Mess for BES bondholders

The underwriters on last month’s €1.045bn Banco Espirito Santo rights issue spent last weekend negotiating the waiver of a lock-up agreement that was barely a month old, or risk a damaging default by EFSG. The situation was triggered by Nomura, a joint bookrunner on the capital increase, demanding the repayment of €100m of margin loans taken out by EFSG to participate in the rights issue. Syndicate heads at the underwriting banks said that they had been unaware of the margin loan. One said he did not believe Nomura had done anything legally wrong, nor was there likely to be any question of failure in due diligence for the rights issue. “We have not had a single complaint from investors, but this looks bad for all of us, investors expect us to protect them, and this is not supposed to happen,” he said. As a result of the lock-up waiver, EFSG sold 281.28m shares, or 4.99% of BES, at €0.34 in what is understood to be a private sale. Shares had closed at €0.481 on Friday.

Just as every child is unique but also pretty much the same, many of Europe’s most troubled banks have problems that are idiosyncratic but share similar essential traits. And the thing that links the likes of Portugal’s Banco Espirito Santo, the UK’s Co-operative Bank and Italy’s Monte dei Paschi di Siena is shoddy corporate governance. In BES’s case it was an unusual and desperately confusing ownership structure, which makes it very difficult to be certain how healthy the bank is. Many of the linked entities in the Espirito Santo group have issued debt, with that debt sold and guaranteed by different group companies. Even the analysts whose job it was to keep track of the moving parts were clearly unable to do so. Similarly, the Co-operative Bank in the UK was wholly owned by the Co-operative Group. Both entities issued bonds. The UK mutual’s massive board failed to provide a sufficient check on the bank’s activities and funding, appointing an unqualified chairman to preside uncritically over the mess that arrived in the wake of its post-crisis purchase of Britannia Building Society. Another bank brought low by M&A adventures, Monte dei Paschi di Siena, also had a pliant shareholder in a foundation linked to the City of Siena. It took nearly six years for Siena to accept the truth and relinquish control through successive dilutive equity issues. There are many other situations in European banking where dominant shareholders are desperately trying to avoid being diluted. These include regionally owned banks such as Spain’s cajas and Germany’s Landesbanken. In all these cases, the ancien regime has tried to stay in charge, despite the crying need for fresh capital, fresh ideas – and, ultimately, consolidation. Will more such instances be disclosed by the ECB’s forthcoming comprehensive assessment exercise, to be concluded before it takes regulatory control of Europe’s banks this November? We can only hope so. Europe’s economies will only recover once its bank structures are truly allowed to be reformed and such resistance is overcome. One thing is clear: If BES turns out to be in the trouble some think it is in, the only way forward is for shareholders to be diluted and creditors bailed-in – and the old owners sent packing. Using protection Over the past year, China sovereign CDS has quietly established itself as the most liquid product in Asian credit markets and the weapon of choice for macro investors to hedge cross-asset regional exposures on the cheap. The pace of growth has been dizzying. Net notional outstanding has leapt by 109% in 12 months and is up 59% this year alone. PIMCO, the world’s largest bond investor, has given its implicit stamp of approval to the instrument, selling almost US$3bn of credit protection – around a fifth of the entire market. The Asia region is long overdue a liquid macro hedge. Somehow broad-based credit indices have never quite managed to gain the kind of traction enjoyed by their European and US peers. Given China’s size – and its dominance of news headlines this year, with rising defaults and predictions of an economic slowdown – it makes sense that sovereign CDS liquidity should reach new heights. Equally, though, the lack of an underlying government bond market may raise a few eyebrows. Calling the contract a credit default swap is even something of a misnomer, considering that it is unlikely to provide any protection against an actual default – thanks to the lack of deliverable bonds. Dyed-in-the-wool traders are unlikely to be perturbed by this, of course – diving in and out of markets, gleaning returns from spread movements, is their bread and butter. And after all, if China ever did default on its debt, the markets would have more pressing concerns than the value of its sovereign CDS. Green shoots It is easy to be cynical about Green bonds. And there are good reasons to wonder whether the initiative is more about marketing than anything more substantial. But putting aside the cyn

Fannie Mae’s third risk-sharing mortgage bond deal of the year finally managed to get over the line last week, a day later than expected, and at wider levels than the agency’s previous trade. The CAS 2014-C03 transaction, just over US$2bn in size, comprised a US$555m 1M-1 1 class, rated BBB–/BBB, and a US$239.5m 2M-1 2 class, rated BBB/BBB. Both tranches priced at one-month Libor plus 120bp, 20bp wide of their guidance and 25bp wide of equivalent tranches in the May issue. As with the trade in May, the new deal included riskier non-rated US$945m 1M-2 1 and US$310.5m 2M-2 2 tranches, which priced at one-month Libor plus 300bp and 290bp respectively, versus 290bp guidance on both portions and some 30bp–40bp wide of the pricing of comparables in May’s issue. Joint leads Morgan Stanley and Nomura had been aiming to print the trade on Wednesday but had been heard still filling books on all but the 2M-2 2 tranche earlier that day, according to an investor. The deal finally was done on Thursday. Market players offered different views on the pricing levels, with some saying that a massive US$3.7bn secondary sale of RMBS bonds by BlackRock may have sapped a lot of demand out of the market. Some also worried that it was a sign investors were reaching their exposure limits on risk-sharing deals, which resurfaced last summer after many years absent from the market. The latest Fannie trade deal is the eighth risk-sharing bond to come to market in the past 12 months. Freddie Mac launched its first so-called Freddie Mac Structured Agency Credit Risk (STACR) bond in June 2013, and Fannie followed up with its debut in October. Some market participants pointed to the riskier nature of the new deal’s underlying loans as a reason for its struggle. About 1% of the collateral pool is made up of loans with late payments of between 30 and 59 days over the life of the mortgage, a step up the risk ladder from previous deals which did not include any loans ever more than 29 days delinquent. Even so, rating agencies said there was not a huge difference in credit quality between this latest deal and the May issue, indicating market conditions would likely have been a bigger factor at play. “The collateral was not that different, except for a small pool of loans that have been delinquent in the past but are no longer,” said one analyst. Fitch, for example, only slightly tweaked its credit enhancement ratios and ratings. The analyst pointed out that pricing has tightened considerably since the first deals were launched last year. The BBB– tranche on the US$675m CAS 13-C01, launched last October, priced at one-month Libor plus 200bp – around 80bp wide of this week’s deal.

Auto deals from GE, TCF Bank and Avis Rental Car highlighted a busy US$3.514bn week in consumer ABS deals. Chase Bank and World Financial Network also added credit card trades to the ABS tally, bringing year-to-date ABS issuance to US$117.141bn, according to IFR data. That’s up from the US$106.903bn total issuance that SDC had for this time last year. Excluding self-funded issuance, volume is US$104.533bn compared with US$97.532bn last year, according to SDC. The auto bonds from GE and TCF were upsized amid heavier deal flow than usual for summer. Just US$2bn in deals priced in the previous two weeks, according to IFR data. RBS and Mitsubishi grew GE Commercial Distribution Finance’s US$675m auto dealer floor plan ABS, called GEDF 2014-1, from its initial US$552.64m size, while Morgan Stanley tacked on US$50.15m to TCF Bank’s inaugural US$200m prime auto loan deal, TCFAT 2014-1. Another notable was Dell Financial’s inaugural US$722m-plus computer equipment, notebook, PC, workstation and server receivables deal, DEFT 2014-1 (see separate story). Its A1 tranche priced with a yield of 0.26% – in line with guidance – while the US$207m A-2 and US$90.792m A-3 portions came 3bp inside guidance at EDSF plus 29bp and plus 39bp respectively, similar levels to TCF. Credit Suisse (structuring) and BofA Merrill led the 144A trade. It was more of a mixed bag in terms of how the week’s mortgage bond deals fared. Citigroup and Goldman Sachs’ US$1.232bn conduit CMBS priced at new post-crisis lows. However, Fannie Mae paid investors 25bp more for the 1M-1 and 2M-1 slices of its US$2bn risk-sharing trade than it did for its previous deal in May. Morgan Stanley (structuring) and Nomura planned to price the transaction, called CAS 2014-C03, on Wednesday, but were delayed closing out the books until late on Thursday (see separate story).

Citigroup settled its mortgage fraud case with the US Department of Justice, agreeing to pay US$7bn, including a US$4bn civil penalty. The bank took a pretax charge of about US$3.8bn in the second quarter to cover the fine. Major global banks have been fined at least US$50bn by US authorities in the past 12 months, according to Thomson Reuters data. These activities ranged from issuing shoddy mortgaged-backed securities to money laundering.  Citigroup’s civil fine is double the fine paid by rival JP Morgan late last year to settle up with the DoJ. The bank said it was willing to pay the larger fine to resolve claims over both its mortgage securities and the collateralised debt obligations that the bank structured or underwrote between 2003 and 2008. During the critical years before the financial crisis from 2005 through 2008 Citigroup was the second-biggest underwriter of CDOs after Bank of America Merrill Lynch. The bank had a 12.4% market share. “We also have now resolved substantially all of our legacy RMBS and CDO litigation,” said Citigroup CEO Michael Corbat. “We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past.” During the same period, however, JP Morgan was the third-biggest CDO underwriter, with an 11.4% market share. JP Morgan’s agreement with the DoJ did not include its CDO exposure. During the bank’s second-quarter earnings call with analysts, its CEO Jamie Dimon said the bank’s CDO litigation exposure was not a significant threat. That might mean that Citigroup just overpaid for an insurance policy – ensuring that the DoJ will not come after the bank for CDOs – or JP Morgan is underestimating its exposure. Under the terms of the settlement, Citigroup will pay a total of US$4.5bn in cash and provide US$2.5bn in consumer relief. The cash portion consists of a US$4bn civil fine to the DoJ, most of which will go to the US Treasury, and US$500m in compensatory payments to the state attorneys general and the FDIC. The consumer relief will be in the form of financing provided for the construction and preservation of affordable multi-family rental housing, principal reduction and forbearance for residential loans, as well as other direct consumer benefits from various relief programmes. Citigroup has agreed to provide the consumer relief by the end of 2018. Bank of America also took took a hit in the second quarter as it added US$4bn to its litigation reserves. The bank is still struggling to settle with the DoJ over its legacy mortgage practices.

Citigroup and Goldman Sachs priced a US$1.232bn conduit CMBS on Thursday afternoon at levels that sources said were a new post-crisis low. The trade, CGCMT 2014-GC23, priced the benchmark 9.93-year A4 Triple A bond (rated by Moody’s, Fitch and Kroll) at Swaps plus 71bp – 1bp inside the previous low for similar bonds priced since the financial crisis. “The deal did really well, despite all the bad news today,” said a source with knowledge of the trade, referring to news of a Malaysia Airlines passenger jet brought down over Ukraine. The conduit’s notes landed 20bp inside the average for other 10-year Triple A bonds priced since 2013, and a dramatic 51bp tighter than the widest 122bp print in that period, according to Jefferies analysts. At the riskier end, the deal’s 9.93-year BBB– bonds (from both Fitch and Kroll) priced at 285bp, the skinniest level since February 2011, the source said. Those prices bode well for a US$1.24bn conduit CMBS from Wells Fargo and RBS in the market, as well as a US$1.288bn trade from Deutsche Bank, UBS and Cantor Commercial Real Estate. In consumer ABS, Chase Bank priced a new US$500m credit card deal, with the sole Triple A tranche fetching iSwaps plus 20bp.

BlackRock will launch another sale of once-toxic RMBS this week, seizing on a dramatic shift in demand for such assets and a rebound in prices since the crisis. The US$4.4bn sale is tipped for Tuesday, market sources said, with a different execution style to the previous week’s auction. The July 15 US$3.7bn all-or-nothing trade – the biggest of its kind since the crisis – only considered bids for the entire list and was won by Credit Suisse. BlackRock will split the sale of the next block into two distinct all-or-nothing groups. Scott Buchta, head of fixed-income strategy at Brean Capital, said BlackRock was taking advantage of a shortage in new RMBS supply and pent-up demand from yield-chasing investors. “Prices have recovered enough to make the sale more economical from the seller’s point of view,” Buchta said. “The first list went well enough that it encouraged BlackRock to bring the second. They’ll strike while the iron is hot.” Back in favour The legacy bonds are backed by UBS collateral that was hived off the Swiss bank’s balance sheet after the mortgage crash. UBS wrote down more than SFr50bn in the aftermath of the subprime mortgage meltdown, according to an October 2010 report from the bank. Such formerly toxic assets are now in demand. TRACE data indicate that Credit Suisse has already placed a majority of the bonds it bought in the first auction. Asset prices for such assets have rebounded dramatically. According to JP Morgan data, the average price of subprime ABS sank to between 15 and 20 cents on the dollar in April 2009. It is now 70 cents. Credit Suisse paid even more than that, beating Goldman Sachs’s second-best bid of 73.16, one of the sources said. Price talk was around 67 cents. This week’s batch will likely attract a broader base of buyers than the first, as it includes floating-rate, fixed-rate and adjustable-rate securities, including Option-ARMs – adjustable-rate mortgage bonds – according to Adam Murphy, president of trade database company Empirasign Strategies. The first lot comprised a mixed-bag of prime, subprime, home equity and Alt-A (alternative mortgage) bonds, he said. Due loan? One of the sources, a former executive at the Swiss bank involved in the overhaul, said the timing of the BlackRock auctions may also be related to the maturity of a senior loan that financed a sale of some of those assets to BlackRock. UBS also kept an equity stake in the soured securities portfolio, the source said. Another source likened the arrangement to a long-term repo, which could trigger cash flows from the portfolio to UBS at loan maturity. To avoid that, BlackRock needs to repay the loan, and one way is by selling some of these assets at prices not available for years. The exact terms of such loans, of which several were made to different parties for UBS’s soured assets, are unclear. “There were a lot of these creepy, sneaky structures at UBS during this time,” another source said. Calls to BlackRock and UBS were not returned. Credit Suisse and Goldman Sachs declined to comment.

First Bank of Nigeria proved yet again its ability to withstand market volatility by printing its second Tier 2 bond issue on Thursday. Credit markets were shaken, first by the US levying sanctions against certain Russian companies, and then by the shooting down of a Malaysian Airlines aircraft over eastern Ukraine. But Nigeria’s biggest bank by assets was able to successfully get its bond offering away, raising US$450m through a seven-year non-call five issue priced at 98.992 to yield 8.25%. That was at the tight end of guidance of 8.25%–8.50%, while the size was a little less than the top of the targeted US$300m–$500m range. The bank had initially announced its price thoughts on Wednesday with a view to printing the bond issue the following day. The overnight news that the US government had stiffened its sanctions against Russia did not have a direct impact on the deal but it certainly made the general market tone weaker on Thursday. But as one lead banker said, because FBN has a supportive investor base it was able to get the bonds printed. “There’s definitely a universe of investors that understand the Nigerian bank space,” said the banker. Moreover, unlike First City Monument Bank, which had to shelve its plans for a senior bond offering earlier this month, FBN is in the top tier of Nigeria’s banks. “This is a large-scale, strategically important bank,” said the banker. The lender has an outstanding US$300m 8.25% 2020 Tier 2 bond issue, which is callable in 2018. That was trading at a yield-to-call of around 7%, according to Tradeweb, or a Z-spread in the mid-500s. The banker on the deal reckoned that based on where that bond issue was trading, fair value on the new notes was in the high 7% area including curve extension, the 2020 bonds’ high cash price and a premium for the spread reset if the new bonds don’t get called. The single reset after the call date of July 23 2019 is two-year mid-swaps plus 648.8bp. The deal offered investors a rare chance to buy a Basel II instrument. As FBN has no senior bonds “the entry point is attractive”, said the banker. There’s no coupon deferral, for example. About one-third of the paper went to African accounts, including South Africa, another one-third to the UK, 20% to the US, with the rest to others. Fund managers took 73%, banks and private banks 21% and supranationals 6%. The bond offering was not only bigger than its previous Tier 2 deal but also, at 8%, it came with a lower coupon. The 2020 notes were issued last August also in a difficult week packed with event risk, including central bank meetings in the US, Europe and the UK, as well as a raft of macroeconomic releases globally. The 144A/Reg S notes are rated B/B– compared with FBN’s senior ratings of BB–/B+. They were trading up 3/4 in the secondary on Friday. Citigroup and Goldman Sachs were the leads.

Bookbuilds on biotech IPOs are all about deal optics. Almost universally the strategy is a late-stage, pre-IPO investment, followed by a testing the waters exercise, and finally the formal public launch, the latter featuring explicit or implicit participation by venture capitalist or cross-over institutional investors. With four IPO pricings this week, and seven due over the next two weeks, the playbook is wearing thin. Investor discrimination was evident as Sage Therapeutics boosted its valuation last Thursday morning while, almost simultaneously, Pfenex lowered its and ultimately was forced to extend marketing. The former extended its financial runway and the latter has limited options given dwindling liquidity. Sage Therapeutics’ lead banks, JP Morgan and Goldman Sachs, communicated the strength of investor demand by increasing both deal size and talk to 5m shares at US$17–$18, from US$14–$16 on 4m shares. They fixed pricing at the top of the revised range to value the early-stage biotech at US$479m. The outcome built on early momentum in the bookbuild process from a handful of cross-over institutional investors that participated in late-stage private rounds. Similarly testing the waters marketing focused on “top thought leaders”, indicated a source familiar with the marketing process, and contributing to hefty levels of oversubscription. Sage Therapeutics jumped to an opening print of US$27.00 on its debut Friday and was last seen at US$28.68, a 59.36% gain on offer. Fidelity Investments anchored a US$38m series C private in March with a US$15m investment at roughly US$4.25 per share to give it a 5.6% pre-IPO stake. Other traditional, long-only institutions participated as well, said the source, but only the 5%-plus shareholders were required to declare their holdings in the IPO prospectus. Other large shareholders include VCs Third Rock Ventures (58.5% pre-IPO stake) and Arch Venture Partners (21.3%). Overall, Sage Therapeutics has raised just US$68m privately since it was founded in 2010, according to Thomson Reuters’ data. Underlying the financial ramp is, of course, science, even if incomprehensible to the layman. Sage Therapeutics received approval from US regulators on its lead drug, SAGE-547, for emergency use new drug application last October for the treatment of super-refractory status epilepticus (SRSE). While still in early stages, the results of drug trials are promising. Of the six patients enrolled in the Phase I/II trial, five patients achieved resolution of SRSE either during the course or soon after SAGE-547 treatment. Put differently, the “data is really compelling”, said the source. Pfenex, a clinical-stage biotech focused on biosimilar therapeutics, seemingly has little choice but to accept what public markets will offer. The company last privately raised US$24m on a seed round in 2009 and had just US$5.1m of cash (and US$300,000 of available credit) as of March 31. William Blair and JMP Securities sought to consolidate demand by fixing the asking price to US$8, from US$12–$14, while increasing the deal size from 5m to 8.125m shares to maintain the overall funding target. The effort was carried over into this week as the leads deferred pricing last Thursday in the hope of drumming up incremental investor demand.

Bellwether with border Bellwether. n. From the practice of placing a bell around the neck of a castrated ram so that it might lead its flock PERHAPS AS PENANCE for getting the outcome of the World Cup so wrong – the bank’s analysts, foolishly, backed Brazil – Goldman Sachs’s board of directors travelled to Germany to hold its annual board of directors meeting. Given that previous meetings have been held in Brazil, Russia, India and China, this does appear to quite a coincidence. But there is another explanation for their decision and one that is not related to Lloyd Blankfein pulling on a hair-shirt. The arrival of Goldman’s suits in Frankfurt came in the same week as it emerged that Germany has usurped the UK at the top of the pay league for investment bankers. Research from Emolument.com shows that managing directors based in Frankfurt can earn total compensation (salary plus bonus) of £850,000, pushing London (£839,000) into second place. World take note – Goldman always follows the money. Frankfurt may indeed be on the rise but you don’t need to be a Goldman Sachs analyst to predict that it is unlikely to draw the world’s brightest and best away from London or New York – or, indeed, from Hong Kong, which post-tax remains the world’s best-paid financial centre. Plus, the research does not mention how much the figures are skewed by the “Anshu effect” – the presence of Deutsche Bank’s highly-paid CEO Anshu Jain in Germany’s capital of capital. JUST AS BELLWETHER was casting around to fill a World Cup shaped hole, UniCredit popped up with a delightful footballing memento. With football fans on a post-World Cup comedown, UniCredit, which is increasingly going by the description of “troubled Italian lender”, figured that this was the right time to remind the world of its status as the lead sponsor of the UEFA Champions League. It sent clients, friends – and Bellwether – a commemorative piece of ticker tape from the Champions league final. Bellwether didn’t want to tamper with the card because the ticker tape was stuck to a picture of a grinning Fabio Capello, the fearsome Italian who led Russia to an ignominious first round exit at the aforementioned World Cup. This is not the geopolitical climate in which to be seen to be accepting freebies from an individual associated with a Russian national body. GOOD NEWS FOR bankers all over the world: the Thomson Reuters TRust Index has advanced into positive territory for the first time, and it’s all down to financial institutions. According to Reuters, second-quarter 2014 trust sentiment in the top 50 global financial institutions continued to improve, as more banks – particularly those in the Americas – received positive scores. Alas, the restoration of trust could be a fleeting experience, given that Q3 kicked off with the emergence of woes at BES. JOHN PHIZACKERLEY IS a man who likes a challenge. Bellwether it pleased to see “Phiz” back in the industry after his long-standing, sterling work at Lehman Brothers and Nomura, where he coped with more than his fair share of slings and arrows. But rather than take a less stressful job, Phiz has earned even more respect with his new role – stepping into the shoes of Terry Smith at Tullet Prebon. It’s easy to see why he might be uniquely qualified for the role, less why he would want to take it. FANCY TAKING A pop at Martin Wheatley and the Financial Conduct Authority? Then look no further than the FCA’s annual meeting – and its no-holds-barred Q&A session open to the general public. The questions usually end up being diatribes, mission statements, cheap shots and a chance to vent, more than anything else. But from a spectator’s point of view, it provides wonderful theatre. Bellwether particularly enjoyed the look on Wheatley’s face when one questioner demanded investigations over supposed £100,000 away days at The Grove, a luxury resort in Hertfordshire (actually, just outside Watford).

US banks rode the surge in capital markets activity in the second quarter to beat analysts’ earnings expectations, in some cases posting record fee performance. Both Goldman Sachs and Morgan Stanley continued to post strong results from debt underwriting. Goldman has had to repeatedly answer the question about when its record run in debt underwriting will come to end with a familiar refrain – not yet. The bank posted its best quarter ever in debt underwriting, with US$730m in fee revenue during the three months to the end of June. Its previous best quarter was the equivalent period last year. It was also one of the few quarters historically in which Goldman reports more revenue from debt underwriting than from its advisory group. Citigroup reclaimed the number three spot in the segment, reporting US$748m in fees from debt underwriting. JP Morgan had the best performance in the segment, reporting US$899m in fees in the quarter, while Bank of America Merrill Lynch fell to number two with US$891m in debt underwriting fees in the quarter – off nearly 10% from the year ago quarter. Morgan Stanley rounded out the group with US$525m in debt underwriting fees, up 26% from a year ago. Overall the banks reported a combined US$3.8bn in fees from debt underwriting in the quarter, up 2% from the prior quarter and 8% from the year-ago period. The banks logged the biggest improvement in fees from equity underwriting, as combined fees surged 30% from last year to about US$2.5bn. Goldman and Morgan Stanley led, reporting US$545m and US$525m respectively in fees in the quarter. For Morgan Stanley the result represented a 50% improvement over the same quarter last year; and for Goldman it was a 47% increase. BofA Merrill Lynch reported a rise of 44% to US$513m while JP Morgan’s fees rose 4% in the segment to US$477m. Citi was up 31% compared with the last year with equity underwriting fees of US$397m. Fees from advisory have not kept pace with the runaway strength of announced mergers and acquisition deal flow. Reported fees in the quarter, however, only reflect closed deals. Revenue from the announced deal pipeline is expected to boost results in the second half. In the latest quarter to the end of June, the banks reported a combined US$1.8bn in fees from advisory, up 10% from the year-ago quarter, but off 5% from the first quarter. The biggest part of the quarter-on-quarter decline was attributed to Goldman. The bank reported US$506m in advisory fees in the period. While it was the best performance among US banks, it was off 26% from Goldman’s stronger performance in the first quarter. Morgan Stanley followed with US$418m in fees from advisory, up 26% from the year-ago period. JP Morgan saw a 31% increase in the segment with US$397m in fees. BofA Merrill reported US$265m in fees from advisory, up 1% from the year-ago period but off 7% from the previous quarter. Citi reported US$193m in fees, down 10% from the year-ago quarter but up 10% from the previous quarter.

A unit of India’s Tata Steel has mandated a dozen banks for a potential US$1.2bn bond sale, sources aware of the matter said. The bond sale, which the sources said will be underwritten, is part of Tata’s refinancing of up to US$7bn for subsidiary Corus Group. Most of the refinancing will be paid for through loans. As reported earlier, Tata Steel will be borrowing US$5.8bn from two units, Tata Steel UK and Tata Steel Global Holdings, the holding company for Tata Steel’s international assets.   Tata Steel UK will borrow around £2.46bn-equivalent (US$4.13bn) made up of a £300m five-year term loan, a £700m five-year revolving credit, with a two-year extension option, and a €1bn (US$1.36bn) seven-year amortising loan.   Singapore-incorporated Tata Steel will borrow US$1.5bn in a seven-year amortising facility.   Tata Steel’s last offshore borrowing was in Singapore when it made its debut with a S$300m (US$242m) 4.95% 10-year bond.