IFR Magazine - October 27, 2018

STRUCTURED FINANCE

S&P CUTS BED BATH & BEYOND TO JUNK

Long-dated bonds of BED BATH & BEYOND
WIDENEDûLASTûWEEKûAFTERûRATINGSûAGENCYû30û
DOWNGRADEDûTHEûRETAILERûTOûJUNKû30ûCUTûTHEû
COMPANYSûRATINGûBYûONEûNOTCHûTOû""û
citing pressure on margins from heightened
COMPETITIONûANDûANûOVERSIZEDûmEETûOFûSTORES
“BBBY has been slow to adapt to changing
INDUSTRYûDYNAMICSûWHICHûHASûCREATEDû
DIFlCULTYûFORûTHEûCOMPANYûTOûATTRACTû
CUSTOMERSûWITHOUTûMEANINGFULûMARGIN
DAMAGINGûPROMOTIONALûACTIVITYvû30ûSAID
30SûOUTLOOKûONûTHEûCREDITûISûNEGATIVE
"EDû"ATHûû"EYONDûHASûTHREEû53ûDOLLARû
BONDSûOUTSTANDINGûAMOUNTINGûTOû53BNû
ACCORDINGûTOû2ElNITIVûDATA
4HEû53MûûûBONDûAPPEAREDû
to bear the brunt of the weakening on
7EDNESDAYûWIDENINGûASûMUCHûASûBPûTOû
BPûOVERû4REASURIESûACCORDINGûTOû
-ARKET!XESSû"YûLATEû4HURSDAYûITûHADû
RETRACEDûSLIGHTLYûTOûBPû4HEûBONDûISûNOWû
YIELDINGûMOREûTHANû
h"""9ûDOESûBENElTûFROMûLOWûLEVELSûOFû
FUNDEDûDEBTûANDûSTILLûDECENTûTHOUGHû
DECLININGûCASHmOWûGENERATIONvûSAIDû30
h4HISûAFFORDSûTHEûCOMPANYûSOMEûlNANCIALû
mEXIBILITYûTOûINVESTûINûSTRATEGIESûTOûADDRESSû
BUSINESSûCHALLENGESv
-OODYSûSTILLûHASûANûINVESTMENT
GRADEû
RATINGûONûTHEûRETAILERûBUTûDOWNGRADEDûITû
ONEûNOTCHûTOû"AAûEARLIERûTHISûMONTH
The rating actions followed weak quarterly
RESULTSûTHATûWEREûANNOUNCEDûINû3EPTEMBER

EUROPE/MIDDLE EAST/
AFRICA

EURO HIGH-YIELD BREACHES 4%

9IELDSûOFFEREDûBYû%UROPEANûHIGH
YIELDûBONDSû
have reached their highest level in over two
YEARSûDRIVENûBYû)TALYSûBUDGETûDRAMAûANDûAû
BROADERûWIDENINGûINû%UROPEANûCREDIT

-ARKITSûI"OXXûEUROûLIQUIDûHIGH

YIELDû

INDEXûHITûûATû4UESDAYSûCLOSEûITSû

HIGHESTûLEVELûSINCEû*ULYûûTHEûLASTûTIMEûITû

OFFEREDûAûFOUR

HANDLEûYIELDû)TûHADûWIDENEDû

FURTHERûTOûûATû4HURSDAYSûCLOSE

The index has widened around 30bp on a

YIELDûBASISûSINCEû3EPTEMBERûûWHENûTHEû

Italian budget started to cause serious

CONCERNûANDûBPûSINCEûTHEûSTARTûOFûTHEûYEAR

Italy is a particular point of concern for the

HIGH

YIELDûMARKETûASûABOUTûûOFûTHEû

%UROPEANûHIGH

YIELDûMARKETûCONSISTSûOFû)TALIANû

CREDITSûMAKINGûTHEûSECTORûPARTICULARLYû

VULNERABLEûTOûNOISEûAROUNDûTHEûSOVEREIGN

“The worst case scenario in Italy is not

PRICEDûINûBUTûWHATSûPRICEDûINûISûAû

meaningful risk that there is no consensual

DEALûANDûTHATûTHEû%5ûANDû)TALYûENDûUPûINû

FURTHERûCONmICTûLEADINGûTOûAûFURTHERû

deterioration in the domestic political

SITUATIONvûSAIDûAûFUNDûMANAGER

“Our view is that the market is pricing

that risk way too high compared to the real

CHANCEûOFûITûACTUALLYûHAPPENINGûSOûYOUûAREû

being compensated quite well for Italian

ASSETSvûHEûSAID

4HEû%UROPEANûHIGH

YIELDûMARKETûHASûALSOû

been under pressure from several idiosyncratic

STORIESûSUCHûASûTHATûOFûCONSTRUCTIONûlRMû#-#û

DIû2AVENNAûTHATûHAVEûLEDûTOûSINGLE

NAMEûSHARPû

MOVESûINûRECENTûWEEKS

h7EûAREûPARTûOFûAûBROADERûSPREADûANDû

CREDITûWIDENINGûSOûITSûNOTûAûSURPRISEû)ûTHINKû

we have to take the correction as a welcome

SIGNûOFû@BACKûTOûREALITYû(IGH

YIELDûHASûBEENû

ANûOUTPERFORMERûFORûAûLONGûTIMEvûSAIDûAû

SENIORûDEBTûBANKER

h7HATSûBEENûHURTINGûUSûISûTHATûTHEûVOLATILITYû

ISûKEEPINGûPEOPLEûONûTHEûFENCEûEITHERûBECAUSEû

PEOPLEûTHINKûITSûAûBLIPûORûITûWILLûGETûWORSEû)FûWEû

COULDûlNDûAûNEWûLEVELûOFûSTABILITYûWHETHERûFOURû

;PERCENT=ûORûSLIGHTLYûABOVEûWEDûBEûABLEûTOû

RESUMEvûHEûADDEDûHOPINGûTHATûTHISûWOULDûHELPû

ISSUANCEûACTIVITYûPICKûUPûAGAIN

Since several large LBOs cleared the

MARKETûINû3EPTEMBERûANDûEARLIERûINû/CTOBERû

issuance activity has quietened down and is

expected to remain that way until the end of

THEûYEAR

STRUCTURED FINANCE

EMEA MBS

AEGON RETURNS WITH FIRST SAECURE

FOR FOUR YEARS

AEGON HYPOTHEKEN last week announced the

lRSTû$UTCHû2-"3ûFORûFOURûYEARSûOFFûITSûLONG

ESTABLISHEDû3AECUREûPROGRAMME

SAECURE 16 has a large lead manager group

ONûTHEûDEALû4HEYûAREûBank of America Merrill

Lynch, ING, Rabobank, Societe Generale and Wells

Fargo

4HEûDEALûISûOFFERINGûJUSTûAû

YEARû4RIPLEû!û

TRANCHE

4HEûPREVIOUSû3AECUREûSOLDûINû/CTOBERû

ûUSEDûTHEûFAST

PAYûANDûSLOW

PAYû

structure that used to be traditional for

$UTCHû2-"3û3AECUREûûSOLDûAûõMûTWO

YEARûATûBPûOVERû%URIBORûANDûAûõBNû



YEARûATûBP

The roadshow for the new deal ran last

WEEKûFROMû7EDNESDAYûTOû&RIDAYûVISITINGû

"ELGIUMû'ERMANYûTHEû.ETHERLANDSû,ONDONû

ANDû0ARISû0RICINGûISûEXPECTEDûTHISûWEEK

4HEûMOSTûRECENTû$UTCHû2-"3ûWASûFROMû

/BVIONûINû!UGUSTûWHICHûSOLDûITSûFOURTHûDEALû

OFûTHEûYEARûANDûSAWûTHEû4RIPLEû!ûNEW

ISSUEû

SPREADûJUMPûTOûBPûFROMûBP

-ARKETûPARTICIPANTSûWEREûUNSUREûWHETHERû

to blame over-exposure to Obvion risk or

weaker overall market conditions for the

WIDENING

Storm paper is now bid a couple of basis

POINTSûTIGHTERûBUTû!EGONSûRETURNûSHOULDû

HELPûPROVIDEûAûCLEARERûPICTUREûOFûEUROZONEû

INVESTORSûAPPETITEûFORû$UTCHûMORTGAGEûRISK

ALL EUROPEAN HIGH-YIELD ISSUERS
1/1/2018 TO DATE

Managing No of Total Share
bank or group issues US$(m) (%)

1 Goldman Sachs 41 6,978.43 8.5
2 JP Morgan 45 6,405.99 7.8
3 Deutsche Bank 48 6,058.37 7.4
4 Credit Suisse 41 5,388.67 6.6
5 BNP Paribas 52 5,078.53 6.2
6 Citigroup 34 4,499.31 5.5
7 Barclays 34 4,260.06 5.2
8 BAML 26 3,323.85 4.1
9 HSBC 32 3,152.48 3.9
10 Morgan Stanley 20 3,033.37 3.7
Total 137 81,775.64
Excluding equity-related debt.

Source: Refinitiv SDC code: B06c

ALL INTL AUSTRALIAN DOLLAR BONDS

BOOKRUNNERS: 1/1/2018 TO DATE

Managing No of Total Share

bank or group issues A$(m) (%)

1 TD Securities 71 5,745.55 16.7

2 Nomura 43 3,478.73 10.1

3 RBC 42 2,914.73 8.5

4 ANZ 20 2,531.99 7.4

5 Deutsche Bank 28 2,475.19 7.2

6 Mizuho 19 2,440.28 7.1

7 CBA 17 2,095.51 6.1

8 NAB 14 1,931.47 5.6

9 JP Morgan 10 1,435.73 4.2

10 UBS 8 1,294.18 3.8

Total 204 34,409.72

Including preferreds. Excluding equity-related debt.

Source: Refinitiv SDC code: K1

ALL INTL NEW ZEALAND DOLLAR BONDS

BOOKRUNNERS: 1/1/2018 TO DATE

Managing No of Total Share

bank or group issues NZ$(m) (%)

1 ANZ 10 1,878.48 27.1

2 NAB 9 1,570.86 22.6

3 TD Securities 8 1,027.53 14.8

4 Daiwa Securities 6 724.87 10.4

5 CBA 6 679.82 9.8

6 Deutsche Bank 1 500.00 7.2

7 Credit Agricole 5 200.00 2.9

8 Sumitomo Mitsui Finl 2 100.70 1.5

9 HSBC 1 45.00 0.6

10 Cooperatieve Rabobank 1 33.21 0.5

Total 36 6,939.87

Including preferreds. Excluding equity-related debt.

Source: Refinitiv SDC code: K4