Citigroup, Deutsche Bank, UBS and Westpac for a
syndicated sale of new February 21 2050
Treasury Indexed bonds to be issued in the
week beginning September 17.
The new bond will extend the sovereign
index-linked curve almost 10 years beyond
the current longest issue, the A$3.55bn
1.25% August 21 2040s.
The AOFM’s previous syndicated sale of
index-linked bonds was in August 2017 - a
A$3.0bn (US$2.15bn) print of 0.75%
November 21 2027s.
Australia is expected to issue around
A$70bn of government bonds in 2018-2019,
most of which will be raised from tenders of
around A$1bn each week.
In addition to the 2050 linker, the AOFM
intends to open a December 2030 nominal
bond line via syndication in the current
fiscal year ending on June 30 2019.
Elsewhere in the Australian public sector,
TREASURY CORPORATION OF VICTORIA (Aaa/AAA)
issued the biggest domestic trade of last
week with Thursday’s A$850m tap of its
3.00% October 20 2028 bond to increase the
size of the line to A$4.117bn.
ANZ, Citigroup and UBS were joint lead
managers for the syndicated sale, which
priced at 100.693 for a yield of 2.92%.
The 36bp spread over EFP (10-year futures)
was in the middle of 35bp–37bp guidance
and the same as the spread over the
November 2028 ACGB.CORPORATES
US DOLLARS
PFIZER KICKS OFF BUSY SEPTEMBER IN
HIGH-GRADEA deal by drug maker PFIZER was among the
highlights of a blockbuster week in the US
high-grade corporate bond market as
market participants got back to business
after the long Labor Day weekend.
The US$5bn bond issue, which priced on
Tuesday, was the second biggest corporate
deal of the week.
Only Cigna’s US$20bn M&A issue was
larger in what turned out to be the busiest
week of the year for volumes in the US high-
grade primary, and the third biggest of all
time (see separate story).
But as one of the first movers, Pfizer’s deal
was looked at by some market participants
as what might lie on store for other issuers
tipped to follow in its footsteps.
And the limited price progression on its
longer dated bonds were not seen as a
particularly good omen.“There is a little bit of a stand-off in the
market right now,” Jason Shoup, senior
portfolio manager at Legal & General
Investment Management America, told IFR
as the deal launched.
Pfizer looked to offer a new issue
concession of between 5bp and 9bp across
several tranches. It was only able to bring in
pricing by 5bp on its 30-year tranche, which
priced at 115bp over Treasuries, compared
with initial price thoughts of 120bp area.
When drug rival AstraZeneca came to
market with a US$3bn high-grade bond in
mid-August, its 30-year tightened 12.5bp-
17.5bp from initial guidance to price at
Treasuries plus 137.5bp, according to IFR.
“The (Pfizer) price talk seemed aggressive,
seeing as it was one of the first deals out of
the gates, and when you know you have a
mega deal on Thursday,” said Shoup.
Pfizer, rated A1/AA/A+, was considered
one of the safer bets for bankers to bring
after the break. Bank of America Merrill Lynch,
Citigroup, Credit Suisse and Morgan Stanley were
bookrunners on the deal.
But it was not the only trade that did not
gain a lot of traction. A much smaller deal
from rarer issuer BUNGE LIMITED FINANCE - a
US$600m 5.5-year - priced at the same level
as IPTs, coming in at 160bp over Treasuries.
Still, final books on the Pfizer deal
reached US$11.3bn, to leave it just over
twice covered. And by Thursday, all of the
tranches were trading flat to tighter in
secondary.
And the rest of the week’s supply went
well.
“The market kind of whips itself up in a
frenzy,” said Tom Murphy, senior portfolio
manager at Columbia Threadneedle
Investments, about the heavy September
supply calendar.
“But there is no correlation to supply and
excess returns. Instead, excess returns
probably lead to more supply.”ENI REVIVES ITALIAN US DOLLAR ISSUANCEENI became only the second Italian corporate
to issue in the US investment-grade market
in five years, with a dual-tranche deal on
Wednesday that is largely sheltered from
Italian political and economic risks thanks
to the oil and gas company’s global reach.
Eni (A3/A-/A-) took advantage of a recent
rating upgrade from S&P to raise US$2bn
through a US$1bn 4% September 2023
tranche that priced at 135bp over Treasuries
and a US$1bn 4.75% September 2028 note at
plus 195bp.
The five-year note came 40bp inside
initial levels, while the 10-year bond printed
30bp tighter than IPTs.
The final levels implied pricing on the
2023s came close to 100bp through BTPsand on the 2028s about 65bp inside the
Italian government curve, after adjusting for
the cross-currency swap.
Even so, the Eni bonds were attractive
compared with another oil and gas company
that was in the US dollar market at the same
time. China’s Sinopec (A1/A+/A+) printed a
four-tranche deal that also included five and
10-year notes.
Those bonds - US$750m of September
2023s and US$750m of September 2028s -
came at spreads of 110bp and 145bp over
Treasuries respectively.
Indeed, Sinopec’s US$500m September
2025s came at the same plus 135bp spread
as Eni’s September 2023s, while the Chinese
company’s US$400m September 2048s came
only marginally wider, at 152.7bp.
Sinopec, arguably, priced too tight but
even with the two-notch difference in
ratings, there was value in Eni as books
approaching US$8bn demonstrated.
Its deal came a week after S&P upgraded
the company from BBB+ and put its ratings
in line with Moody’s and Fitch.
The upgrade reflected the fact that, as of
June 30, Eni had reduced reported and
adjusted debt, while operating cashflow had
benefited from supportive oil prices.
Initiatives to cut costs and restructure all
the businesses, but especially in mid and
downstream operations, were also
proceeding as planned, added S&P analysts.
Its profitable exploration and production
operations are concentrated in Africa, though
smaller business units, such as gas
marketing, power, refining and chemicals
remain exposed to the weak Italian economy.
The only other Italian corporate to issue
in the US high-grade market since 2013 is
Enel. The utility printed a US$3bn triple-
tranche issue last October that followed a
US$5bn offering in May.
Bank of America Merrill Lynch, BNP Paribas,
Citigroup, Goldman Sachs, JP Morgan, Morgan
Stanley and Wells Fargo were the leads on the
Eni trade.
(See Top News for more on the week’s
Yankee deals. See Emerging Markets for
more on Sinopec.)EUROS
MUCH ADO ABOUT NOTHINGADO PROPERTIES has scrapped plans to sell a
bond issue after the summer headlines
about its chairman derailed the hoped-for
pricing level.
The Berlin-focused REIT announced the
roadshow for a no-grow €500m circa eight-
year trade in July. But the deal did not
emerge after the investor meetings had
been completed.30 International Financing Review September 8 20186 Bonds 2250 p25-55.indd 30 07/09/2018 19:29:58