North America Financial Bond House: Citigroup

The 10-tranche issue was the second-largest on record, behind only Verizon’s US$49bn record-setter in 2013, and the biggest ever for a company teetering on the edge of junk – and one that had proven to be very acquisitive just months before. Swooping in to save Allergan from a hostile bid from rival Valeant, the deal followed two other major acquisitions – of Forest Laboratories and Warner Chilcott. Yet investors poured more than US$90bn of orders into the trade – including for the longest dated 20 and 30-year bonds that bore more duration risk – doing so without the protection of step-up coupon provisions in the event of a downgrade. Bankers at the time said the deal hit the sweet spot for what investors were clamouring to buy. “If you want to get some yield, you either go down in credit quality or out in maturities,” said one. “If you like Actavis as a credit, this is your opportunity to buy into what will be one of the most liquid issues available. And you might as well go long to obtain yield.” The bond, which was priced in the first week of March, followed an US$8.4bn equity raise just days before that came at very attractive terms for the company – and amid red hot demand for corporate debt. The prior month had been a blockbuster one for high-grade volumes with US$112bn raised – the biggest February on record – and the market was primed for more M&A supply, notably in the pharma sector. But while market conditions helped, lead bookrunners JP Morgan, Mizuho Securities and Wells Fargo Securities ensured good momentum by starting out with generous new issue concessions of between 25bp and 35bp across all tranches. The leads kept the buyside focused on returns, with the 10-year paying a 3.8% coupon and the 30-year 4.75% – and the book was ultimately so large they had to hold the deal overnight, in part to work out the allocations. The most traction was seen at the longer end of the curve, with final pricing on the longer-dated portions between seven and 30 years coming 20bp–25bp inside talk. The concession on the 30-year looked to be just 4bp at the end-result, and the average across all tranches was just 7bp. The average weighted yield was 3.43%. To top it off, investors saw the bonds rally in secondary trading by 13bp–18bp – but bankers both involved and away from the deal did not believe Actavis had paid up any more than necessary to get the deal done. To see the digital version of the IFR Review of the Year, please click here . To purchase printed copies or a PDF of this report, please email gloria.balbastro@tr.com . <object id="__symantecPKIClientMessenger" style="display: none;" data-install-updates-user-configuration="true" data-extension-version="0.4.0.129"></object> <object id="__symantecPKIClientMessenger" style="display: none;" data-install-updates-user-configuration="true" data-extension-version="0.4.0.129"></object>

A successful year in the bond markets can be measured by any number of metrics. Volume of business is one obvious way, although qualitative considerations are equally important. HSBC managed to combine these elements, not only adding to its league table tally but also notching up an impressive list of debutants as well as a string of repeat mandates. “Our key strategic objectives were threefold,” said Jean-Marc Mercier, global co-head of DCM at HSBC. “They revolved around strength, innovation and access.” Long since a force to be reckoned with in the SSA sector, HSBC proved its credentials yet again. The bank managed noteworthy deals for such market stalwarts as KfW – its €5bn three-year at the end of September was the largest syndicated deal with a negative yield, for example – and EIB, whose first new five-year EARN since January 2013 saw HSBC play an integral role. Its expertise was also important at the heart of the eurozone, with the ESM awarding it a number of mandates. As well as being present on the issuer’s first deal of the year – again with a negative yield – HSBC was also a bookrunner on its €6bn three-year, the largest non-sovereign deal of 2015. And size played an important role throughout the year, with HSBC also active on the largest deal – Spain’s €9bn 10-year – as well as Italy’s €6.5bn 32-year, which was not only the longest in the sector but one of the biggest. Elsewhere in the periphery, it was active for Ireland, Portugal and Cyprus, while a triple-tranche deal for Bulgaria and a 10-year for Poland spoke of EM crossover capabilities. Mexico’s Century bond encapsulated a number of the important themes. The bank was also represented in some of the sector’s rarities, such as AFL’s inaugural transaction in any market, British Columbia’s euro debut, CEDB’s first deal in over a year, Finland’s first long-end transaction since 2012 and an uncommon euro deal from NIB. The last was an environmental bond, and HSBC’s growing capabilities in the SRI/Green arena were also on display throughout the year, with deals from fellow SSA issuers, ICO, EIB, FMO, and NWB, through a social covered bond for Kutxabank, to corporates like Vestas and TenneT. Elsewhere in the corporate world, HSBC was at the forefront of the year’s themes. The reverse Yankee wave saw it active on Coca-Cola’s groundbreaking five-tranche jumbo, as well as deals for the likes of Colgate-Palmolive, PPG, Kellogg, GE, Whirlpool and BorgWarner. It steered issuers through periods of unpredictability, where a strong start to 2015 turned into one that threw up a number of challenges. “As a result of the volatility, it was paramount to be able to navigate around the market. You have to have the right resources available for deployment,” said Adam Bothamley, global head of debt syndicate. The result was the usual impressive roster of corporate stalwarts, sometimes with an innovative twist, such as an increased usage of FRNs, while there was no surprise that HSBC was at the forefront of issuance from diversifying Asian borrowers. Its credentials were also on display in the hybrid arena, from Total’s dual-trancher early in the year, through Deutsche Boerse’s July market-reopener, to such tricky trades as Lufthansa’s understandably delayed transaction. The bank displayed similar expertise in the financials sector, where a strong year in insurance saw it active on subordinated deals from the likes of Swiss Re, Allianz, Ageas, Aviva, Intesa Sanpaolo Vita, SACE, Danica and ASR, combining such elements as innovative liability management, Solvency II grandfathering and simple market reintroduction. It complemented this on the banking side with a number of mandates across the Additional Tier 1 and Tier 2 markets, casting light into the TLAC/MREL abyss. The largest and tightest FRN since 2010 – from Rabobank – saw HSBC at the helm, as did transactions from such diverse jurisdictions as Japan, Canada and Ireland, as well as other peripheral eurozone countries. A rare deal

Total pre-empted any potential financing shortfalls from suffering oil prices and locked in the lowest-ever coupon for a corporate hybrid, despite it being under no pressure to raise capital or defend its balance sheet. Lead-managed by Citigroup and Barclays as joint global coordinators and HSBC and Societe Generale as bookrunners, the deal also attracted the largest order book for a corporate hybrid transaction to-date. The dual-tranche offer – rated Aa3/A by Moody’s/S&P – drew in a whopping €20bn of orders, with investors attributing demand to the deal’s unusually strong credit rating, speculating that a large portion of orders came from investors that have rarely bought hybrids before. The €2.5bn perpetual non-call six-year tranche was priced at 2.25% and the €2.5bn perpetual non-call 10-year at 2.625%, with orders skewed towards the latter. The company had started marketing the deal earlier at 2.375% area and 2.75%–2.875%, respectively. Support continued in the aftermarket, as the 2021 paper was bid at a cash price of 101.30 in the secondary market the day following pricing, while the 2025 was bid at 101.55. The transaction became the first deal from an oil and gas major since BG issued a hybrid in June 2012 and paved the way for Repsol, Dong Energy and BHP Billiton to follow. It also marked another step in the development of the once-niche funding instrument, which is normally the reserve of those defending their ratings without having to tap the equity markets. Following Total’s hybrid debut in February, euro-denominated hybrid issuance reached €7.8bn in the following month of March, the highest ever monthly level, according to IFR data. Hybrid issuance dropped off a cliff in May due to Greece-related volatility, while negative news from Volkswagen and Glencore in September kept the market from bouncing back as corporates wrapped their heads around increased funding costs. Yields in the sector rose to 3.92% in September, from the year’s low of 2.67% in March – just weeks after Total issued its deal, according to the Bank of America Merrill Lynch global corporate hybrid index. “Total’s timing was absolutely perfect; it knew what it wanted to do and it picked the most opportune window to do it in,” a lead banker on the deal said. To see the digital version of the IFR Review of the Year, please click here . To purchase printed copies or a PDF of this report, please email gloria.balbastro@tr.com .

Japan’s push to stimulate economic growth kept yen rates pinned to the floor in 2015, stoking demand for higher-yielding assets among the country’s conservative investor base. Mitsubishi UFJ Morgan Stanley Securities seized the opportunity to introduce new structures and first-time issuers to the yen market, doing the most among its peers to raise the currency’s global profile and deepen liquidity at home. MUMSS arranged three of the four debut international issues in yen during IFR’s review period, more than any of its rivals. It also brought global borrowers back to the yen market after a long absence, deepened the Pro-Bond market, introduced loss-absorbing senior bonds to Japanese investors for the first time, and helped develop the market for Basel III bank capital. The collaboration between Mitsubishi UFJ Financial Group, Japan’s largest bank, and US investment bank Morgan Stanley leaves MUMSS uniquely placed to match overseas issuers and Japanese investors. It covered all the bases during IFR’s review period, bringing global issuers to the euroyen, Global yen, Samurai and Pro-Bond markets. “This has been one of the biggest years for international yen volumes,” said Noriaki Nomura, managing director of debt capital markets at the joint venture. “We drive to bring as many global issuers to the yen market as possible, as that allows Japanese investors to diversify their investments.” The most significant yen debut of the year came from US giant Apple, which hired Mitsubishi as one of two leads for a ¥250bn (US$2bn) global offering, priced in early June. The five-year SEC-registered global, easily the biggest debut offering in the currency, was priced at the tight end of guidance flat to offer-side yen swaps – the traditional floor for core Japanese investors. Global investors also participated, lured by an attractive pick-up over Apple’s dollar curve after swaps, but Double A rated Apple targeted Japanese buyers, allocating around 90% of the deal to Japanese banks, insurers and regional investors that were looking for a safe alternative to their holdings of Japanese government bonds. The deal met Apple’s objectives in diversifying its investor base and funding its share buyback programme. For the wider market, however, it helped bring the yen to the attention of other global issuers, showing that top issuers could find both size and diversification in the currency. MUMSS had already set that train in motion, arranging a ¥100bn global yen offering from consumer giant Procter & Gamble less than two months earlier. After Apple’s debut, MUMSS targeted other North American issuers, winning lead roles on Bank of Nova Scotia’s first Pro-Bond – also its first yen offering since 2007 – and Royal Bank of Canada’s first Samurai issue since 2008. “It’s tempting to look at Apple as a one-off because of its scale, but this is a deal that really made others think,” said Nomura. MUMSS was also instrumental in another landmark debut, the ¥150bn Samurai offering from UK-based lender Standard Chartered. The three-part trade, the result of over a year of preparation, marked the biggest debut Samurai since the Lehman Brothers crisis and could have been even bigger, with total orders reaching ¥210bn. StanChart issued at the holding company level, requiring Japanese investors to become comfortable with risks around pending rules on global banks’ total loss-absorbing capacity. MUMSS followed that up with Barclays’ first Samurai at the holding company level in September, raising ¥60bn. As the world’s biggest banks step up their issuance of senior debt to meet total loss-absorbing capacity requirements, the sign that Japan’s conservative investor base is warming to new international names is a significant step. Other issuers preferred the quicker Euroyen format, where MUMSS worked with Morgan Stanley’s international business to help Banco de Credito e Inversiones make its debut with a ¥16.5bn Euroyen issue in November 2014. Scotiabank’s Pro-Bond

Bankers saw Rabobank as the ideal candidate to introduce the new asset class, having built a first-class reputation over a long track record in the yen market. Even then, success was far from guaranteed: Japanese investors were only just getting comfortable with Basel III structures from their local mega-banks, let alone with an issue under Europe’s far tougher banking regulations. Kazuhide Tanaka, Rabobank’s head of long-term funding for Japan and its chief Japan representative, recalls broaching the idea with local investors almost two years before the issue was finally priced. “The yen market’s low rates and low spreads make it tough for investors to find alternative investments,” he said. “We were confident that investors were looking for higher yields, but it took a while for the market to get their heads around it.” There were numerous challenges. Many of the biggest Samurai investors are Japanese banks, which face punitive 250% risk weightings on holdings of subordinated bank debt under the Basel framework. Some big insurance companies and pension funds were also struggling to adapt their investment mandates to fit loss-absorbing capital securities, which can be written down to zero if the issuer is deemed to be short of capital. At the same time, any issue had to fit with Rabobank’s own capital strategy and offer competitive pricing against its euro funding costs. For the deal to count towards Rabobank’s capital ratios, the loss-absorbing language had to conform to Dutch regulations, adding a further complication for domestic Japanese funds. That meant targeting non-traditional groups of investors, and required a thorough marketing process to explain the intricacies of the structure. Joint bookrunners Bank of America Merrill Lynch, Daiwa, Mizuho, Nomura and SMBC Nikko kicked off a three-day investor roadshow on November 25 2014, followed by a week of soft-sounding before books officially opened on December 8. From a range of 80bp–85bp over swaps, Rabobank priced the deal on December 12 at 83bp over, 2bp–3bp inside its euro Tier 2 curve while offering Japanese investors a fair premium to compensate for the risks in a subordinated European issue. Life insurers, regional and trust banks did take part, but a big portion of the issue went to investors that rarely participate in Samurai bonds, including school associations, charitable foundations and corporate investors. Rabobank’s debut set a template that was quickly followed. France’s BPCE, Societe Generale and Credit Agricole all followed with Samurai Tier 2 offerings in 2015, and the arrival of total capital regulations in November only underlined Japan’s relevance as part of the broad funding base for the world’s biggest banks. To see the digital version of the IFR Review of the Year, please click here . To purchase printed copies or a PDF of this report, please email gloria.balbastro@tr.com .

In many ways, the sterling bond market works as a microcosm of its larger global cousins, reflecting the same themes that exercise the minds of participants throughout the rest of the world, albeit on a less cluttered stage. To truly do the sector justice takes a house that can call upon deep international expertise, but also one that has not sacrificed its domestic roots in gaining that capability. HSBC is just such an entity, combining undisputed world vision with local history. The similarities between the universal and the domestic are plain to see: a bedrock of stalwart repeat issuers; the search for cross-border diversity; and the need for innovation to keep the market fresh. HSBC was in the vanguard of all of these themes. “What we did was position our DCM business to advise and enable clients,” said Jean-Marc Mercier, global co-head of debt capital markets. “We have a good anticipation of what is possible, and at many times we have been a strong voice,” added global head of debt syndicate Adam Bothamley. Similar to other markets, the sterling arena is underpinned by its frequent visitors. And in terms of volume, it is the public sector borrowers that are at the forefront of this subset. Close to home, the UK DMO again awarded a mandate to HSBC, this time with a lead management role on its 2046 index-linked Gilt, with the bank now one of very few annual ever-presents. In wider Europe, HSBC maintained its historically strong relationship with the EIB, working on deals that mounted to double figures, including the £1bn tap of its February 2020 FRN that constituted the largest SSA deal of the year away from the DMO. The Council of Europe also again appointed HSBC – for its December 2019 issue. The German connection continued to function admirably, with the bank active across numerous issues for KfW, including the issuer’s first Green bond in sterling (deals from EIB and TfL underpinned the bank’s SRI credentials). HSBC also maintained its leading bookrunner status with compatriot FMS. Further north, HSBC lead-managed all three deals from Finland within the awards period: five-year transactions in November 2014 and 2015 and a three-year in February. Add to this trades for EDC and AfD, not to mention KommuneKredit’s debut in the currency, and the list becomes all the more impressive. “The simple truth is that we do the plain vanilla issues extremely well,” said PJ Bye, global head of public sector syndicate. While those among the domestic borrower base might be viewed as likely to be frequent issuers by nature of their domicile, this is not necessarily the case. This was certainly true in covered bonds, where HSBC brought Lloyds Bank to the fixed-rate arena for the first time since 2012 ­– selling 52% of the paper into Asia into the bargain – while also ushering in Leeds Building Society for the first time in three years. This was one of a slew of three-year FRNs that included compatriot Abbey, as well as overseas visitors RBC, TD, BMO and CIBC from Canada and Sweden’s Stadshypotek. “On the right day, sterling can represent great diversification as well as competitive funding versus other currencies,” said Hugo Moore, head of frequent borrowers/covered bonds. This was also evident in the senior market, where HSBC led Rabobank’s first fixed-rate deal since 2012 and Wells Fargo returned, while Westpac NZ made its debut and Pohjola Bank diversified even further, with a dual-tranche fixed/floating approach. Nationwide had waited even longer – since 2009 – before making its return to senior, although it was the subordinated sector in which HSBC made a domestic splash, with the likes of Aviva’s first dual-currency hybrid since 2008, Prudential’s T2, Co-op Bank’s post-recapitalisation trade and Centrica’s rating-affirming 60NC10. Overseas corporates such as Apple, IBM, Daimler, Paccar, APT Pipelines and GE were just some that trusted HSBC on the investment-grade side of the equation, while homegrown high-yield issuers such as Angli

It was the inaugural publicly syndicated bond from Santander UK Group Holdings, the entity set up in 2014 in response to the regulatory push for major UK banks to shift their issuance from the operating company to the holding company. The bank’s private ownership structure and regulatory requirements meant it became the first UK issuer to structure an AT1 bond with a permanent writedown feature. That means investors could see their holdings wiped out completely should its CET1 ratio slip below 7%. The deal coincided with a sterling and US dollar cash tender designed to redeem selected legacy Tier 1 instruments at the operating company level. The success of the deal represented an important statement on the credit of a company that was then still eyeing a flotation. The response left little doubt as to investors’ belief in the credit. The perpetual non-call seven bonds pulled in more than £5bn in orders, allowing lead managers to tighten initial talk from 7.50%–7.75% to guidance of 7.375%–7.50%. It fixed at the tight end for a £750m deal, the maximum size target. Issued in early June, it was the first benchmark sterling AT1 bond since the previous June. It was also the European market’s first benchmark AT1 in any currency since DNB Bank’s Reg S dollar deal in March after persistent volatility sidelined issuers. The result reflected an assiduous marketing process that saw two teams meet more than 100 investors across the UK and parts of Europe over three days. “The bond is very subordinated, so, from our perspective, it was critical to ensure investors understood the credit well – the business profile and the relative stability of our capital ratios and the earnings stream,” said Stephen Jones, chief financial officer at Santander UK, at the time of the deal. The issuer announced prior to pricing that its parent would pick up 13.5% of the new notes. “It is helpful for third-party investors, as Santander is motivated that it never hits the 7% trigger – that sends a reassuring message,” said Jones. The trade was bid 75bp higher in the secondary market at the close of business, having been priced at par. Bank of America Merrill Lynch, Barclays, Morgan Stanley, Santander and UBS led the trade. Santander and UBS were also structuring advisers. To see the digital version of the IFR Review of the Year, please click here . To purchase printed copies or a PDF of this report, please email gloria.balbastro@tr.com .

Just after Coca-Cola stormed the Swiss market with its triple-tranche deal in September, Ben Heck, director of syndicate at joint lead Credit Suisse, jokingly asked if “there is any way IFR can’t give us the award this year”. The answer, not that we would tell him that at the time, was a resounding “No!”. The deal – Coke’s first in the Swiss market – went down a storm, with all three tranches well bought, and demand on the two-year note such that it printed with a negative yield. The deal was the pinnacle of what has been a very strange year in the Swiss franc market. The SNB’s decision on January 15 to scrap its defence of a floor against the euro pulled the rug out from under everyone and only the strongest survived the turbulent times that followed. It was a true paradigm shift. The drop of the floor led to FX moves more violent than many traders will see in any currency – the franc spiked 28% against the euro in intraday trading – while the drop in rates to –0.75% meant larger investors were better off keeping their cash in vaults than putting it on deposit. The ramifications for the capital markets were equally severe. The basis against US dollars and euros was distinctly unfavourable for much of the year – swaps were negative out to between eight and 10 years and Swiss governments to almost 15-years for most of 2015 – and with the low rates, normal business was difficult or impossible to conduct. One bank towered over others in meeting the new challenges. Credit Suisse increased its market share in an environment of falling volumes by refocusing its efforts on the issuers that still could print bonds, and even pioneered a new market standard – the Matterhorn Bond. In the combined market share of international and domestic deals, Credit Suisse took 33.5% of the league table during the awards period, up on the previous year’s 33% take. Of the SFr46.2bn (US$45bn) of bonds sold, the bank was mandated on SFr15.5bn and did 89 of the 155 deals. “In spite of falling volumes and difficult market conditions, we significantly increased our international market share and enhanced the attractiveness of the Swiss franc market for large corporate issuers,” said Dominique Kunz, head of Swiss DCM at the bank. Credit Suisse was the leader in bringing the new Matterhorn style bond – that is, international issues over SFr1bn – with deals from Apple, Coca-Cola, Shell and Novartis. It also led in the corporate Triple B and crossover segment with names such as Mondelez and ArcelorMittal. “The Credit Suisse new issue juggernaut remained active in every single month of the year,” said Daniel Gut, head of fixed income secondary trading. While others were stagnating or downsizing, Credit Suisse was the only syndicate desk in Switzerland to add headcount, bringing an experienced banker onto the team. Its focus on North American issuers helped keep the numbers up with large deals. But the bank went a step further, opening the Swiss total loss-absorbing capacity compliant segment with two chunky Credit Suisse holdco bonds totalling SFr1.45bn, and continued to promote the ABS market with Swissauto and Swisscard deals. Other domestic wins included Novartis’s huge SFr1.375bn deal in early February, as well as good-sized offerings from Kudelski, Temenos, Tradition and Geberit. Credit Suisse was also active in the real estate and healthcare sectors, as well as in “bread and butter” business from Swiss local authorities, including the large SFr950m multi-tranche deal from Canton Basel-Landschaft and the longest regional deal with Canton Solothurn’s SFr300m 1% 2045 deal in February. Smaller deals were not left out, with “mini-bonds” from City of Koniz, Hirslanden AG and U-Blox. Credit Suisse was also involved in the only insurance hybrid of the year, from Helvetia, as well as the only international sub-investment grade deal from ArcelorMittal. The Swiss bank even managed to keep some of the old-style flow business of highly-rated international SSA names goi

The SNB on January 15 pulled the plug on the franc peg and dropped short-term rates to a deeply negative minus 0.75%. That move stunned – and stalled – the primary capital markets, as participants readjusted to the new paradigm. Just 26 days later, Apple came with a jumbo dual-tranche deal, taking advantage of the new low rates and pent-up investor demand for quality corporates to net total funding of SFr1.25bn. Deals from foreign issuers in excess of SFr1bn were later dubbed Matterhorns, in view of it being so hard to ascend to that size. The Swiss franc bonds followed massive annual multi-tranche deals in US dollars since 2013 and a debut euro outing in late 2014. As with those issues, proceeds were mainly put towards share buybacks, thus avoiding taxes that would be incurred if the company repatriated any of its vast overseas cash pile. Given the negative swap rates in the franc out to nine years at the time, only longer-end deals would bring yields meaningfully over zero. That led to joint leads Credit Suisse and Goldman Sachs sounding out short 10-year and straight 15-year maturities, before opening a SFr500m minimum November 2024 issue at mid-swaps plus 27bp area and a SFr250m minimum February 2030 at mid-swaps plus 37bp area. Demand was strong enough to upsize and tighten – unusual in the Swiss market – finishing up with SFr875m of 2024s at swaps plus 25bp and SFr375m of 2030s at plus 35bp, printed with respective 0.375% and 0.75% coupons. The bonds were sized to demand with minimal cutbacks. “The debut deal took maximum advantage of Apple’s widespread name recognition, strong ratings and rarity value, and kept the franc on the global radar, showcasing its relevance despite difficult new market conditions,” said Dominique Kunz, head of Swiss debt capital markets at Credit Suisse. The maturities fitted well with Apple’s debt profile, nestling between existing bonds in euros and dollars. As one trader pointed out: “With an eighth more coupon [than the recent Novartis trade] and 4bp more spread for a better rated and bigger company, it’s a no-brainer.” Against Aa1/AA+ rated Apple’s US dollar curve, one analyst pegged the 2024s as giving around 5bp of premium and the 15-year some 15bp–20bp through the curve. Apple is such a big name that even the local mass-market tabloid wrote about a Swiss bond deal. To see the digital version of the IFR Review of the Year, please click here . To purchase printed copies or a PDF of this report, please email gloria.balbastro@tr.com .

UBS’s rise through the ranks over 2015 has been truly meteoric. Having languished in 14th place for all euro-denominated financials business at the end of 2014, by the end of November it had risen to third, taking a 6.4% market share – up from 2.7% – according to Thomson Reuters data. Indeed, 2015 proved a watershed for the Swiss bank. After enduring numerous organisational restructurings and team departures in recent years, this was the year that UBS cemented its position as a major player in the financials space. Its apotheosis came despite a turbulent market backdrop that repeatedly shut issuance windows and a fast-changing regulatory environment both for banks and insurers. But UBS’s ability to bring trades even during the most volatile periods, paired with its best-in-class advisory business, saw it mandated time and again in both the capital and funding markets. Preparing for new resolution rules was a key theme for banks throughout the year, as the worlds of capital and senior collided and different jurisdictions tussled with different solutions. “The funding business has moved to an advisory business,” said James Marriott, head of EMEA financial institutions DCM at the bank. “We now have the capital advisory guys in the room for the first time.” Leading by example, UBS made a strong start on shifting its issuance to the holding company to comply with Swiss regulation, issuing senior bonds in three currencies and a three-part multi-currency inaugural Additional Tier 1 trade. UBS further proved its worth by executing some of the year’s more complex AT1 deals, including inaugural trades for comeback kids Bank of Ireland and ABN AMRO. It also structured and executed an inaugural sterling AT1 for Santander UK, spotting a window in June despite ongoing Greek turmoil. In Tier 2, it helped Banque Federative du Credit Mutuel reopen the market in September, the first trade in the format since July, and landed a deal for Ibercaja, Spain’s eighth-largest bank, after a torrid period that saw others’ mandates fall by the wayside. Tier 2 deals for the Co-operative Bank and SNS Bank, in sterling and euros respectively, underlined its ability to sell more challenging stories to the market. UBS ramped up its market share in the insurance sector, managing to do so without relying on business from franchise loans, and at a time when issuers and investors alike were grappling with the implications of Solvency II regulation. In December 2014, it led a €500m Tier 2 deal for Intesa Sanpaolo Vita before the grandfathering window allowing for that to count as Tier 1 capital slammed shut, despite competing issuance and a volatile backdrop. It helped KLP and Danica access the market after lengthy absences and was involved with a tender and reoffer of subordinated notes for Swiss Re. It also led a perpetual sub for Helvetia, the year’s first Swiss franc hybrid. But it was not in the capital market alone that UBS shone. The bank’s resolve to grow its funding flow business bore fruit, snagging mandates both for covered and senior trades from more than 50 issuers across core and non-core currencies. Its strength in the UK and Irish market saw it pulled into a covered bond issue for Allied Irish Banks after the mandated deal failed to materialise in 2014. It also executed trades for the trickier peripheral names as well as core issuers. UBS’s dialogue with investors was crucial to its success. It arranged more than 600 one-on-one investor meetings for EMEA issuers in the IFR awards period and its global reach enabled it to guide clients beyond Europe’s borders to the most suitable market, whether the Yankee market for Nationwide or Australian dollars for Rabobank. “We offer a very broad reach in terms of which markets we can bring issuers to,” said Barry Donlon, global head of capital solutions and liquidity. “We don’t talk to them about a bond, but a capital structure.” UBS rounded off IFR’s awards period with one of its trickiest trades of all: a li

The pressure was on not only to raise some €3.15bn-equivalent in the bank’s first trip to this market, but to ensure those bonds performed. UBS became the first bank to build a greenshoe option into an AT1 structure, a technique borrowed from equity syndication to assuage investor fears around the volatility that had frequently beset past deals. UBS went on to exercise nearly the full greenshoe option of 10% on the two US dollar tranches. All three tranches traded up by as much as 2.45 points a few days after pricing. The idea left the head of a rival debt syndicate kicking himself that they had not thought of it first. HSBC went on to use the tool in its own AT1 deal the next month. It was also the first time that a bank had sold low-trigger bonds alongside high-trigger ones. The US$1.15bn perpetual non-call five bonds will be written off should UBS’ Common Equity Tier 1 ratio fall below 7%, the first high-trigger, full permanent writedown bonds to be sold. The other bonds have a 5.125% trigger. And they were the first bonds to be sold out of UBS’ newly created holding company rather than the higher rated operating bank. “The significance for our broader capital plan should not be underestimated,” said Barry Donlon, UBS’ head of capital solutions. Timing was key. UBS announced the deal the same day as its full-year results, which helped drive home its capital adequacy. It swiftly moved to a two-day European roadshow run via three separate teams. The first quarter might have offered some of the year’s best execution windows but it also left UBS fighting for investors’ attention, with three AT1 deals having already priced that week alone. Concerns around the surging Swiss franc and negative interest rates were rife. But UBS was well prepared. It had designed the tranches with input from core investors and secured cornerstone bids that ensured momentum from the offset. Orders surged to more than US$15bn-equivalent, with interest from Asia helping to expand UBS’ traditional investor base – and enabled the bank to push on price. Guidance on the US$1.15bn perpetual non-call five high-trigger deal moved from 7.25% area to 7.125% and for the US$1.15bn low-trigger perpetual non-call 10-year from 7.125% area to 7%. The €1bn perpetual non-call seven was priced at 5.75%, tighter than guidance of 5.875%–6%. To see the digital version of the IFR Review of the Year, please click here . To purchase printed copies or a PDF of this report, please email gloria.balbastro@tr.com .