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Equity-linked bond deals hit 10-year high
Global equity-linked bond offerings hit
53BNûINûTHEûlRSTûSIXûMONTHSûOFûTHEû
year, up 28% from a year ago and the highest
lRST
HALFûFORûAûDECADE ûACCORDINGûTOûDATAû
from Thomson Reuters.
The rise was led by technology companies,
WHICHûISSUEDûABOUTû53BNûOFûEQUITY
linked deals, up 36% from a year earlier.
4HEûBIGGESTûDEALûHASûBEENûOILûANDûGASûlRMû
China National Petroleum Corp’s record
2MBBNû53BN ûEXCHANGEABLEûBONDûISSUEû
INû&EBRUARY ûFOLLOWEDûBYûDEALSûOFûOVERû53BNû
by Smart Insight, Sika and Sempra Energy.
CNPC’s deal swelled issuance from Asia-
0ACIlCûEXCLUDINGû*APAN ûTOû53BNûBYû
the end of June, accounting for a third of
GLOBALûISSUANCEûANDûWELLûUPûFROMû53BNû
FROMûTHEûREGIONûINûTHEûlRSTûHALFûOFû
The Americas remained the most active
REGIONûWITHû53BNûISSUEDûINûTHEûlRSTûHALF û
up 25% on the year and making up 47% of the
global tally. Equity-linked deals in Europe raised
53BN ûDOWNûûFROMûTHEûlRSTûHALFûOFû
Global equity capital markets activity hit
53BNûINûTHEûlRSTûSIXûMONTHSûOFûTHEû
YEAR ûmATûFROMûAûYEARûEARLIERû4HEREûWEREû
2,664 ECM deals, down 5% from a 22-year
HIGHûINûTHEûlRSTûHALFûOFû
GOLDMAN SACHS was the leading ECM bank after
WORKINGûONûDEALSûTHATûRAISEDû53BN ûGIVINGûITû
a market share of 9.9%. A year ago Goldman was
in third spot, and it has swapped places with JP
MORGAN, whose market share slipped to 7.6%.
MORGAN STANLEY retained second spot with a
9.4% market share. CREDIT SUISSE moved up to
sixth from ninth a year ago. CHINA INTERNATIONAL
CAPITAL jumped to 10th from 21st.
'OLDMANûRANKEDûlRSTûFORûCONVERTIBLESû
DEALSûTOOûINûTHEûlRSTûHALFûAFTERûWORKINGûONûû
deals - double the number it handled in the
lRSTûHALFûOFûû
ûWITHûPROCEEDSûOFû
53BN ûORûûOFûTHEûMARKET
)NITIALûPUBLICûOFFERINGSûRAISEDû53BN ûUPû
ûFROMûAûYEARûEARLIERûFORûTHEûBUSIESTûlRSTûHALFû
since 2015. Proceeds from US IPOs topped53BN ûTHEûBESTûMID
YEARûTALLYûFORûFOURûYEARS
%#-ûISSUANCEûFROMû#HINAûHITû53BN ûUPû
36% from a year ago and accounting for 18% of
the global total, compared with 14% a year
earlier and the second-highest share since
Thomson Reuters records began in 1980.
Offerings by US issuers rose 8% from last year
and accounted for 32% of global activity.DCM SAGS
Global debt capital markets issuance was
53TRNûINûTHEûlRSTûHALF ûDOWNûûFROMûAû
YEARûEARLIERûANDûTHEûSLOWESTûlRSTûHALFûSINCEû
2015, the data showed.
CITIGROUP kept its top spot for debt
underwriting after working on issues that
RAISEDû53BN ûORûûOFûTHEûMARKET û
keeping it just ahead of JP Morgan in second.
BANK OF AMERICA MERRILL LYNCH and BARCLAYS
stayed in third and fourth, respectively, and
HSBCûMOVEDûTOûlFTHûWITHûAûûMARKETûSHARE û
from seventh place a year earlier. ROYAL BANK
OF SCOTLAND moved to 20th from 27th, and
CITIC ranked 21st from 26th a year earlier.
US investment-grade corporate debt
OFFERINGSûTOTALEDû53BN ûDOWNûûONû
THEûYEARûANDûTHEûLOWESTûLEVELûFORûlVEûYEARS
High-yield corporate debt issuance was
53BNûGLOBALLY ûDOWNûûONûTHEûYEARû
Corporate debt issuance from emerging markets
FELLûûONûTHEûYEARûTOû53BN ûDESPITEûAûû
JUMPûINûISSUANCEûFROMû-EXICOûTOû53BN
Steve SlaterDutch take swipe at CoCo tax treatment
The Netherlands became the second country
to scrap tax deductibility of coupons on
contingent convertible securities,
prompting speculation other governments
might take similar measures.
Dutch Additional Tier 1 paper was quoted
up to 2.75 points lower last Monday
following the government’s decision, which
will come into force from January 2019.
The measure, which affects both bank and
insurance instruments, echoes a similar move
announced by Swedish authorities in September
- It will result in about €150m in extra
revenues for the government, though it will not
decide how to use those proceeds until August.
Stopping tax deductibility in effect
increases the cost of issuing these securities
ATûAûTIMEûWHENûlNANCIALûINSTITUTIONSû
borrowing costs are already on the rise
thanks to weaker credit markets.
The government said, however, the
decision was in line with its policy for a
SOUNDûlNANCIALûSECTOR ûWHEREBYûBANKSûANDû
insurers are stimulated to hold more equity- the same reason given by the Swedish
government in 2016.
It said the move should quash concerns the
tax treatment of AT1 securities is inconsistent
with European rules against state aid, adding
“the European Commission intends to address
concerns in all European member states with
COMPARABLEûSPECIlCûMEASURESv
TAX CALLS?
Despite the initial drop in prices it seems
unlikely that Dutch banks will make use of
tax calls, which would enable them to
redeem the bonds early. No major Swedish
lender called bonds on this basis.
Indeed, Rabobank and ABN AMRO issued
statements saying they would not call securities
within scope early. The former’s €1.25bn 6.625%
perp NC2021s fell from 112.30 bid to 109.74 last
Monday, but closed the week where it started.“The announced intention by the Ministry of
Finance does not currently trigger any change
in our views with regards to the role of CoCos
as part of Rabobank’s capital strategy, nor does
Rabobank intend to exercise a tax call if the
government’s intention or the materialisation
thereof would constitute a Tax Law Change,”
the bank said.
And despite the uptick in costs, AT1 is still
cheaper than equity when it comes to
building loss-absorbing capital.
Some Dutch issuers of AT1 had already
included wording in their documentation
explicitly stating this development would
not be deemed a tax change.
“In our opinion, the language which
SPECIlCALLYûPRECLUDESûANYûTAXûCALLûBEINGûMADEû
as a function of the EU rulings on state aid and
tax deductibility provides a further degree of
comfort for issuers such as Rabobank and
ING,” analysts at JP Morgan said.
Alice GledhillSource: Thomson Reuters Deals Intelligence US China Switzerland Japan
France Canada RoW4%
24%43%4%4%3%18%H1 CONVERTIBLES
EQUITY-LINKED CONVERTIBLE ISSUANCE HAS HIT
A 10-YEAR HIGH THIS YEAR, HELPED BY A BUMPER
DEAL FROM CHINA’S CNPC