Sunday, 21 October 2018

EMEA Investment-Grade Corporate Bond House

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Riding the wave: The volume of corporate bond that deals that priced in Europe in 2012 meant execution teams had to put on an exceptional show to outshine the competition. For its expertise in swathes of products and currencies, leadership in the face of unprecedented competition, and its innovative flair, BNP Paribas is IFR’s EMEA Investment-Grade Corporate Bond House of the Year.

To see the full digital edition of the IFR Review of the Year, please click here.

BNP Paribas has been involved in the execution of more than 140 investment-grade bonds across the EMEA region, including trades from 15 jurisdictions and more than 80 issuers.

Of those, 15 were inaugural offerings and over a dozen consisted of more than one tranche, enabling the bank to secure its place at the crest of the supply wave.

The lender embraced major changes in market dynamics, which saw corporates swinging to bonds from loans, as capital regulations tightened their grip on the markets. It tailored its approach to winning mandates accordingly, collaborating efficiently with fellow bookrunners and co-leads.

At the same time, the bank was able to reap the benefits of corporate institutions making up a relatively stable asset class, especially compared with their financial and sovereign counterparts.

“The interconnectivity of banks and sovereigns created a negative circle,” said Anthony Bryson, BNPP’s European head of corporate debt capital markets. “In contrast, by the time sovereign solvency issues came to the fore, corporates had reacted to the 2008 crisis and improved their balance sheets and stability.”

Currency challenge

In euros, highlights included a dual-tranche 2018 €1.25bn and 2022 £300m bond for commodity trade Glencore, executed in March, that included step-up clauses relating to the developing Xstrata merger.

In May, BNPP ushered Philip Morris into the market, with its first euro transaction in over two years, before guiding Eni spin-off Snam into the market in July, with the inaugural tranche of what ended up being a €6bn financing operation.

Stellar trades for AB InBev, GDF Suez, Sanofi and Carlsberg Breweries also confirmed the bank’s status as bookrunner of choice across geographies, sectors and ratings classes. Trades for British American Tobacco and the Irish Electricity Supply Board at the end of the awards period provided the icing on the cake.

As well as being the most active non-domestic underwriter for Swiss franc deals, BNP Paribas also reared its head in the fast-developing renminbi market, pricing a Rmb1bn 3.8% November 2015 bond for Swedish truckmaker Volvo.

The offering was not only the first of its kind for Volvo, but the first corporate Dim Sum transaction ever to come out of the Nordic region.

BNPP consistently built on its sterling franchise throughout the period too.

Aside from the aforementioned Glencore sterling tranche, the bank was instrumental in opening the market at the beginning of the year, with an unusually large (£750m) 20-year bond for Dong Energy.

In September, it accompanied engineering conglomerate Siemens into the market with a 13-year and 30-year sterling offering that both outperformed two euro tranches, priced simultaneously.

In the Swiss market, BNP’s transaction highlights included a SFr250m 3% 2017 offering for Spanish utility Iberdrola, a SFr450m 1.5% 2018 offering for Israel-headquartered Teva Pharmaceuticals, and a dual tranche SFr275m eight-year and SFr175m 12-year print for GDF Suez.

“With this deal we helped GDF take advantage of a significant arbitrage opportunity,” said Rupert Lewis, the firm’s head of corporate syndicate.

Beyond vanilla

While repeatedly demonstrating their commitment to pricing plain vanilla bonds for corporates at the most attractive levels, BNPP also had a dominant presence in the re-emerging – and higher risk – hybrid bond market.

Together with two other banks, BNPP was an active bookrunner on German utility RWE’s 7% 60-year US$500m Reg S hybrid, described by many as key in opening the market.

The lender also shone as a structuring adviser on BG Energy’s hybrid capital programme, expertly timing the execution of the first ever triple tranche hybrid bond, to coincide with a boost in market sentiment following a market-supporting Greek election result.

The bank was a bookrunner on Scottish utility firm, SSE’s hybrid offering, which represented the first ever US dollar hybrid to print with a sub-6% coupon.

“The unquestionable success of this issue justifies our faith in BNP Paribas,” said Brandon Rennet, the head of corporate finance and treasury at SSE.

Finally in the hybrid market, BNPP joined three other banks to manage ArcelorMittal’s US$650m 8.75% perpetual non-call five-year deal.

As a crossover credit, ArcelorMittal presented the bookrunner with an array of challenges, which BNPP mastered efficiently and elegantly.

Private versus public

The increasing popularity of the private placement market was a further development in 2012 which did not pass under the bank’s radar.

In the realm of peripheral corporates, BNP Paribas executed MTN and Schuldschein transactions for Italian multinational Hera, compatriot utility ENI and Spain’s Iberdrola.

It also succeeded in penetrating the US dollar private placement market – particularly appealing for unrated corporates – and made its mark on the euro private placement market, with offerings like PlasticOmnium’s €250m 3.875% 2018 bond that printed in September.

That deal was the year’s largest euro-denominated private placement under a bond format, and underscored investors’ appetite for debt from unrated French mid-caps.

Observers hailed it as “a market opener” and said it would pave the way for other deals of a similar format.

Beyond sterling and dollar private bonds, BNPP priced a £180m 1.65% inflation-linked bond for BAA due in 2022, and a one-year Rmb400m 2% Dim Sum offering for BMW.

“With our help, the borrower managed to plan the deal almost to execution stage without disclosing details to the public,” Bryson said. “This enabled BMW to fully benefit from the cross-currency arbitrage.” 

Retail revival

The thriving retail bond market added a final string to BNPP’s bow. The bank prided itself in being the only lender to deliver distribution through retail networks in France, the Benelux region and Italy.

During the awards period, BNPP priced approximately €6.5bn of corporate retail bonds, including offerings for sub-investment grade issuers Wienerberger and Lafarge.

A €3bn dual-tranche transaction which the bank printed for Enel was the largest corporate retail transaction priced in Europe in 2012.

Combined orders exceeded €5bn, allowing leads to close order books after just six working days, having originally set aside a three-week marketing period. BNPP acted as arranger, guarantor and placement agent for that transaction.

In the Benelux region, BNPP co-ordinated and ran deals for Belgian natural gas operator Fluxys, unrated builder CFE and building materials producer Etex.

“Being a domestic bank in France, Belgium, Luxembourg and Italy is a clear competitive advantage that no other banks have,” Bryson said.

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