Vodafone shows the value in euros
Vodafone made the most of the relative value on offer in euros on Monday when it printed a four-part euro and sterling deal to fund a tender offer for longer-dated US dollar and sterling paper.
The transaction comprised an upsized €800m four-year, a €600m eight-year, a €500m 13-year and a £500m 25-year. The new paper came alongside a €2bn-equivalent capped tender offer.
A lead said the company chose to refinance in those currencies to make the most of the “relative value on the short to medium part of the curve” in euros and “a little bit of arbitrage” at the 25-year point on the sterling curve.
The new issue and tender offer come as part of a wider balance sheet exercise in which the company has already tendered for shorter-dated debt and run a share buyback programme this year.
“Vodafone has been deleveraging as they told the market they would do,” said the lead. “Now, with that cash, they’re reducing their debt and doing share buybacks.”
The tender offer is targeting seven bonds with different levels of priority. They include five US dollar bonds and two sterling notes. The company's decision to prioritise the longer-dated debt with the latest tender offer was based on where the bonds were trading, as the company is able to buy them back at a discount to par, said the lead.
The 4.25% US$1.5bn 2050 note, for example, which is a top priority of the tender offer, up to a maximum of US$750m, is trading at a cash price of 76 cents on the dollar, according to LSEG data.
Strong demand
Investors clearly liked the new issue. The €1.9bn euro-denominated part of the deal received orders totalling €5.4bn, while the £500m sterling note had a final book of over £1.7bn.
On the euro tranches, the demand was not evenly split. The shortest-dated paper had books of €2.35bn, while the other two tranches attracted €1.4bn and €1.7bn of orders.
That enabled the leads to price the shortest tranche with a minus 5bp new issue concession at mid-swaps plus 60bp, inside initial price talk of 95bp–100bp.
The other two tranches priced flat to fair value, according to the lead. The spread on the eight-year landed at plus 95bp, in from 130bp area IPTs, while on the 13-year it came in at 125bp from 155bp–160bp.
That skew reflected the broader bid for shorter-dated credit. “Investors have to put money to work but are not wishing to put a big bet on the longer term at the moment,” said the lead.
The demand skew was also a feature of Vodafone’s previous liability management activities, according to CreditSights. “With much of Vodafone’s euro paper subject to repeated tender offers, a dearth of supply at the front end means the new 2029s look attractive at IPT,” said CreditSights analysts in a note on the new deal.
On the sterling deal, leads opened books at Gilts plus 140bp area before tightening to 120bp, buoyed by strong demand in an undersupplied market.
“The sterling market hasn’t gone away,” said a second banker, who was a lead on the sterling deal, referring to the strong demand for the paper amid the lower level of supply. “There’s still the same extremely large institutions present.”
Bank of America acted as bookrunner on both currencies, alongside BNP Paribas, Deutsche Bank and Santander on the euros and NatWest and RBC Capital Markets on the sterling.
Opportunistic
Vodafone’s deal came alongside a single €600m five-year tranche from Spain's Abertis Infraestructuras (NR/BBB–/BBB), which a lead described as “opportunistic”.
The proceeds are set to be used for general corporate purposes, including refinancing. The company has a €700m 0.625% note maturing in July 2025, although the lead said the deal was not directly related to that note but instead to “take advantage of the strong backdrop”.
Leads opened books at mid-swaps plus 125bp area for an expected €500m transaction. They were able to upsize the deal to the top end of the €500m–€600m range mentioned at guidance and pulled pricing in to 90bp. The final book was over €2bn.
“The issuer was very focused on landing with zero premium, and that’s what we have achieved for them,” said the lead.
Banco Sabadell, BBVA, BNP Paribas, CaixaBank, Credit Agricole, Deutsche Bank, IMI-Intesa Sanpaolo, MUFG, Natixis, RBC Capital Markets, Santander, SMBC, Societe Generale and UniCredit ran the deal.