IFR 03.7.2020

12 International Financing Review March 7 2020

Top news

CB issuance surges as markets stutter

„ Structured Equity The asset class that loves volatility is booming

BY STEPHEN LACEY

In the face of broad

dislocation across the capital

markets, convertible bonds

HAVEûPROVENûCHARACTERISTICALLYû

resilient, allowing corporates

to fund at costs not seen in

YEARS

Since US stocks peaked on

&EBRUARYûûû53

LISTEDû

companies have raised

53BNûTHROUGHûNEWûEQUITY

linked deals, including US$3bn

this past week alone. That

COMPARESûTOû53BNûOFûHIGH

YIELDûBONDSûANDû53BNûOFû

PRIMARYûSHAREûSALESûOVERûTHEû

same period, according to IFR

data.

h4HEûCONVERTûMARKETûISûREALLYû

ABOUTûSUPPLYûANDûDEMANDvûSAIDû

*OEû7YSOCKIûCO

PORTFOLIOû

manager at Calamos

)NVESTMENTSûh2IGHTûNOWûYOUREû

seeing a lot of demand.”

h#ONVERTIBLEûBONDSûGIVEûYOUû

ANûASYMMETRICûPROlLEûOFû

downside protection in a

SECURITYûTHATûCAPTURESûTHEû

MAJORITYûOFûTHEûUPSIDEûINûANû

UNDERLYINGûSTOCKv

Investor fears about the

fallout of the coronavirus on the

GLOBALûECONOMYûHAVEûWREAKEDû

havoc on capital markets. The

30ûû)NDEXûHASûFALLENûû

FROMûITSû&EBRUARYûûPEAKû

VOLATILITYûSTANDSûNEARûûANDû

YEARû4REASURYûYIELDSûSUNKûTOûAû

LOWûOFûûAMIDûAûmIGHTûTOû

SAFETY

And while CBs have not fared

SPECTACULARLYûEITHERûTHEYûHAVEû

outperformed equities and are

STILLûUPûûFORûTHEûYEARûASû

MEASUREDûBYûTHEû2ElNITIVû53û

Convertible Index.

Investor demand has

extended to new issues.

0AYMENTSûPROVIDERûSQUARE, a

serial CB issuer, raised US$1bn

FROMûTHEûSALEûOFûAûlVE

YEARû

CONVERTûONû-ONDAYûTHATû

printed at a coupon of just

0.125% and conversion

premium of 50%, the mid-point

OFûnûANDûnû

price talk.

Goldman Sachs was sole books

on the Square CB.

ENPHASE ENERGY, a fast-growing

maker of equipment for solar

PANELSûSECUREDûAûSIMILARLYû

attractive 0.25% coupon on a

53MûlVE

YEARû#"ûTHATûWILLû

NOTûALLOWûBUYERSûTOûCONVERTûINTOû

THEûUNDERLYINGûUNTILûITSûSHARESû

RISEûBYûûALSOûTHEûMID

POINTû

of talk.

Barclays and Goldman Sachs

were joint bookrunners on

%NPHASEû%NERGYSû#"

The two CBs were priced with

terms that are among the most

AGGRESSIVEûINûYEARS

Investors keep faith in SBI Cards

„ Equities India’s first credit card listing overcomes weak market and coronavirus fears

BY ANURADHA SUBRAMANYAN

SBI CARDS AND PAYMENT SERVICES

drew an impressive response

to its Rs103bn (US$1.44bn)

IPO, the largest in India since

ûDEFYINGûAûBACKDROPûOFû

global stock market weakness

and fears over the potential

spread of the coronavirus in

India.

The books, which were

26.54 times subscribed,

closed in the nick of time,

hours before the Indian

central bank seized control of

troubled Yes Bank. Share

prices resumed their steep

DECLINEûONû&RIDAYûFOLLOWINGûAû

midweek respite.

The renewed market

turmoil threatens to weigh

ONûTHEûCOMPANYSûPOST

listing performance,

ESPECIALLYûAFTERûPARENTû3TATEû

Bank of India said it would

explore an investment in Yes

Bank, sending its own shares

DOWNûûINûEARLYûTRADEûONû

&RIDAY

4HEû30û"3%û3ENSEXûINDEXû

was down 2.3% over the week

ASûOFû&RIDAYûMORNINGû4HEû

INDEXûHASûLOSTûûINûTHEûYEARû

to-date.

A banker with knowledge of

the SBI Cards IPO said the

torrid backdrop had an impact

EARLYûINûBOOKBUILDINGûWHENûAû

lack of institutional bids on the

lRSTûDAYûUNNERVEDûSOMEû

investors.

h)TûTOOKûSOMEûEFFORTûTOû

convince them that there was

demand for the shares. Most

investors did not want to be

LEFTûWITHûAûHUGEûQUANTITYûOFû

IPO shares with no follow-

THROUGHûBUYINGûUPONûLISTINGvû

he added.

In the end, the tranche

RESERVEDûFORûQUALIlEDû

INSTITUTIONALûBUYERSûWASûCOVEREDû

ûTIMESûTHEûHIGHûNET

WORTHû

investor tranche 45.23 times

and the retail portion 2.5 times.

At a total of Rs1.04trn, bids for

the institutional portion were

the highest for an Indian IPO

SINCEûûTOPPINGûTHEû2SBNû

book for HDFC Life.

Foreign investors showed

THEIRûINTERESTûINû)NDIASû

consumer sector and bought 60%

OFûTHEûM

SHAREûANCHORû

tranche.

Anchor investors included

3INGAPOREû.ORWAYûANDû+UWAITû

sovereign wealth funds, as well

ASû&IDELITYû4HORNBURGû27#ûANDû

BlackRock.

Bankers working on the IPO

SAIDûMANYûOFûTHESEûINVESTORSûALSOû

bought shares in the

institutional tranche.

LIMITED EXPECTATIONS

4HEûGREYûMARKETûPREMIUMûONû

the SBI Cards shares has fallen

TOû2SûFROMû2SûATûTHEû

start of the month. However,

THEû)0/ûISûLIKELYûTOûBEûPRICEDûATû

THEûTOPûOFûTHEû2Sn2Sû

RANGEûIMPLYINGûAû0%ûOFûûFORû

THEûlNANCIALûYEARûTOû-ARCHûû

2020.

.OTûSURPRISINGLYûMARKETû

participants do not expect

spectacular listing gains when

trading starts on or around

March 16.

h)FûTHEûSHAREûRISESûBYûnû

upon listing, it will be a good

outcome. It should not end up

being another SBI Life

)NSURANCEvûAûBANKERûAWAYûFROMû

the deal said.

3TATEû"ANKûOFû)NDIASû

INSURANCEûSUBSIDIARYûWASû

mOATEDûINûAû2SBNû)0/ûINûû

ANDûITûTOOKûUNTILûTHEûlRSTûHALFû

Source: Refinitiv

510

520

530

540

550

560

570

580

590

Jan 1Jan 8 Jan 15Jan 22Jan 29 Feb 5 Feb 12Feb 19 Feb 26 Mar 4

2,

2,

2,

3,

3,

3,

3,

3,

3,

3.9%

8.3%

7.6%

5.3%

Refinitiv US Convertible Bond Index (lhs) S&P 500 (rhs)

CBs OUTPERFORM EQUITY

PERFORMANCE TO AND FROM MARKET PEAK OF FEBRUARY 19

4 IFR Top news 2323 .p 4 - 14 .indd 12 06 / 03 / 2020 19 : 26 : 36