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Friday, 17 November 2017

Swiss Franc Bond: Lindt & Spruengli’s SFr1bn triple-tranche bond

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Swiss confectioner Chocoladefabriken Lindt & Spruengli hit all the high notes with its bumper triple trancher in late September. The combination of SME financing, M&A activity, multiple tranches, huge size and rarity ensured that Lindt beat off stiff competition in one of the more interesting years for the market to be IFR’s Swiss Franc Bond of the Year.

Despite lacking a formal rating and being a quasi-debut name, the company capitalised on its impressive brand recognition to be a “must-buy” for every fund across Switzerland, according to Credit Suisse’s Dominique Kunz, managing director of capital markets.

The SFr1bn (US$1.03bn) bond issue was a rare acquisition financing trade in the Swiss market, brought to help purchase US candy maker and retailer Russell Stover Candies. The buyout, announced in mid-July, was completed on September 15, with the bond pricings the following week.

The roadshow was well attended, and potential investors walked away with not only a better understanding of the company’s updated profile, but also a kilogram of fine chocolate each, according to one fund manager who was present.

Credit Suisse and UBS were joint-leads, with the latter joint bookrunner on the FRN, and the former sole books on the longer fixed-rate tranches.

Following the meetings, the leads performed a very quick feasibility check before opening books on a minimum SFr800m deal comprising a SFr150m minimum three-year FRN at 3mL+18bp, a SFr400m minimum six-year fixed at mid-swaps plus 15bp–20bp and a SFr150m minimum 10-year at plus 23bp–28bp.

Books closed early for pricing before lunch, and luckily so, coming just as the benchmark five-year swap rate dipped below 0.2% for the first time.

Final terms saw a total of SFr1bn printing, with all three tranches pricing in line with their area guidance, with the three-year upsized to SFr250m, the six-year 0.5% to SFr500m and the 1% 10-year to SFr250m.

Books were described as “manageably oversubscribed” by a lead official, with over 150 investors taking part and placing nearly 250 orders. Distribution was predictably wide, although like some of the company’s more exotic confections, the paper was a bit rich for some investors.

Private banks and retail clients were heavily involved in the shorter tranches. Bank treasuries, predictably, were major takers of the FRN, while asset managers played a large role in the fixed bonds. Pension funds and insurers also took a smaller part across the board.

A syndicate banker unconnected to the trade said that, despite the obvious attractions of the trade, it still was not an “easy deal”. He cited the uncertainty surrounding the pricing of a debut transaction, but said the leads executed it well.

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 gloria.balbastro@thomsonreuters.com.

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