The European Investment Bank amassed a huge amount of interest for a €750m Climate Awareness Bond on Wednesday, with the deal upsized by €250m and final order books closing in excess of €5.75bn despite pricing tight to its own curve. The 0% November 2027 transaction marks a rare December outing for the supranational and bucks the trend of less exuberant demand for most recent SSA trades as investors begin to wind down ahead of year-end. “The demand was clearly there, and the order book is insane. It is not like they have offered any concession either," said a banker. “It is one of the tenors that has been pretty hot post-summer, that five to 10-year area.” The spread was set at mid-swaps less 20bp, tightening by 2bp from guidance via Citigroup, NatWest Markets, Santander and UniCredit. Demand was strong from the outset, with books in excess of €3.4bn on the first update when the spread was set. “I saw them pricing 1bp through their own curve. Last week's deal was almost two years shorter and it came at the same level versus swaps," said the banker. On November 22, a €350m tap of EIB's 0.375% May 2026 SAB priced at less 20bp. The paper is bid around the same level. “Just look at where the EU July '26s are trading," added the banker. "No matter the liquidity, that just looks wrong. When EIB comes at less 20bp, of course you have this huge order book. Currently, you have big issuers with secondary valuations that are wrong and don’t reveal where the primary is printing.” The European Union's €11.495bn 0% July 2026 NGEU paper was bid at less 29.5bp on Wednesday afternoon, according to Tradeweb. SOFR debut In US dollars, New Development Bank expanded its range of products in the market with an inaugural SOFR-linked floating-rate note. Since making its debut in the currency in June 2020, NDB has returned with three more fixed-rate transactions targeting the three and five-year tenors. “They have been in the market for a while now," said a second banker. "Maybe if they did it a bit earlier in the year they could have been a bit more aggressive with pricing." The spread for the US$500m no-grow December 2024 Reg S note tightened by 2bp from IPTs, landing at SOFR plus 28bp via Barclays, Citigroup, Deutsche Bank, Goldman Sachs and TD Securities. As it is a debut in the format, there is not a clear reference point in its curve. International Finance Corp and Asian Development Bank were highlighted by the lead as possible comparables, though given their Triple A ratings, a pick-up over these for NDB (AA+ by S&P and Fitch) is reasonable. Books closed over US$580m, shedding a little from more than US$650m when the deal was launched. Proceeds will be used for financing sustainable development activities and providing emergency support loans to the issuer's member countries, in response to the adverse economic impact of the Covid-19 pandemic. NDB is targeting a total of US$1bn in crisis-related assistance including health and social safety expenditures, as well as supporting member states' economic recovery. On Monday, Swedish Export Credit Corporation raised US$350m with a May 2023 Global FRN that came at SOFR plus 16bp.
US business development companies and direct lenders are looking at the euro benchmark market to fund the expansion of their operations at home and in Europe. Issuance from these sectors in the euro market has only just got off the ground but bankers think these corporates could represent a significant area of growth for reverse Yankee supply next year. In late October, Blackstone Private Credit Fund raised €500m through the sale of a 1.75% November 2026 senior unsecured note to become the first BDC from the US to issue in the euro market. The deal was motivated by the fund’s desire to lock in the low rates available. Some bankers say that this transaction will be the first of many. “With the first deal done for Blackstone Private Credit, we have the whole potential for all these business development companies to come to the market,” said one syndicate manager. “There are plenty of direct lenders in the US who may also be looking at the market. There is a lot to do here. They continue to push the envelope.” These types of issuers have been regular funders in the domestic dollar benchmark market. Blackstone Private Credit has raised US$3.115bn this year. The key draw of the euro market is the diversification it offers, in the context of these firms’ growth. “They have been able to do everything in US dollars before,” said the banker. “[But] their businesses have grown so massively, as part of the whole era of zero interest rates and cheap liquidity, that they have greater funding needs.” Given the absolute low coupons that issuers are able to achieve in euros compared with dollars, the European market makes a lot of sense. “They do also have some European assets, so they can do with low-coupon euro debt in their capital structure,” added the banker. Not everyone agrees that the euro market will represent an obvious choice for US issuers next year. One strategist has argued that conditions in the euro market will not be as accommodating to foreign issuers in 2022, as it has been this year. “The attraction for foreign issuers, or namely US issuers issuing a euro bond, is based on some factors, of which the cross-currency basis swap and the differential between dollar and euro spreads [are very important ones],” he said. “For next year, we expect the attraction to be rather mild.” However, it is possible that this may not dampen the appeal of the market or reduce the volume of reverse Yankee issuance seen next year. Net investment hedging is another big factor behind that motivates issuance. “This is the biggest driver of reverse Yankee issuance,” said the syndicate banker. “It has nothing to do with the basis swap. Companies themselves decide with their auditors how much capacity they have in euros. If their business is growing or they buy European businesses, then this can grow and increase the need to issue in euros.” This year, reverse Yankee issuance has, despite a strong run of trades during the second half, declined when compared to 2020. There has been €52.5bn of supply year-to-date, slightly down on the €54.6bn recorded by IFR last year.
ING Bank showed covered bond pre-funding is still on the table with a €1.5bn 10-year deal on Wednesday that replicated the success of a near-identical trade for compatriot Rabobank last week. ING is the first financial institution to venture into the euro market since the identification of the new Covid-19 variant Omicron triggered a broad sell-off at the end of last week. Bankers expect December to be a quiet month for euro FIG supply unless there is a sustained improvement in market conditions. but the covered bond market has been highlighted as a potential exception, with the asset class proving resilient to the widening pressure exerted over unsecured products. Most tranches of euro FIG debt sold in November have widened from reoffer levels, but covered bonds have continued to perform, supported by a supply versus demand imbalance, strong relative value versus government debt, and European Central Bank purchases. "It's a defensive asset class, investors in that part of the world are still cash long, and this is the trade to do in a market like this and still expect a good outcome," said a DCM banker away from the deal. With January expected to be a typically busy month for supply, the still-functioning market offers issuers attractive pre-funding opportunities. "This was the main driver for ING," said a syndicate banker on the deal. "They can easily take the carry of four weeks and use a clear window now rather than face the crowds in January." The Dutch lender's deal was marketed with initial guidance of mid-swaps plus 5bp area, via Credit Suisse, Danske Bank, HSBC, ING, LBBW, Nord/LB and UniCredit. The spread was fixed at 1bp over mid-swaps, leaving a new issue premium of 1bp–2bp. “Obviously, the volatility and everything else we have seen going on in the markets over the last few days was always going to make you wonder if deals in the covered bond market are still doing well, and I think that was certainly proven today," said a second lead. "From my point of view, the highlight is that covered bond markets function very well and also function further out the curve.” ING matched the size and final spread achieved by domestic rival Rabobank with a €1.5bn 10-year covered bond on November 23. "Traditionally, would there potentially be a basis point or two between them? Possibly yes," said the DCM banker. "But in this market, where spreads are so tight, it comes down to size and timing. In this case, with ING going with the same trade and the same size in a very similar market to what Rabo had – arguably a slightly weaker one – investors would expect them to price flat to each other." Bankers noted ING was able to attract a similar level of demand as its peer, with orders coming in at €2.4bn-plus (including €90m JLM interest) versus the €2.5bn-plus book (excluding JLMs) for Rabobank. That represented a good outcome, bankers said, given ING is a more frequent issuer than Rabobank across all formats. ING and its Dutch peers tend to favour long maturities that better match their assets for their covered bond issuance. In this market, some bankers suggested the 10-year tenor is the longest that covered bond issuers can go without having to substantially pay up. Nevertheless, at least one issuer is said to be eyeing the long end. "I would say this is it [for 2021], but I would have said this on Monday also," said the first lead banker. "You never know, but I don't foresee a huge chunk of pre-funding.”
ING Bank showed covered bond pre-funding is still on the table with a €1.5bn 10-year deal on Wednesday that replicated the success of a near-identical trade for compatriot Rabobank last week. ING is the first financial institution to venture into the euro market since the identification of the new Covid-19 variant Omicron triggered a broad sell-off at the end of last week. Bankers expect December to be a quiet month for euro FIG supply unless there is a sustained improvement in market conditions. but the covered bond market has been highlighted as a potential exception, with the asset class proving resilient to the widening pressure exerted over unsecured products. Most tranches of euro FIG debt sold in November have widened from reoffer levels, but covered bonds have continued to perform, supported by a supply versus demand imbalance, strong relative value versus government debt, and European Central Bank purchases. "It's a defensive asset class, investors in that part of the world are still cash long, and this is the trade to do in a market like this and still expect a good outcome," said a DCM banker away from the deal. With January expected to be a typically busy month for supply, the still-functioning market offers issuers attractive pre-funding opportunities. "This was the main driver for ING," said a syndicate banker on the deal. "They can easily take the carry of four weeks and use a clear window now rather than face the crowds in January." The Dutch lender's deal was marketed with initial guidance of mid-swaps plus 5bp area, via Credit Suisse, Danske Bank, HSBC, ING, LBBW, Nord/LB and UniCredit. The spread was fixed at 1bp over mid-swaps, leaving a new issue premium of 1bp–2bp. “Obviously, the volatility and everything else we have seen going on in the markets over the last few days was always going to make you wonder if deals in the covered bond market are still doing well, and I think that was certainly proven today," said a second lead. "From my point of view, the highlight is that covered bond markets function very well and also function further out the curve.” ING matched the size and final spread achieved by domestic rival Rabobank with a €1.5bn 10-year covered bond on November 23. "Traditionally, would there potentially be a basis point or two between them? Possibly yes," said the DCM banker. "But in this market, where spreads are so tight, it comes down to size and timing. In this case, with ING going with the same trade and the same size in a very similar market to what Rabo had – arguably a slightly weaker one – investors would expect them to price flat to each other." Bankers noted ING was able to attract a similar level of demand as its peer, with orders coming in at €2.4bn-plus (including €90m JLM interest) versus the €2.5bn-plus book (excluding JLMs) for Rabobank. That represented a good outcome, bankers said, given ING is a more frequent issuer than Rabobank across all formats. ING and its Dutch peers tend to favour long maturities that better match their assets for their covered bond issuance. In this market, some bankers suggested the 10-year tenor is the longest that covered bond issuers can go without having to substantially pay up. Nevertheless, at least one issuer is said to be eyeing the long end. "I would say this is it [for 2021], but I would have said this on Monday also," said the first lead banker. "You never know, but I don't foresee a huge chunk of pre-funding.”
UBS has appointed Sarah Youngwood as chief financial officer when Kirt Gardner steps down from the role in May after six years. Youngwood is chief financial officer of JP Morgan’s consumer and community division. She will join the Swiss bank at the beginning of March and work with Gardner before he leaves. Youngwood has been in her current role since 2016 and last year was also put in charge of finance for the group’s technology function and its diversity and inclusion team. Before 2016 she was head of investor relations for four years after a 14-year spell in the financial institutions group in the investment bank in Paris, London and New York. Gardner joined UBS from Citigroup in 2013 as chief financial officer for the wealth management division. At Citi he had been CFO and head of strategy in its global transaction services division as well as head of strategy for its corporate and institutional and consumer bank. Later this month UBS will hear the outcome of an appeal in French courts against a ruling that it helped clients evade taxes, which could uphold a financial penalty of up to €3.2bn. That is lower than the €4.5bn UBS was originally fined, after a negotiation with the French authorities. UBS could appeal the decision in the French Supreme Court. It has only provisioned €450m against the case. In its latest results the group reported its highest quarterly profit for eight years, leading to US$5.7bn in excess capital at the end of September – more than enough to cover any fine. Chief executive Ralph Hamers said he planned to give a update on his strategy on February 1, alongside full-year results. Speaking of Youngwood’s appointment, Hamers said: “With her strong track record, in-depth finance expertise, and experience across various banking areas, Sarah is ideally suited to lead our finance function into the future.”
Bonds sold by German real-estate firm Adler Group sank by over four points on Tuesday, after the company failed to respond to allegations of fraud from short-seller Viceroy in its third quarter earnings report. Adler's 2.25% January 2029s dropped to 80.5 down from 84.85 bid, according to data from Tradeweb. The bonds are now trading with a yield of around 5.8%, up from 4.8% Tuesday morning. The company also failed to reference the allegations in the subsequent earnings call - in which executives declined to take any questions from investors or analysts. "Absolutely unbelievable," said one high-yield bond investor of the lack of questions. "That is shocking for a publicly-listed company." Adler shares fell by over 21% on the day. David Shnaps, a senior analyst at CreditSights said that executives' decision not to take questions was unexpected. Previous earnings calls involved a Q&A session where management answered pre-selected questions that were read out by investor relations personnel. "Not taking questions at all, especially given the predicament that the company is in was surprising, and reflected in the bonds' moves since," said Shnaps. Adler spokespersons did not immediately return a request for comment. Adler has been under significant pressure since Viceroy Research published a report in October in which it alleged that the company is mismanaged, is operating with too much debt and that Adler's real estate values have been artificially inflated. Adler has called the report "misleading" and "not correct", but has yet to release a detailed response to the allegations. High-yield investors told IFR that they still had pressing questions after the earnings release. "Where are the answers to the Viceroy report?" asked the investor. "How will the company fund itself going forward? And where is the cashflow?" However, Adler said in its earnings report that it had appointed KPMG's specialised forensic accounting division to review certain historical transactions. In addition, it said that an independent report on the allegations would be completed in early 2022. "While the independence of a response is good and certainly worth the wait, the delay is not and once again speaks to poor investor communication," wrote CreditSights analysts. Adler has looked to turn sentiment around in recent months with the promise of billions of euros worth of asset sales. A portfolio transaction to LEG Immobilien worth €1.4bn is set to close by year-end, and the company said it hopes to close another €1bn portfolio sale to a second investor in the first quarter of 2022. Adler also said that it has seen rental growth of 3.9% year-over-year, and that Ebitda from rental activities was up by 26% year-to-date compared to the first nine months in 2020 and stands at €169.2m. Adler Group was formed in 2020 from a three-way merger between Adler Real Estate, Ado Properties and Consus Real Estate. The combined company has €5.69bn in bonds outstanding, and carries only one rating: a BB (stable) from S&P. Since the merger, high-yield investors have told IFR they were not happy about the group's governance and transparency, as well as its high leverage.
UBS has appointed Sarah Youngwood as chief financial officer when Kirt Gardner steps down from the role in May after six years. Youngwood is chief financial officer of JP Morgan’s consumer and community division. She will join the Swiss bank at the beginning of March and work with Gardner before he leaves. Youngwood has been in her current role since 2016 and last year was also put in charge of finance for the group’s technology function and its diversity and inclusion team. Before 2016 she was head of investor relations for four years after a 14-year spell in the financial institutions group in the investment bank in Paris, London and New York. Gardner joined UBS from Citigroup in 2013 as chief financial officer for the wealth management division. At Citi he had been CFO and head of strategy in its global transaction services division as well as head of strategy for its corporate and institutional and consumer bank. Later this month UBS will hear the outcome of an appeal in French courts against a ruling that it helped clients evade taxes, which could uphold a financial penalty of up to €3.2bn. That is lower than the €4.5bn UBS was originally fined, after a negotiation with the French authorities. UBS could appeal the decision in the French Supreme Court. It has only provisioned €450m against the case. In its latest results the group reported its highest quarterly profit for eight years, leading to US$5.7bn in excess capital at the end of September – more than enough to cover any fine. Chief executive Ralph Hamers said he planned to give a update on his strategy on February 1, alongside full-year results. Speaking of Youngwood’s appointment, Hamers said: “With her strong track record, in-depth finance expertise, and experience across various banking areas, Sarah is ideally suited to lead our finance function into the future.”
Alsea S.A.B de CV, rated B1/BB–, is starting investor calls today for a possible US$500m 144A/Reg S senior unsecured note offering due in 2026. The Mexico-based restaurant operator mandated BBVA, Bank of America, Santander and ScotiaBank as active bookrunners on the offering. Proceeds will be used entirely to refinance a portion of existing debt. Fitch Ratings on Monday assigned first-time foreign and local currency long-term issuer default ratings of BB– to Alsea, with a stable outlook. Fitch also assigned a BB– to Alsea's proposed notes. Fitch said "Alsea's ratings reflect its solid position as an owner and franchise operator of QRS, cafeterias, and casual dining restaurants in Mexico, Latin America and Europe." Moody's Investors Service assigned on Monday a B1 rating to Alsea, with a stable outlook. "Alsea's B1 ratings reflect its position as one of the largest restaurant operators in the fast-food, coffee shop, casual dining, and family restaurants segments. It also incorporates Alsea's presence in Latin America and Europe together with its diverse portfolio with leading brands that include Starbucks and Domino's, which accounted for 56% of revenues as of September 2021," said Alonso Sánchez, a vice president at Moody's. Alsea has a large presence in Mexico and Europe where it generates 87% of its revenues, Moody's said. The company also operates in Argentina, Chile, Colombia, and Uruguay. With 4,204 stores as of September 2021, Alsea has restaurants in Mexico, Europe and South America
Bonds sold by German real-estate firm Adler Group sank by over four points on Tuesday, after the company failed to respond to allegations of fraud from short-seller Viceroy in its third quarter earnings report. Adler's 2.25% January 2029s dropped to 80.5 down from 84.85 bid, according to data from Tradeweb. The bonds are now trading with a yield of around 5.8%, up from 4.8% Tuesday morning. The company also failed to reference the allegations in the subsequent earnings call - in which executives declined to take any questions from investors or analysts. "Absolutely unbelievable," said one high-yield bond investor of the lack of questions. "That is shocking for a publicly-listed company." Adler shares fell by over 21% on the day. David Shnaps, a senior analyst at CreditSights said that executives' decision not to take questions was unexpected. Previous earnings calls involved a Q&A session where management answered pre-selected questions that were read out by investor relations personnel. "Not taking questions at all, especially given the predicament that the company is in was surprising, and reflected in the bonds' moves since," said Shnaps. Adler spokespersons did not immediately return a request for comment. Adler has been under significant pressure since Viceroy Research published a report in October in which it alleged that the company is mismanaged, is operating with too much debt and that Adler's real estate values have been artificially inflated. Adler has called the report "misleading" and "not correct", but has yet to release a detailed response to the allegations. High-yield investors told IFR that they still had pressing questions after the earnings release. "Where are the answers to the Viceroy report?" asked the investor. "How will the company fund itself going forward? And where is the cashflow?" However, Adler said in its earnings report that it had appointed KPMG's specialised forensic accounting division to review certain historical transactions. In addition, it said that an independent report on the allegations would be completed in early 2022. "While the independence of a response is good and certainly worth the wait, the delay is not and once again speaks to poor investor communication," wrote CreditSights analysts. Adler has looked to turn sentiment around in recent months with the promise of billions of euros worth of asset sales. A portfolio transaction to LEG Immobilien worth €1.4bn is set to close by year-end, and the company said it hopes to close another €1bn portfolio sale to a second investor in the first quarter of 2022. Adler also said that it has seen rental growth of 3.9% year-over-year, and that Ebitda from rental activities was up by 26% year-to-date compared to the first nine months in 2020 and stands at €169.2m. Adler Group was formed in 2020 from a three-way merger between Adler Real Estate, Ado Properties and Consus Real Estate. The combined company has €5.69bn in bonds outstanding, and carries only one rating: a BB (stable) from S&P. Since the merger, high-yield investors have told IFR they were not happy about the group's governance and transparency, as well as its high leverage.
EGUCIGALPA, Nov 30 (Reuters) - Honduras opposition presidential candidate Xiomara Castro will seek to negotiate a new debt deal with the International Monetary Fund, but she is opposed to raising existing taxes or creating new ones, according to a senior adviser. Castro, who is leading by a wide margin in a preliminary vote count of Sunday's election, wants to restructure debt to lower debt service payments, said Hugo Noe, the head of her campaign's policy platform. An existing IMF deal with Honduras runs through January, when Castro will be sworn in as the country's first woman president if her advantage in the vote count, which currently puts her nearly 20 points ahead of her nearest rival, holds up. "A dialogue with the International Monetary Fund has begun," Noe told Reuters.
Bellwether