Tuesday, 25 September 2018

Sterling Bond House: Royal Bank of Scotland

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  • Forensic focus

In a year that saw many institutions engrossed in multi-tranche jumbo deals in US dollars and euros, one house did not let its eye stray from the importance of its domestic market, chalking up an impressive list of transactions across asset classes. Royal Bank of Scotland is IFR’s Sterling Bond House of the Year.

Hardly an issue of note in the sterling market failed to include Royal Bank of Scotland in some guise across the 2014 awards period, with the bank displaying the kind of focus required to remind both issuers and investors alike that alternatives exist.

“It’s about equipping people with information and the quality of dialogue,” said Jonathan Peberdy, head of credit and ABP sales, EMEA.

“It’s all about doing the basics incredibly well,” added Gordon Taylor, head of investment-grade capital markets.

A simpler, stripped-down RBS made a virtue of its circumstances, the result being the ability to deliver uncluttered advice. It covered all bases for issuers – from debuting new borrowers through the reintroduction of erstwhile participants and on to continued execution for stalwarts – all the while demonstrating that the sterling market can help address their needs.

A deal for Nationwide Building Society offered evidence of the regulatory solutions available, the mutual selling £1bn of Additional Tier 1 capital in March, the first such transaction in the sterling sector. If triggered, the bonds convert into CCDS, an innovative equity-like instrument, £500m of which Nationwide issued the previous November.

Demand reached around £11bn and attracted some 500 accounts – both eye-catching numbers for a sterling issue.

This set the scene for fellow UK mutual Coventry to follow suit with a £400m AT1 transaction in June with similar characteristics, again with RBS at the helm.

And just to show that it was not all about AT1, RBS was also instrumental in bringing Yorkshire Building Society’s 10-year non-call five Tier 2 in November 2014, the first T2 bond from a UK mutual since March 2013 (and for which it had already carried out a tender exercise). It was also responsible for Pension Insurance Corp’s 10-year bullet, an inaugural, unrated deal that gave the company the leeway to continue to fund new business.

In addition, RBS acted for the Society of Lloyd’s on its return to the market, while also playing a role in the buyback of its existing paper, and for L&G, with its 50-year non-call 30, its first since 2009.

But it was not just domestic issuers for which RBS flew the T2 flag. It also played a role on BPCE’s £750m 15-year bullet, the first such issue from a French bank since 2008.

Away from Europe, more overseas credits took advantage of the opportunities RBS helped uncover, including Australia’s Macquarie with its inaugural senior unsecured deal, and Verizon and McDonald’s from the US, the former with its post-US$49bn European venture and the latter with a return to long-end sterling issuance after a gap of some 12 years. And there were many others.

“It’s a question of knowing your client,” said Peberdy, alluding to both the sell and buy-sides.

This knowledge led to sometimes infrequent or surprising manifestations, such as African Development Bank’s first sterling benchmark issue since 1991, or Deutsche Pfandbriefbank’s three-year floating-rate covered bond, a rarity that owed its genesis to enquiries coming out of meetings held for another deal altogether.

Covered bonds played to one of RBS’s strengths, as it took a leading role in what little sterling issuance there was, a prime example being Lloyds’ three-year floating-rate issue, the first in the sector for some 18 months and Lloyds’ first since March 2012.

RBS showed a continued strong hand in the public sector, where a close relationship with regular issuer the UK DMO was compounded by some less familiar fare, such as Jersey’s debut in the sterling capital markets.

Its innovation was also evident, one case in point being its work on the buyback of four long-dated transactions for the EIB (for which it also launched an inaugural sterling Green bond), which was carried out as an intraday exercise on a fixed spread rather than price basis, both unusual features.

And if sterling again played to the longer end, there was no better example than EDF’s January foray, which saw it push the boundaries on the non-call period for a hybrid, topping this off with a highly uncommon 100-year offering.

Add to this myriad private placements and introductions to the bond market from issuers previously dependent on the loan market, and RBS demonstrated that it was a truly rounded house when it came to operating across the entire sterling sector.

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

To purchase printed copies or a PDF of this report, please email

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