Saudi petrochemical company Petro Rabigh has completed its SR7.95bn (US$2.12bn) rights issue with the sale of all unsubscribed shares. The company said demand for the residual shares amounted to 16.5 times the roughly 23.1m shares available that were sold for an average SR16.89 each to raise SR390.4m. Interest came from a wide group of local, regional and international investors. Petro Rabigh saw 97.15% take-up for the rights issue with 772.35m shares subscribed out of 795m offered on a 0.907534-for-1 basis at SR10 each. The company said on Tuesday that the number of rump shares had been increased from the previously announced 22.64m due to adjustments following completion of the reconciliation process. The company had already corrected the number once before. Proceeds will be used to help bring down debt and increase the company’s share capital, which it says is in line with its strategic objectives. The shares closed up 1.3% at SR17.30 on Tuesday. A syndicate of banks underwrote the deal with HSBC as financial adviser and lead manager, and GIB Capital, Riyad Capital, SNB Capital, Alinma Investment, Arab National Investment Company, Saudi Fransi Capital and Aljazira Capital also involved. Petro Rabigh is expected to be one of the last pre-summer deals though bankers are expecting a reasonably busy September in the Middle East with some already reporting progress in early look work and a likelihood of a wave of Saudi deals. Less positive for Middle Eastern deal flow was the response to real estate group Tecom's debut in Dubai on Tuesday. Shares fell more than 17% after pricing at the top of the Dh2.46–Dh2.67 range in its Dh1.7bn (US$454m) IPO, despite books that were more than 20 times subscribed. The shares on Tuesday touched a low of Dh2.21 during the day before ending at Dh2.44, still down 8.6% on the day and notably below the bottom of the range. It isn't the first Dubai IPO to disappoint when trading began. The previous float on the Dubai Financial Market, the Dh22.3bn IPO of Dubai Electricity and Water Authority, pulled in demand of US$86bn yet shares closed on Tuesday just 2% above the IPO price despite rising more than 15% on debut in April. One banker on Tecom acknowledged softer trading had left everybody disappointed, saying that it would mean more caution over pricing. Trading saw a mix of groups selling with no skew towards a particular type of investor. Tecom had a week’s lag between pricing and its first day of trading, which is far from ideal during the current volatility. The DFM General index was down 1.13% on Tuesday and has fallen 4% over five days. The banker noted strong fundamentals remained in the Middle East though which, although not fully insulated, was in a better place compared to other regions. A second banker pointed to the large variation in the region, arguing against a broad brush approach and comparing it with Europe. “You can’t compare Swedish or Nordic markets with Italian or French, for example,” he said. Supporting that point to some extent, Borouge shares in Abu Dhabi are up 18.4% since its Dh7.4bn IPO last month, though 23% lower than its debut close. Emirates NDB, First Abu Dhabi Bank, Goldman Sachs, Morgan Stanley and UBS were joint bookrunners on Tecom.
The green format gave Rentenbank's 10-year extra appeal on Tuesday, with the transaction gathering over €3.3bn of demand in a market which, while better in tone, remains challenged. The German agency launched a €1bn trade at 11bp through mid-swaps, 2bp tighter than guidance, via BNP Paribas, Bank of America, DekaBank and Societe Generale. "If you look at their deals historically, they always tend to be quite difficult. But here, it's gone very well, and that's despite coming on the expensive side, I think," a syndicate banker said. "I'd argue that, looking at recent deals, the green aspect has been very helpful." KfW, for example, pulled together €13.6bn in orders for a €4bn seven-year green last week, while the likes of Bpifrance and Swedish Export Credit Corporation also harnessed the power of the format to land successful transactions at the end of June. Already, two more issuers are looking to follow, albeit in a slightly different ESG format. Austria's OeKB has mandated BNP Paribas, HSBC, Raiffeisen Bank International and UniCredit for a €500m no-grow five-year sustainability bond, while BNG is planning a euro 10-year sustainable bond via Credit Agricole, DZ Bank, Rabobank and Santander. "For a high-quality credit, €1bn of green clearly is fine," another banker said. "In the case of EIB, we saw that €1bn in a part of the curve that offers value works well. Generally, I would say that the euro market would seem to offer reasonable execution. There's a bit more uncertainty in dollars after AfDB and CDPQ. It was very volatile going into the end of the first half and quarter-end. Now that's out of the way, we just need a guinea pig to step in and test the market." As has been the case on recent transactions, there were varying views on how to calculate relative value. Some bankers looked at Rentenbank's own curve, others at where KfW's 1.375% €3bn June 2032 green bond that priced in April was trading, and others versus where a new theoretical KfW would price. At less 11bp, it was around 5bp–6bp back of KfW's secondary curve and more or less flat to the borrower's own curve. "I'm not sure investors are looking at the deal that way [versus Rentenbank]," a third banker said. "It's more about the relative value versus KfW and the Bund spread, that's more of a driver. I think, right now, pricing through your own curve like we were a few months ago is challenging." He added that, while deals were getting done and gathering decent demand, it might not be enough of an impetus for every issuer to jump in unless they are keen to do some funding before the summer break. "Rentenbank today got a very good result and it was great to see them react to the market and pay a decent concession," the third banker said. "This is a sensible level to offer in this kind of market, and the strategy paid off." In the case of Region Nouvelle-Aquitaine, it was an "important lead order" that helped get the trade off the ground, a lead said. The €100m will-not-grow 20-year sustainable note was a debut for the region as it seeks to increase its bond market visibility. Books closed over €120m, excluding JLM interest. "We executed over two days given the volatile market backdrop," the lead said. "It allowed us to gather feedback and execute rapidly, with the help of the lead order." The issue priced at 30bp over interpolated OATs, in line with guidance and in the middle of the trading range for similar French regions.
Corporate issuers have not completely given up on any transactions this side of September but violent moves in rates are making the journey to markets a hazardous one. There were no new issues for a fourth straight session on Tuesday, with only one issuer, Celanese Corporation, in the euro public pipeline. The extended pause follows supply of only €2bn in the first half of last week. "We've still got issuers monitoring the pre-summer window, but there's not a big rush. They have time on their hands, so are relatively patient," said a syndicate banker. "We're not really worried about trades being pulled, and have guided our clients to meet their pricing parameters but that becomes very difficult when rates move meaningfully intraday." Five-year mid-swaps, for example, are around 1.7%, after starting last week at above 2% and dropping to as low as 1.64% on Friday. "The market is very quiet for good reasons. With the volatility in the rates market, whether that's from Bunds or swaps that are moving 10bp–15bp intraday, investors would naturally want to build their cushions to show interest in new deals," said a DCM head. High-grade corporate deals last week confirmed that investors do have cash to put to work, but the new issue premiums remained elevated, as investors are also more inclined to hold onto higher cash balances to meet any withdrawals, according to JP Morgan credit analysts. While the demand-side technicals do not look particularly supportive, earnings blackouts and holidays in the US and Europe are also helping to keep a lid on primary activity. "This week will be very slow due to the US Independence Day holiday and there's also US nonfarm payrolls. It's the same next week, with the Bastille Day holiday on Thursday," said a second syndicate banker. Corporate issuance is about one-fifth below last year's H1 volumes in the euro market. Bankers are hoping that supply will not slip further behind in the second half of the year. "We're down around 20% this year and it'd be nice to see it staying at that level," said the DCM head. "It's going to be another window-driven period like in the past several months, but there should be windows and, if the market is there, there are a number of issuers that would want to go." Another DCM head sees the market reopening from the summer supply lull "fairly early in August", as the more frequent and well-recognised borrowers will want to pick the right days instead of waiting. "If you see some supply and the market is a little bit calmer, it feels like late August could be a bit more accommodating because we've had less supply and people might take advantage of it, saying I don't want to be number 25 when it comes to mid-September."
Corporate issuers have not completely given up on any transactions this side of September but violent moves in rates are making the journey to markets a hazardous one. There were no new issues for a fourth straight session on Tuesday, with only one issuer, Celanese Corporation, in the euro public pipeline. The extended pause follows supply of only €2bn in the first half of last week. "We've still got issuers monitoring the pre-summer window, but there's not a big rush. They have time on their hands, so are relatively patient," said a syndicate banker. "We're not really worried about trades being pulled, and have guided our clients to meet their pricing parameters but that becomes very difficult when rates move meaningfully intraday." Five-year mid-swaps, for example, are around 1.7%, after starting last week at above 2% and dropping to as low as 1.64% on Friday. "The market is very quiet for good reasons. With the volatility in the rates market, whether that's from Bunds or swaps that are moving 10bp–15bp intraday, investors would naturally want to build their cushions to show interest in new deals," said a DCM head. High-grade corporate deals last week confirmed that investors do have cash to put to work, but the new issue premiums remained elevated, as investors are also more inclined to hold onto higher cash balances to meet any withdrawals, according to JP Morgan credit analysts. While the demand-side technicals do not look particularly supportive, earnings blackouts and holidays in the US and Europe are also helping to keep a lid on primary activity. "This week will be very slow due to the US Independence Day holiday and there's also US nonfarm payrolls. It's the same next week, with the Bastille Day holiday on Thursday," said a second syndicate banker. Corporate issuance is about one-fifth below last year's H1 volumes in the euro market. Bankers are hoping that supply will not slip further behind in the second half of the year. "We're down around 20% this year and it'd be nice to see it staying at that level," said the DCM head. "It's going to be another window-driven period like in the past several months, but there should be windows and, if the market is there, there are a number of issuers that would want to go." Another DCM head sees the market reopening from the summer supply lull "fairly early in August", as the more frequent and well-recognised borrowers will want to pick the right days instead of waiting. "If you see some supply and the market is a little bit calmer, it feels like late August could be a bit more accommodating because we've had less supply and people might take advantage of it, saying I don't want to be number 25 when it comes to mid-September."
Syndicated lending in EMEA slumped to US$345.5bn in the first six months of the year, 41% lower than the previous year as loan market activity was hit by a maelstrom of macroeconomic uncertainty, exacerbated by Russia’s war in Ukraine. Drastically higher energy prices, rising raw material and supply chain costs have hit industries and consumers in an increasingly inflationary environment, while rising global food prices after the loss of agricultural exports and fertilisers from Ukraine and Russia have added to the uncertainty. “It’s a difficult market at the moment, there’s a severe lack of visibility and people are searching for some orientation,” a senior banker said. “We have to get comfortable with the new normal and to come to terms with these circumstances, but we really don’t know where it’s going or what the war in Ukraine could lead to.” Amid increased energy prices and higher raw material costs, oil and gas companies and utilities, sought to strengthen their liquidity. French oil and gas group TotalEnergies raised an US$8bn short-term committed syndicated credit line in April. It has an initial 12-month maturity with two six-month extension options. Finnish utility Fortum completed a €5.5bn long-term revolving credit facility in June after Italy’s Enel increased its record-sized sustainability-linked revolving credit facility by €3.5bn to €13.5bn, in May. Meanwhile, German utility RWE increased its available credit lines to €8bn in the first half to bolster its liquidity. Refinancing, the traditional driver of loan market activity slumped to US$164bn in the first half, 50% down on last year as corporates held out for greater visibility. However, with an anticipated rise in pricing on the horizon, many companies are preparing for early refinancing over the summer to lock in cheaper long-term pricing, bankers said. M&A activity was hit even harder, with just US$42bn of acquisition financing arranged in the first half, 67% down on the previous year. “The lack of M&A is not surprising given the uncertainty over valuations,” another banker said. “After the promise of activity and opportunistic financing after Covid at the beginning of the year, it’s very much on the back burner.” However, there are a handful of large ticket M&A financings in the works. Tobacco company Philip Morris is backing its US$16bn acquisition of Swedish Match with a US$17bn bridge loan. The bridge has been reduced to US$11bn through a €5.5bn term loan arranged in June. Germany’s Siemens Energy is backing its around €4bn bid to buy out minority shareholders of Spanish-listed Siemens Gamesa Renewable Energy with a fully underwritten €4.2bn bridge loan. Meanwhile, the Benetton family and Blackstone’s takeover offer for Italian airport and motorway operator Atlantia is being backed with €8.225bn of commitments from a group of lending banks, while Dutch life sciences and materials science company DSM is backing its merger with Swiss perfumes and flavours company Firmenich with a €3bn bridge loan. Central & Eastern Europe, Middle East and Africa first half volume was just US$59.7bn, a drop of 39% on the previous year with volumes down across the board. Activity in the Middle East was down 29% to US$39bn, despite the refinancing of oil giant Saudi Aramco’s US$10bn RCF in April. Regional borrowers are benefitting from soaring energy prices, which may hit appetite for new loans. Lending in Central and Eastern Europe, including Russia and Turkey, remains the most heavily impacted by the ongoing crisis with the effective closure of the Russian loan market to international lenders, with volume falling 57% in the first half to US$13.67bn. Volume in the region has been propped up by Turkish banks’ biannual refinancings. Fragile market The leveraged loans market struggled with volatility an
Bundesbank president Joachim Nagel is back in the headlights following 1) revelations from Reuters that he objected to the decision on an anti-fragmentation tool at the special meeting on June 15 and 2) a speech on Monday cautioning the ECB over using "monetary policy instruments to limit risk premia". A short history littered with rifts: There is a whiff of the old Bundesbank in the comments from Nagel and likely reflects early cracks between the ECB and Bundesbank on the anti-fragmentation tool that are likely to widen. Disagreement on policy and tools between the ECB and Bundsebank is not uncommon as was evident with Axel Weber, Jens Weidmann and Juergen Stark with two of those, Weber and Stark*, resigning in protest and the third, Weidmann, testifying against the OMT programme. It is too early to conclude that a similar rift is in the making but the risks are certainly there for a more troubling period for ECB president Lagarde. Nagel cautions on anti-fragmentation tool: The Bundesbank president in a speech on Monday said 1) policy must not be driven by "what are often very short-term developments"; 2) unusual measures to combat fragmentation are justified in "exceptional circumstances and under narrowly defined conditions"; 3) cautioned against using monetary policy to limit risk premiums; and 4) said it is "virtually impossible to establish for sure whether a widened spread is fundamentally justified". He went further and laid out conditions that should apply to a new instrument that include help in exceptional circumstances and narrowly defined conditions. Other hawks not on same page: While Nagel has chosen to publicly caution against an anti-fragmentation tool, other hawks have been more accommodating. Pierre Wunsch (Belgium) and Klaas Knot (Netherlands) have both provided their support since the ECB meeting on June 15. Nagel's comments may reflect the debate at home where elevated inflation is leading to greater sensitivities creating the need for political cover. It is important to recognise that one of the Nagel's wants policy to focus on very high inflation rates and for policy to concentrate on combating high inflation. Reuters this week highlighted that liquidity-absorbing operations might be a concession rather than outright bond sales that would have caused the Bundesbank to record losses. Policy direction clear, Bundesbank a minority: Under ex-ECB president Draghi it was clear that the Bundesbank is one voice within the ECB governing council and rarely altered the direction of policy. Draghi's style and strategic use of leadership was key, and it will be interesting how ECB president Christine Lagarde approaches open dissent. Her objective since heading the ECB has been to create a consensus looking to keep policy disagreements from spilling out into the open. But the direction of policy is clear with or without the backing of the Bundesbank and the ECB will ensure that legally its anti-fragmentation tool will pass any hurdles in the GCC or ECJ. *Stark was at the ECB at the time but had previously been Bundesbank president.
Syndicated lending in EMEA slumped to US$345.5bn in the first six months of the year, 41% lower than the previous year as loan market activity was hit by a maelstrom of macroeconomic uncertainty, exacerbated by Russia’s war in Ukraine. Drastically higher energy prices, rising raw material and supply chain costs have hit industries and consumers in an increasingly inflationary environment, while rising global food prices after the loss of agricultural exports and fertilisers from Ukraine and Russia have added to the uncertainty. “It’s a difficult market at the moment, there’s a severe lack of visibility and people are searching for some orientation,” a senior banker said. “We have to get comfortable with the new normal and to come to terms with these circumstances, but we really don’t know where it’s going or what the war in Ukraine could lead to.” Amid increased energy prices and higher raw material costs, oil and gas companies and utilities, sought to strengthen their liquidity. French oil and gas group TotalEnergies raised an US$8bn short-term committed syndicated credit line in April. It has an initial 12-month maturity with two six-month extension options. Finnish utility Fortum completed a €5.5bn long-term revolving credit facility in June after Italy’s Enel increased its record-sized sustainability-linked revolving credit facility by €3.5bn to €13.5bn, in May. Meanwhile, German utility RWE increased its available credit lines to €8bn in the first half to bolster its liquidity. Refinancing, the traditional driver of loan market activity slumped to US$164bn in the first half, 50% down on last year as corporates held out for greater visibility. However, with an anticipated rise in pricing on the horizon, many companies are preparing for early refinancing over the summer to lock in cheaper long-term pricing, bankers said. M&A activity was hit even harder, with just US$42bn of acquisition financing arranged in the first half, 67% down on the previous year. “The lack of M&A is not surprising given the uncertainty over valuations,” another banker said. “After the promise of activity and opportunistic financing after Covid at the beginning of the year, it’s very much on the back burner.” However, there are a handful of large ticket M&A financings in the works. Tobacco company Philip Morris is backing its US$16bn acquisition of Swedish Match with a US$17bn bridge loan. The bridge has been reduced to US$11bn through a €5.5bn term loan arranged in June. Germany’s Siemens Energy is backing its around €4bn bid to buy out minority shareholders of Spanish-listed Siemens Gamesa Renewable Energy with a fully underwritten €4.2bn bridge loan. Meanwhile, the Benetton family and Blackstone’s takeover offer for Italian airport and motorway operator Atlantia is being backed with €8.225bn of commitments from a group of lending banks, while Dutch life sciences and materials science company DSM is backing its merger with Swiss perfumes and flavours company Firmenich with a €3bn bridge loan. Central & Eastern Europe, Middle East and Africa first half volume was just US$59.7bn, a drop of 39% on the previous year with volumes down across the board. Activity in the Middle East was down 29% to US$39bn, despite the refinancing of oil giant Saudi Aramco’s US$10bn RCF in April. Regional borrowers are benefitting from soaring energy prices, which may hit appetite for new loans. Lending in Central and Eastern Europe, including Russia and Turkey, remains the most heavily impacted by the ongoing crisis with the effective closure of the Russian loan market to international lenders, with volume falling 57% in the first half to US$13.67bn. Volume in the region has been propped up by Turkish banks’ biannual refinancings. Fragile market The leveraged loans market struggled with volatility an
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Bundesbank president Joachim Nagel is back in the headlights following 1) revelations from Reuters that he objected to the decision on an anti-fragmentation tool at the special meeting on June 15 and 2) a speech on Monday cautioning the ECB over using "monetary policy instruments to limit risk premia". A short history littered with rifts: There is a whiff of the old Bundesbank in the comments from Nagel and likely reflects early cracks between the ECB and Bundesbank on the anti-fragmentation tool that are likely to widen. Disagreement on policy and tools between the ECB and Bundsebank is not uncommon as was evident with Axel Weber, Jens Weidmann and Juergen Stark with two of those, Weber and Stark*, resigning in protest and the third, Weidmann, testifying against the OMT programme. It is too early to conclude that a similar rift is in the making but the risks are certainly there for a more troubling period for ECB president Lagarde. Nagel cautions on anti-fragmentation tool: The Bundesbank president in a speech on Monday said 1) policy must not be driven by "what are often very short-term developments"; 2) unusual measures to combat fragmentation are justified in "exceptional circumstances and under narrowly defined conditions"; 3) cautioned against using monetary policy to limit risk premiums; and 4) said it is "virtually impossible to establish for sure whether a widened spread is fundamentally justified". He went further and laid out conditions that should apply to a new instrument that include help in exceptional circumstances and narrowly defined conditions. Other hawks not on same page: While Nagel has chosen to publicly caution against an anti-fragmentation tool, other hawks have been more accommodating. Pierre Wunsch (Belgium) and Klaas Knot (Netherlands) have both provided their support since the ECB meeting on June 15. Nagel's comments may reflect the debate at home where elevated inflation is leading to greater sensitivities creating the need for political cover. It is important to recognise that one of the Nagel's wants policy to focus on very high inflation rates and for policy to concentrate on combating high inflation. Reuters this week highlighted that liquidity-absorbing operations might be a concession rather than outright bond sales that would have caused the Bundesbank to record losses. Policy direction clear, Bundesbank a minority: Under ex-ECB president Draghi it was clear that the Bundesbank is one voice within the ECB governing council and rarely altered the direction of policy. Draghi's style and strategic use of leadership was key, and it will be interesting how ECB president Christine Lagarde approaches open dissent. Her objective since heading the ECB has been to create a consensus looking to keep policy disagreements from spilling out into the open. But the direction of policy is clear with or without the backing of the Bundesbank and the ECB will ensure that legally its anti-fragmentation tool will pass any hurdles in the GCC or ECJ. *Stark was at the ECB at the time but had previously been Bundesbank president.
The Church Commissioners for England is preparing to make its first visit to the bond market with a sterling dual-tranche issue that will give investors a rare opportunity to get exposure a religious entity. Leads Bank of America, JP Morgan and Morgan Stanley are arranging investor calls from Monday for the charity's proposed transaction, comprising a 10 to 16-year sustainability bond and a 30-year-plus conventional portion. Proceeds will be used for non-profit activities as well as eligible sustainable projects, including investments in renewable energy and affordable housing. "This won't cause any ESG troubles that any fund manager running an ESG fund would be worried about, so it ticks all the right boxes," said a portfolio manager. While universities and housing associations have been frequent borrowers in the sterling market, the charity's proposed bonds mark an unusual offering from a religious organisation, which also manages a £10.1bn investment fund. The rarity value as a "safe harbour" will provide a tailwind for the deal, if issued, although the funder of the broader Church of England sits between SSA and corporate. "Whether it's a corporate or sovereign – it's like comparing Oxford and Cambridge [universities]. I suppose these kinds of names will find buyers with buy-and-hold mandates and certain managers holding proxies instead of Gilts will look at it," the investor said. "It's a new name with low risk and lack of leverage." The deal is set to test demand at the long end of the curve when the broader risk tone remains sapped on worries over growth and inflation. "It's an ultra-high-quality credit so they weren't probably worried if the market is open or not, while they may have taken a view that inflation would only push up government bonds higher and make issuing bonds 1%–2% more expensive in six months' time," said the portfolio manager. The Church Commissioners' Aa1 rating by Moody's is helped by its high levels of liquidity with around three years of cash on hand as of fiscal 2021, according to the ratings agency. The spendable cash and investments to total adjusted debt was 6.9x. "The deal will go extremely well – it's the kind of name that the sterling market really likes. I imagine there will be a mix of rates and credit investors," said a syndicate banker, who added that tackling the long end of the sterling market would be easier than in the euro space. There has been a dearth of supply of longer-tenor notes in euros this year with only one issuer, Dutch state-owned transmission system operator TenneT, printing a 20-year tranche in May. The deal was the first at that tenor since October. "The bid for high-quality, long-term paper is there for sterling. It's not flighty like in the euro market." A second banker away from the deal, however, said the demand will come with a price given that two-tranche offerings in the sterling market are "always a risky strategy". "You need people to give focus because you're asking for a lot of interest on both ends of the curve. But the trade is very doable at a certain level, maybe around 100bp over Gilts," the second banker said. University of Cambridge's (Aa1, Moody's) October 2052s, for example, were bid around 117bp, according to Tradeweb. While it's unusual to have three US banks on a sterling transaction, the second banker said the issuer could have run a process a year or two ago for the new trade, and the banks may have been advisers for the issuer's rating.
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