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IFR 2383 - 15 May 2021 - 21 May 2021

Germany pushes on pricing to highlight green advantage

Germany adopted a striking approach to marketing a 30-year green bond on Tuesday, starting the execution process with guidance already inside its conventional curve as the sovereign sought to demonstrate with as much clarity as possible the relative pricing advantage of green issuance. With pricing on the €6bn deal then tightened further, final terms saw the country capturing a saving of more than €30m over the life of the green security versus its conventional bond with exactly the same maturity and coupon. Germany uses a twin structure strategy for its green bond issuance whereby the maturity and coupon of the green bond are an exact match for an outstanding conventional bond, making pricing comparisons between the two far more transparent. “There’s no two ways about it given the green framework they use, the green premium, greenium – or whatever you want to call it – is extremely visible," said Asif Sherani, head of DCM syndicate for EMEA at HSBC, which was a lead manager on the transaction. The spread for the 0% August 2050 green note was set at 2bp through the issuer's conventional bond, tightening by 1bp from guidance. While Germany had demonstrated the pull of green assets last year when it brought its debut in the structure, marketing for that 10-year trade had started flat to its conventional curve before pricing inside it. Starting marketing through the conventional as it did last week marks another milestone for the green bond asset class. “There was definitely less price discovery than the first time, so we were confident to start already negative ," said Sherani. “There was minimal, if any pushback from investors to buy the bond up at what is 2bp through theoretical fair value. That’s very encouraging because the more we go down this route, the better it is when you have less pushback and a more broad acceptance on the greenium." Three in a row The transaction is the sovereign's third green bond, the second via syndication, after making its debut in September with the €6.5bn 0% August 2030 note, which eventually priced 1bp through its conventional curve. That bond was quoted on Tuesday around 5bp through its conventional equivalent, according to Refinitiv, highlighting its outperformance in the secondary market. "The 30-year is going to be rarer and I would argue will richen beyond minus 5bp – to minus 6bp, minus 7bp versus the conventional, so maybe it could have come a bit tighter. But you can say that they were fair," said a banker away from the deal. "Could they have pushed further? Maybe. But I guess it’s 30-year risk and €6bn is a lot more than what they would do in an auction, so they would have had to be cognisant of the fact that it was a much bigger size. Also, the market has been a bit wobbly, so if they pushed too much and the deal wobbled, they would have got criticism for being too greedy.” The order book for the 30-year benchmark bond, of which €500m will be retained by the sovereign, was in excess of €38.9bn (including €1.95bn of interest from the joint lead managers) when the deal was launched, larger than the €33bn (including €2.45bn JLM interest) for the green August 2030 note. “We were very confident to start at minus 1bp and we knew we were going to land at a slightly tighter level but to be able to go to minus 2bp with that book, print the upper end of the limit and tick the box from a distribution angle was a pleasant surprise," said Sherani. Asset managers received the lion's share with a 63% allocation, followed by insurers at 18% and central banks at 7%. Banks (6%), hedge funds (4%) and others (2%) made up the rest. There was a good geographical split with 28% going to the UK , 24% to Germany, 14% to the Nordic region, 10% each to Switzerland and France, 6% to the Netherlands and "others" getting the remaining 8%. "Demand for this long-term maturity is very impressive in

BON RATE
7 min read
EMEA
IFR 2383 - 15 May - 21 May
David Cheetham
IFR 2383 - 15 May 2021 - 21 May 2021

ESM looks to its second act with bigger mandate

When Nicolas Sarkozy and Angela Merkel met for a weekend summit at the French seaside resort of Deauville in October 2010, Europe was in deep crisis. Greece was just five months into its first bailout, and Ireland was days from becoming the second country to seek help. Fear was rife that it was the beginning of a crisis that would drag in much bigger countries and maybe even bring down the euro. The French and German leaders realised they were unprepared for a big flare-up. In their haste to push through the Greek rescue and avoid painful treaty renegotiations, the European Financial Stability Facility – the body charged with funding any bailouts – had been set up to automatically expire after two years. Both agreed that a new, permanent rescue vehicle would be needed. And so the European Stability Mechanism was born. A decade on, it still bears the scars of the European sovereign debt crisis. Its job is to continue financing the €260bn still owed by the five countries that were bailed out. While Spain is due to pay back the €40bn it borrowed before the end of the decade, the €200bn lent to Greece in three rescue deals isn't due to be paid off until 2070. The 10-year anniversary of the ESM’s conception also coincides with a big change in its remit. Later this year, the Luxembourg-based institution will take on new responsibilities linked to bank resolution and economic monitoring. The transformation will leave it looking more like a European version of the International Monetary Fund with a vastly expanded mandate. “This feels like something really significant because it’s reopening the treaty,” said one official. The new treaty was signed in January and will enter into force once ratified by the 19 parliaments of euro-member countries. “In a sense, it’s a real new chapter and you will see an upgraded ESM.” By popular demand The biggest change will see it become a backstop to the Single Resolution Board, the body charged with the orderly resolution of failing banks. The ESM will raise money on its behalf as and when needed. Until now, the SRB’s resources have been limited to bank contributions. Access to the debt markets through the ESM will increase its available liquidity tenfold to €68bn. Such increased firepower will help avoid situations like the forced fire sale of Banco Popular, which was sold off overnight to Santander in June 2017 for just €1 – in part because the SRB could not muster the liquidity to allow Banco Popular to open branches the next day. Santander was the only bidder and looks set to make huge gains. Investors allege the sale was flawed and are suing the SRB for compensation. Billions of euros could be needed at very short notice in such situations. But the ESM has already proven itself adept in crisis management. In 2012, as part of the Spanish bailout, it issued bonds directly to banks, which then used them as collateral to generate liquidity. The ESM-SRB alliance has been brought forward due to the pandemic, amid concern that the economic fallout could destabilise some banks. The ESM will also take on new monitoring powers. While the old bailout programmes will not be affected by the changes, any new rescue packages will be designed, negotiated and monitored by the ESM in collaboration with the European Commission. It will also monitor economic developments in all 19 euro-member countries on an ongoing basis. Pandemic response Having been born out of crisis, the ESM clearly saw the pandemic as an opportunity to re-establish itself as a vital tool – but results have been mixed. Just weeks into the pandemic, it launched €240bn of pandemic crisis support loans for countries in need. Not a single euro has been drawn, although officials point out that the existence of the backstop may have helped prevent a flare-up in the debt crisis. Klaus Regling, the managing director of the ESM, also waded into the de

RATE
9 min read
IFR 2383 - 15 May - 21 May
Gareth Gore
IFR 2383 - 15 May 2021 - 21 May 2021

European blocks and IPOs stumble

European ECM is once again on thin ice after German online car seller MeinAuto pulled its IPO at the last moment and was followed by a dogs dinner of a debut from Canadian chip designer Alphawave IP Group that has imperilled the new issue pipeline. The challenge to ECM issuance was apparent earlier in the week when Monday night saw seven overnight trades launched to raise US$4.4bn, including the first market sale in nearly three years by the UK government of a part of its majority stake in NatWest. The following day five of those delivered losses to investors, led by the 13.8% slump in Evolution Gaming on the back of a SKr6.3bn (US$756m) ABB. The difficulty followed US markets trading off on Monday, led by tech names (Tesla dropped 6.4%), that filtered through into Asia and Europe on Tuesday. The prospects had looked good for both MeinAuto and Alphawave until then. MeinAuto was covered on its first day of bookbuilding on May 5 though final guidance on Tuesday morning was that pricing would come at the bottom of the €16–€20 range. By the afternoon the €326m Frankfurt float was scrapped. Alphawave’s £857m London Stock Exchange IPO had a similarly auspicious start, achieving coverage within hours of opening bookbuilding and guiding investors to pricing of 410p on Wednesday morning, the upper half of the 375p–430p price range. But Alphawave shares plummeted when trading started and were down 24% by late morning on Thursday. A minor pullback, presumably due to judicious use of the greenshoe, moderated losses to 16.3% by the end of the day. Ahead of Alphawave’s debut, ECM bankers had been concerned about volatility pushing back above 20% (and 25% on Thursday) but had seen limited impact on their live deals. Right decision “We could have done a deal on MeinAuto but felt that it wasn’t the right thing to proceed and put out that deal in this market,” said a head of syndicate involved in the deal. "The backdrop is brutal and the feedback we have had so far has been net positive, with investors grateful that we did not proceed.” Bankers away from MeinAuto agreed that cancellation had been the right choice. Another head of syndicate involved said: "Trying to price a deal into that environment wouldn’t be sustainable, as seen with Deliveroo. A market rotation is playing out but there is a lack of clarity and certainty for investors on their existing portfolios." Online food delivery business Deliveroo is still 39% below pricing on its April IPO, despite some positive news flow since listing. “The concern is getting a broken deal like Deliveroo, which will probably take a few quarters to get above water – if at all,” said the first head of syndicate. "Alphawave is a total car crash and it absolutely impacts the pipeline, including what we have already live or in pilot-fishing”. Too much choice Bankers generally noted how quickly the mood can change, especially on tech names, so the negativity could soon blow over. A senior ECM banker said on Thursday that his bank would still launch two IPOs this coming week and commodities dealer Marex filed for a LSE IPO on Friday. And yet some IPOs were already struggling to gain traction because investors are overwhelmed with choice. "We are fighting to get investors’ attention," said a banker at a European firm. "There are 20 or more early-look meetings for IPOs before summer, and more for assets in September. It's difficult to get meetings booked in if they’re not at the top of people’s radars." The risk from exposing so much of the pipeline was seen with the IPOs of Spanish renewable power companies Opdenergy and Ecoener two weeks ago. Both deals struggled because investors were more interested in other companies in the same sector that would follow, yet those are now less likely to come to market because Opdenergy cancelled and Ecoener has traded down. Another self-inflicted probl

EQY
5 min read
Americas, EMEA
IFR 2383 - 15 May - 21 May
Robert Venes
IFR 2383 - 15 May 2021 - 21 May 2021

European blocks and IPOs stumble

European ECM is once again on thin ice after German online car seller MeinAuto pulled its IPO at the last moment and was followed by a dogs dinner of a debut from Canadian chip designer Alphawave IP Group that has imperilled the new issue pipeline. The challenge to ECM issuance was apparent earlier in the week when Monday night saw seven overnight trades launched to raise US$4.4bn, including the first market sale in nearly three years by the UK government of a part of its majority stake in NatWest. The following day five of those delivered losses to investors, led by the 13.8% slump in Evolution Gaming on the back of a SKr6.3bn (US$756m) ABB. The difficulty followed US markets trading off on Monday, led by tech names (Tesla dropped 6.4%), that filtered through into Asia and Europe on Tuesday. The prospects had looked good for both MeinAuto and Alphawave until then. MeinAuto was covered on its first day of bookbuilding on May 5 though final guidance on Tuesday morning was that pricing would come at the bottom of the €16–€20 range. By the afternoon the €326m Frankfurt float was scrapped. Alphawave’s £857m London Stock Exchange IPO had a similarly auspicious start, achieving coverage within hours of opening bookbuilding and guiding investors to pricing of 410p on Wednesday morning, the upper half of the 375p–430p price range. But Alphawave shares plummeted when trading started and were down 24% by late morning on Thursday. A minor pullback, presumably due to judicious use of the greenshoe, moderated losses to 16.3% by the end of the day. Ahead of Alphawave’s debut, ECM bankers had been concerned about volatility pushing back above 20% (and 25% on Thursday) but had seen limited impact on their live deals. Right decision “We could have done a deal on MeinAuto but felt that it wasn’t the right thing to proceed and put out that deal in this market,” said a head of syndicate involved in the deal. "The backdrop is brutal and the feedback we have had so far has been net positive, with investors grateful that we did not proceed.” Bankers away from MeinAuto agreed that cancellation had been the right choice. Another head of syndicate involved said: "Trying to price a deal into that environment wouldn’t be sustainable, as seen with Deliveroo. A market rotation is playing out but there is a lack of clarity and certainty for investors on their existing portfolios." Online food delivery business Deliveroo is still 39% below pricing on its April IPO, despite some positive news flow since listing. “The concern is getting a broken deal like Deliveroo, which will probably take a few quarters to get above water – if at all,” said the first head of syndicate. "Alphawave is a total car crash and it absolutely impacts the pipeline, including what we have already live or in pilot-fishing”. Too much choice Bankers generally noted how quickly the mood can change, especially on tech names, so the negativity could soon blow over. A senior ECM banker said on Thursday that his bank would still launch two IPOs this coming week and commodities dealer Marex filed for a LSE IPO on Friday. And yet some IPOs were already struggling to gain traction because investors are overwhelmed with choice. "We are fighting to get investors’ attention," said a banker at a European firm. "There are 20 or more early-look meetings for IPOs before summer, and more for assets in September. It's difficult to get meetings booked in if they’re not at the top of people’s radars." The risk from exposing so much of the pipeline was seen with the IPOs of Spanish renewable power companies Opdenergy and Ecoener two weeks ago. Both deals struggled because investors were more interested in other companies in the same sector that would follow, yet those are now less likely to come to market because Opdenergy cancelled and Ecoener has traded down. Another self-inflicted probl

EQY
5 min read
Americas, EMEA
IFR 2383 - 15 May - 21 May
Robert Venes
IFR 2383 - 15 May 2021 - 21 May 2021

ESG focus reshapes Aussie coal loans

The investor base for loans to Australia's coal sector is changing rapidly as more banks step back from carbon-intensive industries to meet their sustainability goals. Recent refinancings for Port of Newcastle, the world's largest thermal coal export port, and the Loy Yang B coal-fired power plant in Victoria show that the sector is becoming increasingly reliant on a narrower group of lenders as the focus on environmental, social and governance factors upends long-standing relationships. Both deals took several months to close, underlining the challenges facing Australian borrowers in a sector with about US$13bn of loans due to mature by the end of 2023. “The ESG movement is strong and it’s very challenging to fight against it,” said a Sydney-based banker at an Asian bank. “Banks are competing for green credentials and keen to promote how ‘green and clean’ they are. It’s difficult to book new assets, particularly in thermal coal.” Four existing lenders to PON – ANZ, DBS Bank, MUFG and Mizuho Bank – declined to participate in its new deal, a A$666m (US$514m) refinancing that included A$515m of sustainability-linked debt. New lenders joining PON’s refinancing were Agricultural Bank of China, China Everbright Bank, China Merchants Bank, Citigroup and First Commercial Bank, accounting for A$365m combined, or nearly 55% of the overall deal. Meanwhile, three of Loy Yang B’s existing lenders – Intesa Sanpaolo, Sumitomo Mitsui Banking Corp and United Overseas Bank – dropped out from the A$440.5m refinancing for the 1,100 megawatt power plant, even at richer pricing than the original loan from December 2017. Loy Yang B, which is owned by Alinta Energy, a unit of Hong Kong-based Chow Tai Fook Enterprises, closed the refinancing last month with a syndicate of seven banks, including three Chinese banks that were first-time lenders to the project. "Banks’ standards on what’s bankable and what’s not are constantly evolving," said another Sydney-based banker at an Asian bank. "What may have seemed possible a couple of months ago, may no longer be today." Inconsistent approach The two loans also reveal a lack of common standards in lending to coal-related businesses. While some banks welcomed the structure of PON's refinancing – with targets linked to emissions reductions and a green tranche aimed at energy-efficient building projects and diversifying the port's revenue base – others shied away because of its exposure to the coal sector, which represented nearly 90% of shipments last year. Some bankers away from the transaction also raised concerns that a sustainability-linked loan for a coal port could risk hurting the credibility of the product, which is still in its infancy. The sustainable portion was more popular: of the 11 lenders participating in the financing package, only three took exposure to the non-SLL tranches. Others were wary that the deteriorating ties between Australia and its biggest trading partner, China, would hurt the business. China has refused to grant customs clearance for Australian coal imports since October amid an intensifying diplomatic row. Chinese banks, however, now make up six of the 11 banks in the new syndicate for PON, versus three of 10 for the 2018 financing. Loy Yang B's refinancing told a similar story. Some banks were unable to participate because of their internal policies around coal financing, but ANZ and DBS – both of which declined the PON deal – were happy to participate in Loy Yang B's refinancing despite its high emissions profile. Bank of China, China Everbright Bank and China Minsheng Bank were the mandated lead arrangers and bookrunners, with China Merchants Bank and Standard Chartered joining ANZ and DBS at the lower levels. Chinese support The heavy presence of Chinese banks in both loans is not surprising given the parentage of the borrowers. PON counts

BON LOA
7 min read
Asia
IFR 2383 - 15 May - 21 May
Mariko Ishikawa
IFR 2383 - 15 May 2021 - 21 May 2021

JPM gets sports finance wrong again, as it pulls €300m Infront loan

JP Morgan, still reeling after the European Super League debacle, has another sporting-related failure on its hands after it was forced to pull a €300m loan refinancing for Swiss sports marketing firm Infront Sports & Media from the European leveraged loan market. JP Morgan was leading the five-year term loan but failed to attract enough institutional investors. Infront's president and CEO is Philippe Blatter, the nephew of former FIFA president Sepp Blatter. Sepp Blatter is banned from participating in FIFA activities until 2028 following allegations of corruption. “People are wary . . . from an ESG perspective,” a senior banker said. Three other sources said that potential investors had similar views. It is the first financing to be pulled from Europe’s syndicated leveraged loan market this year. While increased supply has allowed investors to become more picky, leading to an increase in pricing or softening of documentation, no deal had previously failed. Pricing was quite rich on Infront, which was launched on April 16 and had posted a deadline for investor commitments by April 29. It was guided to pay 525bp–550bp over Euribor, with a 0% floor at 98.5 OID at launch. “The pricing on Infront itself was attractive but this deal could not be cured with pricing. Failed deals aren’t suddenly going to become a trend in the market, this was situation-specific,” a second senior banker said. It doesn’t bode well for JP Morgan as the second sporting failure on its books within as many months. JP Morgan declined to comment. JP Morgan was drawn into widespread and furious condemnation from fans after 12 major football clubs announced in April they planned to split and create the ESL. The US bank was widely criticised for lining up €3.5bn of financing to back the plan. Politicians and sports leaders quickly threatened sanctions to stop the breakaway going ahead. “JP Morgan totally misread the putt. It was like expecting Accrington Stanley to beat Liverpool, possible but no one thought betting on it would be a good idea . . . Essentially JP Morgan have been tone deaf,” the first banker said. Infront is now having to explore the private debt market in order to refinance its debt. Infront agreed a €450m three-year loan in 2018 that comprised a €350m term loan and a €100m revolving credit facility. The term loan, which had two one-year extension options, paid a margin of 175bp–325bp over Euribor, depending on leverage. There were options to increase the term loan by up to €100m and the RCF by up to €50m, with an overall cap of €100m across the facilities. Infront increased the term loan to €402.5m in September 2019. Infront is part of Chinese global sports events, media and marketing platform Wanda Sports Group.

LOA
3 min read
EMEA, Asia
IFR 2383 - 15 May - 21 May
Claire Ruckin
IFR 2383 - 15 May 2021 - 21 May 2021

ESG focus reshapes Aussie coal loans

The investor base for loans to Australia's coal sector is changing rapidly as more banks step back from carbon-intensive industries to meet their sustainability goals. Recent refinancings for Port of Newcastle, the world's largest thermal coal export port, and the Loy Yang B coal-fired power plant in Victoria show that the sector is becoming increasingly reliant on a narrower group of lenders as the focus on environmental, social and governance factors upends long-standing relationships. Both deals took several months to close, underlining the challenges facing Australian borrowers in a sector with about US$13bn of loans due to mature by the end of 2023. “The ESG movement is strong and it’s very challenging to fight against it,” said a Sydney-based banker at an Asian bank. “Banks are competing for green credentials and keen to promote how ‘green and clean’ they are. It’s difficult to book new assets, particularly in thermal coal.” Four existing lenders to PON – ANZ, DBS Bank, MUFG and Mizuho Bank – declined to participate in its new deal, a A$666m (US$514m) refinancing that included A$515m of sustainability-linked debt. New lenders joining PON’s refinancing were Agricultural Bank of China, China Everbright Bank, China Merchants Bank, Citigroup and First Commercial Bank, accounting for A$365m combined, or nearly 55% of the overall deal. Meanwhile, three of Loy Yang B’s existing lenders – Intesa Sanpaolo, Sumitomo Mitsui Banking Corp and United Overseas Bank – dropped out from the A$440.5m refinancing for the 1,100 megawatt power plant, even at richer pricing than the original loan from December 2017. Loy Yang B, which is owned by Alinta Energy, a unit of Hong Kong-based Chow Tai Fook Enterprises, closed the refinancing last month with a syndicate of seven banks, including three Chinese banks that were first-time lenders to the project. "Banks’ standards on what’s bankable and what’s not are constantly evolving," said another Sydney-based banker at an Asian bank. "What may have seemed possible a couple of months ago, may no longer be today." Inconsistent approach The two loans also reveal a lack of common standards in lending to coal-related businesses. While some banks welcomed the structure of PON's refinancing – with targets linked to emissions reductions and a green tranche aimed at energy-efficient building projects and diversifying the port's revenue base – others shied away because of its exposure to the coal sector, which represented nearly 90% of shipments last year. Some bankers away from the transaction also raised concerns that a sustainability-linked loan for a coal port could risk hurting the credibility of the product, which is still in its infancy. The sustainable portion was more popular: of the 11 lenders participating in the financing package, only three took exposure to the non-SLL tranches. Others were wary that the deteriorating ties between Australia and its biggest trading partner, China, would hurt the business. China has refused to grant customs clearance for Australian coal imports since October amid an intensifying diplomatic row. Chinese banks, however, now make up six of the 11 banks in the new syndicate for PON, versus three of 10 for the 2018 financing. Loy Yang B's refinancing told a similar story. Some banks were unable to participate because of their internal policies around coal financing, but ANZ and DBS – both of which declined the PON deal – were happy to participate in Loy Yang B's refinancing despite its high emissions profile. Bank of China, China Everbright Bank and China Minsheng Bank were the mandated lead arrangers and bookrunners, with China Merchants Bank and Standard Chartered joining ANZ and DBS at the lower levels. Chinese support The heavy presence of Chinese banks in both loans is not surprising given the parentage of the borrowers. PON counts

BON LOA
7 min read
Asia
IFR 2383 - 15 May - 21 May
Mariko Ishikawa
IFR 2383 - 15 May 2021 - 21 May 2021

Amazon delivers its largest bond yet

Online shopping giant Amazon priced its largest bond issue ever on Monday, taking advantage of the attractive funding rates despite its large cash position. Amazon priced an US$18.5bn eight-part deal, surpassing in both size and number of tranches the seven-part US$16bn transaction it priced in 2017 to fund its acquisition of Whole Foods. It is the second largest deal of 2021, behind Verizon's US$25bn deal, and larger than the US$15bn deals from Bank of America and Oracle. Amazon garnered US$41bn in orders at the peak as investors clamoured to fund what was the company's fifth US dollar bond offering since entering the space in 2012, IFR data show. One lead banker said the final book came in at US$37.65bn with demand most concentrated in the 30-year tranche. Proceeds will be used for general corporate purposes, which rating agency Fitch says includes refinancing some US$8.5bn of capital leases, used to fund infrastructure for the Amazon Web Services business, which will be rolled off in the coming years and replaced with new senior unsecured notes. "As such, the issuance is expected to be leverage-neutral over time as existing finance leases roll off and are not replaced," Fitch said in the report. Few companies have benefited from stay-at-home behaviour as much as Amazon. The company grew sales by 44% year-on-year in the first quarter as customers ordered more from the online store amid the coronavirus pandemic. Even with its large cash position, low rates and cheap financing costs were too good to resist. "With US$73bn of cash on hand, clearly they don’t need the deal, but being able to borrow at such low rates makes sense since the top line/Ebitda is growing so quickly," a banker at one broker-dealer said. Treasury rates demonstrated their resilience the previous Friday when April jobs numbers missed expectations of one million new jobs, with just 266,000 jobs added during the month. The 10-year Treasury rate briefly slipped below 1.5% following the news, but rebounded to close at 1.6% – 2bp higher from the day prior. "The Friday number was more questions than answers and people recognised that the data is noisy and volatile and they’ll look through it at this point," said Jim Caron, a portfolio manager at Morgan Stanley Investment Management. "Once rates stabilise, and companies believe it’s stable, issuance activity picks up because they want to get their funding done by May or June." Amazon overcoming some of the volatility in the market spoke to just how attractive funding rates are right now and could be a preview of other opportunistic issuers accessing the market. "In the run up to the summer you’ll see more of these opportunities for large companies like Amazon to issue jumbo deals," said Christophe Dugardyn, director of global capital markets at ING. "There are a lot of tech companies and similarly rated companies in the same position and you start to ask yourself ‘is this market as good as it gets?’" Debut sustainability bond While most of the funds will go to general corporate purposes, the two-year tranche is the company's debut sustainability bond offering. The company, rated A2/AA–/A+, managed to tighten spreads by 20bp through price progression on all the tranches, landing the two-year just 10bp wide of US Treasuries. Proceeds from that tranche will finance eligible green or social projects including the electrification of its delivery vans, renewable energy, building sustainable warehouse facilities, affordable housing and investing in training, according to the SEC filing. Most prominently, Amazon is making large investments in transportation this year after severing ties with FedEx as its main transportation partner in order to facilitate orders from warehouses with its own fleet of vehicles, research firm CreditSights noted in a report. ESG investors helped drive up demand for the two-year tranche, which allowed bookrunners Citigroup, JP Morgan

BON
5 min read
Americas, EMEA
IFR 2383 - 15 May - 21 May
William Hoffman
IFR 2383 - 15 May 2021 - 21 May 2021

JPM gets sports finance wrong again, as it pulls €300m Infront loan

JP Morgan, still reeling after the European Super League debacle, has another sporting-related failure on its hands after it was forced to pull a €300m loan refinancing for Swiss sports marketing firm Infront Sports & Media from the European leveraged loan market. JP Morgan was leading the five-year term loan but failed to attract enough institutional investors. Infront's president and CEO is Philippe Blatter, the nephew of former FIFA president Sepp Blatter. Sepp Blatter is banned from participating in FIFA activities until 2028 following allegations of corruption. “People are wary . . . from an ESG perspective,” a senior banker said. Three other sources said that potential investors had similar views. It is the first financing to be pulled from Europe’s syndicated leveraged loan market this year. While increased supply has allowed investors to become more picky, leading to an increase in pricing or softening of documentation, no deal had previously failed. Pricing was quite rich on Infront, which was launched on April 16 and had posted a deadline for investor commitments by April 29. It was guided to pay 525bp–550bp over Euribor, with a 0% floor at 98.5 OID at launch. “The pricing on Infront itself was attractive but this deal could not be cured with pricing. Failed deals aren’t suddenly going to become a trend in the market, this was situation-specific,” a second senior banker said. It doesn’t bode well for JP Morgan as the second sporting failure on its books within as many months. JP Morgan declined to comment. JP Morgan was drawn into widespread and furious condemnation from fans after 12 major football clubs announced in April they planned to split and create the ESL. The US bank was widely criticised for lining up €3.5bn of financing to back the plan. Politicians and sports leaders quickly threatened sanctions to stop the breakaway going ahead. “JP Morgan totally misread the putt. It was like expecting Accrington Stanley to beat Liverpool, possible but no one thought betting on it would be a good idea . . . Essentially JP Morgan have been tone deaf,” the first banker said. Infront is now having to explore the private debt market in order to refinance its debt. Infront agreed a €450m three-year loan in 2018 that comprised a €350m term loan and a €100m revolving credit facility. The term loan, which had two one-year extension options, paid a margin of 175bp–325bp over Euribor, depending on leverage. There were options to increase the term loan by up to €100m and the RCF by up to €50m, with an overall cap of €100m across the facilities. Infront increased the term loan to €402.5m in September 2019. Infront is part of Chinese global sports events, media and marketing platform Wanda Sports Group.

LOA
3 min read
EMEA, Asia
IFR 2383 - 15 May - 21 May
Claire Ruckin

Bonds

US high-yield supply surges as corporates grab refinancing opportunity

Elevated US Treasury yields have emboldened high-yield corporate borrowers to take advantage of cheap borrowing costs to refinance their debt, spurring analysts to hike their issuance forecasts and put the market on track for what could be another record year of supply. It has been another active week in the high-yield primary with issuers pricing US$10.625bn across the first three days of the week. Refinancing has dominated the use of proceeds – US$7.95bn of the new debt raised through Wednesday will be used at least in part to refinance existing debt, according to IFR data. With one eye on possible rate hikes high-yield corporate treasurers are becoming bolder in their refinancing plans, according to Andres Copete, director of debt capital markets at ING. "Companies are now starting to see a scenario where rates are going to creep up, inflation is going to make the Fed move sooner than people expect, and so they are going after refinancings that are less obvious,” he said. In this low-yield environment companies have been aggressively refinancing any callable bonds that mature over the next couple of years. JP Morgan data shows high-yield issuers have raised US$220bn of bonds through May 7, but only US$66.3bn was not for refinancing. "We keep thinking that we have done all the refinancing that is left to do, but there is more," said Andy Feltus, co-head of high-yield at Amundi US. Now, more companies are looking to pay up to take out bonds that are not yet callable, an expensive option which would require a make-whole payment to compensate investors, or issuing equity to pay down bonds using an equity claw feature, said Copete. "Corporates are saying they want to take advantage of the market right now," he said. "This kind of refinancing activity is going to keep volumes up." Records in sight T-Mobile (Ba3/BB/BB+) priced the largest refinancing deal this week, as it sold US$3bn in a three-part tap at record low levels for a high-yield borrower. Proceeds will be used to redeem its 6% senior notes due 2023 and 6% senior notes due 2024. But there were also refinancing deals from the likes of aluminum product producer Kaiser Aluminum (B1/BB/BB), middle market lender MidCap Financial Issuer Trust (B1/B+), hotel REIT Park Hotels & Resorts (B1/BB-), and homebuilder Brookfield Residential (B2/B+). All of this refinancing activity has caused banks to rethink their supply forecasts for 2021. Many Wall Street analysts were expecting a drop in high-yield supply this year after a record 2020 that saw US$438bn of issuance according to IFR data, spurred primarily by liquidity needs. That did not materialize. January, March and April all delivered record calendar months this year, according to JP Morgan. The bank on May 7 raised its new issue forecast to US$525bn, which would be a record for gross issuance and would include a record US$365bn of refinancing activity. "I keep thinking we'll get a slowdown come summer, but it will still be relatively busy. Refinancing will continue to dominate unless we get some mega LBO deals," said Feltus. In this low-yield environment investors are keen to put cash to work, but they are also wary that companies are taking advantage of high-yield spreads being close to all-time tights which leaves little margin for error for investors when it comes to picking the right credits. "We’re missing a lot more deals than we were a year ago. Back then every deal looked good, you were either getting paid a lot or you had airtight documentation. It's definitely not that kind of market anymore," said Feltus.

BON
4 min read
Americas
David Bell

Latest News - Global

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RATE FX

BUZZ-AUD/USD-Buoyant as US inflation fears ease, upside limited

AUD/USD starts week on bid note after rallying 0.7% Fri on weak U.S. data Boosted by lower U.S. yields as inflation fears ebb after tepid retail sales Buoyant risk mood supports; Wall Street ends volatile week sharply higher Rally capped by retreating iron ore & copper prices nL1N2N10GXnL1N2N10OF Virus spread in Asia may weigh on AUD sentiment nL2N2N3013nL2N2N304I China April activity data due Mon likely to show recovery extending, support Resistance 0.7790-0.7800, 0.7815-20, support 0.7745-50, 0.7715-25 For more click on FXBUZ AUD: https://tmsnrt.rs/2Qt18Ra

RATE FX
2 min read
Global
krishna k

RATE FX

BUZZ-W/E News-Taiwan new COVID-19 rules, UK lockdown decision

Taiwan urges no panic buying as new COVID-19 rules kick off nL2N2N3013 UK to make final lockdown easing decision on June 14 nL2N2N303K Singapore to shut schools as coronavirus cases risenL2N2N304I Italy study shows virus infections, deaths plummeting after jabsnR1N2MF00B GRAPHIC-Take Five: Retail, PMIs and a timely tantrum anniversarynL8N2MZ688 U.S. retailers set for earnings stage after market turbulence nL1N2MZ3KE For more click on FXBUZ Taper tantrum: https://tmsnrt.rs/3hmT27r

RATE FX
2 min read
Global
krishna k

FX option expiries for 10-am New York cut

Monday May 17 EUR/USD: 1.2120 (635M), 1.2150 (1.9BLN), 1.2155 (236M) USD/CHF: 0.9050 (200M) GBP/USD: 1.4000 (282M) AUD/USD: 0.7755-60 (1.4BLN) USD/JPY: 108.80-85 (470M), 109.25 (270M), 109.90-110.00 (370M) Tuesday May 18 USD/CHF: 0.9140 (740M). USD/CHF: 1.4000 (202M) AUD/USD: 0.7750 (1BLN), 0.7800 (201M) NZD/USD: 0.7225 (268M), 0.7260-70 (1.4BLN) UD/CAD: 1.1950 (887M) USD/JPY: 108.60-75 (400M) Wednesday May 19 EUR/USD: 1.2100 (383M) 1.2150 (1.7BLN), 1.2170-75 (500M) GBP/USD: 1.4100 (228M) AUD/USD: 0.7735 (387M), 0.7875-80 (400M) USD/JPY: 108.90-109.00 (636M), 109.50 (905M), 109.70 (250M) Thursday May 20 EUR/USD: 1.2045-55 (1.1BLN) , 1.2075 (340M), 1.2160-75 (1.7BLN), 1.2190-95 (380M) USD/CHF: 0.9000 (195M), 0.9035 (556M), 0.9150 (500M), 0.9200 (485M) GBP/USD: 1.3990-1.4000 (592M), 1.4020 (607M) AUD/USD: 0.7730-35 (665M), 0.7760-65 (610M), 0.7800-15 (530M), 0.7915 (300M ) USD/CAD: 1.2125-30 (400M). AUD/JPY: 84.50 (409M) USD/JPY: 108.50 (350M), 108.65-75 (325M), 108.85-90 ( 300M), 109.00-10 (630M), 109.50 (290M), 110.00 (721M), Friday May 21 EUR/USD: 1.2080 (740M), 1.2145-50 (350M), 1.2160-70 (600M), 1.2200 (500M) USD/CHF: 0.9000-20 (500M). EUR/GBP: 0.8500 (700M) USD/CHF: 1.4065-75 (330M), 1.4095-1.4100 (380M) AUD/USD: 0.7690 (509M), 0.7750-60 (337M), 0.7780-90 (300M) NZD/USD: 0.7200 (755M), 0.7250 (201M) USD/JPY: 108.50-55 (482M), 109.65 (315M), 109.90-110.00 (350M)

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Equities

Marqeta eyes June debut

Fast-growing payments software firm Marqeta filed with the SEC on Friday for a Nasdaq IPO that could raise more than US$1bn and play a key role in reviving the out-of-sorts US new issue market. Goldman Sachs and JP Morgan are named in the filing atop a 10-firm underwriting syndicate. The filing puts the IPO on track to potentially launch right after Memorial Day on May 31, even as several companies opted in the past week to postpone their plans to go public. Founded in 2010 and based in Oakland, California, Marqeta’s “modern” card-issuing platform helps businesses such as Affirm, DoorDash, Instacart, Klarna, and Square create customised payment cards for customers. Marqeta shapes as one of the fastest growing companies to go public in recent times. The company, which processed US$60bn of transaction volume last year, lifted revenue 123% to US$108m in the first quarter of 2021. Marqeta also turned profitable at the adjusted Ebitda line during the quarter, generating US$1.65m or a margin of 2% versus a loss of US$10.4m in the same quarter a year ago. The IPO filing highlights Marqeta's exposure to favourable payments trends. They include the growth of e-commerce, the convergence of software and payments, the push for improved user experience via software development, greater trust in new technologies, and the rise of the gig economy and open data. Marqeta’s biggest shareholder with 14.1% is founder and CEO Jason Gardner, who previously co-founded a rent and lease platform sold to MoneyGram International in 2007. “We plan to make bold decisions and invest in the business with specific long-term outcomes in mind,” Gardner writes in a letter to investors contained in the filing. “At my core, I am an entrepreneur. I plan to use that DNA as we look to chart a path forward and continue leading the industry. We will use data, and we will trust our instincts and those of our customers.” The company is reportedly seeking a valuation of more than US$10bn, implying a US$1bn-plus IPO if it sells roughly 10% of outstanding. According to the filing, the most recent secondary transactions involving insiders included Gardner’s sale last year of about 3m shares at prices of up to US$10.00 a share, valuing the company at around the US$5bn mark.

EQY
2 min read
Americas

Structured Finance

RMBS: GSMS 2021-PJ5 (144a) Prime Jumbo *Priced*

Goldman Sachs priced on Friday its private (144a) US$565.696m (offered) prime-jumbo residential mortgage-backed securitization issued from GS Mortgage Backed Securities Trust 2021-PJ5. Sole Structurer and Bookrunner: Goldman Sachs & Co. LLC - Collateral Details - Size (mm): $597.36 Type: 30yr WAC: 2.88 WALA: 2 WAM: 358 ALS (mm): $1.012 OLTV: 69.27 CLTV: 69.42 FICO: 765 % CA: 49.4 Deal Name: GSMBS 2021-PJ5 Pricing Speed: 15 CPR -Anticipated Timing- Settlement: 5/28/21

SF
Quick read
Americas
Doris Dastas

RATE FX

BUZZ-Replay-Advantage EUR/USD, retail hiccup, ether gains

Analysis: Retail sales a shot the arm for the Fed, but not the dollar nL1N2N11FI Advantage EUR/USD bulls after soft US retail sales nL1N2N11BA Dollar, yen stalemate after US retail sales, Fed minutes next up nL1N2N11KS Sterling could rally toward May high 1.4167 after weak retail sales nL1N2N118H Spot, technicals coverage: Bitcoin, ether regain key 50k, 4k as risk rallies after tepid retail sales nL1N2N11J7 EUR/USD-Yields, commodities, stocks give longs some traction nL1N2N1230 USD/JPY-Stalled, both havens sold as inflation fears ebb after sales data nL1N2N128Q Sterling bulls eye trend, 2021 highs, on dour data, steady Fed view nL1N2N11ZR AUD/USD-Data, yields help drive a cloud break nL1N2N123N

RATE FX
Quick read
Global
Burton Frierson

Structured Finance

CMBS: MHC Trust 2021-MHC2 US$352m *Priced*

A private floating-rate commercial mortgage-backed securitization transaction MHC Trust 2021-MHC2 priced on Friday, May 14th. Co-lead managers and joint bookrunners: Morgan Stanley; Barclays and Bank of America Securities. PRIVATELY OFFERED CERTIFICATES: (1) INITIAL MATURITY* (2) FULL EXTENSION* - TRANSACTION DETAILS - Collateral: The Mortgage Loan will be will be primarily secured by first mortgage liens on the Borrowers’ fee simple interests in 39 manufactured housing communities (collectively, the “Properties” or the “Portfolio”) located in eight states. Mortgage Loan Balance: $352.00mm Mortgage Interest Rate: One-month LIBOR (floored at 0.0000%) plus a weighted average component spread (the “Spread”) of approximately 1.9500%. Term: Two years, with three, one-year extension options, subject to certain conditions including but not limited to (i) no event of default existing as of the commencement of the applicable extension period and (ii) the Borrowers’ purchase (or the extension) of interest rate protection at a strike price no greater than the greater of (a) 4.0000% or (b) the rate that when added to the spread would result in a DSCR of 1.10x. Amortization Type: Interest-Only Cut-Off LTV: 77.8% UW NCF DSCR: 3.22x UW NOI DY: 7.0% UW NCF DY: 6.9% Physical Occupancy: 91.3% Sponsor Brookfield Strategic Real Estate Partners II MASTER SERVICER: Midland Loan Services, a Division of PNC Bank, National Association. SPECIAL SERVICER: CWCapital Asset Management LLC TRUSTEE: Wells Fargo Bank, National Association. B&D: MS EXPECTED SETTLEMENT: On or about May 27, 2021

SF
2 min read
Americas
Doris Dastas

RATE FX

BUZZ-IMM: Specs heed Fed's steady rate view; EUR, CAD and GBP buyers lead way

USD IMM net spec short increased in May 5-11 period nL1N2N12C5 EUR buyers back in force +9,078 contracts to 93,907; EUR +1.08% in period Yen gains lagged other majors was +0.63% in period; specs sold 236 contracts GBP biggest riser +1.93%; specs bought 8,328 contracts now long 28,176 CAD remained bid post-BoE taper specs buy 12,682 now long 38,629 AUD (+940) and NZD (+756) moved higher on reflation talk BTC reversed last period gain, specs sold 174 contracts now short 1,938 Majors w/IMM Perf Chart: https://tmsnrt.rs/3eNs6fr IMM Positions Chart: https://tmsnrt.rs/3uTMJfG

RATE FX
2 min read
Global
Paul Spirgel

RATE FX

USD/JPY Trader

Uptrend wobbling after this week's limited clearances of last week's May high and the daily cloud top. Drop back fully inside the cloud Friday after Wednesday and Thursday's highs were rejected by the upper 21-day Bolli also leaves the uptrend in limbo. 2021's recovery will itself be at risk if the up TL from January, Monday at 108.81 on EBS, is eventually closed below.

RATE FX
2 min read
Asia
Randolph Donney
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BUZZ-AUD/USD-Buoyant as US inflation fears ease, upside limited
BUZZ-W/E News-Taiwan new COVID-19 rules, UK lockdown decision
FX option expiries for 10-am New York cut
Marqeta eyes June debut
US ECON - IFR US Economics Weekly Preview
RMBS: GSMS 2021-PJ5 (144a) Prime Jumbo *Priced*
BUZZ-Replay-Advantage EUR/USD, retail hiccup, ether gains
CMBS: MHC Trust 2021-MHC2 US$352m *Priced*
MBS CLOSE - Mostly tighter as market heals further as long-end leads rally; 15-yr rolls bid
US GOVTS WRAP - Another big data miss relegates range trade for treasuries
BUZZ-IMM: Specs heed Fed's steady rate view; EUR, CAD and GBP buyers lead way
Majors Position Summary
USD/JPY Trader
High-yield primary market sees US$13.2bn in supply this week
PRICED - JBS USA US$500m (wng) 10.5-yr NC5.5 snr note at 3.75%
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