IFR Magazine – June 08, 2019

CAPITAL ONE PAYS UP TO DIVERSIFY WITH
FIRST STEP INTO EUROS

CAPITAL ONE FINANCIAL CORPORATION paid up to
ACHIEVEûFUNDINGûDIVERSIlCATIONûWITHûITSû
DEBUTûEUROûTRANSACTIONûLASTû7EDNESDAY ûAû
€1.25bn dual-tranche senior, winning a
€3.55bn-plus book.
The US lender’s deal was the latest in a
STRINGûOFûREVERSEû9ANKEEûTRADESûTHISûYEARû
&OLLOWINGû#APITALû/NESûTRADE ûYEAR
TO
DATEû
EUROûISSUANCEûFROMû53ûlNANCIALS ûSOMEû
õBN ûHASûNOWûSURPASSEDûTHATûSOLDûINû
the whole of 2018.
0ARTûOFûTHEûREASONûFORûTHISûHASûBEENûHIGHLYû
competitive funding levels that have made
euros more attractive on a relative basis
versus US dollars.
But Capital One paid up to tap the euro
market, making the trade unusual, bankers
said.
“I thought it was very far back of US
dollars,” said a syndicate banker away from
the deal.
h.ORMALLY ûISSUERSûUSEûREVERSEû9ANKEEûFORû
arbitrage, so I thought the fact that they
came at those type of levels made it an
interesting trade.”
The SEC-registered offering, expected to
BEûRATEDû"AA"""!
ûCOMPRISEDûAûõMû
lVE
YEARûTRANCHEûANDûAûõMû
YEAR
4HEûlVE
YEARûWASûLAUNCHEDûATûAûlNALû
spread of 95bp over mid-swaps, inside initial
price thoughts of 120bp area and
subsequent guidance of 100bp area.
4HEû
YEARûLANDEDûATûBP ûDOWNûFROMû
)04SûOFûBPûAREAûANDûGUIDANCEûATûBPû
area.
&ORûCOMPARISON û#APITALû/NESû53BNû
lVE
YEARûPRICEDûINû*ANUARYûWASûQUOTEDûATû
115bp over Treasuries, according to
2ElNITIVû%IKONûDATA ûEQUIVALENTûTOûBPûOVERû
euro swaps.
A syndicate banker at one of the leads
agreed that the trade did not offer Capital
/NEûAûPRICINGûBENElTûVERSUSû53ûDOLLARSû
Instead, the issuer was focused on
ESTABLISHINGûDIVERSIlCATION

“Capital One has increased the amount

they issue on capital markets in recent

years,” he said. “If they want to continue

expanding, it makes sense to have access to

European investors as well as their home

INVESTORSûSOûTHISûISûAûDIVERSIlCATIONûPLAYv

h7HENûYOUûSEEûOTHERûISSUERSûBEHAVINGû

opportunistically in other currencies, that is

because they have the access established

already and they can do that. But step one is

to establish yourself in the new market, and

that is what this trade is about.”

The new issue’s spreads looked attractive

versus the US supply that had come before,

bankers said. Citigroup’s most recent euro

senior, a €1.35bn 10-year, was bid at around

BPûATû7EDNESDAYSûOPENûFORûEXAMPLE

4HISûREmECTEDûTHATû#APITALû/NEûWHILEûWELLû

known in its domestic market, is a less

familiar name in Europe.

“[Capital One] is a great name and it offers

DIVERSIlCATIONûBUTûTHEYûDONTûHAVEûTHEûSAMEû

FOLLOWINGûASûAû"&#-ûHASvûSAIDûAûSECONDû

syndicate banker away.

)04SûFORû#APITALû/NESû

YEARûWEREûALSOû

just 20bp tighter than for a 10-year Tier 2

SUBORDINATEDûNOTEûFORû"ANQUEû&EDERATIVEûDUû

#REDITû-UTUELûWHICHûWASûALSOûINûTHEûMARKETû

LASTû7EDNESDAY

4HEûATTRACTIVEû)04SûENSUREDûMOMENTUMû

FORûTHEûTRADEû$EMANDûWASûOVERûõBNûFORû

THEûlVE

YEARûANDûINûEXCESSûOFûõBNûFORûTHEû

10-year.

Capital One held a European roadshow

marketing the deal the previous week. Bank

of America Merrill Lynch, Barclays, Capital One,

Credit Suisse and JP Morgan were the

bookrunners.

MIZUHO BRAVES SHAKY MARKETS

FOR HOLDCO RETURN

MIZUHO FINANCIAL GROUP took the plunge

early last week, opening the European

PRIMARYûMARKETûFORûlNANCIALûISSUERSû

taking little chance in the process by

STARTINGûMARKETINGûAûlVE

YEARûHOLDCOû

senior with an initial concession of 20bp-

25bp.

Holidays and a shaky backdrop had

thwarted issuers’ ambitions in recent days

ANDûASIDEûFROMûAû-UENCHENER(YPûSUB

benchmark the week before last, there had

been no holdco or non-preferred senior

SINCEû-AYû

However, more solid conditions

encouraged leads BNP Paribas, Goldman

Sachs, HSBC, Mizuho and Natixis to go ahead

ANDûANNOUNCEûTHEû!!

ûRATEDûBENCHMARKû

ATû)04SûOFûSWAPSûPLUSûBPûAREA

The transaction surfaced on a bumper

DAYûFORûCORPORATEûSUPPLYû

ûlVEûBORROWERSû

were out in euros and sterling, all

attracting solid books on the back of

premiums of up to 30bp.

-IZUHOSû)04SûWEREûBPûWIDERûTHANû

WHEREûCOUNTRYûPEERû3UMITOMOû-ITSUIû

&INANCIALû'ROUPû!!

    ûSTARTEDûOUTûWITHûITSû

NO

GROWûõMûlVE

YEARû'REENûBONDûONû

-AYûû4HATûDEALûLANDEDûATûBPûBUTûHADû

WIDENEDûBYûBPûBYûTHEûTIMEû-IZUHOû

emerged.

h-ARKETSûAREûMATERIALLYûDIFFERENTûFROMû

WHENû3-"#ûDIDûITSûTRADEvûAûLEADûSAID

The iBoxx senior bail-in index closed at

BPûLASTû-ONDAYûOUTûBPûFROMûMID

-AYû

levels and 23.5bp wider than a month ago.

h7EVEûSEENûAûDETERIORATIONûINûSENTIMENTû

and we’re in a lower yield environment.

Spreads are wider, new issue concessions

are bigger and investors are more selective

about what they purchase.”

The yield on the 10-year Bund held near

its record low on Tuesday, supported by talk

of central bank rate cuts and a weak

EUROZONEûINmATIONûPRINT

Swap rates, negative up to six years,

dropped by up to 3.5bp on the day.

The cautious start meant leads were able

to garner good interest, with books passing

€1.7bn at the second update - around €700m

MOREûTHANû3-&'Sû4ALKûWASûTHENûREVISEDûTOû

BPûAREAû

BP 

4HEûlNALûBOOKûWASûAûTOUCHûSMALLERûATû

õBN

PLUSûPRE

RECONCILIATION  û,EADSûlXEDû

the spread at the tight end of the range for a

€750m trade.

“Japanese issuers typically price on top of

others. Here, there was 25bp of delta

BETWEENû3UMIûANDû-IZUHOûBUTûITûDOESûMAKEû

SENSEvûAûBANKERûAWAYûSAIDûATûTHEû)04ûSTAGE

STERLING

BARCLAYS STAYS AT HOME FOR AT1

RETURN

BARCLAYS PLCûSEIZEDûONûANûIMPROVEMENTûINû

MARKETûCONDITIONSûTOûBRINGûTHEûlRSTû

Additional Tier 1 from a bank issuer since

mid-April, a deal that also offered investors a

rare opportunity to buy deeply subordinated

debt in sterling.

An escalation in Brexit headlines in recent

weeks sent UK bank spreads wider across

the capital structure. But a sharp turnaround

in the risk tone last week opened the door

FORû"ARCLAYSûTOûGOûAHEADûWITHûITSûlRSTûSTERLINGû

AT1 since 2017.

-ARKETINGûFORûTHEûaBNûSELF

LEDûPERPETUALû

NON

CALLûSIXûSTARTEDûATû)04SûOFûûAREAû

ûAû

level that investors and bankers away

considered attractive. Talk was later revised

TOûûAREAû

BP  

“There’s going to be volatility in the next

four to six months - around the Tories, around

Brexit come October. But if you’re willing to

run with this volatility over the short term,

then you’re picking up a fair amount of yield

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

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

1 UniCredit 52 7,653.26 6.9
2 HSBC 37 7,640.75 6.9
3 LBBW 39 7,336.84 6.6
4 Natixis 26 5,623.56 5.1
5 Credit Agricole 27 5,283.76 4.8
6 Barclays 25 4,929.05 4.4
7 Deutsche Bank 23 4,787.52 4.3
8 NatWest Markets 21 4,260.04 3.8
9 ING 20 4,254.45 3.8
10 BNP Paribas 19 3,856.99 3.5
Total 152 111,077.68
Source: Refinitiv SDC code: J15a