22 International Financing Review March 7 2020JAMES BREMEN, PARTNER AT LAW FIRM QUINN EMANUEL, P16Projects could be delayed, costs rise and loans
might have to be renegotiated and restructured”
IG secondary liquidity worsens
Secondary market liquidity in the European
investment-grade bond market continues to
deteriorate and traders increasingly rely on
automation and algorithms, according to a
survey by the International Capital Market
Association.
“Liquidity conditions remain challenging
in certain segments and where radical
structural change driven by technology and
automation is taking place,” said ICMA chief
executive Martin Scheck.
Secondary market liquidity for sell-side
lRMSûINûPARTICULARûISûWORSEûTHANûWHENû)#-!ûpreviously surveyed the market in 2016.
ICMA said dealers were more constrained
by regulatory capital and liquidity costs, as
well as the state of the credit funding and
hedging markets.
Liquidity is adequate for smaller trade
sizes, perhaps helped by the increased use of
automation, but block trades create the
biggest challenge for the buy-side.
“While the capacity of dealers to provide
liquidity is becoming more constrained and
increasingly selective, asset managers are
looking to new approaches for sourcingliquidity, either becoming more
sophisticated in their interaction with
market-makers, or through diversifying
their use of trading venues and protocols,”
ICMA said.
)TûSAIDûTHEûMOSTûSIGNIlCANTûTRENDûSINCEûITSû
previous survey was the use of sophisticated
“rules-based” or even algorithmic
automated processes for trading orders.
These are more typically seen in equity
markets but are now increasingly used by
BUY
SIDEûANDûSELL
SIDEûlXED
INCOMEûTRADERSû
They are still mainly used for sovereign
bonds but are beginning to impact
investment grade credit, ICMA said.
Chris MooreJust not that Intu you
Indebted shopping centre owner INTU
PROPERTIES said it was looking at alternatives to
lXûITSûBALANCEûSHEETûAFTERûFAILINGûTOûPERSUADEû
investors and potential new shareholders to
invest up to £1.5bn in the company.
The group had £4.5bn of debt at the end of- The majority was secured against assets
within its portfolio, such as Manchester’s
Trafford Centre and Lakeside in Essex, and a
smaller proportion unsecured at a group level.
A possible solution might see the
break-up of the group, with secured
bondholders taking control of some assets.
Chief executive Matthew Roberts said that
after spending six months looking at “vanilla
equity deals” the group had also received
“proposals at the asset level and plc level” as
well as more complex structured deals.
Shares in the company more than halved
to 4.7p, after it said it was “unable to proceed
with a planned £1.3bn equity raise at this
point”. The shares have plunged 86% this
YEAR ûSLASHINGûTHEûlRMSûMARKETûVALUEûTOû
£67m, or just 3.3% of its latest net asset value.
Intu said some investors had expressed
interest, including in “alternative capital
structures and asset disposals”. Major
shareholder Peel Holdings, which has a
27.3% stake, is understood to be supportive.
In November 2018 Peel pulled out of a
possible offer, backed by Saudi investor
/LYANûANDû53ûGROUPû"ROOKlELD ûTOûTAKEûTHEû
group private at 210.4p a share. That bid had
emerged after listed rival Hammerson
withdrew a separate offer.
Bank of America and UBS are corporate
brokers to Intu and RothschildûISûITSûlNANCIALû
adviser.RUNNING OUT OF EXCUSES
Intu said volatility in the equity markets as well
as the retail property investment markets has
“precluded a number of potential investors
from committing capital into the business”.
“We had support from existing
shareholders and non-shareholders, but it
would be wrong of me to name them or the
quantum on that,” said Roberts.Intu said it will broaden its conversations
with stakeholders to discuss options and “to
utilise its assets to provide further liquidity”. It
said an equity raise had not been ruled out. It
delayed reporting 2019 results until March 12.
Mike Prew, analyst at Jefferies, said Intu had
run out of excuses. “Intu is probably heading for
a debt/equity swap with debt providers across
THEûASSETûSPECIlCûSILOSûENDINGûUPûCONTROLLINGûTHEû
assets. Could Peel Holdings reverse engineer the
sale of the Trafford Centre?”
)NTUûSAIDûITSûlNALûRESULTSûWILLûSHOWûAûaBNû
writedown of its portfolio for 2019, or 22%,
to £6.63bn. The unaudited net asset value
per share on an EPRA basis has declined to
147p from 293p.
As part of its update Intu said it was in
compliance with its debt covenants but
warned that it could breach some when they
are tested in July. Interest payments are
covered 1.67 times by earnings.
As well as a £600m revolving credit facility
Intu also has £1.18bn of unsecured bonds as
well as at least £3bn of debt secured against
its individual property holdings and liabilities
stemming from swap agreements.
Christopher SpinkArgentina mandates banks for restructuring
ARGENTINA has mandated on its upcoming
debt restructuring, choosing LAZARD as a
lNANCIALûADVISERûANDûBANK OF AMERICA and
HSBC as placement agents.
The long-awaited move comes as a relief
to some Argentina bondholders who
insisted the government of newly elected
Alberto Fernandez could not move forward
with the restructuring without the advice of
banks.
#OMPETITIONûFORûTHEûMANDATEûWASûlERCEû
as a string of banks, including Citigroup,
Morgan Stanley, Deutsche Bank andRothschild, knocked at the Ministry of the
Economy’s door to pitch their wares.
The decision was thought to be partly
driven by politics, however.
The abundance of former JP Morgan
bankers involved in the prior administration
of president Mauricio Macri - whom the new
government blames for the current debt
crisis - meant the US banking powerhouse
stood little chance of winning the business.
Even so, few banks could lay claim to not
partaking in the frenzy of sovereign debt
issuance that took place between 2016 and 2018.During that time the country issued over
US$43bn equivalent in nine bond deals
denominated in dollars, euros and Swiss
francs, according to IFR data.
Bank of America was only a lead on one of
those deals, as was Morgan Stanley and JP
Morgan. HSBC, on the other hand, was
involved in four.
“Bank of America only did one deal and
that played well (to the government), but I
was surprised about HSBC. But somehow
they got it,” said one banker.
Paul Kilby5 IFR PM 2323 p 15 - 24 .indd 22 06 / 03 / 2020 19 : 22 : 46