IFR International - 20.10.2018

Goldman Sachs ûBank of America Merrill Lynch û
JP Morgan ANDûMizuhoWEREûACTIVEû
BOOKRUNNERSûSEEûSUMMARYûTABLEûFORûDEALû
DETAILS 

EUROS

DIAGEO CUTS SWATHE THROUGH PRICING

$RINKSûCOMPANYûDIAGEOûTOOKûHEFTYûCHUNKSû
OUTûOFûINITIALûPRICINGûASûITûLAUNCHEDûAûõBNû
TRIPLE
TRANCHERûONû-ONDAYûTHATûWASûFOURû
TIMESûSUBSCRIBED
h4HEûBOOKSûAREûEXTREMELYûROBUST ûANDûWEû
EVENûPUNCHEDûTHROUGHûGUIDANCEûONûTHEû
NINE
YEAR vûSAIDûAûLEADûh7EûHADûSOMEû
ISSUANCEûLASTûWEEKûBUTûNOTûVERYûMUCHû3INGLEû
!ûSUPPLYû4HISûWASûAûRAREûISSUERûANDûITûWASû
OFFERINGûRELATIVELYûSHORTûTRANCHESv
$IAGEOû!!
!
ûPUTûOUTû)04SûATûSWAPSûPLUSû
BP
BPûFORûANû/CTOBERû ûBPûAREAû
FORûANû!PRILû ûANDûBPûAREAûFORûANû
/CTOBERû
#REDIT3IGHTSûANALYSTSûSAIDû)04SûAPPEAREDûTOû
BEûATTRACTIVE ûALTHOUGHûITûHASûANûUNDERPERFORMû
OPINIONûONûTHEûNAMEû)TûSAWûAûNEW
ISSUEû
PREMIUMûATû)04SûONûTHEûSûANDûSûOFû
AROUNDûBP ûANDûBPûFORûTHEûS
h7EûHAVEûLONGûBEENûBEARISHûONû$IAGEOû
BECAUSEûOFûOURûCONCERNûTHATûMANAGEMENTû
HASûTENDEDûTOûOVER
REWARDûSHAREHOLDERSû
WITNESSûTHEûANNOUNCEMENTûOFûANOTHER û
LARGERûSHAREûBUYBACKûTHISûYEARûaBN ûAFTERû
COMPLETINGûaBNûLASTûYEAR vû#REDIT3IGHTSû
ANALYSTSûWROTE
#REDIT3IGHTSûALSOûHIGHLIGHTEDû5+
DOMICILEDû$IAGEOSû"REXITûRISK ûGIVENûAûLARGEû
3COTCHûWHISKYûEXPORTINGûBUSINESSûTHATû
EXPOSESûITûTOûCHANGESûINûEXCISEûDUTIESûORû
ACCESSûTOûMARKETS ûASûWELLûASûANYûLEGALûANDû
lSCALûCONSEQUENCESûOFûLEAVINGûTHEû%5
4HEûDEALûNEVERTHELESSûSAILEDûTHROUGH û
WITHûACCOUNTSûPLACINGûMOREûTHANûõBNûOFû
ORDERSûBYûLAUNCH
h4HISûWASûAûWELL
RECEIVEDûLOW
BETAûNAME vû
SAIDûAûBANKERûAWAYûh)ûTHINKûTHEûLONGûSIX
YEARû
WASûAûTOUCHûSOFTERûONûBOOKSûVERSUSûTHEûOTHERS û
BUTûOVERALLûITûWASûAûPRETTYûSTRONGûTAKE
UPv
4HEûLEADûSAIDûTHEûTHREE
YEARûHADûSCOOPEDû
UPûSHORT
ENDûDEMAND ûWHILEûTHEûSûHADû
BEENûAûWELCOMINGûPROPOSITIONûFORûASSETû
MANAGERS
h4HEûINSURANCEûDEMANDûATûTHEûLONGERûENDû
ISûGETTINGûAûYIELDûSLIGHTLYûINûEXCESSûOFû û
DEPENDINGûONûWHEREûYOUûSEEûTHEûSWAPS ûSOû
ITSûAûNICEûHEADLINEûNUMBER vûHEûSAID
4HEûLEVELûOFûDEMANDûGAVEû$IAGEOûROOMûTOû
CUTûPRICING ûSETTINGûlNALûTERMSûONûAûõMû
THREE
YEARûATûPLUSûBPûANDûAûõMûLONGû
SIX
YEARûATûBPû4HEûGREATESTûMOVEûWASû
RESERVEDûFORûTHEûõMûNINE
YEAR ûWHICHû
LAUNCHEDûATûBP
$IAGEOûWASûLASTûINûTHEûMARKETSûINû-AY û
WHENûITûRAISEDû53BNûTHROUGHûAû

COMBINATIONûOFûlXEDûANDûmOATING

RATEûNOTES

CitigroupûDeutsche BankûHSBCûMorgan

StanleyûANDûNatWest MarketsûWEREûTHEûACTIVEû

BOOKRUNNERSûONûTHEûLATESTûDEAL

JCDECAUX SKIPS RATINGS FOR

TWO-YEAR FLOATER

&RENCHûADVERTISINGûCOMPANYûJCDECAUXû"AA

""" ûZIPPEDûINûANDûOUTûOFûTHEûMARKETûONû

4HURSDAYûPRICINGûAûTWO

YEARûmOATERûTHATû

CARRIEDûNOûRATINGS

h)TSûAûSMALLûTRADEûANDûTHEûISSUERûWANTEDûTOû

MINIMISEûTHEûCOSTûANDûTHEûPROCESSvûAûLEADûSAID

)TûISûANûUNUSUALûTACKûTOûTAKEûALTHOUGHûNOTû

UNPRECEDENTEDû'ERMANûMEDIAûCOMPANYû

"ERTELSMANNûWHICHûISûRATEDû"AA"""û

PRICEDûANûUNRATEDûõMûTWO

YEARûmOATERûINû

*ULY

BONDS CORPORATES

Downgrades leave Spanish

retailer in DIA straits

„ CORPORATES Multiple-notch downgrades for retailer after profit warning

The corporate bond market may fret about the

prospect of Triple B downgrades when economic

growth slows, but DIA has ironically been pushed

into junk territory on the back of Spain’s recovery.

Moody’s and S&P downgraded the retailer

after it issued a third profit warning in 12 months

last Monday and said it was likely to lower its

2017 equity level by €70m in a restatement. It

suspended its finance director later in the week.

Moody’s cut by two notches to Ba2 late on

Thursday, while S&P dropped three to BB– on

Friday afternoon. Both ratings are on review for

further downgrade.

The company, which gained market share

during Spain’s crisis, has been struggling with its

strategy since the country returned to growth. It

expects to generate Ebitda of between €350m

and €400m in 2018, compared with €568m in

2017.

A €300m 0.875% senior unsecured 2023

bond has plummeted nearly 30 points since last

week’s close, now bid on Tradeweb at 66.29 for a

yield of 10.80% – a level comparable to some of

the weakest issuers in the high-yield market.

“It’s crazy. The problem is, given such a low

coupon, if you’re looking for an increased return,

the price is going to be volatile,” said a former

bondholder.

“It’s likely to be very whippy with news flow.

They could reaffirm the guidance given on

Monday, or say that there are more problems

than they thought,” he said.

Moody’s said the downgrade reflects

expectations of a sharp fall in earnings over the

next 18 months on the back of declining market

share in Spain and currency depreciation in

emerging markets, which will raise debt well

above levels in keeping with an investment-

grade rating.

“Moody’s believes that the magnitude of the

earnings revision highlights weaknesses in DIA’s

business model and governance, which will likely

make it difficult for DIA to recover its competitive

position and improve its operating performance

going forward,” said analyst Vincent Gusdorf.

The downgrade comes as investment-grade

and high-yield market participants eye €70bn of

Triple B debt that is vulnerable to being junked

in the event of weakening growth in European

economies.

Triple Bs went on a borrowing spree thanks

to funding costs that have been lowered by the

ECB’s corporate sector purchase programme

since August 2016.

DIA has €906m in bond debt outstanding,

according to Refinitiv Eikon data, but only its

€300m 2023s, issued in 2017, were sold during

the CSPP. Still, that bond would equate to nearly

a turn of leverage at the lower end of DIA’s profit

forecast.

S&P analysts said the week’s announcements

are “compounded by diminished headroom

under the financial covenant on DIA’s revolving

credit facility and short-term debt maturities in

excess of €700m”.

BNP Paribas analyst Karan Samtani said in a

note that DIA would need to secure a new credit

line or obtain waivers on its existing RCF facilities

to give credit investors and suppliers confidence.

Yoruk Bahceli

ALL INVESTMENT-GRADE BONDS IN EUROS

BOOKRUNNERS: 1/1/2018 TO DATE

Managing No of Total Share

bank or group issues €(m) (%)

1 BNP Paribas 214 53,356.54 7.2

2 SG 195 49,777.84 6.7

3 HSBC 228 47,920.52 6.5

4 JP Morgan 162 45,761.08 6.2

5 Credit Agricole 180 43,351.49 5.9

6 Deutsche Bank 175 40,871.60 5.5

7 Barclays 134 40,533.25 5.5

8 UniCredit 170 37,523.08 5.1

9 Goldman Sachs 94 32,555.13 4.4

10 Citigroup 123 29,896.66 4.0

Total 1,053 738,394.89

Excluding ABS/MBS, equity-related debt.

Source: Refinitiv SDC code: N9