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Goldman rapped over Australia block
Equities Wider discounts might be necessary on stock sale underwritings, as Aussie regulators crack down on placementsBY THOMAS BLOTTBankers in Australia are feeling
increasingly nervous about
their handling of share
placements after the country’s
corporate regulator penalised
GOLDMAN SACHS over its role as
underwriter of a block trade in
2015.
The US bank and the
Australian Securities and
Investments Commission last
week signed an enforceable
undertaking, the second
enforcement action involving an
Australian share placement in
the last month.In June, the Australian
Competition and Consumer
Commission said that federal
prosecutors had charged issuer
Australia and New Zealand
Banking Group, underwriters
Citigroup and Deutsche Bank, as
well as six current and former
employees, with criminal cartel
offences related to a 2015 share
placement.
The announcement rocked
the banking sector, leading to
concerns that the
Commonwealth Director of
Public Prosecutions’ decision to
pursue charges of collusion
could lead to banks taking amore cautious stance on
follow-on offerings, possibly
bringing an end to joint
underwritings.
The agreement between ASIC
and Goldman centres on claims
that the US investment bank
overstated the level of demand
for an A$853m (US$631.6m)
block of shares in private
hospital group Healthscope and
failed to notify investors
following a change in demand
later during the bookbuilding.
Bankers said that ASIC’s
enforcement action against
Goldman meant that banks
might take a more conservativeapproach to handling share
placements.
“There’s not a lot of guidance
on how banks need to handle
disclosure during bookbuilding,”
said one ECM banker. “The
unwritten rule is no news is bad
news. If a deal is going well, you
get multiple updates saying the
books have been covered, they’re
multiple times covered, etc.”
“If the regulator wants live
updates, then banks will be
thinking if we have to notify
everyone when a deal goes awry,
we’re fucked. To protect their
position, the only way they’ll be
willing to underwrite the deal isItalian banks: back by popular-ish demand
Bonds Supply returns after 10-week lull, but covered issues are only a partial test of real demandBY ALICE GLEDHILLINTESA SANPAOLO last week
reopened the bond market for
Italian lenders, but a subsequent
lacklustre trade from MEDIOBANCA
stoked concerns over market
access for all but the country’s
largest institutions.
Italian banks had been locked
out since mid-April after months
of political and market
turbulence, sending spreads
wider across asset classes. Euro-
DENOMINATEDû)TALIANûlNANCIALû
issuance amounted to just €8bn
INûTHEûlRSTûSIXûMONTHSûCOMPAREDû
with €15bn over the same period
in 2017.
Intesa Sanpaolo’s trade was
encouraging. The €1bn seven-year
covered was priced at swaps plus
63bp and drew €1.5bn in orders,
though the unusually high
concession for a covered bond
offering – in the mid-teens –
highlighted high investor caution
even towards secured debt.
4HEûlNALûLEVELûWASûJUSTûBPû
inside where the bank sold a 10-
year senior unsecured note issue
(Baa1/BBB/BBB/BBB) in March,bid last Thursday at 207bp over
swaps, underlining the sharp
back-up in spreads.
“Intesa being the national
champion in Italy, it’s very
important they set the benchmark
for other Italian issuers,” said a
banker at one of the lead managers.
“And given the uncertainty
we’ve seen with BTPs, it made
sense to open in the covered
bond format. It felt like the right
trade at the right time.”
Banca IMI, Credit Agricole, Credit
Suisse, NatWest Markets, Santander
and UniCredit ran the trade.
Mediobanca, a smaller lender
but also rated BBB/BBB, offered a
higher concession still for its
covered bond deal – of around
23bp. However, it had to settle for
€500m at mid-swaps plus 70bp,
just inside low 70s IPTs, and the
issue was only just fully subscribed.
Credit Agricole, Mediobanca,
Santander, Societe Generale and
UniCredit were bookrunners.
h)TSûNOTûTHEûmASHIESTû
transaction, but they ended up
printing what they needed,” said
a lead banker. “You have to be
very careful and offer the rightconcession. [But] in case things
get worse in September, it’s
already done.”UNDER PRESSURE
The deals throw into sharp relief
the challenges facing Italian
FUNDINGûOFlCIALSûUNDERûAûNEWû
populist government that has
unnerved investors just as broader
markets have also deteriorated.
For now at least, Italian banks
are well-funded, having been the
largest users of cheap loans from
the European Central Bank, with
ANûESTIMATEDûõBNûINûINITIALû
drawings from the TLTRO II.
But that scheme ended earlier
this year, and banks are also
under pressure to build up layers
of loss-absorbing debt to meet
global and European standards
to mitigate future crises.
Regulators have cracked down
on bond sales to retail investors,
historically an important pool of
demand in Italy.
A potential stand-off between
the two coalition parties when
they negotiate the budget in the
autumn threatens to weigh on
spreads further.“Before there is absolute
certainty around the budgetary
items and [less] anti-euro
rhetoric, I just don’t think
people will buy with
conviction,” said a third banker.A GAME OF TWO HALVES
Italy’s largest banks should be able
to raise unsecured debt as well as
issue covereds, albeit at a price.
UNICREDIT in particular may
simply have to pay up. According
TOûITSûlXEDûINCOMEûPRESENTATIONû
from May, the bank has a €27.5bn
funding plan for 2018 but it had
only raised 16% of that by the end
of April.Source: Thomson Reuters0102030405060708005/0105/0305/0505/
1805/0705/0905/
17(Swap spread)GAPPING WIDER
INTESA’S €1bn JUNE 2027 COVERED
BOND OVER ONE YEAR