14 International Financing Review February 29 2020Yandex finds tight window for CB
Structured Equity US$1.25bn deal is first European convertible in over a monthBY ROBERT VENESNasdaq-listed Russian search
engine YANDEX squeezed through
a small window to price a
53BNûlVE
YEARûCONVERTIBLEû
BONDûONû4UESDAY ûlNDINGûAû
period of calm as the spread of
the coronavirus towards
pandemic status rocked stock
markets globally.
European indices fell 3%–4%
on Monday, more in Italy, but
much of that was reversed
initially on Tuesday morning. A
syndicate led by Goldman Sachs as
global coordinator, with JP
Morgan, Morgan Stanley, UBS and
VTB Capital as active
bookrunners, launched
Yandex’s CB mid-morning
without any pre-sounding.
"ANKERSûWEREûCONlDENTûTHATû
Yandex ticked a number of
boxes for investors starved of
new paper – it was only the
third equity-linked trade in
Europe year to-date, following a
õMûlVE
YEARû#"ûFORûDEBUTû
issuer Pharming Group of the
Netherlands in mid-January, and
€1.75bn of four-year and seven-
year CBs from Delivery Hero
shortly after.
Sizing at US$1.25bn was a
positive factor with bankers
saying there is a desire for
benchmark deals and onesuggesting that sub-€500m
trades that were more typical
last year might struggle.
Technology is also an attractive
and under-represented sector in
equity-linked and Yandex has a
market cap well in excess of
US$13bn.
Also, while the company does
not have any outstanding bonds,
ITûISSUEDûAûlVE
YEARû#"ûINûû
so is a known quantity for some
investors.LITTLE PUSHBACK
As it is unrated, benchmark
Russian and tech names such as
0ROSUSûANDû.ETmIXûPROVIDEDûTHEû
inputs for a 175bp credit
assumption. The stock is liquid,
with plenty of borrow, and
there was little pushback on the
credit spread.
Books were covered at the
mid-point after about two
hours, and pricing came at that
level in late afternoon.
On guidance of 0.5%–1%
coupon and 45%–50% premium
the implied vol was 25%–31%,
with pricing at the mids – 0.75%
coupon, up 47.5% – giving
implied vol of 28% versus
historic over most time frames
OFûAROUNDûû4HEûBONDûmOORû
on pricing was 89.5%. There is a
call from three years subject to a
130% trigger.Opting for a Reg S deal, rather
than 144A allowing for
marketing to US investors,
meant less paperwork and the
ability to launch on shorter
notice.
Proceeds will be used for
general corporate purposes.
Bankers said strong
momentum helped them move
accounts up to the mid-point,
with a number of investors,
both hedge funds and outrights,
coming in with large orders in a
book of more than 100 lines.
There was some crossover with
accounts that bought Delivery
Hero paper and a banker said
that there did not appear to be
any accounts put off by a
Russian name, or at least this
Russian name.
Books closed at 4pm in
London on Tuesday, by which
time markets were in reverse.
Pricing was set on the full-day
VWAP of US$40.7289 for a
conversion price of US$60.0751.
Yandex shares have risen by
more than 41% since mid-
October to the Monday close of
US$42.02, although the stock
reached an all-time high close of
US$48.62 earlier this month.
A banker away from the deal
said that such a tight credit spread
showed how much demand there
is for new issuance and said that,stock falls notwithstanding, there
is an opportunity to push on terms
and structures that might not be
achievable in a more active
market.MORE SUPPLY
Structured equity issuance was
on a similarly low run rate this
time last year, with food
delivery service Takeaway.com
raising €250m alongside equity,
Swiss chemicals group Sika
picking up US$1.3bn from
mandatory convertible bonds
and a €200m tap by Cellnex
4ELECOMûnûALLûINûTHEûlRSTûTWOû
months. The average deal size is
certainly up in 2020.
The hope now is that there
will be more supply to take
advantage of volatility, with one
banker betting on full-year
issuance topping US$20bn.
Issuance in 2019 was US$18bn
from 41 deals, which was a
massive uptick on 2018’s
disappointing US$12.7bn from
39 deals.
A banker estimated
maturities this year totalling
around US$8bn, but said that is
down on last year and will be
mitigated by liability
management. Elevated stock
levels may also result in more
exchangeable bonds being
considered. Top news
Are your colleagues as
well-informed as you?
If there are other people in your team, department or company who you think would benefit from the
authoritative and independent content that IFR offers, you should know that considerable discounts are
available to companies with multiple subscriptions.To discuss your requirements, please contact your local IFR representative:
EMEA: +44 (0)20 7542 45 69, [email protected]
Americas: +1 (646) 223 5543, [email protected]
Asia-Pacific and Japan: +852 291 26606, [email protected]4 IFR Top news 2322 .p 4 - 14 .indd 14 28 / 02 / 2020 19 : 41 : 48