Issuer and Corporate Issuer: Volkswagen

IFR Review of the Year 2013
4 min read
Anil Mayre

Cruising in all lanes: Raising more than €18bn of unsecured and asset-backed bonds over 12 tumultuous months is an exceptional feat in itself. Scoring solid subscription rates, boasting exceptional secondary performance, spearheading new structures and targeting a whole array of investor groups while doing so, makes Volkswagen IFR’s Issuer and Corporate Issuer of the Year.

Corporate Issuer 2013

A familiar face in its domestic senior bond market, this year Volkswagen swerved off the autobahn by printing a flurry of niche currency deals, exploring a variety of tenors and sizes, and becoming the first automaker ever to access the euro-denominated hybrid bond market.

It chose the market for its hybrid exercise wisely, moving as soon as investors returned to their desks after the summer, but beating a wave of potentially competing supply to the market.

The company, which comprises 12 brands from Bugatti to Skoda, opted for a drive-by transaction to minimise the risk of the market backdrop changing mid-trade, and successfully printed a €1.25bn non-call five-year and a €750m non-call 10 tranche.

It was a ray of light for investors who had been seeking exposure to the name but were put off by the puny yields offered on the A3/A– rated company’s senior paper.

“The popularity of the deal was also evident in the speed of execution,” said Markus Steilen, a syndicate manager at Commerzbank, one of the banks involved in the trade.

Bankers agreed the offering had paved the way for other companies from a whole miscellany of sectors to examine hybrids – traditionally used by telecoms and utilities.

“It opened the door to the others and proved that hybrids are a valuable tool, not just for corporates seeking to cling on to their investment-grade rating,” said Christoph Haenschel, origination official at another joint lead, Goldman Sachs.

Books on the two-part offering hit €3.6bn from around 360 players. It represented the only perpetual bond from a German corporate in 2013.

Moving up the credit structure, VW’s ability to issue five separate senior euro bonds without becoming the victim of investor fatigue was particularly commendable.

In January, just days into the new calendar year, it became the first corporate out of the blocks in euros with a €1bn seven-year offering that was later tapped by €150m. Two subsequent deals in the currency in March were also tapped, and a €1.25bn dual-tranche three-year FRN and short five-year fixed-rate note set a trend among corporate issuers for printing floating-plus-fixed in one go. The FRN portion also represented the second-largest FRN of the year in the currency.

No stranger to tapping straight debt, the company in June tapped its €2.5bn mandatory convertible bond (an IFR Award winning deal in 2012) for a further €1.27bn (€1.2bn nominal).

Yet prior to this year taps had not been seen in the European structured equity market. VW’s was the second, and rather more of a test than the 50m trade that went before it. Anchored by major shareholder Qatar Holding and backstopped by JP Morgan the deal went like a dream and triggered a wave of CB taps.

Volkswagen picked the right time to raise US$2.15bn via a four-tranche issue in the US dollar high-grade market in November, pricing in line or tighter than outstanding bonds. A lesson had been learnt after a US$300m eurodollar misfired in September.

A regular issuer in the securitisation market, another two jurisdictions were added to its portfolio in the review period. It made its debut in France in September with Driver France One, and followed by going further afield with Driver Australia One in November – setting the record for the tightest Australian deal since the crisis. China and Mexico could be next too, as feasibility studies are in progress.

In addition to the two regional debuts, VW launched four other public European deals during the year, securitising German loan collateral with Driver Ten in January and Driver Eleven in June and bonds backed by lease contracts in February through VCL 17 and September with VCL 18. It also printed its second Japanese deal ever, in February, and sold three trades in the US market too – taking issuance past the €7bn equivalent mark.

VW has structured private and retained deals in the UK, Spain, the Netherlands and Germany as well.

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