International Financing Review April 4 2020 7For daily news stories
@ visit http://www.ifre.com“The duration extension is
marginal but the average life
extension is material, which is
important in debt stats for
COUNTRIES vûSAIDûTHEûlRSTûLEADû
banker.
“The key point was delivering
some extra capacity” at
attractive coupon rates.
Israel priced the US$1bn April
2120 bond at a yield of 4.5%, the
US$2bn July 2030 tranche at
2.75% and the US$2bn July 2050
note at 3.875%.
Those compare with initial
price thoughts of the 3.125%
area, the 4.25% area and the
4.875% area. At those IPTs, the
premium was about 75bp, but
leads cut that in half by the end.
Israel, which did a couple of
private placements recently, was in
the public market at the beginning
of the year, raising US$3bn.
Bank of America, Barclays,
Citigroup and Goldman Sachs were
the leads on the latest deal.
Israel was not the only
sovereign to sell 100-year debt
last week. IRELAND (A2/AA–/A+)
responded to a reverse enquiry
with a €100m 2120 MTN with a
coupon of 1.2% on Monday via
Barclays.Bankers noted the relatively
low coupon, especially given
market conditions.Just like its eurozone peers,
Ireland is expected to see an
increase in its borrowing activity
in the coming years because of
the coronavirus pandemic.
To that end, numerous SSA
issuers are taking advantage of the
better conditions to raise funds
with investors more than happy to
lend. Indeed, BELGIUM (Aa3/AA/AA–)
amassed a record €57bn-plus peak
of demand for a new October 2027
issue on Tuesday.
Belgium’s order book
exceeded the SSA market
(excluding emerging markets)
demand record, set by Spain in
January when it attracted more
than €53bn for a 10-year bond.Additional reporting by Ed Clark (^)
h'OVERNANCEûRISKS ûSPECIlCALLYû
Oracle’s shareholder-oriented
lNANCIALûPOLICIES ûAREûAûKEYû
driver of today’s ratings action,”
Moody’s analyst Raj Joshi said in
the ratings report.
“Oracle’s proposed debt
issuance, the recent US$15bn
increase in share buyback
authorisation, and its history of
elevated share repurchases lead
USûTOûBELIEVEûTHATû/RACLESûlSCALû
policy will continue to target
aggressive share repurchases
and gross leverage will remain
HIGHûTHROUGHûlSCALûYEARûv
TRADING LEVELS
Bookrunners Bank of America, Bank
of New York Mellon, JP Morgan and
Wells Fargo started IPTs cheap and
tightened spreads by 40bp through
price progression.
Still, the company paid up to
take size, giving up around
33bp–38bp of new-issue
concessions over its secondary
curve, according to IFR
calculations. CreditSights placed
the premium closer the 60bp.
Oracle priced the US$3.5bn
lVE
YEARûATûBPûOVERû4REASURIES û
the US$2.25bn seven-year,
US$3.25bn 10-year, US$3bn 20-
year and US4.5bn 30-year
tranches all at 225bp over and the
US$3.5bn 40-year at 250bp over.
Some of the shorter-dated
tranches were trading as much
as 40bp tighter in the secondary
market on Thursday, while the
longer maturities barely budged
from pricing levels, according to
MarketAxess data.
Two other tech names were in
the high grade-primary market
this month: Chipmaker INTEL
with a US$8bn six-part trade
and NVIDIA with a US$5bn four-
part transaction.
The Oracle deal landed wide
of where these bonds tightened
to in the secondary.
For example, Intel’s 3.9% 2030 is
trading at around 178bp over
Treasuries while Nvidia’s 2.85%
2030 is trading around 195bp over,
according to MarketAxess data.
Banks prepare for wall
of debt standstills
Loans Some will halt repayments without permission
BY SANDRINE BRADLEY
Lenders are preparing to be
inundated by debt standstill
requests, as European corporate
borrowers ramp up their efforts
to lock in liquidity, although
debt advisers expect some
companies to stop making
interest payments on their loans
WITHOUTûOFlCIALLYûSEEKINGû
permission.
“Everyone is in survival
mode. We are entering the
standstill phase, some will
SEEKûTHEMûOFlCIALLY ûWHILEû
others will just stop paying –
that’s where we are at. If you
aren’t making money, keep all
the cash you can and face the
consequences later,” said a debt
adviser.
7HENûTHEûLOCKDOWNûlRSTû
began, many borrowers chose to
drawdown on their loans,
including revolving credit
facilities. Following that, more
companies sought additional
liquidity through new RCFs
and bridge loans. Italian
auto giant FIAT CHRYSLER, for
example, agreed a €3.5bn
bridge to support its access to
capital markets during the
pandemic.
Debt advisers say the new
phase will see more requests for
debt standstills, with some
already formally negotiated.
Norway’s PROSAFE, which
provides accommodation vessels
for the oil industry, has agreed
deferrals on its US$1.3bn and
US$288m loan facilities, while
Ukraine’s largest private power
producer DTEK also suspended
interest payments on Eurobonds
and bank loans.
Other borrowers will
inevitably opt to take a more
informal route.
“You have to prioritise
critical payments to keep the
business alive and to protect
employees. If you need liquidity,
just don’t make interest
repayments,” a second debt
adviser said.
SUPPORT SYSTEM
Debt advisers say standstill
discussions are generally
supported by lenders.
“Banks and CLOs are open to
discussions and are generally
being supportive,” the second
adviser said.
And for companies that are
seemingly protected from the
effects of the coronavirus for
now, the advice is to begin talks
on debt standstills sooner rather
than later.
h3OMEûCOMPANIESûAREûlNEûFORû
now, but even healthy
companies can’t be healthy
forever. It’s a function of time –
will this last two to four months
or longer? If it’s twelve months,
then what happens? Even for
those companies standstills
might be a sensible option now,”
a third adviser said.
This becomes more acute as
lenders are expected to become
more selective over which
borrowers they can offer
support to as time goes on.
“Everyone is thinking about
liquidity – from investment-
grade to sub-investment grade,
across the ratings spectrum –
and lenders are trying to work
out what the priorities are and
where the best relationships
are,” a head of syndicated
lending said.
“They are also trying to work
out which borrowers need it and
who just wants it. Some
companies want liquidity as a
backup and some need it to
navigate the next few months.”
Additional reporting by Alasdair
Reilly and Claire Ruckin
“Everyone is in survival
mode. We are entering
the standstill phase,
some will seek
them officially, while
others will just stop
paying – that’s where
we are at”
“It’s probably a
unique name for
this market. It’s
well rated, not an
oil economy and
is a member of the
OECD”
4 IFR Top news 2327 .p 2 - 12 .indd 7 03 / 04 / 2020 19 : 29 : 29