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Sea change as Atlantia
turns to loans
Bonds/Loans Atlantia taps relationship banks for M&A fundingBY HELENE DURAND,
ALASDAIR REILLYUnpredictable and expensive
bond markets proved too much
of a risk for ATLANTIA and the
Italian company kicked plans for
a new issue into touch, turning
instead to the loan market to
complete its portion of the
lNANCINGûOFûTHEû!BERTISû
acquisition.
The motorway and airport
infrastructure company had
originally appointed banks on
-AYûûFORûAûMULTI
TRANCHEûlXED
rate bond with tenors ranging
from six to 15-years.
But the timing proved
unfortunate. Bond markets that
had up until that point proven to
be broadly immune to political
risk suddenly woke up as Italy’s
two anti-establishment parties
struck a coalition deal on May 18,
sending markets into a tailspin.
And while some of the acute
nervousness around Italy has
eased since, volatility has
continued to plague bond
markets, making execution
treacherous, especially for
Italian credits. Telecom Italia,
for example, paid some 50bp in
concessions to clear a €750m
long seven-year last month.
“[Atlantia] didn’t want to go
out with a bond, which is fully
understandable,” said a loan
banker.
“The relationship banks were
willing to step in for what was a
relatively small amount, giving
the company more time. They
can be relaxed going into the
summer.”
The issuer signed a new
õBNûlVE
YEARûTERMûLOANûLASTû
week with Banco BPM, BNP Paribas,
Cassa Depositi e Prestiti, Intesa
Sanpaolo, Mediobanca and UniCredit.
!TLANTIAûAGREEDûAûõBNûLOANû
lNANCINGûINû-AY ûREPLACINGû
loans backing its original bid forSpanish toll road operator
Abertis in 2017.
4HATû-AYûlNANCINGûINCLUDEDûAû
õBNûlVE
YEARûTERMûLOANûANDûAû
€2.5bn 18-month bridge-to-bond
facility, which was expected to
be taken out by subsequent
bond issues.
Last week’s term loan, in
ADDITIONûTOûTHEûõBNûlVE
YEARû
loan signed in May, completed
ITSûRElNANCINGûFORû!BERTIS û
which Atlantia is jointly buying
with German builder Hochtief.
4HEûNEWûlNANCINGûALSOûINCLUDEDû
AûõBNûlVE
YEARûREVOLVINGû
credit facility.
As well as certainty of
execution, the 90bp margin over
Euribor for the loan is much
more attractive than what the
issuer could have achieved in
the bond market. Atlantia has a
1.625% €750m February 2025
bond quoted at 127bp over mid-
swaps.
Whether Atlantia’s shift from
loans to bond markets is a
temporary and isolated case or a
sign of the times for Italian
corporates remains to be seen.
“We’ve been busy,” the
banker said. “The loan market is
probably more resilient than the
bond market and while we’ve
been hit by volatility, it’s not the
same as what we’ve seen in the
bond market. There’s liquidity
in the banking community and
we have a few situations that
we’ve started to work on the
loan side.”
Bankers on the capital
markets side are hopeful that
the issuer will be able to revisit
its bond plan later on this year.
“The fact that they’ve done
the loan doesn’t mean that the
bond is dead, it’s not
unthinkable that they might
take the bank loan out with a
bond,” another banker said.
Atlantia did not reply to arequest for comment. (^)
IFûTHEYREûûCONlDENTûITûWILLû
clear the market, which means
wider discounts.”
MORE CAUTIOUS
According to ASIC, some of
Goldman’s equity sales team
“may have ... conveyed a
misperception” to investors
during the November 2015
block trade by informing them
THATûlVEûCORNERSTONEûINVESTORSû
had covered around A$500m of
the share sale when in fact the
BANKûHADûNOTûOBTAINEDûlRMû
commitments.
The regulator also
reprimanded the bank because,
when interest in the deal waned,
its sales team did not correct
earlier statements made to
investors about demand levels.
As part of the deal with ASIC,
Goldman agreed to an internal
review of policies and controls
in addition to a A$500,
hCOMMUNITYûBENElTvûPAYMENT
“We acknowledge ASIC’s
concerns and have taken steps
to enhance our controls and
processes,” a spokesperson for
Goldman said.
Bankers said that they would
be taking a more cautious
approach until the regulator
provides more guidance.
ANZ, Citigroup and Deutsche
plus six former and current
bankers are due to appear in
Sydney’s Downing district court
ONû/CTOBERûûFORûTHEûlRSTûHEARINGû
in the cartel case, after the court
accepted an application by the
defendants’ lawyers to postpone
the hearing, which was originally
scheduled last Tuesday. (^)
Its senior non-preferred due
January 2023 – its only TLAC-
eligible bond issue sold so far
this year – has widened from
swaps plus 70bp to 183bp since
being priced in January, but
securities from mid-tier lenders
have suffered heavier losses – in
absolute terms, at least.
UBI’s €500m of April 2023s
(Ba3/BB+/BBB–/BBBL) were
trading around 300bp over swaps
last week, for example, having
BEENûPRICEDûATûBPûINû!PRIL
That divergence in spreads
REmECTSûTHEûNATURALûGRAVITATIONû
of investors towards the larger,
MOREûPROlTABLEûPLAYERSûTHATû
have shifted more of their non-
performing loans.
“Investors, slowly and surely,
continue to express a preference
for these bigger banks, in every
product, let alone sub,” the
third banker said. “It’s fair to say
people are worried.”
LIGHT RELIEF?
The competitive edge of the
largest banks is likely to
increase further as the ECB rolls
back its facilities and
quantitative easing draws to an
end.
Intesa, for example, should be
able absorb the higher funding
costs, particularly given it has
the power to re-price its
lending, the third banker said.
“Where I see a problem is for
the medium-sized institutions
that fund 100bp or even more
above Intesa, and they may be
incentivised to lend to lower
quality companies. Different
funding costs will be very
powerful drivers of
consolidation.”
But there could be some
respite on the horizon. The
Italian government has asked
the European Commission to
extend by a further six months a
guarantee scheme aimed at
easing the disposal of bad loans,
a particular boon for weaker
lenders. A third round of TLTRO
could also offer further relief if
funding conditions deteriorate.
A €250m Tier 2 bond issue
(rated BBB–) from Italian insurer
VITTORIA ASSICURAZIONI gave
further cause for optimism,
despite its sub-benchmark size.
It was priced last Wednesday at
5.75%, inside 6% area IPTs after
ATTRACTINGûõM
PLUSûOFûORDERS
“Is there a market for sub or
senior non-preferred Italian debt?
To some extent we proved that
point: for the right name at the
right price, if you have a story to
sell, deals can get done,” said a
banker involved in the deal. (^)