The People's Republic of China, rated A1/A+/A+, has announced the mandate for its planned US$4bn 144A/Reg S sovereign bond offering and will hold investor calls today. Bank of China, Bank of Communications, China Construction Bank, China International Capital Corp, ICBC, Bank of America, Citigroup, Credit Agricole, CTBC Bank, Deutsche Bank, Goldman Sachs, JP Morgan, Mizuho Securities and Standard Chartered Bank are joint lead managers and joint bookrunners. The multi-tranche senior unsecured bonds will be issued by the Ministry of Finance and will have tenors of three, five, 10 and 30 years, according to a statement dated September 30 posted on the MoF's website. A Hong Kong tax exemption will be granted to the bonds, which will be eligible for US dollar intraday repos in the US dollar clearing system in Hong Kong. The deal will launch as early as tomorrow. In October last year China expanded its reach to US investors with a US$6bn 144A/Reg S four-tranche deal, its first in the 144A format since 2004, despite tensions with the US. The three, five, 10 and 30-year bond offering was the largest by an Asian sovereign issuer in 2020 and matched the previous record China set in 2019. The deal came 5bp–10bp inside its curve, supported by final orders of over US$27.2bn. China's 0.4% 2023s, 0.55% 2025s, 1.2% 2030s and 2.25% 2050s are bid at a G spread of 15bp, 31bp, 20bp and 46bp, respectively. China in November last year also issued €4bn triple-tranche Reg S bonds comprising five, 10 and 15-year tranches.
The European Union made a spectacular entry into the green bond market last week, printing a record-breaking €12bn no-grow 15-year debut under its NextGenerationEU programme, a trade that is set to rewrite the rules for green assets in the global capital markets. "Another record has been broken and the first NGEU green bond is the latest of many firsts for the EU as a borrower," said Johannes Hahn, commissioner for budget and administration at the European Commission, which arranges the EU's borrowing. "This programme is set to turn the Union into the biggest green bond issuer worldwide and have a strong, positive impact on the markets." With a book of more than €135bn, the scale of demand had never been seen for a green bond issue before. Still, the EU is no stranger to breaking records. It shifted the capital markets goalposts in June when it priced its debut issue under the NGEU programme – a €20bn 10-year trade that is the largest outstanding single tranche bond in the currency. And while at €12bn the green issue does not match that, it is the start of a journey that will see the EU bring 30% – roughly €250bn – of its planned €800m NGEU issuance in the green format. “It is a very big step for the green bond market. I think it is a more important transaction for the green bond market than for the conventional SSA market as a whole,” said Johann Ple, senior portfolio manager at Axa Investment Managers. “The EU will go on to represent a far bigger proportion of the green bond market than the wider conventional SSA market.” The UK DMO held the records for largest green bond and largest book for a green bond after its £10bn (€11.65bn) green debut less than a month ago attracted final demand of more than £100bn, including £10bn of joint lead manager interest. It was no coincidence that the EU deal eclipsed the UK one in size. “It is a remarkable trade. Most of the inaugural green bonds from sovereigns and large issuers have been extremely well-received but this is maybe something more," said Benjamin Moulle, head of SSA syndicate at Credit Agricole, a lead manager on the deal alongside Bank of America, Deutsche Bank, Nomura and TD Securities. “The headline figures are obviously very strong, but it is what is behind the scenes that is particularly impressive for me. There has been a lot of discussion recently around very large order books and how hedge funds and trading accounts were creating distortions and dominating books. This is different. Traders and hedge funds were there with their regular size but here real-money orders dwarf them. It is one of the strongest books I have seen.” Who's who Fund managers received the largest allocation at 39%, followed by bank treasuries at 23%, insurance and pension funds took 16%, central bank and official institutions bought some 13%, while banks and hedge funds bought 8% and 1% respectively. “The book was really a who’s who of European asset managers and asset owners," said Pierre Blandin, global head of SSA DCM at Credit Agricole. "I can’t think of any significant investors that were not there and the size of some of the individual orders was massive. This shows that for almost every European investor it was a must-have bond for their portfolio.” The overall SSA demand record is held by the EU's debut under the SURE programme after its €10bn 10-year amassed orders in excess of €145bn just under a year ago. A confluence of supporting factors led to the "staggeringly large" order book, according to Peter Goves, fixed income research analyst at MFS Investment Management. “The demand tells you there is a wall of interest behind something that offers a spread to Germany, is a high credit quality and satisfies an ESG appetite that I don’t think is going to go away anytime soon. It provides a lot of comfort for investors because it
The urgency of financing Europe’s recovery from the coronavirus pandemic meant that the debut NextGenerationEU green bond – a 15-year that raised €12bn from a book in excess of €135bn last week – failed to meet the European Union’s own green bond standard. But investors were willing to look past the inconsistency and focus on the NGEU framework’s exclusion of fossil fuels and high additionality instead. Although the European Commission (which manages the EU's borrowing) launched the GBS in July, the new standard is unlikely to come into force until late next year. Both the European Parliament and the European Council must accept it first. As a result, formal alignment with the GBS – and the EU taxonomy of approved green activities that the standard incorporates – was impossible for the entity that developed it. “It would have been very difficult to apply a standard which is not yet complete,” said Axel Fougner, policy officer at the Commission, who worked on developing the GBS. The only way to achieve alignment would have been to wait. But the principle that 30% of NGEU funding should be executed in green format, which Commission president Ursula von der Leyen and other senior EU politicians have emphasised as a key element of the initiative’s goal of creating a greener, more digital and more resilient union, overrode this and led to a compromise. The Commission said the framework is aligned to the extent feasible with the GBS. It also stressed that elements of the EU taxonomy have been incorporated into the rules governing the recovery and resilience facility through which as much as 90% of the grants and loans to member states financed by the NGEU programme will come. At least 37% of each member state’s RRF plan had to be committed to what the Commission calls “climate-relevant investments and reforms”, though some states submitted higher proportions. All green spending must pass the taxonomy’s “Do No Significant Harm” criteria. Moreover, the EU framework does not permit the two or even three-year “lookbacks” of other green bond programmes that incorporate past expenditure. This ensures a uniquely high level of additionality – ensuring that the funds finance projects that would not have been undertaken otherwise. Nonetheless, the RRF permits “a broader set of green investments” than full adherence to the taxonomy would have allowed, the Commission acknowledged. With that in mind, the Commission will publish the share of NGEU green bond proceeds that it considers to be EU taxonomy-aligned. The green bond frameworks of EU member states are also more accommodating than the GBS taxonomy, bankers note. However, while sovereigns such as Spain will look to tighten their eligibility criteria for green projects to meet the standard once it is finalised, the EU has committed to not change its framework after launch. Johannes Hahn, commissioner for budget and administration, nonetheless insists that the GBS will still benefit the NGEU green programme. “Once we have this final green bond standard it will certainly give a further reassurance to the market,” he said. Sooner the better For now, investors seem willing to focus on the framework’s ambition. “It comes from the same authority that regulates the market so one would assume they would adhere to the highest standards, but we need to wait for the actual regulation to see how it develops,” said Jesus Martinez, senior fixed income portfolio manager at Aegon Asset Management. And some bond buyers applauded the EU’s pragmatism in not waiting for the final GBS before launching NGEU’s green component. “The objective of this plan is to finance the recovery and to finance the recovery with environmentally friendly projects. So if you wait another year before you do that, you miss the purpose,” said Jo
The urgency of financing Europe’s recovery from the coronavirus pandemic meant that the debut NextGenerationEU green bond – a 15-year that raised €12bn from a book in excess of €135bn last week – failed to meet the European Union’s own green bond standard. But investors were willing to look past the inconsistency and focus on the NGEU framework’s exclusion of fossil fuels and high additionality instead. Although the European Commission (which manages the EU's borrowing) launched the GBS in July, the new standard is unlikely to come into force until late next year. Both the European Parliament and the European Council must accept it first. As a result, formal alignment with the GBS – and the EU taxonomy of approved green activities that the standard incorporates – was impossible for the entity that developed it. “It would have been very difficult to apply a standard which is not yet complete,” said Axel Fougner, policy officer at the Commission, who worked on developing the GBS. The only way to achieve alignment would have been to wait. But the principle that 30% of NGEU funding should be executed in green format, which Commission president Ursula von der Leyen and other senior EU politicians have emphasised as a key element of the initiative’s goal of creating a greener, more digital and more resilient union, overrode this and led to a compromise. The Commission said the framework is aligned to the extent feasible with the GBS. It also stressed that elements of the EU taxonomy have been incorporated into the rules governing the recovery and resilience facility through which as much as 90% of the grants and loans to member states financed by the NGEU programme will come. At least 37% of each member state’s RRF plan had to be committed to what the Commission calls “climate-relevant investments and reforms”, though some states submitted higher proportions. All green spending must pass the taxonomy’s “Do No Significant Harm” criteria. Moreover, the EU framework does not permit the two or even three-year “lookbacks” of other green bond programmes that incorporate past expenditure. This ensures a uniquely high level of additionality – ensuring that the funds finance projects that would not have been undertaken otherwise. Nonetheless, the RRF permits “a broader set of green investments” than full adherence to the taxonomy would have allowed, the Commission acknowledged. With that in mind, the Commission will publish the share of NGEU green bond proceeds that it considers to be EU taxonomy-aligned. The green bond frameworks of EU member states are also more accommodating than the GBS taxonomy, bankers note. However, while sovereigns such as Spain will look to tighten their eligibility criteria for green projects to meet the standard once it is finalised, the EU has committed to not change its framework after launch. Johannes Hahn, commissioner for budget and administration, nonetheless insists that the GBS will still benefit the NGEU green programme. “Once we have this final green bond standard it will certainly give a further reassurance to the market,” he said. Sooner the better For now, investors seem willing to focus on the framework’s ambition. “It comes from the same authority that regulates the market so one would assume they would adhere to the highest standards, but we need to wait for the actual regulation to see how it develops,” said Jesus Martinez, senior fixed income portfolio manager at Aegon Asset Management. And some bond buyers applauded the EU’s pragmatism in not waiting for the final GBS before launching NGEU’s green component. “The objective of this plan is to finance the recovery and to finance the recovery with environmentally friendly projects. So if you wait another year before you do that, you miss the purpose,” said Jo
European leveraged finance bankers are rushing to shift risk off their banks' balance sheets ahead of any further repricing of primary markets unsettled by rising rates. Banks have about €30bn of M&A-related financing risk on their books that needs to be cleared, including a potential £6.6bn trade for the buyout of UK supermarket operator Morrisons. Two-thirds of that €30bn is headed for the high-yield bond market, with the rest to be taken out in leveraged loans. But with the global economic outlook in the balance, and rising inflation and expectations of tighter monetary policy unnerving financial markets, banks face a race against time. "The question everyone is asking me is: 'is this a blip in the bull market or is it the start of a new phase?'," said a leveraged finance banker. "No one knows the answer to that." Bankers say that, while there is no question that pricing in the bond market has widened, there is still plenty of leeway to get their trades into the market. However, if rates continue to rise, pricing may become too expensive or investors could shut up shop to limit any damage to their portfolios before the end of the year. Banks are therefore acting as quickly as possible. In the week before last, nine out of the 10 deals in the European high-yield bond market were event-driven, with another three trades emerging last week. Chemicals company Polynt was marketing €1.3bn-equivalent of senior secured notes to back its acquisition by private equity firm Black Diamond. Power generator supplier Aggreko was also out with a £1bn-equivalent bond to back its takeover by TDR Capital and I Squared Capital. But the main headline-grabber was the €3.6bn-equivalent deal backing French telecom Iliad's buyout by entrepreneur Xavier Niel, which is the biggest high-yield bond offering by a European borrower this year. Iliad: an odyssey Iliad could yet prove to be a cautionary tale about the risks of pushing a big, time-sensitive deal through such a volatile market. Iliad (Ba3/BB/BB) was forced to delay by almost a week its dual-currency multi-tranche bond, which backs Niel's bid to take the company private, as weak markets and a complex structure meant leads had to rip up initial pricing terms. The yields on all four tranches, two in euros and two in US dollars, were increased. A €1.1bn five-year non-call two tranche, for example, priced at 5.125% compared with initial price thoughts of high fours. At the same time, nearly 20 changes were made to the documentation to make it more investor-friendly (see Bonds section for more). "The whole market has traded off," said a source familiar with the deal. "Single B high-yield bonds have widened 90bp since the middle of September. When that happens, it has an implication on price." By October 6, shortly after the Iliad deal was announced, every single high-yield bond that had been printed this year was quoted below par, according to the source. "That doesn't leave a very good taste in investors' mouths," said the source. "They say: 'you want me to play all of this primary while bonds are trading down? We need a bit of stability'." The volatility has coincided with one of the busiest periods of a year characterised by plentiful supply. In the week ending October 8, bankers were marketing nearly €8bn of high-yield bonds, including Iliad, which finally priced on October 13. Supply has been averaging €10bn–€15bn per month. Glass half-full For now, bankers are adopting a glass-half-full view. They say that, so far, uncertainty has largely fed through to pricing discussions rather than bringing any fundamental change to the market to the point where leveraged credit is under pressure. Deals are pricing around 50bp wider on average compared with three weeks ago but the pipeline is manageable. "Unless volatility significantly ticks up in the next couple of months, I don't think it will be an issue for the M&A pipeline," sai
Hong Kong-listed Lenovo Group pulled the plug on a planned Rmb10bn (US$1.5bn) Star board IPO just one working day after filing, raising questions about what could have gone wrong and denting the already weak outlook for China ECM. The Chinese computer maker filed for an IPO that would have been the first Chinese depositary receipts offering from an overseas-listed company in the A-share market on September 30, the last working day before China’s seven-day Golden Week holiday. It recalled the application on the next working day – October 8 – making it the fastest withdrawal on the A-share market. So far this year 69 companies have abandoned Star IPOs for a variety of reasons. Abandoned deals include AI chipmaker Yitu’s Rmb7.51bn CDR offering and Geely Automobile’s Rmb20bn IPO. In a stock exchange disclosure, Lenovo said that, having considered its “business scale and complexity” and “the capital market conditions”, it cancelled the plan as “the validity of the financial information in the prospectus may lapse during the vetting process of the application”. The sudden change of heart surprised market watchers, since market conditions had not changed significantly since the IPO filing. A person close to Lenovo speculated that an unforeseen factor may have led to the termination. The company's H-shares sank more than 13% on Monday after the news had been announced the day before. Lenovo completed the IPO tutorial with CICC from January to March. It said on an investor conference call in August that listing on “the Star market can help Lenovo strengthen the close connection between the international and domestic markets and maximise the synergy between the two markets”. Market participants were not convinced by Lenovo’s official explanation. They said the company could have opted to halt the review once its financial data expired and just update the number. That was what Syngenta Group, the seeds and crop protection giant, did last week as it goes through the Star approval process. A Beijing-based analyst also said all regulatory obstacles for Chinese companies such as Lenovo to offer shares or CDRs on A-share markets have been cleared. “They have prepared for the A-share IPO for a long time,” said the person close to Lenovo, adding that the listing was important to the company. Some market participants questioned whether the computer maker met the requirements for companies to list on the technology-focused Star board, but it seemed to qualify. Lenovo has allocated on average Rmb11.3bn to research and development over the past three years, more than the Rmb60m requirement, and since 80% of its income in the same period came from selling PCs and mobiles it can be argued it is the kind of "hard-core" technology company the Star board targets. Its financial performance is sound, too. Lenovo posted a net profit of Rmb8.68bn in 2020, up 55%, on revenues of Rmb411.6bn. Its asset-liability ratio in the past three years was nearly 90%, but still lower than Dell and HP’s asset-liability ratios of over 95%. “Social media or retail investors can make many guesses on the cancellation in hindsight; however, we can say that we do not have any problems at the implementation level, and Lenovo absolutely meets the listing requirements of the Star market as a tech company,” a person close to the arrangers said. Star setback Market participants are worried that the cancellation will deter other high-profile companies from accessing the Star market, China’s Nasdaq-like bourse intended to make it easier for technology firms to raise domestic funds. The Star market was launched in July 2019 and had 341 listings with a market value of Rmb4.8trn as of October 15. “Investors are calling up and asking if this [Lenovo] is going to be another Ant-type case. No one has an answer and that is creating nervousness,” a Hong Kong-base
European leveraged finance bankers are rushing to shift risk off their banks' balance sheets ahead of any further repricing of primary markets unsettled by rising rates. Banks have about €30bn of M&A-related financing risk on their books that needs to be cleared, including a potential £6.6bn trade for the buyout of UK supermarket operator Morrisons. Two-thirds of that €30bn is headed for the high-yield bond market, with the rest to be taken out in leveraged loans. But with the global economic outlook in the balance, and rising inflation and expectations of tighter monetary policy unnerving financial markets, banks face a race against time. "The question everyone is asking me is: 'is this a blip in the bull market or is it the start of a new phase?'," said a leveraged finance banker. "No one knows the answer to that." Bankers say that, while there is no question that pricing in the bond market has widened, there is still plenty of leeway to get their trades into the market. However, if rates continue to rise, pricing may become too expensive or investors could shut up shop to limit any damage to their portfolios before the end of the year. Banks are therefore acting as quickly as possible. In the week before last, nine out of the 10 deals in the European high-yield bond market were event-driven, with another three trades emerging last week. Chemicals company Polynt was marketing €1.3bn-equivalent of senior secured notes to back its acquisition by private equity firm Black Diamond. Power generator supplier Aggreko was also out with a £1bn-equivalent bond to back its takeover by TDR Capital and I Squared Capital. But the main headline-grabber was the €3.6bn-equivalent deal backing French telecom Iliad's buyout by entrepreneur Xavier Niel, which is the biggest high-yield bond offering by a European borrower this year. Iliad: an odyssey Iliad could yet prove to be a cautionary tale about the risks of pushing a big, time-sensitive deal through such a volatile market. Iliad (Ba3/BB/BB) was forced to delay by almost a week its dual-currency multi-tranche bond, which backs Niel's bid to take the company private, as weak markets and a complex structure meant leads had to rip up initial pricing terms. The yields on all four tranches, two in euros and two in US dollars, were increased. A €1.1bn five-year non-call two tranche, for example, priced at 5.125% compared with initial price thoughts of high fours. At the same time, nearly 20 changes were made to the documentation to make it more investor-friendly (see Bonds section for more). "The whole market has traded off," said a source familiar with the deal. "Single B high-yield bonds have widened 90bp since the middle of September. When that happens, it has an implication on price." By October 6, shortly after the Iliad deal was announced, every single high-yield bond that had been printed this year was quoted below par, according to the source. "That doesn't leave a very good taste in investors' mouths," said the source. "They say: 'you want me to play all of this primary while bonds are trading down? We need a bit of stability'." The volatility has coincided with one of the busiest periods of a year characterised by plentiful supply. In the week ending October 8, bankers were marketing nearly €8bn of high-yield bonds, including Iliad, which finally priced on October 13. Supply has been averaging €10bn–€15bn per month. Glass half-full For now, bankers are adopting a glass-half-full view. They say that, so far, uncertainty has largely fed through to pricing discussions rather than bringing any fundamental change to the market to the point where leveraged credit is under pressure. Deals are pricing around 50bp wider on average compared with three weeks ago but the pipeline is manageable. "Unless volatility significantly ticks up in the next couple of months, I don't think it will be an issue for the M&A pipeline," sai
Bankers are lining up around £3bn of debt financing to back a potential sale of Unilever’s tea business in what is the latest headline-grabbing jumbo deal but punchy leverage could deter some lenders. Goldman Sachs and Centerview Partners are advising on the sale, which includes PG Tips, Pukka Herbs and some of its Lipton business. The deal has attracted interest from private equity firms Advent, The Carlyle Group, CVC, Cinven and Abu Dhabi Investment Authority. Bids are due in mid-November in the second round of an auction process. A staple financing has been put together to offer certainty of debt to any potential buyer. It totals around £2.6bn, equating to around 6.9 times the unit’s approximate £375m Ebitda. Including undrawn facilities, debt is pushed up to around £3bn. The total leverage comprises senior and junior debt, with debt through the senior equating to around the mid-fives, bankers said. In addition to the staple, a number of lenders are approaching sponsors to fund their bids, hoping to get a spot on the financing. Staples are traditionally there to be beaten, so the expectation is that leverage could push beyond seven times. Senior leveraged loans, second-lien loans and high-yield bonds could be considered, in euros, US dollars and sterling. While high leverage could deter some, all lenders are expected initially to look at the financing, given its size and profile. “6.9 times is eye-watering, but it is a big enough global deal for people to look at it regardless. Maybe they won’t get there, but it is too big to ignore,” a senior banker said. The US leveraged lending guidelines, which regulators updated in 2013, warn that leverage of more than six times “raises concerns". The European Central Bank’s guidance on leveraged lending, introduced in November 2017 in a bid to match the US guidelines, say much the same. Earlier this year, Bank of America, which was sell-side adviser and staple provider to Swiss contract drug maker Lonza's ingredients unit when it was sold, was notably absent on the associated SFr3bn (US$3.4bn) loan and bond financing, as were a number of US lenders, after it proved too aggressive from a regulatory standpoint. However, lending above six times is allowed if all the company’s secured debt or half of the company’s debt can be paid down within five to seven years, the regulations and guidelines advise. In March 2018, a €4.7bn-equivalent leveraged loan backing KKR’s acquisition of Flora Food Group, Unilever's spreads business, had leverage of 6.23 times and Unilever's tea unit is seen as stronger. “It is a large and very stable company that has a dominant global market position. Because of low growth it has not been a focus in the corporate sector so the perception is that you can both rejuvenate the company and run it more efficiently,” a syndicate head said. “While leverage is high, it is cash generative so it is quite possible it will pass all the pay-down metrics. It is a big important deal and everyone is going to try and look at this.”
Hong Kong-listed Lenovo Group pulled the plug on a planned Rmb10bn (US$1.5bn) Star board IPO just one working day after filing, raising questions about what could have gone wrong and denting the already weak outlook for China ECM. The Chinese computer maker filed for an IPO that would have been the first Chinese depositary receipts offering from an overseas-listed company in the A-share market on September 30, the last working day before China’s seven-day Golden Week holiday. It recalled the application on the next working day – October 8 – making it the fastest withdrawal on the A-share market. So far this year 69 companies have abandoned Star IPOs for a variety of reasons. Abandoned deals include AI chipmaker Yitu’s Rmb7.51bn CDR offering and Geely Automobile’s Rmb20bn IPO. In a stock exchange disclosure, Lenovo said that, having considered its “business scale and complexity” and “the capital market conditions”, it cancelled the plan as “the validity of the financial information in the prospectus may lapse during the vetting process of the application”. The sudden change of heart surprised market watchers, since market conditions had not changed significantly since the IPO filing. A person close to Lenovo speculated that an unforeseen factor may have led to the termination. The company's H-shares sank more than 13% on Monday after the news had been announced the day before. Lenovo completed the IPO tutorial with CICC from January to March. It said on an investor conference call in August that listing on “the Star market can help Lenovo strengthen the close connection between the international and domestic markets and maximise the synergy between the two markets”. Market participants were not convinced by Lenovo’s official explanation. They said the company could have opted to halt the review once its financial data expired and just update the number. That was what Syngenta Group, the seeds and crop protection giant, did last week as it goes through the Star approval process. A Beijing-based analyst also said all regulatory obstacles for Chinese companies such as Lenovo to offer shares or CDRs on A-share markets have been cleared. “They have prepared for the A-share IPO for a long time,” said the person close to Lenovo, adding that the listing was important to the company. Some market participants questioned whether the computer maker met the requirements for companies to list on the technology-focused Star board, but it seemed to qualify. Lenovo has allocated on average Rmb11.3bn to research and development over the past three years, more than the Rmb60m requirement, and since 80% of its income in the same period came from selling PCs and mobiles it can be argued it is the kind of "hard-core" technology company the Star board targets. Its financial performance is sound, too. Lenovo posted a net profit of Rmb8.68bn in 2020, up 55%, on revenues of Rmb411.6bn. Its asset-liability ratio in the past three years was nearly 90%, but still lower than Dell and HP’s asset-liability ratios of over 95%. “Social media or retail investors can make many guesses on the cancellation in hindsight; however, we can say that we do not have any problems at the implementation level, and Lenovo absolutely meets the listing requirements of the Star market as a tech company,” a person close to the arrangers said. Star setback Market participants are worried that the cancellation will deter other high-profile companies from accessing the Star market, China’s Nasdaq-like bourse intended to make it easier for technology firms to raise domestic funds. The Star market was launched in July 2019 and had 341 listings with a market value of Rmb4.8trn as of October 15. “Investors are calling up and asking if this [Lenovo] is going to be another Ant-type case. No one has an answer and that is creating nervousness,” a Hong Kong-base
Morgan Stanley was the first of the big US banks to come to the bond market this week as third quarter earnings season got underway, launching a US$5bn senior unsecured deal after beating analyst expectations with a strong set of results. Morgan Stanley, rated A1/BBB+/A, expects to price on Wednesday a US$2.5bn four-year non-call three fixed-to-floating rate and a US$2.5bn 11-year non-call 10 fixed-to-floating rate tranche. The bank launched the four-year at 57bp over Treasuries and the 11-year at 100bp over, in line with price guidance and tighter than initial price thoughts of 70bp and 115bp, respectively. The active bookrunners were Morgan Stanley, CastleOak Securities and Academy Securities, and passive bookrunners were Siebert Williams Shank, AmeriVet Securities, Seelaus and Loop Capital Markets. Morgan Stanley used five so-called diversity and inclusion banks as bookrunners, the latest demonstration of its commitment to include D&I banks as leads. Today's offering follows the bank's US$3bn subordinated debt offering in September – its first since 2015 – and an US$8.5bn three-part unsecured offering of fixed-to-float notes in July that was its largest bond deal ever, according to IFR data. After the new offering's announcement, the existing 2.239% July 2032 fixed-to-float unsecured notes widened by 2bp to 96bp over Treasuries, according to MarketAxess. A strong quarter for Morgan Stanley's investment banking division helped the company beat analyst expectations. As the damage wrought by the pandemic eased, businesses took new confidence in the US economic recovery and engaged in a spree of mergers and initial public offerings this year. Morgan Stanley reported third quarter net income of US$3.58bn, or US$1.98 a share, on revenue of US$14.75bn. Analysts were expecting a profit of US$1.68 per share, according to Refinitiv. Citigroup, Wells Fargo and Bank of America also reported results on Wednesday.
Bellwether