48 International Financing Review April 4 2020The tactic is used in order to entice new
investors to support new debt raises while
the company itself is struggling. But so-
called “priming” leaves existing
bondholders more at risk of not getting
their money back.
“For those names which are low quality
with a real potential for them to go bust,
recovery value is very important and
priming can be a key issue for investors,”
said the investor.
However, if a company is facing a short-
term liquidity problem, then it’s a good idea
to raise secured debt if it has the capacity
and ability to do so, he said.
“If it’s a question of either being layered
or the company going bust, investors will
put up with it. This is what covenants are
FORûTOûALLOWûCOMPANIESûTOûHAVEûmEXIBILITYûINû
a moment of crisis, and investors will want
them to use it.”
The risk existing investors run is that if
the company raises super senior debt and
still cannot weather the storm, investors’
recovery value will be less, he said.
Cirsa’s 6.25% December 2023s are now bid
at a cash price of 66, according to Tradeweb
DATAû4HEYûWEREûTRADINGûATûûASûRECENTLYûASû
early March.FALLEN ANGELS COULD UNSTICK HIGH-
YIELD SECONDARYBefore the coronavirus crisis, a wave of
fallen angels would have struck fear into
European high-yield investor hearts, who
had found themselves trying to walk a thin
margin of error thanks to ECB-compressed
yields in the asset class.
But now, with secondary frozen and bids
hard to come by, some portfolio managers
say they are hoping for the opportunity to
pick up some bonds from forced
investment-grade sellers who are seeking to
OFmOADûFALLENûANGELS
!BOUTûõBNûOFûBONDSûCOULDûBEû
downgraded to high-yield following the
coronavirus shock – 4.3% of the investment-
grade index’s notional value, according to a
recent JP Morgan report.
“The reality is that liquidity is only
marginally better than it was a week to two
weeks ago,” said one high-yield fund
manager.
“I would challenge anybody very strongly
who claims that there is a functioning
market at this point in time.”
He said that a wave of fallen angels could
provide some much-needed opportunities
for fund managers to deploy capital.
“We’re going to have a lot of fallen angels
that could provide some opportunity,” he
said.
Another investor said: “All research
shows that high-yield returns in
recessionary periods are better than
investment-grade or high-yield in normal
markets.”
The European market has already seen
õBNûOFûBONDSûFALLûFROMûINVESTMENT
GRADEû
to high-yield this year, including Atlantia/
Autostrade per l’Italia (€6.5bn), Kraft Heinz
õBN û2ENAULTûõBN ûANDû$EUTSCHEû
Lufthansa (€500m) – the highest volume
SINCEû ûSAIDû*0û-ORGANû
/Nû-ARCHû û53ûCARMAKERû&ORDûBECAMEû
another corporate to see its ratings cut toJUNK ûPUSHINGû53BNûWORTHûOFûBONDSûFROMû
investment-grade into high-yield.
European Triple B names that could
potentially be at risk of downgrade into
high-yield include real estate company
Aroundtown, Electricite de France and
Tesco, according to Bank of America
analysts.STRUCTURED FINANCE
EMEA MBS
JP MORGAN CIO THOUGHT BUYING
CHESTER B1 TRIPLE AS!ûaBNû5+û2-"3ûCALLEDûCHESTER B1, backed
BYûMORTGAGESûORIGINATEDûBYû.ORTHERNû2OCKû
BEFOREûTHEûûlNANCIALûCRISIS ûWASûPRE
placed last week.
Market participants speculated that JP
Morgan’s CIO bought the deal’s Class A,
given the CIO’s previous willingness to take
down senior securitised risk from the UK,
and the presence of JP Morgan as joint lead
on the Class A only.
4HATû#LASSû!ûISûSIZEDûATûaBN ûRATEDû
4RIPLEû!ûBYû-OODYSûANDû30 ûHASûAûTWO
YEARû
weighted average life and carries a coupon
OFûBPûOVERû3ONIA
The rest of the capital stack was not seen
marketed to third-party investors.
BNP Paribas and Citigroup were joint
arrangers and joint leads for all tranches,
and Citi will take a single vertical loan note
for risk retention.
The assets are part of a £4.9bn portfolio
acquisition last year by CITIGROUP from UK
hBADûBANKvû5+û!SSETû2ESOLUTIONû0IMCOû
PROVIDEDûTHEûMAJORITYûOFûlNANCING
In April last year Citigroup sponsored and
PRE
PLACEDûAûaBNû2-"3ûCALLEDû#HESTERû! û
backed by a portion of those mortgages.
Last week’s new issue was also sponsored
by Citi. The capital structure shows all
tranches pre-placed, and with coupons that
resemble levels before the coronavirus
forced spreads to gap out. However issue
prices for the tranches were not disclosed.
The deal has optional redemption in April
2023.EMEA ABS
FCA PLANS FREEZE ON PERSONAL
LOAN AND CARD PAYMENTSThe UK’s Financial Conduct Authority (FCA)
has proposed a freeze of up to three months
on personal loan and credit card paymentsALL INTL AUSTRALIAN DOLLAR BONDS
BOOKRUNNERS: 1/1/2020–31/3/2020
Managing No of Total Share
bank or group issues A$(m) (%)Including preferreds. Excluding equity-related debt.
Source: Refinitiv SDC code: K11 ANZ 5 1,195.42 15.5
2 TD Securities 12 814.53 10.5
3 CBA 2 800.00 10.4
4 Deutsche Bank 3 731.42 9.5
5 Nomura 7 677.85 8.8
6 Mizuho 7 565.24 7.3
7 Westpac 2 466.13 6.0
8 Citigroup 2 438.98 5.7
9 HSBC 3 378.00 4.9
10 JP Morgan 5 360.99 4.7
Total 47 7,720.86AUSTRALIAN DOMESTIC BONDS
BOOKRUNNERS: 1/1/2020–31/3/2020
Managing No of Total Share
bank or group issues A$(m) (%)Source: Refinitiv SDC code: AJ021 ANZ Banking Group 15 6,149.65 22.8
2 NAB 20 5,580.31 20.7
3 Westpac Banking 14 4,790.29 17.7
4 CBA 10 2,612.64 9.7
5 UBS 5 2,061.98 7.6
6 Deutsche Bank 3 1,151.39 4.3
7 BofA Securities 4 1,009.09 3.7
8 JP Morgan 2 914.44 3.4
9 Macquarie Group 3 701.66 2.6
10 Citigroup 1 560.55 2.1
Total 33 27,000.98GLOBAL DIM SUM BONDS
BOOKRUNNERS: 1/1/2020–31/3/2020
Managing No of Total Share
bank or group issues Rmb(m) (%)Including preferreds. Excluding equity-related debt.
Source: Refinitiv SDC code: AS24a1 HSBC 6 2,600.00 14.4
2 SG 2 2,155.00 11.9
3 Natixis 2 2,000.00 11.1
4 Standard Chartered 5 1,546.29 8.5
5 Credit Agricole 3 1,262.29 7.0
6 JP Morgan 1 1,000.00 5.5
7 Goldman Sachs 1 1,000.00 5.5
8 Nomura 1 1,000.00 5.5
9 BNP Paribas 1 1,000.00 5.5
10 LBBW 1 1,000.00 5.5
Total 25 18,096.536 IFR Bonds 2327 p 25 - 65 .indd 48 03 / 04 / 2020 20 : 29 : 00