44 International Financing Review April 4 2020“As we saw in euros, there is a clear
interest in much longer-dated trades as
investors try to lock in that spread
DECOMPRESSION ûANDûTHEûSAMEûISûREmECTEDû
in sterling,” said a banker away from the
deal.
“Issuers like housing associations
therefore make a lot of sense because that is
the type of funding they typically look for.”
Utilising the increased appetite for long-
ENDûPAPER û3ANCTUARY ûAûSOCIALûLANDLORDû
ACTIVEûINû%NGLANDûANDû3COTLAND ûONû&RIDAYû
announced an April 2050, the longest bond
seen in the sterling corporate primary since
January.Leads began marketing the deal at the
200bp area above Gilts. A book of around
aBNûMEANTûTHEûSPREADûWASûRATCHETEDûINû
ANDûGUIDANCEûWASûREVISEDûTOûTHEûBPû
area for an expected size of £300m.
!ûBORROWERûSUCHûASû3ANCTUARYûISû
currently viewed as an attractive issuer.
Not only is it a strong credit at a time of
economic uncertainty but the spread it
offers, especially further out the curve, is
enough to draw in orders.
h3TERLINGûISûAûVERYûSELECTIVEûMARKETûBUTû
something like a housing association in
this market is very well suited,” said the
banker.4HEûlNALûBOOKûTOPPEDûaBN ûWITHûTHEû
issuer opting to increase the deal size to
aM ûPRICINGûATûAûSPREADûOFûBP
Housing association Optivo put in an
appearance last Tuesday. The £250m
/CTOBERûS ûOFûWHICHûaMûWASû
retained, were sold at a spread over Gilts of
230bp.
The housing provider has a portfolio in
excess of 45,000 homes across London, the
3OUTHû%ASTûANDûTHEû-IDLANDSFIG
EUROS
LEASEPLAN ACCEPTS MARKET REALITY
WITH STATEMENT OF ACCESSLEASEPLAN attracted modest demand for a
õMûlVE
YEARûGREENûSENIORûUNSECUREDû
offering on Friday despite paying a pick-up
OFûSOMEûBPûOVERûSECONDARIES ûBUT ûANû
OFlCIALûATûTHEûISSUERûSAID ûMADEûANûIMPORTANTû
statement of its market access.
Leads Danske Bank, HSBC, ING, JP Morgan
and Societe Generale opened books for the
lVE
YEARûEUROûBENCHMARKûWITHûINITIALû
guidance of mid-swaps plus 375bp area.
4HEûSPREADûWASûlXEDûATûTHATûLEVELûANDûTHEû
size at €500m, with books passing €650m.
Bankers saw fair value in the 270s, based
on LeasePlan’s curve, implying a pick-up of
SOMEûBPû
,EASE0LANSûû3EPTEMBERûSûWEREû
BIDûATûAROUNDûBPûANDûITSûû-ARCHû
2024s around 257bp.
Paul Benson, group treasurer at LeasePlan,
said the issuer’s rationale in entering the
market was “partly an acceptance of the
world in which we are operating” but
mainly to demonstrate to clients and
stakeholders, including ratings agencies,
that LeasePlan has continued market access.
“We have four different funding
platforms: retail deposits, bilateral bank
LINES û!"3ûANDû$#- vûHEûSAIDû
“Following this transaction, we can now
demonstrate that since the escalation of the
#OVID
ûCRISISûINûJUSTûTHEûPASTûTHREEûWEEKS û
we have successfully raised funding across
all four different platforms, leaving us now
holding cash and committed facilities
comfortably in excess of €6bn.”
Bankers away from the deal said its
lacklustre reception – in spite of the sizeable
premium and the green element, which
tends to improve demand – probably
REmECTEDûCONCERNSûOVERûTHEûAUTOMOBILEû
LEASINGûANDûmEETûMANAGEMENTûBUSINESSû
during the coronavirus crisis.Lloyds takes senior opportunity
while Europeans stay away
FIG Bank takes contrasting approach to European peersLloyds made a quick return to the senior market
last week, raising €1bn of opco senior funding for
LLOYDS BANK CORPORATE MARKETS and US$1.5bn
of holdco debt, showcasing the contrasting
market views of UK and European banks.
The new issue from LBCM, which is Lloyds’
non-ring-fenced entity and sits at the opco level
within the group, comes just over a week after
holdco LLOYDS BANKING GROUP tapped the euro
market.
Despite the success of LBG’s deal and a string
of other highly subscribed senior deals from UK
and US banks last month, European lenders
are staying away from the market while spreads
remain elevated.
Sole bookrunner Lloyds marketed LBCM’s
six-year deal at initial price thoughts of the mid-
swaps plus 300bp area last Thursday.
The spread was ultimately fixed at 270bp and
the size at €1bn, with the book closing above
€3.25bn.
LBCM’s curve indicated fair value was around
220bp, implying a 50bp new issue concession.
The deal also landed around 30bp inside
where the recent €1.5bn six-year non-call five
senior from Lloyds Banking Group was trading.
Later that day, Lloyds hit the US dollar market,
printing US$1.5bn of 5.25-year holdco senior
debt via LBG.
The SEC-registered deal was priced at 350bp
over Treasuries, inside IPTs of the 375bp area.
Opco senior or senior preferred supply has
been particularly limited since the primary
market reopened.
Besides Lloyds, the only other name to have
issued in the format is NatWest Markets, the
non-ringfenced bank of RBS, which sold a €1bn
five-year at 300bp last month.
European banks have remained absent from
the senior unsecured market entirely. Their needshave been curbed by the offer of new cheap
loans from the ECB, and European lenders have
preferred to issue covered bonds when seeking
wholesale funding.
“It just depends on whether you think
conditions will get better or you take the view
that when you see an opportunity and a window,
you try to hit it,” said a syndicate banker. “The
US and the UK banks have been taking that
approach.
“Who knows where the market will be even at
the start of next week? It’s very hard to predict
with how spreads have been moving around so
it makes sense to take an opportunity when you
have it.”
European banks are generally more likely to
wait for spreads to tighten before seeking senior
funding, according to syndicate officials.
“Most don’t want to pay these levels,” said a
second syndicate banker.
“The view from a lot of borrowers is that
spreads will rally back somewhat – definitely
not to where they were, but we’ve seen a decent
move since last week, so let’s see if they’re right.”
While seeking new senior funding for LBCM,
the Lloyds group is at the same time looking to
repurchase senior bonds issued by Lloyds Bank,
which also sit at the opco level.
Last Tuesday, Lloyds launched two tender
offers on its bonds, the first for four US dollar-
denominated senior bonds maturing in 2021,
2022 and 2025, and the second for its US$2bn
12% fixed-to-floating perpetual capital securities.
The new issue was not connected to
the tender offer. Lloyds said it is seeking to
repurchase the bonds to manage its funding and
liquidity base and capital position. It is targeting
the senior notes because they do not qualify as
MREL-eligible debt.
Tom Revell6 IFR Bonds 2327 p 25 - 65 .indd 44 03 / 04 / 2020 20 : 29 : 00