International Financing Review February 29 2020 7For daily news stories
@ visit http://www.ifre.comBond issuance outside
Asia grinds to a halt
Bonds Not a single deal in US bond marketBY SUDIP ROYThe US primary bond market
experienced a rare blank week,
while supply in Europe was
mostly limited to SSA issuers as
fears about the growing threat
of the coronavirus sent investors
scurrying for safe assets.
The impact on primary
markets was most evident in the
US, where not a single deal was
priced in high-grade or high-
yield.
“Right now, it’s hard to say
investors are going to show up
even if you’re paying 15bp over
the outstanding secondary
level,” said a US banker.
“You have to be careful
[because the market could shift
wider] and it’s why I think you
NEEDûPERIODSûOFûSTABILITYûlRSTûSOû
people can feel like the market
level on which we are basing
our new-issue pricing is
reasonable.”
Outside of the onshore US
market, the sudden change in
sentiment was summed up by
ING GROEP’s quickly revived
Additional Tier 1 transaction,
which was relaunched on
Monday just three days after
the original was pulled.
The Dutch bank had to settle
for a higher price, smaller size
and much diminished book
compared with what was
WITHINûITSûGRASPûlRSTûTIMEû
around.
The US$750m perpetual
non-call November 2029 was
priced at 4.875% off a book of
US$3bn. On February 19, it was
on course to price a US$1bn
deal off an US$11bn book at
4.625% or lower, before the
deal was yanked mid-
execution due to the chief
executive’s decision to join
UBS.
While some bankers
thought the timing was poor,
others argued that ING was
still able to secure a
historically attractive price and
a reasonable book.Until last week, risk markets
had been insouciant - arguably
complacent - about the virus’s
potential to do damage to the
global economy.
But as parts of Italy went
into lock-down, sentiment
quickly changed, with risk
assets selling off and rates
PRODUCTSûlNDINGûAûBIGûBID
On Thursday, the yield on the
10-year Treasury fell below 1.20%
FORûTHEûlRSTûTIMEûINûHISTORYû!Tû
the start of the year, it was 1.91%.
The 30-year Treasury similarly
achieved a record low yield.
In contrast, high-yield indices
on both sides of the Atlantic
widened by 30bp-45bp in the
lRSTûHALFûOFûTHEûWEEKûINûASSETû
swap terms.
A €1.25bn 3.875% perpetual
non-call June 2027 AT1 from
UniCredit that was priced at par
on February 12 fell to 93, or a
yield-to-call of 5.10% last
Wednesday.
“That is the equivalent of
nearly two years of coupons lost
in three days,” said Charlene
Malik, portfolio manager at
TwentyFour Asset Management.
4HEûMOVESûINûlXEDûINCOMEû
and credit were driven mostly
by exchange-traded funds. JP
Morgan analysts reported
OUTmOWSûOFûAROUNDû53Mû
from ETFs on Monday alone.
Real-money investors, on the
other hand, are for the most part
watching and waiting.
“We haven’t seen any panic
selling or big volume real-money
selling at this stage,” said a
syndicate manager in London.
And while most investors are
reducing risk and buying
protection, they are also
assessing when best to exploit
more attractive entry points.
“Anytime the markets are
spooked and are exaggerating
the risk, it’s a good investment
opportunity,” said Ken
Monaghan, co-head of high-yield
at Amundi Pioneer. “This seems
to be a manageable issue and Ithink eventually it will fade.” (^)
The bank agreed an ASA.
Barclays disclosed the ASA in its
June 2008 capital-raising
prospectus, but not the
payment of £42m. When
Qatar invested again in
October 2008, another ASA
was signed. Barclays did
not disclose the existence
of the second ASA, including
the payment of £280m to
Qatar.
The defence lawyers said
Barclays’ in-house and
external lawyers approved
the ASAs throughout the
process.
“The unequivocal, repeated
advice was that this was
legitimate provided the ASA was
a genuine contract for the
PROVISIONûOFûBENElTSûTOû
Barclays,” Kelsey-Fry said.
But prosecutors told the jury
the defendants were worried
they were breaking the law and
had even joked about the threat
of jail.
“None of us wants to go to jail
here... the food sucks and the
sex is worse,” Kalaris said on a
call with Boath in June 2008 as
they discussed the structure of
the deal.
HEART ATTACK
The money raised in 2008
allowed Barclays to avert a state
bailout, unlike Royal Bank of
Scotland and Lloyds Banking
Group, which had to be rescued
with taxpayer cash.
“It is no exaggeration to say
that Barclays’ future as an
independent bank was in
jeopardy in September and
October of 2008,” SFO
prosecution lawyer Brown said.
Brown said the Barclays board
was determined to avoid taking
a government “bail-out”
because that would have
RESTRICTEDûSTRATEGICûmEXIBILITYû
He said the former bankers
were also incentivised to get a
deal to secure lucrative bonuses.
Prosecutors said Jenkins was
paid £39.5m in 2007, and was
promised a bonus of £25m for
securing the two fundraisings.
But Jenkins reacted angrily to
that accusation.
“I had a heart attack on
August 5 2008 and I was
instructed to get out of my bed,
leave my family on August 29
and come back to work to help
this bank survive,” the 64-year-
old Jenkins told the jury.
ALL OVER?
The acquittal of the three
former bankers will not fully
close the door on events from
the fundraising 12 years ago.
In fact, it will restart some
other investigations and court
cases related to the 2008
fundraising, which have been
on hold.
Boath is also suing Barclays
for unfair dismissal, claiming he
WASûlREDûFORûWHATûHEûTOLDûTHEû
SFO.
£50m COSTS?
The SFO’s defeat is another
costly blow for the organisation
and raises questions about its
future.
Legal costs related to the case
and years of investigations have
swelled, and could exceed
£50m, sources said. The SFO on
Friday estimated its costs for the
investigation and trial at
£9m–£10m.
The defendants’ costs are
expected to have been covered
by Barclays, or the insurance
cover the bank takes out for its
employees. The bank declined
to comment.
Former Barclays chief
executive John Varley was
previously accused of fraud by
the SFO and was acquitted by a
judge following a previous trial
last year. Fraud charges against
Barclays itself were dismissed in
2018.
“The SFO has been dogged in
its pursuit of individuals and
that pursuit has ended in
failure,” said Aziz Rahman at
legal specialists Rahman Ravelli.
“There is the possibility that this
could reshape the SFO’s
thinking when it comes to
dealing with individuals after
the company has already been
dealt with.”
The SFO said its prosecution
decisions were based on the
evidence available. “Wherever
our evidential and public
interest tests are met, we will
always endeavour to bring this
before a court,” an SFO
spokesperson said. (^)
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