is a euro proxy), will fail to lower their debt-
to-GDP ratios between 2019 and 2024, the
ratings agency forecasts.
Heavily indebted Mediterranean states
such as GREECE (-22.5%) PORTUGAL (-18.3%), plus
IRELAND (-13.6%), are on course for
particularly striking showings during the
period.
But core European states such as GERMANY
(-13%), the NETHERLANDS (-9.4%) and AUSTRIA
ûSHOULDûREDUCEûDEBTûSIGNIlCANTLYûTOO û
Scope says.
This translates to debt reductions of 30%-
40% in much of the EU over the decade from
2014 to 2024.
“That is really a lot and it affords some
lSCALûSPACE ûTHOUGHûWHETHERûTHATûISûUSEDûISû
really a question of political will,” said Alvise
,ENNKH ûDEPUTYûHEADûOFûPUBLICûlNANCEûATû
Scope Ratings.
The EU’s reduction contrasts with the rest
of the world’s 35 biggest sovereign debt
issuers. CHINA and the UNITED STATES lead a host
of non-eurozone states set to see expansionary
policies lift their debt-to-GDP ratios.
RUSSIA and TURKEY are also prominent in
this group, though their debt would still be
at modest levels by 2024 on this basis.
The world’s two top economies will
increase debt as a proportion of GDP by as
much as 21% and 9.5%, respectively, Scope
says. This will leave them with contrasting
ratios, however.
While China’s debt/GDP is set to reach
76.6% in 2024, the US would have climbed to
115.8%. This exceeds by some margin levels
in indebted eurozone countries such as
FRANCE (97.8%), BELGIUM (95.1%), SPAIN (90.5%)
and even PORTUGAL (99.3%) - though it would
still be far off JAPAN‘s 237.6%.
h4HEûHIGHLYûPRO
CYCLICALûlSCALûSTANCEûINû
the US is really remarkable - the Trump tax
cuts have certainly had an effect,” said
Lennkh, who views spending as “the key
ISSUEûINû53ûPUBLICûlNANCEvû
While China enjoys a wide range of levers
to manage potential shocks from what
would be a high debt ratio for a middle-
income country, the speed of its increase is
notable. The country’s debt/GDP will have
almost doubled in a decade, Lennkh said.CORPORATES
US DOLLARS
HEALTHCARE CREDITS RECEIVE BOOST
FROM SUPER TUESDAY RESULTSThe US healthcare credit space was active
last week amid new M&A deals, fresh bondissuance, coronavirus fears and the
resurgence of a more moderate approach to
healthcare reform in the Democratic
Primary.
Joe Biden’s strong Super Tuesday
performance in the Democratic Primary was
a cause for optimism in the markets as
equities gained more than 1,000 points on
the Dow Jones index led by a surge for
healthcare names.
The boost was evident in credit markets
too, where CVS, ABBVIE and AMGEN all
experienced some 6bp-9bp of spread
tightening on the day, according to
MarketAxess data.
Healthcare was also one of only three
sectors that saw average spreads tighten and
are now trading at 111bp over Treasuries,
according to ICE BofA data.
Lower-than-expected voting totals for
Bernie Sanders on the biggest night of the
Democratic primary race to date sharply
decreased the likelihood of a Medicare-for-
all plan disrupting the space, CreditSights
noted in a report.
“We now put the likelihood of Medicare-
for-all being implemented in the foreseeable
future at below 2%,” CreditSights wrote.
“Meanwhile, the likelihood that the status
quo persists, which we would consider a
major win for health insurers given that it
will preserve Medicaid Expansion and other
key tenets of the healthcare framework, is
hovering in the 80% area.”
MEDICINAL PROPERTIES
CIGNA issued into this favourable
environment on Wednesday, pricing a
US$3.5bn three-part bond that garnered a
US$17.6bn order book.
The health insurer priced a US$1.5bn 10-
year at 142bp over Treasuries, a US$750m
20-year at 157bp and a US$1.25bn 30-year at
177bp.
At those levels, Cigna’s new notes came
mATûTOûITSûOUTSTANDINGûCURVEûONûTHEû
YEARû
and gave up just 2bp-3bp of new-issue
concession on the long-dated tranches,
according to IFR calculations.
The bonds were offered in conjunction
with a tender for up to US$500m of 2022
notes and up to US$950m 2023s.
Cigna’s new bonds tightened as much as
10bp on the break on Thursday morning but
subsequently pulled back.
4HEû
YEARûTRADEDûmATûTOûITSûPRICINGûLEVELû
on Thursday and the two long tranches were
still some 3bp-6bp inside of pricing,
according to MarketAxess.M&A CONFIDENCE
The changing tone of the election is also
causing companies to be more bold with
their M&A strategies, where market
participants thought such deals were likely
to take a back seat until after the election.THERMO FISHER, a medical supplies and
software provider in the healthcare space,
on Tuesday announced plans to purchase
pharmaceutical research company Qiagen
in a deal valued at US$11.5bn.
The company is expected to fund the
transaction with a mixture of new debt and
cash on hand.
Moody’s expects adjusted debt to Ebitda
will climb to 3.6 times, but the acquisition
will allow it to build up cash fast to pay off
DEBTû4HEûAGENCYûREAFlRMEDûITSû"AAûRATINGû
on the day of the announcement.
“The Qiagen acquisition will further boost
Thermo Fisher’s scale in its core life sciences
business, while also giving it access to new
products and customers in the molecular
diagnostics space,” said Jonathan Kanarek,
SENIORûCREDITûOFlCERûATû-OODYSû
h4HEûAFlRMATIONûALSOûREmECTSû4HERMOû
Fisher’s good track record of deleveraging in a
timely manner following large acquisitions.”EUROS
CADENT BRINGS TRANSITION FINANCE
INTO THE SPOTLIGHTCADENT GAS raked in orders of €4.5bn for its
debut transition bond as investors continue
to show their support for the nascent
structure.
The €500m 12-year deal is only the second
of its type by a European corporate,
following the €500m six-year offering by
Snam in February 2019.
Unlike green bonds, there is no formal
framework for transition bonds, which has
led to controversy. Some investors see them
as just a marketing gimmick.
However, a lead dismissed those issues for
Cadent, saying there were “no material nor
credit concerns”.
Another lead said that Cadent’s deal “adds
important momentum to the dialogue
AROUNDûTRANSITIONûlNANCEû
ûAûDIALOGUEûWHICHû
is also taking place in the new ICMA
working group”.
The UK utility launched its deal on a busy
day for the euro primary market with four
other issuers hitting screens as the market
took tentative steps back to normality after
a coronavirus-inspired sell-off.
,EADSûWEREûCONlDENTûABOUTûEXECUTION û
partly because of the deals that priced on
Tuesday, but also because of the extensive
marketing that management had
undertaken with investors.
“On the whole, we received constructive
feedback from accounts who see transition
as a critical new part of the sustainable
lNANCEûASSETûCLASSûANDûWANTûTOûSTIMULATEû
investments to support the transition to
hydrogen gas,” said the second lead.30 International Financing Review March 7 20206 IFR Bonds 2323 p 25 - 53 .indd 30 06 / 03 / 2020 19 : 18 : 06