year

to-date.

At least one other bank is shying away from

the equity market. Private sector lender ICICI BANK

recently told analysts it has no plans to raise

capital immediately given the uncertainty on

loan growth.

“Keeping economic uncertainty in mind, the

management is not targeting any loan book growth

number,” Harshil Gandhi, an analyst at broking

house Way2Wealth, said in a research report.

Gandhi said loan growth is likely to pick up

only after the festival season starts in September.

The 19 banks he surveys showed average loan

growth of 12.4% in the first quarter (April–June)

of the current financial year. Of these, private-

sector banks showed a growth of 16.35% and

state-owned banks 9.8%.

About 231.9m shares or 10% of the capital are

being sold in Yes Bank’s QIP.

The funds are being raised to improve the

bank’s capital adequacy ratios.

CLSA, JM Financial, Motilal Oswal, Prime Securities and Yes Securities are the joint global

coordinators. Bank of America Merrill Lynch and

Deutsche Bank are no longer working on the

transaction.

Axis Capital, BNP Paribas, Citigroup, Credit Suisse, HSBC, JP Morgan and UBS are working on

the Axis Bank transaction.

In 2017, Axis Bank raised Rs116bn from a sale

of shares to Bain Capital and Life Insurance

Corporation of India.

S Anuradha

SOUTH KOREA

ZINUS PREPARES TO RELIST ON KRX

Mattress manufacturer ZINUS is preparing to relist on the Korea Exchange as soon as this year, according to a person close to the deal.

June 3 and has mandated NH Investment and Securities to work on the IPO.

Zinus shares, which are traded over the counter on K-OTC, were quoted at W76,500 last Tuesday, implying a market capitalisation of about W1trn (US$823m).

known as Jinwoong as a tent manufacturer and listed on the KRX in 1989. The business

2004, focusing on orders from e-commerce merchants including Amazon.

It posted net income of W15.4bn for the

annual net income of W43.6bn.Zinus chief executive and founder Lee

Yoon-jae holds a 43.7% stake in the company.

Zinus did not respond to an email seeking comment.

EUROPE/MIDDLEEAST/AFRICA

EGYPT

PAYMENTS GROUP FAWRY SURGES ON FIRST DAY

Shares in Egypt’s FAWRY were up 27.7% on debut on Thursday, following the digital payment company’s E£1.6bn (US$100m) Egyptian Exchange IPO.

The stock debuted at E£8.25, hit an intraday high of E£9.31 versus pricing at E£6.46 and closed at E£8.48, up 31.2%.

Total subscription was 30.3 times for an offering of 254.6m shares, representing a

capitalisation of E£4.6bn. A private placing for 10% of the stock was 15.9 times subscribed and totalled E£360m. A retail offer represented 13.89% of the stock in the IPO.

Founded in 2009, Fawry is owned by local and foreign investment banks and processed 600.1 million transactions last year with a total value of E£34.2bn, according to a statement by EFG Hermes, which was the offering manager on the IPO. Fincorp advised.

GERMANY

POWERTRAIN FLOAT EXPECTED H1 2020

Auto parts supplier Continental has POWERTRAIN

reporting disappointing second-quarter results.

Powertrain, which provides hybrid and electric drive systems, batteries and combustion engines, are still on the agenda.

“We’re working on taking action in the

capital markets conditions must be

Continental will seek deeper cost cuts

lower vehicle demand in China and steep investments for electric and autonomous

company said it did not expect headwinds to ease in the second half of 2019.

Powertrain, to be rebranded Vitesco Technologies, will focus more on electric vehicle technology due to a fall in demand for traditional combustion engine vehicles.

“We are aligning our Powertrain operations consistently toward this, since the market is clearly moving in this direction,” said Continental CEO Dr Elmar Degenhart.

The Powertrain IPO is expected to involve 25% of the company and total more than US$1bn, with Bank of America Merrill Lynch, Deutsche Bank and JP Morgan attached.

Schaefer also said that Continental may relocate some of its production due to the

ISRAEL

INMODE RAISES US$70m IN NASDAQ DEBUT

Barclays and UBS priced 5m INMODE shares on Wednesday night at US$14, the low end of the US$14–$16 range.

The deal was priced to sell at only a mid-two times multiple of EV-to-sales for 2020. The book was oversubscribed and 70% of the deal was concentrated in the hands of just 10 institutions.

Inmode shares fell 3.1% to US$13.57 at

They opened on Friday at US$13.55 but had fallen to about US$13.35 after a few hours.

“Cosmetic surgery is a tough business and some investors wondered if the company’s growth trajectory is sustainable,” an ECM banker told IFR.

Inmode expects to report a US$15.6m–

revenues in Q2, more than double the

comparable year-earlier period.The gross margin is also expanding to

86%–87% in Q2, a 3% expansion from Q2 2018.

A public valuation of US$460m is a fraction of what some companies have paid to acquire Inmode’s biggest competitors.

Allergan paid US$2.48bn two years ago to acquire Zeltiq Aesthetics and its CoolSculpting fat-freezing technology. That deal closed a few weeks after Hologic paid US$1.65bn for laser aesthetics specialist CynoSure.

Inmode uses radio-frequency energy to contour fat and tighten skin. The company has six products that are FDA-approved to perform 16 cosmetic surgeries.

Units are sold to cosmetic surgery

Inmode generates recurring revenue by selling hand-pieces that are used in each procedure.

The company is using the proceeds from its IPO to expand the commercialisation of its existing line of products and develop new ones.

ITALY

EUROCASTLE SELLS 6.3% OF DOVALUE

Eurocastle sold 6.3% of debt collector DOVALUE last Wednesday evening, raising

money position in doValue of 25.5%, held alongside Fortress Investment in a joint


EMEA EQUITIES BOOKRUNNERS: 1/1/2019 TO DATE


1 JP Morgan 44 7,050.44 10.7

2 Morgan Stanley 33 7,012.62 10.6

3 Goldman Sachs 36 6,023.62 9.1

4 Citigroup 37 4,119.05 6.2

5 UBS 20 3,284.57 5.0

6 Credit Suisse 23 2,967.38 4.5

7 BAML 16 2,868.46 4.3

8 Barclays 21 2,529.28 3.8

9 Jefferies 25 1,979.07 3.0

10 Berenberg 20 1,416.18 2.1

Total 523 65,973.05


Source: Refinitiv SDC code: C4cr

venture called Avio. Post-money, Eurocastle’s position is approximately 19.2%, with Avio’s total position reduced to 43.8% from 51.1% previously. Fortress did not sell any shares.

Avio remains the main shareholder of doValue but loses its majority shareholding. Eurocastle is locked up for 90 days.

The selldown was a heavy 80 days’ of trading volume. The stock’s illiquidity was a motivating factor behind the sale, a banker said, with interest coming from both existing shareholders and new investors vying to build positions.

Only around 55,400 doValue shares have traded per day on average in the past three

The fundamental demand for position-

which was heavily concentrated to the top.

Despite being a lot for the market to swallow, the deal launched with messaging indicating full coverage from a wall-crossing exercise. The wall-crossing lasted 48 hours instead of the typical 24 hours due to the time of the year and quiet market backdrop.

Citigroup and JP Morgan ran the deal.A total of 5m shares were offered, and

9.28% discount to Wednesday’s close of

The market backdrop and illiquidity also provide some explanation for the wide discount.

doValue shares opened last Thursday 5%

listed its shares in Milan in July 2017, under its previous moniker, doBank. It proved popular with investors at the time with the IPO process cut short due to strong demand.

UniCredit was also in the IPO syndicate with Citigroup and JP Morgan.

UK

REASSURE BUYS QUILTER WEEKS AFTER CANCELLING IPO

Swiss Re’s UK-based REASSURE unit has agreed to buy the life insurance and pensions division of Quilter for £425m, just weeks after the reinsurer halted plans to list the business in London.

The Zurich-based company last month

ReAssure, citing weak demand from institutional investors.

The acquisition showed Swiss Re remained “fully supportive of ReAssure as the company continues to pursue its growth

strategy”, Thierry Leger, chief executive of Swiss Re’s Life Capital Business, said in a statement on Monday.

The purchase helps bulk up Swiss Re’s closed book business, which deals in policies that are shut to new customers and where

add over 200,000 customer policies and £12bn of assets to ReAssure’s platform, Swiss Re said.

The business ReAssure is buying consists of Old Mutual Wealth Life Assurance Limited and its subsidiary Old Mutual Wealth Pensions Trustees Limited, and includes about 300 employees.

The transaction will increase ReAssure’s total policy count to 4.5 million and assets under administration to £81bn, Swiss Re said.

The world’s second largest reinsurer had wanted to spin off ReAssure to put the business under a more favourable regulatory regime and give it easier access to capital to fund its expansion.

until at least next year, with Swiss Re saying long-term options remained open.

GORE STREET ENERGY STORAGE FUND RAISES £30.9m

GORE STREET ENERGY STORAGE FUND raised £30.9m in a placing and offer for subscription, falling short of the initial maximum target of up to £50m.

Over 85% of the proceeds came from Ireland’s National Treasury Management Agency, which had promised to invest £25m and also subscribed to a further 1.62m shares.

The NTMA initially said its commitment was conditional on the fund raising at least £15m in the initial issue but it waived this requirement, after the fund said it did not expect to receive commitments totalling that amount.

In the end, it attracted £5.91m in investments in addition to the £25m promised by the NTMA.

Shore Capital was bookrunner. The placing was not underwritten.

The deal launched on July 16 and books were originally supposed to close on July 31, but this was extended until August 1.

Pricing was set at 91p per share, a 1% discount to the fund’s NAV of 91.9p per share as of March 31.

The fund said it is well placed for funding sources for Irish projects, from investors who have expressed interest in the placing but were not able to invest at this time.

Gore Street last raised cash in June 2018. That placing, which initially targeted £100m, was also downsized and in the end raised just £30.6m. Stockdale Securities was corporate broker for that placing.

AMERICAS

UNITED STATES

MARKET VOL, SUMMER HIATUS PROMISES ECM SLOWDOWN

US ECM syndicate desks braved the most volatile week of the year for stocks to price a solid slate of equity offerings, getting in before time runs out for companies to raise money before the summer slowdown later this month.

The US IPO market, which is having a banner year, has already slowed considerably.

Only one non-SPAC IPO of note was priced, the US$70m Nasdaq listing of Israeli medical aesthetics company InMode. The deal struggled, trading down on its debut on Thursday.

The coming week brings just two small IPO pricings, including the up to US$120.9m Nasdaq IPO of CrossFirst Bankshares and

US$85m NYSE IPO. Both are expected to be priced post-close on August 14.

Other IPO aspirants are now likely to wait until after Labor Day on September 2 to launch their deals, and in most cases they are unlikely to price them until the week beginning September 16.

come in September include WeWork, SmileDirectClub, GFL Environmental and Cloudfare, though bumpy market conditions in the past week may cause some to reassess their timing.

Bankers want to cram in as many deals as possible before September 30 based on the fear that investors worried about a repeat of the market sell-off in the fourth quarter of 2018 will check out early this year.

Follow-on activity in the past week included a resurgence of sponsor block sales, including sell-downs at Ceridian HCM and National Vision.

their second-quarter earnings, insiders are freer to sell stock in organised offerings, though market conditions have complicated the decision-making process.

A string of convertible equity sales represented the biggest trend of the week, but General Electric’s sell-down of its remaining US$1.5bn holding in rail transportation company Wabtec was the biggest ECM offering.

It proved a disappointing trade for those who took stock in the deal. The shares tumbled below the offer price in the aftermarket, even though the offering had been eagerly awaited.


EQUITIES AMERICAS

CROSSFIRST SHUTS DOWN SUMMER IPO MARKET

Kansas City-based CROSSFIRST BANKSHARES’ up to US$120.7m Nasdaq IPO scheduled for pricing Wednesday is the coming week’s sole new issue and could also be the market’s last debut until mid-September.

CrossFirst’s offering of 7.1m shares (81% primary, 19% secondary) at US$15–$17 each is the only IPO on the forward calendar and is unlikely to get any company as ECM winds down for the summer ahead of Labor Day on September 2.

Given expectations IPO aspirants will wait until the following week to launch, the next pricing is not likely to come until the week beginning September 16.

Keefe, Bruyette & Woods, Raymond James and Stephens are joint bookrunners on CrossFirst’s IPO.

With US$4.5bn of assets, the bank boasts an impressive track record of growth, including 58.5% compound growth in total assets since it was founded in 2007 (37.5% since 2012).

The bank’s tangible book value stands at US$11.27 a share on a pro-forma basis adjusted for the primary proceeds from the offering.

The IPO pitches the bank at up to 1.5 times tangible book. The much larger UMB

market share in Kansas City, trades at 1.3 times.

In the online roadshow, CEO Mike

afforded it a US$400bn a year market opportunity.

“With US$4.5bn of total assets, we have a lot of room for growth organically in our existing markets,”

More than 36% of the bank’s loan portfolio comprises commercial and industrial loans and 26% is commercial real estate, though the bank says the portfolio is

No one industry segment comprises more than 12% of the commercial and industrial portfolio.

The bank has managed to fund its growth with 33.9% compound annual growth in deposits with modest reliance on wholesale funding.

Only 11.1% of total deposits are brokered deposits, traditionally considered a lower quality source of funding.

KINSALE FUNDS GROWTH ACCELERATION

Excess and surplus lines insurer KINSALE

CAPITAL raised US$60m from a one-day marketed follow-on stock sale that will help fund organic growth.

After a day of marketing, a syndicate led by sole bookrunner JP Morgan sold 645,000 new shares, up from 530,000 at launch, at US$93 each, a 2.6% discount to last sale and

The shares held their ground in Thursday’s aftermarket, closing at US$93.07 and not far from a record high of US$99.70 struck on June 30.

Kinsale shares have soared since the company went public in 2016 at US$16 a share.

The offering, representing 3% of

reported better-than-expected earnings just days earlier, on Friday, August 2.

The company was vague about the timing of the raise except to indicate it would do so by year-end instead of in 2020 as previously expected.

Given Kinsale’s strong share price, there was little reason not to launch the deal as soon as possible.

“The issue with capital is, hey, we’re in this very attractive trading environment where we’re not only able to grow at that kind of exaggerated rate, but we’re also able to push up our prices,” CEO Michael Kehoe told analysts.

Kinsale’s second quarter net income rose 36.1% to US$13.8m and it reported an impressive combined ratio of 84.8%.

“Our goal is to always be capital

capital, if you will, and that’s dry powder that we can (use to) execute our business plan and operate our business and

SILK ROAD GAINS PAVE THE WAY FOR EQUITY

Surgical device company SILK ROAD MEDICAL crystallised some of its post-IPO gains through a US$166m stock sale last week.

Silk Road shares were up 88.5% to US$37.70 when the deal launched on

Tuesday night from the US$20.00 issue price in April.

JP Morgan and Bank of America Merrill Lynch marketed 3.5m shares or 11% of the company for the standard two days for recent IPOs.

They ended up pricing an upsized offering of 4.2m shares at US$39.50 on Thursday, a slight discount to the US$40.43 last sale. The

Nearly all of the shares come from major shareholder Warburg Pincus. Other major holders The Vertical Group, Norwest Venture Partners and Janus did not sell.

The offering comes nearly two months ahead of IPO lock-up expiration on October 1.

In this case, the selling stockholders cannot sell again for another 90 days.

Silk Road reported early last week that revenues from its stroke prevention medical device rose 92% to US$14.9m, driven by growing adoption of its TransCarotid Artery Revascularisation (TCAR) procedure by hospitals and physicians.

The company has been prepping for the

MEIRAGTX GOES OVER THE WALL FOR EQUITY

Gene therapy specialist MEIRAGTX shares plunged 11% on Thursday after the former Kadmon subsidiary raised US$75m overnight on Wednesday.

Like most biotech overnights this year,

privately with select insiders beforehand.

overnight biotech deals is ‘did you wall cross?’,” a healthcare ECM banker told IFR. “The second question is: ‘Are you covered?’”

Bank of America Merrill Lynch, Piper Jaffray and Chardan were only approaching deal

after the close. They still managed to price 3.2m shares at US$23.50, midpoint to the US$23.00–$24.50 range.

MeiraGTx traded down to US$22.77 at the close, but still comfortably above its US$15 IPO price last June.

The offering coincided with MeiraGTx’s

The company announced that it has initiated a Phase I/II trial of a gene therapy treatment for an inherited retinal disease under its collaboration with Janssen Pharmaceuticals, its sixth drug to enter clinical trials.

It also said the US$204.3m of cash in the bank is enough to fund its capital requirements into 2022. It now has upwards of US$280m of cash following this week’s raising.


US EQUITIESBOOKRUNNERS: 1/1/2019 TO DATE


1 Goldman Sachs 106 17,006.43 16.3

2 JP Morgan 116 12,177.47 11.6

3 Morgan Stanley 91 11,435.03 10.9

4 BAML 83 10,178.08 9.7

5 Citigroup 71 8,936.64 8.5

6 Barclays 54 6,707.08 6.4

7 Credit Suisse 54 4,592.10 4.4

8 Wells Fargo 45 4,364.32 4.2

9 RBC 35 4,072.76 3.9

10 Deutsche Bank 20 2,571.58 2.5

Total 439 104,536.78


Source: Refinitiv SDC code: C3r

SAFEHOLD PROVES NOT SO SAFE AFTER US$252m RAISE

In a market of low interest rates and increased volatility, SAFEHOLD, the ground net lease real estate owner, shapes up as the type of investment that should appeal to the risk averse.

Yet the REIT’s pretensions to offering “bond-like” income streams failed to prevent its stock price dropping 10.5% to US$29.37 on Wednesday ahead of a US$252m marketed follow-on stock sale and concurrent private placement.

After a day of marketing, a syndicate led by JP Morgan, Bank of America Merrill Lynch, Barclays and Mizuho Securities priced the sale

discount, for proceeds of US$84m.Separately, iStar, Safehold’s promoter/

sponsor, bought 6m shares at that price to maintain its two-thirds stake.

Wednesday’s share price fall was an inevitable step back for a stock that is thinly traded (50,000 shares a day on average in the past six months) and relatively little followed since its June 2017 IPO, priced at US$20.

At the time of the IPO, the REIT was called Safety Income & Growth and was billed as

iStar rebranded it as Safehold in February.Prior to Wednesday’s slide, Safehold

shares had doubled in the past 12 months, helping to set the stage for recent

Earlier in the week, the REIT closed on

New York and Austin worth US$140m.It also revealed it had signal contracts to

pay US$620m for a ground lease on 425 Park Avenue, a development almost complete

Citadel.Safehold plans to join with a sovereign

wealth fund to hold the asset in a 55%/45% JV.

intent for US$530.6m of additional ground lease acquisitions and has other prospects in the pipeline to add to its current portfolio of 38 leases.

At Wednesday’s closing price, Safehold is bond-like in the sense it currently pays only a 2.1% yield (US15 cents a quarter) at the offering price, not much above the yield on US 10-year bonds.

SILVER SPIKE STRIKES NEW DEAL ON US$250m SPAC IPO

SILVER SPIKE ACQUISITION, a US-listed SPAC targeting cannabis-related acquisitions, agreed to shorten the investment horizon on its investment vehicle to 18 months,

from 24 months, ahead of pricing Wednesday night.

The concession, which means public investors will get their money back sooner if a target is not found, is rare for a strong underwriting lineup headed by Credit Suisse.

The deal comprised 25m units at US$10 without additional changes, leaving the one-share, one-half warrant structure intact.

Nasdaq at US$10.00.Silver Spike is headed by Scott Gordon, a

former Wall Street banker and current chairman of Egg Rock, the parent of cannabis-derived essentials maker Papa & Barkley.

BESPOKE CAPITAL ACQUISITION, a Canadian cannabis-focused SPAC, also saw pushback on its US$350m IPO, prompting joint-bookrunners Canaccord Genuity and Citigroup to delay pricing from a planned Thursday timeline.

Bespoke, which is seeking to list on the Toronto Stock Exchange, is structured with the same one-share, one-half warrant structure and 18 month investment horizon, though the vehicle has a 36-month extension possible on approval by public shareholders.

Led by the US$575m IPO of Canadian SPAC Subversive Capital, cannabis-focused SPACs have raised US$2.4bn of funding this year alone, according to IFR data.

“Investors can afford to be selective,” said one ECM banker. “The focus is not just on cannabis but proven management teams that have operational experience.”

Bespoke Capital is headed by Paul Walsh, the former CEO of Diageo.

MEDTECHS CAPITALISE ON Q2 FINANCIALS

Cancer drug developer STEMLINE

THERAPEUTICS raised US$76m of funding on Thursday for the commercial launch of its

JP Morgan marketed for one day before pricing 5m shares at US$15.25, a 13.3% all-in discount. The stock traded heavily on Friday at prices just above the offer.

Stemline shares were up after reporting

FDA-approved drug Elzonris is going better than expected.

The company reported Q2 sales of US$13m that were 71% better than the consensus estimate and more than double Q1 sales.

Stemline’s drug was approved by the FDA in December for treating a rare type of blood cancer. The company is seeking FDA approvals treating other types of cancer.


EQUITIES AMERICAS

Allakos stock flares up US Biotech capitalises on positive clinical trial results

High-flying orphan-drug developer ALLAKOS had

no trouble cashing in on the overwhelmingly

positive clinical trial results it reported last week.

Allakos raised US$350m in a follow-on

offering on Wednesday, rising further to

US$402.5m now that the greenshoe has been

exercised, pricing at an impressive 18% file-to-

offer premium.

After presenting the Phase II data ahead of the

market open on Monday, Allakos stock ran from

US$31.00 to US$65.26 at the close.

Confidential marketing with select insiders

before launching an overnight public offering is

a popular execution strategy among biotechs

this year.

Allakos could not conduct a wall-cross

because it did not file a shelf registration

statement with the SEC.

Goldman Sachs and Jefferies brought new

investors on board after a day of marketing. They

ended up pricing 4.54m shares at US$77 a share

in a deal that was upsized from US$200m at

launch plus a fully exercised greenshoe.

Allakos drug works by inhibiting the

production of two types of cells (called masts

and eosinophils) that can cause inflammation

flare-ups, leading to disorders like gastritis and

gastroenteritis – the two patient populations

that were tested in the Phase II trial.

For now, treatment options for such patients

are limited to changes in diet and steroids.

Nearly all of the patients that received Allakos’

drug (95%) showed robust decreases in both

types of cells and more than half said their

symptoms actually improved.

Allakos thinks its drug is capable of generating

more than a billion dollars in annual sales if

approved only for gastritis and gastroenteritis.

In a note to clients Tuesday, analysts at

Jefferies see potential extensions of the drug

to other indications such as Crohn’s disease,

leading the bank to up its price target on the

stock to US$150.

Allakos expects to present results from the

Phase II trial to the FDA later this year as well

as outline plans for Phase III trial. If all goes

according to plan, it hopes to launch the Phase

III trial in Q1 that will be structured similar to the

Phase II trial but with more patients.

Robert Sherwood

It is working on getting the drug approved in Europe.

QUANTERIX, a medical technology company that pioneered the technology that measures blood biomarkers, raised US$60m of new funding last week.

The stock was down 10% after JP Morgan and SVB Leerink marketed a larger US$75m raise on Wednesday. The banks ended up pricing a downsized offering of 2.4m shares at US$25.25, a 12% all-in discount.

results. The company reported US$13.5m

of revenue for the quarter, a 57% increase over the comparable period last year, from four FDA-approved products.

CANADA

3G SELLS US$1.5bn STAKE IN BURGER KING OWNER

The sponsor behind RESTAURANT BRANDS

INTERNATIONAL, the holding company behind fast food chains Burger King, Tim Hortons and Popeyes Louisiana Kitchen,

50% year-to-date surge.3G Capital, the Brazilian private equity

co-investor, forward sold 20m RBI shares via a US$1.5bn block trade late on Thursday.

Block buyer Morgan Stanley reoffered the shares to investors at US$73.50, the bottom of a US$73.50–$75.50 marketing range and a 4% discount to the US$76.57 close.

“We knew there was a lot of long-short demand but we were pleasantly surprised by the long-only participation,” a banker close to the deal said.

Unusually, the forward sale element of the deal is a very temporary arrangement.

3G expects to deliver 20m shares to Morgan Stanley to settle the forward at the end of this month (August 29), as opposed to the more typical forward sale structure whereby the counterparties might have a year to settle the agreement.

when the exchange of 3G’s partnership units into common stock settles.

Once the forward is settled, 3G will have cut its investment in RBI to 170m shares or 36.7%, down from 190m shares or 41% previously. There is a 60-day lock-up on further sales.

of year to hand back some cash to limited partners.

But cashing in part of another of its big investments, a 22.1% stake in cheese and ketchup maker Kraft Heinz, was understandably an unappealing option in light of its current share price woes, with the shares down nearly 9% on Thursday.

Restaurant Brands’ share register includes not just 3G but also Bill Ackman’s Pershing Square as a major shareholder, both a legacy of the 2014 merger of Tim Hortons and the 3G-controlled Burger King

3G previously sold nearly US$900m of Restaurant Brands shares in two small unregistered blocks at US$61 and US$65.51 in July and November 2017.


Sponsor blocks reappear despite volatility

US Ceridian HCM, National Vision sponsors cash in before summer slowdown

The US sponsor block trade business is having

a slower year, but sprang back to life in the past

week with a series of overnight sell-downs that

allowed private equity firms to pare their public

portfolio holdings at attractive prices.

In several widely expected deals struck

at thin discounts to last sale, Thomas H Lee

Partners sold the bulk of the shares offered

in a nearly US$497.5m registered block trade

in cloud human resources software provider

CERIDIAN HCM, while KKR & Co sold its remaining

US$283.6m stake in eyewear retailer NATIONAL

VISION to complete a highly successful and rapid

monetisation that began by taking the company

public in 2017.

Brazilian private equity firm 3G Capital also

sold a US$1.5bn stake in Canada-based Burger

King owner RESTAURANT BRANDS INTERNATIONAL

via a block trade late on Thursday.

Despite a choppy week for the broader equity

market, the past week also brought unregistered

block trades in ECM regulars FLOOR & DECOR

(Freeman Spogli sold 3.5m shares through

Morgan Stanley) and IQVIA (the sponsor group

sold 5m shares), moves that may give them

flexibility to return with registered follow-ons

near-term to sell remaining positions.

“These tend to come in a wave around this

time of the year,” one hedge fund manager said.

Sponsor blocks remain a fixture on the ECM

scene but fewer buyout-backed IPOs in recent

years – halving by number in the first half of

2019, according to Refinitiv data – have reduced

the opportunities for follow-on sales and a

number of buyout situations have already been

fully monetised.

According to Solebury Capital, the second

quarter of 2019 saw 27 block trades (not all were

sponsor blocks) raise US$9.3bn in proceeds,

materially lower than the 43 block trades that

raised US$12.9bn in the second quarter of 2018.

Despite this, there are still some large sponsor

stakes that are likely to return as block trades

in the coming months, among them KKR &

Co’s US$10bn-plus stake in Fiserv following the

latter’s recently closed merger with long-time

portfolio company First Data.

The Ceridian block saw Goldman Sachs reoffer

an upsized 10m shares, including 9.5m from

Thomas H Lee and 500,000 from Ceridian CEO

David Ossip, at US$49.75 each, the bottom of

a US$49.75–$50.25 range and a 1.1% discount

to last sale. Filings later revealed Goldman

collected a US$4.8m underwriting spread (48

cents a share) on the deal.

Thomas H Lee cut its stake to 21.3% from

27.9% and can sell more after a 30-day lock-up

expires.

Ceridian’s other sponsor, the publicly traded

Cannae Holdings, did not participate in the

offering, which was upsized from 8m shares at

launch as Thomas H Lee sold an additional 1.5m

shares.

Ceridian, whose growth engine is its Workday-

like Dayforce cloud platform, benefited from

some analyst target price increases after the

company affirmed its guidance alongside its

quarterly earnings release.

VISIONKKR’s final National Vision sell-down, comprising

the block sale of 9.1m shares at US$31.00

through Goldman Sachs, was smoothed by the

company repurchasing 819,134 of the shares or

9% of the offering.

The block priced at the midpoint of a

US$30.75–$31.25 range and a 1.2% discount to

last sale and was KKR’s fourth sell-down since

National Vision’s October 2017 IPO priced at

US$22 a share.

However, KKR’s final sell-down priced below

the incrementally higher prices of US$33.00,

US$39.75 and US$40.50 at which KKR (and

co-investor Berkshire Partners) sold stock in

last year’s three secondaries in March, July and

November last year.

National Vision was one of several sponsor-

backed growth retailers pitched as IPOs in recent

years on the basis its business is somewhat

e-commerce resistant, in its case, because

customers generally have to be fitted for glasses.

Anthony Hughes

The latest sale comes as Burger King has just dropped its plant-based Impossible Whopper, developed by Beyond Meat competitor and potential IPO candidate Impossible Foods, into all of its stores nationally.

It also came just days after Restaurant Brands reported impressive 3.6% comp sales growth for Burger King and 3% for Popeyes for the second quarter.

NEW GOLD MINES INVESTORS FOR C$150m

NEW GOLD, an operator of producing gold mines in Canada, raised C$150m (US$113m) from a bought deal

sheet.BMO Capital Markets led the sale of 93.7m

shares at C$1.60, a 7% discount to last sale.

Despite renewed investor interest in gold amid increased market volatility, the shares fell nearly 10% in Friday’s aftermarket.

Earlier this month, Raymond James, which has a US$1.25 price target and market perform rating on the stock, said the miner’s second quarter earnings were in line with expectations but capital spending and net debt was expected to increase in the second half.


EQUITIES AMERICAS

ECM DEALS: WEEK ENDING 9/8/2019

Stock Country Date Amount Price Deal type Bookrunner(s)

AMP Australia 09/08/2019 A$650m A$1.60 Follow-on (Primary) CS, UBS

Transurban Group Australia 08/08/2019 A$500m A$14.70 Follow-on (Primary) MS, UBS

New Gold Canada 08/08/2019 US$150.0m C$1.60 Block (Primary) BMO CM

Pro Real Estate Investment Canada 07/08/2019 C$50.0m C$7.00 Block (Primary) Canaccord Genuity

AMTD International China 02/08/2019 US$174.3m US$8.38 IPO (Primary) AMTD, TIGR

AMTD International Hong Kong 05/08/2019 US$174m US$8.38 IPO (Primary) AMTD GM, Loop CM, MasterLink,

Tiger Brokers and ViewTrade Secs.

Inmode Israel 07/08/2019 US$70.0m US$14.00 IPO (Primary) Barclays, UBS

doValue Italy 07/08/2019 €52.25m €10.45 Accelerated bookbuild (Secondary) Ciitgroup, JPM

Napier Port New Zealand 07/08/2019 NZ$234m NZ$2.60 IPO (Primary) Deutsche Craigs, GS

Allakos US 06/08/2019 US$350.4m US$77.00 Follow-on (Primary) GS, Jefferies

Ameren US 05/08/2019 US$561.0m US$74.30 Block (Primary) GS

Ceridian HCM US 06/08/2019 US$497.5m US$49.75 Block (Secondary) GS

Kinsale Capital Group US 07/08/2019 US$60.0m US$93.00 Follow-on JPM

MeiraGTx US 07/08/2019 US$75.2m US$23.50 Accelerated bookbuild (Primary) BAML, Piper Jaffray, Chardan

Mesa Laboratories US 07/08/2019 US$78.8m US$210.00 Follow-on (Primary) Jefferies, JPM, Wells Fargo

National Vision Holdings US 07/08/2019 US$283.7m US$31.00 Block (Secondary) GS

Pennymac Mortgage Trust US 08/08/2019 US$174.0m US$21.75 Block (Primary) CS, MS, BAML, Citigroup, JPM

Quanterix US 08/08/2019 US$60.0m US $25.25 Follow-on (Primary) JPM, SVB Leerink

Restaurant Group US 08/08/2019 US$1.76bn US$75.50 Block (Secondary) MS

Safehold US 07/08/2019 US$84.0m US$28.00 Follow-on (Primary) JPM, BAML, Barclays, Mizuho

Silk Road Medical US 08/08/2019 US$165.9m US$39.50 Follow-on (Secondary) JPM, BAML

Silver Spike Acquisition US 07/08/2019 US$250.0m US$10.00 IPO (Primary) CS

Stemline Therapeutics US 08/08/2019 US$76.3m US$15.25 Follow-on (Primary) JPM

Thunderbridge Acq II US 08/08/2019 US$300.0m US$10.00 IPO (Primary) MS, CS

Wabtec US 07/08/2019 US$1.49bn US$72.50 Follow-on (Secondary) GS, BAML, Citigroup, JPM, BNP Paribas

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STRUCTURED EQUITY

FRONT STORY US

Snap impresses with US$1.1bn CB Messaging platform opens window on issuance

There is no disputing Snap is on a roll.The messaging platform capitalised on its

recent momentum by raising US$1.1bn

which comes shortly after reporting strong Q2 results last month.

Morgan Stanley and Goldman Sachs were

bump the offering size from US$1bn to

Snap’s shares fell just 1% on the Tuesday

below the US$17 price the company went public at in March 2017 are still up nearly

December 31).

reference.

lot of sense.

The company saw cash holdings fall to

Goldman Sachs and Morgan Stanley elected to

running US$2bn of issuance that was to follow.

The amount of time spent online per user

minutes daily and the number of daily Snaps sent grew to more than 3.5bn.

in the second quarter of US$78.7m on

estimates on both lines that called for a

by some accounts.

Stephen Lacey

Clovis Oncology plugs funding hole with

US$250m CB Drug developer’s non-dilutive loan metastises into dilution

CLOVIS ONCOLOGY

JP Morgan and Bank of America Lynch placed

upsize from the US$225m originally 30.

seemingly off the boil.

the treatment of prostate cancer as a competitor

into an agreement to borrow up to US$175m

through to September 30 2022.

if it borrows the entire US$175m.Stephen Lacey

80

STRUCTURED EQUITY CONVERTIBLES


CHINA

BENGANG STEEL CB SET FOR CSRC REVIEW

BENGANG STEEL PLATES’ plan

The company will use the proceeds for

steel and the rolling and processing of steel plates.

SF HOLDING DOWNSIZES CB TARGET

SF HOLDING has cut the

from the use of proceeds.

Huatai United Securities is the sponsor.

BLUE SAIL MEDICAL SET TO LAUNCH CB

BLUE SAIL MEDICAL plans to

acquisitions.

and the shares it doesn’t already own in

set up and upgrade production lines for

automobile manufacturers such as

offering.

GUANGDONG HAID PLANS SIX-YEAR CB

GUANGDONG HAID GROUP

The feedstuff manufacturer will use the proceeds for 15 feed projects and to repay

August 8.

UNITED STATES

CB ISSUANCE HEATS UP AS SUMMER WINDS DOWN

BLACKLINE

corporate purposes and potential acquisitions.

Morgan Stanley and JP Morgan

pricing at a coupon of just 0.125% and

37.5%.

following an upsized US$1.1bn raising by Snap on Tuesday and a US$700m raising on

EQUITY-LINKED DEALS WEEK ENDING: 9/8/2019

Issuer Country Date Amount Greenshoe Tenor Coupon (%) Premium (%) Bookrunner(s)

Alteryx US 07/08/2019 US$350.0m US$50.0M 5y 0.50 50.0 Goldman Sachs, JP Morgan, Morgan Stanley

Alteryx US 07/08/2019 US$350.0m US$50.0M 7y 1.00 50.0 Goldman Sachs, JP Morgan, Morgan Stanley

BlackLine US 08/08/2019 US$435.0m US$65.0m 5y 0.13 37.5 Morgan Stanley, JP Morgan

Clovis Concology US 08/08/2019 US$250.0m US$37.5m 5y 4.50 25.0 JP Morgan, BAML

CorEnergy Infrastructure US 07/08/2019 US$100.0m US$20.0m 6y 5.88 13.0 Stifel

Ironwood Pharma US 07/08/2019 US$175.0m US$25.0m 5y 0.75 37.5 JP Morgan

Ironwood Pharma US 07/08/2019 US$175.0m US$25.0m 7y 1.50 37.5 JP Morgan

Mesa Laboratories US 07/08/2019 US$150.0m US$22.5m 6y 1.38 35.0 Jefferies, JP Morgan, Wells Fargo

Snap US 06/08/2019 US$1.1bn US$165.0m 7y 0.75 40.0 Goldman Sachs, Morgan Stanley

GLOBAL CONVERTIBLE OFFERINGSBOOKRUNNERS: 1/1/2019 TO DATE


1 Goldman Sachs 25 6,405.46 9.5

2 BAML 27 5,268.40 7.8

3 JP Morgan 33 4,750.71 7.0


5 Citic 10 4,226.26 6.3

6 Citigroup 19 3,277.67 4.9

7 Credit Suisse 17 3,161.36 4.7

8 China Securities 9 2,593.11 3.8

9 Bank of China 4 2,442.73 3.6

10 China International Cap 3 2,220.11 3.3

Total 217 67,389.14

Including exchangeables and domestic offerings.

Source: Refinitiv SDC code: C9

GLOBAL CONVERTIBLE OFFERINGS – US BOOKRUNNERS: 1/1/2019 TO DATE


1 BAML 18 3,619.58 17.8

2 Goldman Sachs 16 2,918.94 14.4

3 Morgan Stanley 14 2,714.99 13.4

4 JP Morgan 16 2,008.22 9.9

5 Barclays 12 1,397.31 6.9

6 Citigroup 10 1,185.24 5.8

7 Credit Suisse 6 1,165.00 5.7

8 Jefferies 10 731.48 3.6

9 Wells Fargo 8 604.88 3.0

10 HSBC 2 592.19 2.9

Total 52 20,279.48

Source: Refinitiv SDC code: C9a

81


STRUCTURED EQUITY CONVERTIBLES

repurchased and warrants are sold at a

a 100% premium to the US$53.38 reference.

IRONWOOD PHARMACEUTICALS found a

JP Morgan

of the offering from US$330m to

acquisition.MESA LABORATORIES

sterilisation equipment for the medical

effort to build out the company’s

Jefferies and JP Morgan

understandable that introductions were

for the entire month of July.

CORENERGY SETS INFRASTRUCTURE FOR ACQUISITION

CORENERGY INFRASTRUCTURE TRUST followed

Stifel

allowing it to build incremental demand

acquisition.

said on its quarterly earnings call that it

US$250m and that it was “busy assessing

quarters. That translates into a payout

GLOBAL CONVERTIBLE OFFERINGS – EMEA BOOKRUNNERS: 1/1/2019 TO DATE


1 JP Morgan 9 1,453.48 14.5

2 BNP Paribas 6 1,074.09 10.7

3 HSBC 5 793.25 7.9

4 UBS 3 764.25 7.6

5 Citigroup 2 739.78 7.4


7 BAML 2 555.35 5.6

8 Credit Suisse 2 502.23 5.0

9 SG 4 458.73 4.6

10 Natixis 3 401.93 4.0

Total 26 10,002.18

Including exchangeables.

Source: Refinitiv SDC code: C09d

ALL INTERNATIONAL ASIAN CONVERTIBLES

(EXCLUDING JAPAN) BOOKRUNNERS: 1/1/2019 TO DATE


1 Credit Suisse 8 1,455.73 18.2

2 Goldman Sachs 4 1,143.75 14.3

3 JP Morgan 6 1,128.56 14.1

4 BAML 5 1,058.06 13.2


6 Citigroup 6 608.77 7.6

7 UBS 4 403.71 5.0

8 HSBC 2 304.79 3.8

9 BNP Paribas 3 274.37 3.4

10 Deutsche Bank 2 231.25 2.9

Total 20 8,013.70


Source: Refinitiv SDC code: M11

ALL INTERNATIONAL ASIAN CONVERTIBLESBOOKRUNNERS: 1/1/2019 TO DATE


1 Credit Suisse 8 1,455.73 17.3

2 Goldman Sachs 5 1,167.37 13.9

3 JP Morgan 6 1,128.56 13.4

4 BAML 5 1,058.06 12.6


6 Citigroup 6 608.77 7.2

7 UBS 4 403.71 4.8

8 HSBC 2 304.79 3.6

9 BNP Paribas 3 274.37 3.3

10 Sumitomo Mitsui Finl 2 237.20 2.8

Total 24 8,409.18


Source: Refinitiv SDC code: M10

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INTERNATIONAL FINANCING REVIEW INDEX

9F 71ABN AMRO 34AES-VCM Mong Duong Power 58AKKA Technologies 59Albertsons 65Allakos 77Alteryx 7Ameren 69America Movil 62American Credit Acceptance 41Amlogic Shanghai 72AMP 23, 70AMTD International 72Anadarko 6, 29Ancestry.com 62April International Enterprise 55ASB Bank 34Ascend Performance Materials 62Asian Development Bank 27Australian Capital Territory 27Axis Bank 73Banca Popolare di Bari 38Banco Bilbao Vizcaya Argentaria 32Banco BPM 32Banco Sabadell 32Bank Negara Indonesia 56Bank of America Merrill Lynch 15Bank of China 15Bank of Communications 23Barclays 15Bartec 68BCA Marketplace 66Beijing Automotive Group 54Beijing Huafeng Test & Control Technology 72Beijing Unisound Information Technology 72Bengang Steel Plates 81Bespoke Capital Acquisition 77BlackLine 81Blue Sail Medical 81BNP Paribas 15, 17British American Tobacco 61Broadcom 62BTON Financial 20Bulgaria 47Burford Capital 22Cambrex 66Central Nippon Expressway 31Ceridian HCM 78CGNPC International 55CGN Power 5Changde Economic Construction Investment Group 11, 48Charter Hall Prime Office Fund 54China General Nuclear Power Corp 55China Merchants Bank 23CIMC Vehicles 71CIMIC Group 54Citgo 50Citic 15Citigroup 15, 16, 19CityMD 63CK Hutchison Group Telecom 66Claire’s Stores 53Clear Channel Outdoor Holdings 36Clovis Oncology 80Cobham 66Commerzbank 17, 22, 23Commonwealth Bank of Australia 23Co-operative Bank 34CorEnergy Infrastructure Trust 82Corning 31CPOF Finance 54Credit Agricole 15Credit Suisse 15, 19CrossFirst Bankshares 76CVS Health 29Daimler 47Daisy Group 64DaVita 65Deutsche Bank 15, 23DigiCert 65Digi Communications 59Dongxing Securities 11, 48doValue 74Duerr 58E2open 64Element Fleet Management 41

Emirates NBD 60Envision Energy (Hong Kong) 55ESR Cayman 57Excellence Commercial Properties 48Export-Import Bank of Korea 50Fagron 58Fawry 74Fillmore Advisors 20First Data 53Flagship Credit Acceptance 41Flexigroup 41Floor & Decor 78Frontier Communications 35Fujian Zhanglong Group 48Funding Circle 41G4S 61General Electric 11General Motors 41Global Payments 27, 30Goldman Sachs 15, 16Gore Street Energy Storage Fund 75GrandVision 59Guangdong Haid Group 81Helical 61Housing Development Finance Corp 56HSBC 8, 15HSBC, New Zealand branch 34Huali University 71Hyflux 49Hyland Software 67Hylea Metals 37Hyundai 41ICICI Bank 73I-Med 68Indonesia 47ING Bank AS 60ING Bank Australia 34Inmode 74Intesa Sanpaolo 32INTL FCStone 20ION Group 64Iqvia 78IQVIA 68Ironwood Pharmaceuticals 82JAGGAER 67Jefferies Financial Group 20JP Morgan 15Kaisa Group Holdings 48Kerry Group 59Kingboard Holdings 56Kinsale Capital 76Las Vegas Sands 53Liaoning Chengda Biotechnology 71Life Time Fitness 67Live Nation Entertainment 7Lloyds Bank 29, 31Lodha Developers International 12McDonald’s 29MCUBS MidCity Investment 57MeiraGTx 76Meraki Global Advisors 20Merlin Entertainments 4, 66Mesa Laboratories 82Metalloinvest 60Mexico 47Miclyn Express Offshore 50Mitsubishi UFJ Financial Group 15Mizuho Financial Group 15Morgan Stanley 15, 23Motor Trade Finance 41MyEyeDr 64Nanjing CEC Panda FPD Technology 56Napier Port Holdings 73National Vision 78NCR 35Nedbank 60Nederlandse Waterschapsbank 27NEP Group 67New Gold 79New Media Investment Group 64NEXT Group 30NiSource 28Northern Trust 20Occidental Petroleum 6, 29Optivo 61Orient Securities 48

Osram 66Paladin Energy 37People’s Bank of China 47Petco Animal Supplies 63Pet Supplies Plus 40, 41Phoenix Group 61Poland 47Poly Property Development 71Powertrain 74Primrose Schools 41Public Service Co of Colorado 27, 29Q Card Trust 41QIC Shopping Centre Fund 26Qlik Technologies 64Quanterix 78ReAssure 75Refinitiv 4, 66Restaurant Brands International 78Roark Capital 40RPS Group 61Safehold 77Sankei Real Estate 57, 72Santander Consumer USA 41Savage Enterprises 66Savills 61Scandlines 58Schleswig-Holstein 25Scout24 66Sedgwick 65SESAC 41SF Holding 81Shanghai Friendess Electronics Technology 72Shanghai Pudong Development Bank 23Shenzhen Chipscreen Biosciences 72Shinsei Bank 73Siberian Anthracite 60Siemens Healthineers 59Silk Road Medical 76Silver Spike Acquisition 77Sirius Minerals 6, 35Slovakia 47SNCF Reseau 25Southern Energy Holdings Group 49South Korea 47Spandana Sphoorthy Financial 69Stemline Therapeutics 77Sterling and Wilson Solar 69SUEK 60Sumitomo Mitsui Financial Group 15Survitec 68Swedbank 33Swissport 36, 67Takamatsu Construction Group 56Tencent Holdings 54Teneo 63THDC India 72The Seminole Tribe of Florida 62Tibet Financial Leasing 49Total System Services 30Toyota 41Transurban Group 70Turkey 51UBS 15, 17UGI Corp 65UniCredit 17, 22, 32Unifin Financiera 51Unione di Banche Italiane 32, 33Uralkali 60US Farathane 35US Foods 64Utico 49Venezuela 50Venus Medtech (Hangzhou) 71VGI Partners Asian Investments 70Wabtec 11Well Faith Management 56Wells Fargo 20WestJet Airlines 62, 63WeWork 4Wind Tre 66Wisconsin Public Service 28, 29Yes Bank 73Zhongliang Holdings Group 72Zinus 74

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SAMURAI LOANS ROUNDTABLEThe IFR & LPC Samurai Loans Roundtable takes place in Tokyo on the afternoon of Tuesday August 27 2019.

Conducted in English with simultaneous translation into Japanese, the Roundtable will convene the following panel of senior market practitioners:

• Jonathan Tam - Asian Regional CFO - Vitol Holding BV

• Vineyesh Sawhney - Senior Vice President of Finance and Head of Financial Resources - Reliance Industries Ltd

• Daisuke Otsuka - Managing Director, Head of Solution Products Division, Global Head of Loan Syndications and Distribution - MUFG

• Yasushi Goto - General Manager, Syndicated Finance Department - Mizuho Bank

• Tadahiro Kaneko - General Manager, Distribution Dept – Sumitomo Mitsui Banking Corp

• Takeshi Endo - Deputy General Manager, Financial Market & International Business Department - Bank of Yokohama

• Wakako Sato

• Prakash Chakravarti

The panel will provide an overview of the Samurai loan market and discuss the following topics:

• How long will this market appeal to non-Japanese borrowers?

• Growing markets such as Australia, China, India and Indonesia.

• Where will the opportunities for Samurai lending come from?

• What are the expectations of investors on tenors and pricing of the Samurai loans?

• Will changes to the Bank of Japan’s quantitative and qualitative easing policy affect the Samurai and Ninja loan market?

• What will be the impact of geo-political and macro-economic issues on Samurai and Ninja loans?

The event is free to attend but places are limited. To guarantee your seat at this must-attend Roundtable, just complete the short registration form at http://bit.ly/samurai_loans

Sponsored by:

DATE

AUGUST 27 2019

TIME

15:00 – 18:00

VENUE

TOKYO

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