IFR Magazine - October 27, 2018

Lukewarm welcome for MMB’s

second attempt at covered bond

Closure after pulled debut, but price contentious

MY MONEY BANK edged over the line in its second
ATTEMPTûATûAûDEBUTûCOVEREDûBONDûTAKINGûOVERû
õMûOFûORDERSûFORûAûõMûTRADEûWITHûTHEû
ADDITIONûOFû.ORD,"ûTOûTHEûTOPûLINEûHELPINGûTOû
SOURCEûSOMEûMUCHûNEEDEDû'ERMANûDEMAND
--"ûlRSTûTRIEDûTOûSELLûTHEûDEALûONû
3EPTEMBERûûBUTûORDERSûREACHEDûONLYû
õMûANDûITûWASûPULLEDû)TûWASûTHEûlRSTû
time in many years that a euro covered had
BEENûSHELVEDûAFTERûBOOKBUILDINGûHADûBEGUN
7HILEûITûGOTûTHEûDEALûDONEûTHEûSECONDûTIMEû
AROUNDûMOMENTUMûWASûAGAINûSLOWûANDû
CONTRASTEDûWITHûTHEûõBNûGATHEREDûBYû
BETTERûKNOWNû#REDITû-UTUELû!RKEASûõMû
-ARCHûûLASTû4UESDAY
The issuer acknowledged feedback that
investors needed more time last month and
said it would ensure lines were in place
BEFOREûRETURNING
)NûTHEûWEEKSûSINCEû--"ûREDOUBLEDûITSû
MARKETINGûEFFORTSûRETURNINGûWHENûITûWASû
COMFORTABLEûITûHADûACHIEVEDûSUFlCIENTûCOVERAGEû
--"SûTREASURERû&ADYû7AKILûTOLDû)&2
The €500m seven-year Obligations
Foncieres was marketed with initial guidance
OFûBP
BPûAREAûOVERûSWAPSûWIDERûTHANûTHEû
BPûAREAûSTARTINGûPOINTûLASTûTIME
)TûPRICEDûATûBPûWITHûBOOKSûOVERûõMû
EXCLUDINGûJOINTûLEADûMANAGERûORDERS
7AKILûFELTûTHEûDEALûFOUNDûAûGOODûRESPONSEû
ESPECIALLYûFROMû'ERMANûACCOUNTSûANDûSAIDû
DEMANDûWASûINûLINEûWITHûEXPECTATIONSû!û
BANKERûATûONEûOFûTHEûLEADSûSAIDûITûWASûWHILEûNOTû
AûBLOWOUTûAûSUCCESSûGIVENûMARKETûCONDITIONS
3OMEûBANKERSûWEREûLESSûCONVINCED
h!TûLEASTûTHEYûHAVEûSCRAPEDûTHROUGHû
ûõMû
of orders is not exactly a stellar success for
SOMETHINGûLIKEûSIXûWEEKSûOFûMARKETINGvûSAIDûAû
BANKERûAWAYûFROMûTHEûDEAL
h.OWûTHEûBANKûANDûTHEûLEADûMANAGERSûCANû
GETûONûWITHûTHEIRûLIVESv
4HEûUSEûOFûAûNARROWûGUIDANCEûRANGEû
UNUSUALûINûTHEûEUROûCOVEREDûMARKETûGAVEû
THEûIMPRESSIONû--"ûWASûACTINGûONûSOLIDû
INVESTORûFEEDBACKûANDûCONlDENTûINûDEMANDû
Bankers away said this was dispelled when
THEûSPREADûlXEDûINûTHEûMIDDLEûOFûTHATûRANGE
“It looks like they’ve tried to be too cute
AGAINvûSAIDûTHEûBANKERûAWAYûh4HEYûCHANCEDû
their arm that they’d get done at 20bp when
presumably the feedback was around 21bp-
BPv
(OWEVERûTHEûLEADûBANKERûSAIDûTHEûBOOKû
was there for pricing at 20bp but the issuer
decided to stick to 21bp so as not to send the
WRONGûSIGNAL
7AKILûSAIDûTHEûWIDERûGUIDANCEûREmECTEDûAû
hSLIGHTvûPREMIUMûONûACCOUNTûOFûTHEûDEALSû

POSTPONEMENTûBUTûMOREûIMPORTANTLYû

REmECTEDûWIDENINGûINûCOVEREDûBONDûSPREADSû

OVERûTHEûLASTûMONTH

-ARKITSûI"OXXûEUROûCOVEREDûBONDûINDEXûISû

AROUNDûBPûWIDERûONûTHEûMONTHûACCORDINGû

TOû2ElNITIVû%IKON

“There were not a lot of investors that didn’t

COMEûINûONûTHEûBASISûOFûPRICINGvûSAIDû7AKIL

The spread offered a pick-up of roughly

20bp versus seven-year paper from

ESTABLISHEDû&RENCHûISSUERS

MAYBE NEXT TIME?

!FTERûTHEûlRSTûATTEMPTûITûWASûSUGGESTEDû

some accounts would not participate in the

DEBUTûEVENûWITHûMOREûTIMEûTOûSETûUPûLINES

-ARKETûPARTICIPANTSûSAIDûTHISûWASûINûSOMEû

CASESûDUEûTOûINVESTORûCONCERNSûOVERû--"Sû

business model - the Cerberus-owned bank

specialises in debt consolidation loans

backed by residential property - or because

ACCOUNTSûWEREûWAITINGûFORûTHEûSECONDûDEAL

“There were a lot of questions around our

SHAREHOLDINGûANDûAROUNDûTHEûCOLLATERALûBUTû

ATûTHEûENDûOFûTHEûDAYûALLûTHEûINVESTORSûWEû

met were pretty comfortable with the

COLLATERALûONûTHEûTABLEvûSAIDû7AKIL

“The limiting factor and the reason there

is probably not as high demand as you’d

expect for larger traditional issuers is this is

an inaugural issue and people are waiting to

SEEûHOWûITûGOESv

--"ûPLANSûTOûISSUEûATûLEASTûONEûEUROû

BENCHMARKûCOVEREDûPERûYEARûSAIDû7AKIL

4HEûLEADSûFORû7EDNESDAYSûTRANSACTIONû

were ABN AMRO, BNP Paribas, Credit Agricole,

Nord/LB and Societe Generale - the same lead

group as previously except for the addition

OFû.ORD,"

"ANKERSûAWAYûSPECULATEDû.ORD,"ûCOMMITTEDû

to placing orders as part of the arrangement but

7AKILûSAIDûTHISûWASûNOTûTHEûCASE

h4HEûONLYûCOMMITMENTûWASûTHATû.ORD,"û

would do their absolute best to give us the

BESTûPENETRATIONûINûTHEû'ERMANûMARKETûANDû

THEYûDELIVEREDvûHEûSAID

!CCOUNTSûFROMû'ERMANYû!USTRIAûANDû

3WITZERLANDûWEREûALLOCATEDûûOFûTHEûDEAL

h-OSTûOFûTHEûUSUALûBIGWIGSûYOUûlNDûINû

more established names were not in the

BOOKvûADDEDûTHEûLEADûBANKERûh)NSTEADûITû

had very big granularity in terms of second

ANDûTHIRD

TIERûACCOUNTSv

)NûITSûlRSTûATTEMPTû--"ûDISCLOSEDûITûMAYû

RETAINûAROUNDûûOFûTHEûTRANSACTIONû)TûDIDû

not communicate this possibility the second

TIMEûANDûTHEûDEALûWASûEXTERNALLYûPLACED

Tom Revell

WEEK IN NUMBERS

US$2.06bn

„ AMOUNT RAISED BY NETFIX ACROSS

EUROS AND US DOLLARS, ALTHOUGH IT HAD

TO PRICE AT THE WIDE END OF GUIDANCE

4%

„ YIELD BREACHED BY MARKIT’S IBOXX

EURO LIQUID HY INDEX, ALMOST DOUBLE

THE LEVEL A YEAR AGO

US$18bn

„ FACE VALUE OF TWENTY-FIRST

CENTURY FOX BONDS ON WHICH WALT

DISNEY HAS WON INVESTOR APPROVAL

TO STRIP PROTECTIONS AHEAD OF ITS

US$71bn ACQUISITION

7.30%

„ YIELD HIT BY DANSKE BANK’S 5.75%

PERPETUAL NC2020 AT1 AS UNCERTAINTY

PERSIST REGARDING MONEY-

LAUNDERING FINES

54.50

„ BID PRICE ON DIA’S APRIL 2023s, 12PTS

LOWER THAN A WEEK AGO AND 38PTS

LOWER THAN TWO WEEKS AGO, WHEN IT

WAS STILL IG RATED

2.0

2.5

3.0

3.5

4.0

4.5

5.0

6/10/176/11/176/12/176/1/186/2/186/3/186/4/186/5/186/6/186/7/186/8/186/9/186/18/18

6.3

6.4

6.5

6.6

6.7

6.8

6.9

7.1

7. 2


8. 3

7.4

22/10/1823/10/1824/10/1825/10/1826/10/18

50

55

60

65

70

75

80

85

90

95

12/10/1813/10/1814/10/1815/10/1816/10/1817/10/1818/10/1819/10/1820/10/1821/10/1822/10/1823/10/1824/10/1825/10/18