STRUCTURED EQUITY: Nexans 8x covered in New Year surge

It may not be booming, but the structured equity market is showing just what a New Year can do for issuance. Nexans was the fourth name to visit in Europe this year and the repeat issuer met with a strong response for its up to €275m January 2019 CBs, ending with a book eight times covered and pricing at the tightest terms. HSBC and Societe Generale were joint bookrunners.

As a repeat issuer the company chose a tenor that fitted in with its existing debt schedule, and therefore a rare short seven-year tenor, especially for a sub-investment grade name. The previous seven year in the French market came from Vilmorin in May 2008.

In line with discussions with investors on Monday a put was included on June 1 2018. Though a deal for a repeat issuer, pre-sounding was completed as the first French issue of the year and due to the long tenor.

The base deal totalled €240m, with a greenshoe likely to increase it to €275m by next week. The proceeds will go towards taking out the January 2013 CBs of €280m nominal. A reverse bookbuild yesterday saw the issuer buy back about one-third of the issue at €86, a 2.2% premium to par plus accrued. The bonds had been trading at €85.60. The company will offer the same price to other bondholders March 2–8.

The new bonds were offered with a 2.5%–3.0% coupon and 30%–35% premium, with pricing of 2.5% and 35%, for a €72.74 conversion price.

The company has a BB+ rating from S&P and there is also a 2016 convertible and straight debt as reference leading to consensus around a 400bp credit spread. Volatility assumptions were more varied – something bankers have suggested will be a challenge with new issues in the coming weeks as volatility is expected to fall. Analysts at Barcap used 38% and 30% at Deutsche. Both are well below realised levels in the mid-40s, but in line with 1m and 3m levels in the first half of 2011.

There was still value in the bonds and initial demand meant the bonds rose over a point in the grey.

The syndicate was also notable as Nexans has used several banks for convertibles over the years but BNP Paribas had been ever-present. The absence follows on the back of a only a co-bookrunner slot on Pescanova’s return earlier this month.