In early September, the 12-year tenor also
proved to be the sweet spot for a number of
issuers, as investors were happy to take on
more risk having had little paper to get their
teeth into since the beginning of July.
“Heineken has always focused on the
longer part of the curve, so this is not an odd
maturity for them. But we’ve seen quite a
few longer trades going well and that’s why
we were comfortable bringing this one
today,” said one lead.
Tightening during deal execution was
roughly similar on both bonds, the longer
one coming 20bp inside the 100bp area at
IPTs, while the shorter one launched at
swaps plus 60bp from an initial 75bp-80bp
marketing level.
New issue premiums were minimal, in
the 5bp area, according to leads, who
referenced its existing curve.
Heineken had €500m January 2027s at
54bp, according to Tradeweb pre-
announcement prices. Its €800m October
2029s, which priced in September last year
at 50bp, were at 65bp last Monday.
“Fair value on the 8.5-year is
straightforward. On the longer part of the
curve, it’s not an exact science; we decided
to see a curvature of 4bp-5bp per year,” said
the first banker.
Proceeds will be used for general
corporate purposes.
In early August, Heineken agreed to take a
US$3.1bn stake in the parent of China
Resources Beer, China’s leading brewer.
A few days before that, it was forced to cut
its full-year margin forecasts because of its
expansion in Brazil, adverse currency effects
and higher input costs.
Deutsche Bank, ING, JP Morgan, MUFG and
Societe Generale were bookrunners.A TALE OF TWO PERIPHERALSTwo peripheral corporates hit screens with
seven-year bonds last Tuesday, but
contrasting outcomes highlighted caution
around Italian credits.
Spanish telecoms company TELEFONICA,
Baa3/BBB/BBB, was the first to start
marketing its trade, which a lead said was
purely opportunistic.
“It’s kind of pre-funding. And they chose a
seven-year because beyond that their curve
is very steep,” he said.
The frequent issuer - last in the market in
March with a hybrid dual-trancher - had
€1.25bn January 2025s at mid-swaps plus
74bp, €1.35bn April 2026s at 101bp and
€1bn January 2027s at 117bp, according to
pre-mandate Tradeweb prices.
Those suggested fair value around 88bp
and therefore a final 7bp premium for the
€1bn deal. Books peaked at over €2.6bn
before deflating a fair amount to €1.5bn.Still, there was more momentum for the
Spanish credit than for Italy’s 2I RETE GAS,
Baa2/BBB, which found just €850m of
interest for its issue despite IPTs at a more
alluring spread of 175bp area.
The no-grow €500m trade launched at
165bp with a 35bp-40bp new-issue
concession, according to a lead banker.
Pre-mandate, 2i Rete Gas July 2024s were
spotted at 107bp and August 2026s at 138bp,
suggesting fair value around 125bp.
The trade repriced the utility’s curve, with
both bonds widening substantially following
the announcement, to 130bp and 163bp
respectively.
A €550m 10-year, which priced last
October at 70bp, was trading pre-
announcement at 166bp, before reaching
182bp later in the session.
“Their last trade was already a bit of a
struggle with only a €850m book so I don’t
think it’s just Italian-specific, although it
played a part. There’s a lot of selectivity
from investors to invest into Italian credit
right now,” one banker away said.
“But they priced 65bp tighter than BTPs,
so it’s hugely impressive from that angle.”
Ever since the Italian political crisis
started to unfold in mid-May, few Italian
names have braved the corporate market.
But Terna - Rete Elettrica Nazionale
dazzled with its debut Green bond in mid-
July, attracting a €4.3bn book.
Some fear the Italian budget in October
will create further volatility; Fincantieri,
which has been in the pipeline for over
three months, has yet to hit screens.
The 10-year BTP/Bund spread was at
270bp last Tuesday afternoon, having
breached 300bp in late May from 129.7bp a
couple of weeks prior.RARE INVESTOR AB REFI TARGETS
POPULAR TENORSwedish investment company INVESTOR AB
made a rare appearance in the bond market
last Tuesday, bringing a €500m 12-year
alongside a tender offer for its November
2021 notes.
But despite Investor AB’s absence for
almost five years, there was no rush of
buyers and books were less than twice
subscribed at the guidance stage.
Still, leads Barclays, Citigroup (B&D),
Goldman Sachs and SEB were able to tighten
pricing by 13bp from the tight end of IPTs
for a launch at swaps plus 47bp.
The deal had been expected to go very
well, with one banker referencing the
credit’s Aa3/AA- ratings and the scarcity
value.
“The only issue is that it’s quite long and
some investors might not be able to go that
far out on the curve,” said the banker.One investor said he would give the trade
a miss because the high rating meant the
deal’s price was not compelling enough.
In early September, various highly rated
issuers found ample demand when they
tapped the 12-year maturity, a consequence
of a near drought since the beginning of July
in primary corporate paper leaving investors
keen to take on more risk.
While Investor AB has four euro bonds
outstanding, the banker away said the curve
was irrelevant in estimating fair value
because it was fairly illiquid. Its November
2021s were quoted at 32bp, according to
Tradeweb pre-announcement prices.
Instead, he referenced Aa2/AA- Nestle, which
has €750m November 2029s at swaps plus 23bp.
In the same sector as Investor AB but less
well rated, Baa1/BBB+ JAB Holdings has
€750m June 2029s at 130bp.
The Swedish company said part of the
proceeds would be used to refinance
existing debt and concurrently launched a
tender offer for its €600m 4.875% November
2021s via dealer managers Citigroup and SEB.
The offer expires on September 10.AIR FRANCE-KLM LAUNCHES
HYBRID TENDERAIR FRANCE-KLM announced a tender offer last
Monday to repurchase its unrated €600m 6.25%
hybrid, which is callable in October 2020.
The airline said the offer, the results of
which will be announced on September 12,
is aimed at optimising financing costs and
managing its balance sheet structure.
The notes rallied a point in cash terms on
the announcement, according to Tradeweb
prices, and were bid at 106.72 for a 2.84%
yield late on Tuesday morning.
The deal - launched in 2015 and the airline
sector’s first hybrid since 1999 - came to market
despite investors questioning the choice of
instrument given the company had not paid a
dividend in the previous seven years.
As the instruments are unrated, there is
no equity credit to be lost and no restrictions
around early redemption, BNP Paribas
analysts wrote in a note.
The analysts expect the tender to have a
limited impact on the rest of the hybrid
market, “although unrated instruments
from opportunistic issuers like Trafigura
could catch a bid on the back of this, as well
as possibly the Ferrovial hybrid that doesn’t
currently get any equity credit from S&P”.
They said “this is a small positive for the
asset class, although it will continue to be
weighed down by the prospect of significant
new supply from Vodafone and the negative
returns so far this year”.
In May, Vodafone said it would issue
hybrids to help fund its €18bn acquisition of
some Liberty Global assets.International Financing Review September 8 2018 33BONDS CORPORATES
6 Bonds 2250 p25-55.indd 33 07/09/2018 19:29:59