IFR 03.21.2020

International Financing Review March 21 2020 1

Upfront

„ OPINION INTERNATIONAL FINANCING REVIEW

Keep buggering on

I

n normal times, a bunch of the world’s most famous

companies and banks issuing bonds wouldn’t call for much

comment.

But these are not normal times, and right now it’s worth

highlighting that bond deals are getting done in the US and

Europe. Not frequently, certainly not easily and not always

successfully. The failure of three trades last week, including a

covered bond, shows how tough the situation is.

Some liken the coronavirus crisis to the aftermath of the

9/11 terrorist attacks; others to the turmoil that came after

Lehman Brothers’ collapse in 2008.

But, as bad as those two events were, what makes this

CRISISûHARDERûFORûlNANCIERSûISûTHATûNOûMATTERûHOWûMUCHû

money governments and central banks are throwing to

support the system, the only indicator that will help settle

nerves is a slowdown in people getting ill – and there are

precious few signs of that yet.

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comprehend – UniCredit’s Additional Tier 1 that was priced

at par on February 12 was trading in the low 50s at one point

last week – much of what we’re seeing is logical, albeit

deeply disturbing at the same time.

Investors are seeking the safest asset of all – cash. That’s

why government bonds, such as Treasuries and Bunds, have

sold off sharply in the past week, less than a fortnight after

HITTINGûRECORDûLOWûYIELDSûTHOUGHûTHEûENORMOUSûlSCALû

stimulus packages that are now inevitable are also weighing

on government debt prices).

It’s also why spot gold prices were back to levels seen last

November and why the cost of accessing short-dated funding

HASûRISENûSUFlCIENTLYûTOûSPOOKûCENTRALûBANKSûTOûTAKEûACTIONûINû

the repo and commercial paper markets.

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investors are willing to put cash to work is something to

cheer. The tentative resilience of the primary bond market

is one of the few bright spots at a time when much else

is dark.

New kinds of normal

T

he corona crisis is further along in Asia, where, after

violent price swings and equally powerful responses

from governments and central banks, capital markets

professionals are growing accustomed to the idea that their

daily life may be disrupted for a very long time.

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second-quarter rebound for Asian investment banking are

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shift back to raising money in primary (rather than losing it

in secondary), and it is encouraging to see some degree of

normality returning to Asian capital markets.

Two big beauty parades have taken place over the past

week for IPOs from companies backed by Tencent and

Alibaba, with all major banks pitching for roles. Another

Hillhouse portfolio company is preparing a US$1bn Hong

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at a handsome premium in the grey market. Crisis? What

crisis?

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come to the market is not yet clear, but it is a reasonable bet

that Chinese companies will lead the way once the window

reopens.

Until that happens, bankers can spend their time

pondering what the Asian capital markets will look like

when the dust has settled.

Will nationwide lockdowns and border closures have a

PERMANENTûIMPACTûONûCAPITALûmOWSû4HEûDETERIORATIONûOFûTHEû

US-China relationship is hardly good news for the global

economy, even if Hong Kong’s stock market looks set to

BENElTûFROMûAûWAVEûOFûSECONDARYûLISTINGSûFROMûCOMPANIESû

hedging their listings in New York.

Will roadshows and global travel become optional rather

THANûEXPECTEDû/NCEûISSUERSûANDûINVESTORSûREALISEûTHEYûCANûDOû

deals remotely, they may never go back to their old ways.

Time, perhaps, to add more video-conferencing suites.

Or will anything have changed at all? It is too early to make

any predictions for the rest of 2020, or beyond. But on the

evidence of last week’s pitches, with all the familiar names

attached to big Chinese IPOs, Asia’s capital markets are

already itching to get back to business as usual. That has to

be a good sign.

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very fact that some investors are

willing to put cash to work is

something to cheer

2 IFR Upfront 2325 p 1 .indd 1 20 / 03 / 2020 20 : 19 : 40