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Thursday, 23 November 2017

Europe Investment-Grade Corporate Bond House: BNP Paribas

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Gateway to Europe

For executing the corporate market’s first-ever negative-yielding bond, the largest-ever euro bond and for providing unrivalled consistency of market access during a year of shocks and volatility, BNP Paribas is IFR’s Europe Investment-Grade Corporate Bond House of the Year.

BNP Paribas has been at the forefront of this year’s ever-changing and challenging European market, breaking new records and reaching new milestones despite the backdrop of the Brexit vote, shock US election results and ongoing bouts of political volatility.   

“Once again we have been firing on all cylinders in all European currencies,” said Martin Egan, global head of primary markets and origination at the bank. “We have really tested the boundaries of the market this year as events like Brexit made investors more discerning.”

Throughout the year, it helped clients access markets even during the most difficult periods. It was joint bookrunner on a transaction from BP in February not long after a huge commodities sell-off. The landmark deal helped reopen the bond market for oil majors and confirmed that markets were open despite the worst start to a year for European investment-grade corporate issuance in 16 years.

Without waiting for the dust to settle on that deal, BNPP went to work in the same week with a liability management exercise for troubled miner Anglo American, which was returning after a one-year absence from the capital markets.

Anglo American bought back up to US$1.3bn-equivalent of bonds to help reduce its gross debt, after the three major rating agencies stripped the mining giant of its investment grade status earlier in February.

“We have become a trusted adviser to Anglo, and helped it seize the opportunity to smooth out its maturity profile and help cut debt at a difficult time,” said Mark Lynagh, head of European corporate DCM at the bank. 

BNPP was also keen to take advantage of the post-Brexit landscape. Amid acute uncertainty, the Bank of England cut rates by 25bp, increased Gilt purchases by £60bn and said it would buy up to £10bn of corporate bonds, sending the sterling market into a momentum-led rally.

Vodafone, with the help of BNPP, was quick to take advantage of the strong rally to print 2016’s largest and longest corporate sterling issue at that time, a £1bn 3% 40-year.

Months later, BNPP brought to life the biggest ever corporate sterling bond, helping National Grid Gas Finance to cash in on the year’s sterling market comeback. The company raised £3bn in the sterling market with a five-tranche deal ranging across the curve from five to 30 years on September 13.

And the bank also made waves in the Swiss Franc market, helping to execute a SFr400m no-grow eight-year deal from McDonald’s in September (IFR’s Swiss Franc Bond Deal of the Year), which built up a well oversubscribed book in a short space of time.

“As well as our core euro market, we have offered issuers arbitrage funding solutions across sterling and Swiss francs as those markets have had to get to grips with QE and negative rates of their own,” said Fred Zorzi, global head of syndicate for bonds and loans at BNPP.

BNPP was bookrunner on Sanofi’s landmark transaction. The company demonstrated what was possible by selling the first negative-yielding non-financial corporate bond in euros in September.

The deal was brought about by the European Central Bank’s market-changing stimulus measures and was brought to life with the help of BNPP as bookrunning bank. Just hours later, BNPP was also a bookrunning bank for German consumer goods producer Henkel’s €500m September 2018 paper, which was also priced at a yield of –0.05%.

Borrowing costs hit record lows after the ECB made its initial announcement regarding corporate purchases on March 10, which saw yields on dozens of eurozone companies’ existing bonds fall below zero.

BNPP also demonstrated its ability to execute and advise on jumbo M&A deals in 2016. It was, for example, picked to be a bookrunner on Anheuser-Busch InBev’s €13.25bn bond in March.

That deal became the biggest ever corporate bond deal in the European market after attracting €28bn of investor demand, a result that unleashed billions more of euro M&A funding into the market in the following months.

Danone’s €6.2bn deal in October became the next largest euro M&A bond this year, demonstrating how the European bond market is becoming the new hotbed for M&A debt financing.

“BNP Paribas has taken to the world stage this year, with a diversity of issuers from around the world. We have acted as a gateway to European markets,” said Rupert Lewis, head of European bond syndicate at BNPP.

To see the digital version of this review, please click here.

To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

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