Yen Bond: HSBC’s ¥181.8bn triple-tranche bond

The deal to help fund the US$110bn takeover of SABMiller was the second-biggest investment-grade bond ever priced, and it was executed with poise, good timing and confidence. “InBev redefined the playbook for acquisition finance,” said Marc Fratepietro, co-head of global debt capital markets at Deutsche Bank, which led the deal along with Bank of America Merrill Lynch and Barclays. “The company got orders from investors in over 45 different countries, and there was no controversy after this deal. It was the optimal size – it didn’t trade up hugely and it has rallied since.” But the deal’s success was by no means a given back in January when oil prices were slumping and the Dow Jones index was off to one of its worst starts to a calendar year. Market sentiment was dampened by worries about China in particular and the global economy broadly. In addition, some worried that bond investors might be in the mood for a long winter’s nap after digesting a record US$1.29trn of issuance in 2015. Those worries proved unfounded as the buyside bellied up to the bar with US$110bn of demand – the largest order book for a corporate bond ever recorded. The extraordinary demand allowed leads to ratchet in pricing from initial thoughts by 15bp–35bp across the tranches by launch. That significantly lowered the funding costs for AB InBev (A3/A–), which would use the proceeds to help take out a US$75bn syndicated loan financing the SABMiller purchase. The company – maker of brands such as Budweiser and Beck’s – was judged to have paid new issue concessions ranging from negative 5bp to plus 20bp across the deal’s seven tranches. About US$28bn of the deal was dated 10 years and longer, bucking the trend at the time for shorter maturities. Tenors of 20 and 30 years – each sized at about US$11bn – found buyers thirsty for yield in a desert of meagre returns. And unlike other attractive deals that generated gripes about distribution, allocations went smoothly. Mitsubishi UFJ, Santander and Societe Generale were joint books on the deal. In the end, the company – itself the product of several mega-mergers – sold an outstanding bond to fund its latest expansion and was able to capitalise on its strong track record. “The management team have delivered time and again on deleveraging targets in prior acquisitions,” a banker close to the deal said at the time. To see the digital version of this review, please click here. To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

For those at the top of their game, the difference between high achievement and dominant performance is small. There is a concept in sport that success can be best realised by the aggregation of marginal gains – that a 1% improvement across every related area adds up to a significant overall advantage. To be able to capitalise on this obviously requires being towards the front of the pack in the first place, though none could deny that BNP Paribas has consistently been a force to be reckoned with in the euro bond market. “The last two years have been about consolidation; this year has been about getting the rewards,” said Martin Egan, global head of primary markets. He highlighted the change to the bank’s platform, whereby primary and credit market activities were brought together under one management umbrella, which “reinforced true connectivity with our corporate client base, bringing bond and loan origination businesses together”, creating what the bank calls a credit continuum. “There was a clear focus on marginal gain across all areas of activity, which, entwined with our corporate and institutional bank mantra of ‘focus, improve, grow’ has driven our primary markets strategy,” he said. The results were plain to see, with BNPP claiming a seat at the top table across the various sectors. The sum of the parts made it the aggregate league table leader. Such an outcome requires not only thorough and continual client coverage but also an understanding of the themes playing out throughout the year and the best way to address them. The ECB and its various QE initiatives were front and centre of proceedings, not least in the SSAR sector, where the spectre of disappearing yields created a challenging backdrop. One result was the emergence of ultra long-dated issuance from eurozone sovereigns, as they took advantage of the low rates on offer, while investors looked to book any returns they could. BNPP acted as lead manager on the year’s first 50-year deal from France – which in tandem with a 20-year is IFR’s SSAR Bond of the Year – and also subsequent deals from Spain and Italy. At the shorter end of the new issue market, the bank tempted investors to cross the Rubicon into negative yield territory with Finland’s €3bn seven-year at the end of August. The bank’s credentials in the sub-zero sphere had already been set in the supranational arena at the start of the year through a three-year from the EIB. This central bank-inspired narrative was repeated in the corporate sector, and again BNPP was at the forefront, lead-managing negative-yielding deals from Sanofi and Henkel on the same day. It was also in the vanguard of championing the euro market when it came to large multi-tranche deals, often M&A-related, for the likes of Anheuser-Busch InBev and Teva, and subsequently Air Liquide and Danone, even when the acquisition currency was US dollars. “It showed what’s do-able in the euro market in terms of size,” said Fred Zorzi, global head of bond and loan syndicate. It also underscored the “integrated, unbiased service” facilitated by the amalgamation of the loan and bond initiatives. “We already had long-term relationships; it was about offering a better service,” he said. BNPP was also instrumental in providing market access to the mid-cap corporate community. “It’s not just about large deals but also debut and smaller issuers,” said Renaud Franck-Falce, head of corporate debt platform EMEA, highlighting inaugural deals for unrated Ferrari and Ipsen. Add to this a principal role in such thematic events as reverse Yankee issuance and leadership at times of uncertainty – for example, around the introduction of the ECB’s corporate bond-buying programme, the UK’s EU referendum and the US election – and it makes for a winning formula, for which BNPP was named IFR’s Europe Investment-Grade Bond House. This leadership was also visible in the financials sector, where the bank was a guiding light in much that was innovative, such as Nykre

Like other banks in Europe, the Danish mortgage lender was aware that it had to raise billions in loss-absorbing debt to satisfy regulators that creditors rather than taxpayers will shoulder the costs of future crises. French banks had been widely expected to pioneer a new type of senior debt to meet those requirements, but Nykredit beat them to it, pricing a ground-breaking €500m three-year senior resolution note issue in June. “This was the deal of a lifetime for us,” said Nicolaj Legind Jensen, head of funding at the Danish lender. The rationale was twofold. In addition to its regulatory requirements, Nykredit risked remaining on negative outlook at S&P without raising this debt. But with costs under intense scrutiny ahead of an envisaged IPO, Tier 2 issuance was simply not an option. Nykredit’s funding team therefore structured a new senior instrument, bringing BNP Paribas, Goldman Sachs and Morgan Stanley on-board along the way. The name – one of about 20 options devised by the bank – was crucial to the bond’s positioning in order to avoid overpaying, while also keeping the regulator happy. The strategy paid off. Buoyed by extensive investor work, including 65 meetings for the SRN alone, the book included all the major asset managers, with orders nearing €2.5bn and the issuer saving 125bp compared with a theoretical Tier 2 transaction. The bonds rallied strongly from their reoffer level of swaps plus 110bp despite pricing at the tighter end of the massive 95bp–200bp range guided by investors, highlighting the challenge of pricing a new asset class. Though Nykredit is not subject to the minimum requirement for own funds and eligible liabilities standard that applies to other European banks, it has provided a much needed pricing point in the burgeoning Tier 3 market, and the funding team was bombarded with calls from other market participants. “Where Nykredit Realkredit has gone, we expect many others may follow,” S&P wrote in a note at the time. The ratings agency revised its outlook on the bank to “stable” from “negative” after the issuer’s second deal in the format only one month later, in what was the first unsecured financial euro transaction after the UK voted to leave the European Union. “We think this level of leadership is unsurpassed for an issuer of our size,” said Henrik Hjortshoj-Nielsen, Nykredit’s head of group treasury. To see the digital version of this review, please click here. To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

SMBC Nikko began 2016 as it ended the previous year, with a series of popular Samurai bonds for global financial institutions, but it was its performance after the introduction of negative interest rates in late January that set it apart from its competitors. After the Bank of Japan’s move, senior bonds from Double A rated issuers such as Pohjola Bank and Westpac no longer offered enough yield to tempt Japanese investors, despite the spread over JGBs. After a period of adjustment, higher-yielding paper was now the focus, whether that was from issuers from a few notches down the credit curve, with longer tenors or subordinated structures. When the Samurai market reopened in the second quarter, SMBC Nikko brought Credit Agricole to market with a concurrent ¥130.1bn (US$1.2bn) senior bond with tenors of five, seven and 10 years and a two-part Tier 2 offering, meeting the maturity targets and risk tolerance of a varied group of investors. SMBC Nikko spent a lot of time on investor relations, including non-deal roadshows for potential new issuers, and spent time engaging regional investors, who would later prove crucial to the success of long-tenor deals and bank capital trades. There was one group that was missing out, though. Following extensive internal training and customer suitability tests, SMBC Nikko brought French banking group BPCE to the market for a repeat of its concurrent senior and bank capital offering from December 2015, but this time added a Tier 2 tranche aimed at retail investors. This was the first time any issuer had targeted retail investors for a Basel III-compliant Tier 2 Samurai. The retail tranches of a 10-year bullet and 10-year non-call five raised a combined ¥53bn, despite being priced only a few days after Britain voted to leave the European Union, and prompted other banks to seek internal approvals to allow them to market to the same investor base in future deals. SMBC Nikko had sold yen Tier 2 bonds targeting Japanese retail investors before, so it had already come up with testing criteria for its sales people. In September, SMBC Nikko was a bookrunner on Standard Chartered’s ¥45bn five-year bond, the first Samurai offering from a British institution to fall under total loss-absorbing capacity rules. Despite the uncertainty of the Brexit vote and the complex British bail-in rules, it printed a respectable size and paved the way for a similar deal to follow a week later. HSBC Holdings’ subsequent ¥181.8bn three-tranche Samurai, its first TLAC-eligible offering in yen, was the standout deal of the year, drawing strong demand across three tranches from five to 10 years. SMBC Nikko had earlier helped lead Citigroup’s first TLAC-eligible yen offering in the Pro-bond market, since US bank bonds sold through the Samurai market do not count towards TLAC. Citic’s debut Samurai in October was another highlight. The first Samurai from a Chinese issuer in 16 years drew a huge oversubscription, reaching ¥200bn for a ¥100bn deal, and showed the strength of demand for paper from new, higher-yielding markets. SMBC Nikko had helped bring ICBC to Japan for its debut Pro-bond a few months earlier. The bank also showed its mettle when the Republic of Indonesia returned to yen, this time printing ¥100bn across three and five-year tenors, and for the first time not requiring a guarantee from Japan Bank for International Cooperation on any tranche. The order book also showed increased demand from regional and other investors, repeating a theme that was evident in deals throughout the year. JBIC still had its place, though, guaranteeing a ¥80bn 10-year transaction for Petroleos Mexicanos, or Pemex, in its first Samurai offering this decade, again via SMBC Nikko. All in all, SMBC Nikko racked up ¥285.6bn of league table credit for Samurai bonds during the period, topping the table with a market share of 19.6%. In the onshore market, SMBC Nikko was involved in most of the largest trades for the likes of Panasonic, Sony and de

Much as it is sometimes viewed as a law unto itself, the sterling bond market does not operate in a vacuum. It is subject to similar factors as other areas, although it also retains idiosyncrasies that require in-depth knowledge to address. Barclays was therefore perfectly placed to play a pivotal role in a 2016 market that experienced ebbs and flows that mirrored events elsewhere in the world. It is a UK-headquartered bank that has long boasted proficiency on a global scale. This means it “is truly currency agnostic”, said global co-head of investment-grade syndicate Jonathan Brown, something that could perhaps create a danger of neglecting your domestic franchise in the search of prospects elsewhere ­– a trap Barclays resolutely resisted falling into. Unexpected events always create volatility, but with this comes opportunity. And Barclays was quick to demonstrate its ability to seize such chances, nowhere better exemplified than following the UK’s June referendum on EU membership. “We brought calm after the Brexit storm,” said Mark Lewellen, global co-head of debt capital markets and risk solutions. “While others might have been looking internally after the vote, we were concentrating on what was going on in the market.” This approach was swiftly rewarded, with Barclays leading deals for BAT and US distiller Brown-Forman within a week of the referendum result. The latter played into the theme of the bank having a leading role in cross-border sterling issuance, and not just for US companies, as deals from the likes of BASF, Nestle and FCA Capital Ireland testify. Add to this supply from a slew of international borrowers in the SSA and FIG sectors and it becomes plain that Barclays spread the net wide when helping issuers broaden their investor bases to include the sterling market. “We try to close up the gap between buyside and sellside,” said Neil McLaren, head of European credit distribution. “The investor side faced challenges that we worked hard to address.” This approach was evident throughout the year, Barclays spotted an opportunity for public sector issuers early on in proceedings, leading what became a flurry of SSA supply at the start of 2016. By the end of February, there had already been some £12bn of such paper issued, half of 2015’s full-year figure. Barclays capitalised on the situation, arranging around half of the 40 or so early-year transactions for diverse issuers around the globe. And it was no slouch at home, bookrunning the DMO’s first Gilt deal of the calendar year, as well as its first after the Brexit vote. In the financials arena, the bank was also at the top of its game, spearheading thematic issuance such as floating-rate covered bonds, while additionally working on more bespoke transactions, notably in the insurance space. There, it reopened the subordinated sector with a deal for Aviva in September after a 10-month hiatus – the last deal having been from specialist insurer Hiscox in November 2015, on which Barclays was also active. It followed this up with a challenging Tier 2 for unrated JRP in October, just as “hard Brexit” concerns were at their peak, getting the deal over the line in a week that saw a high-yield offering from telecoms services outfit Daisy pulled. Barclays was not involved in that transaction. It did, however, play a role in the remarketing of CYBG capital notes, and its investor negotiation skills were also exhibited during Nationwide’s covered bond consent solicitation. Barclays’ corporate credentials are unquestioned, and it combined those with its liability management expertise, what Lewellen termed “intellectual content”, on National Grid’s LM exercise and issuance of a multi-tranche deal that resulted in the largest sterling corporate transaction to-date. Having reopened the market following the EU referendum, the bank also displayed its nimbleness around the subsequent Bank of England announcement that it would start buying corporate debt. On August 1, it acted as lea

Not that it was plain sailing: the transaction came during a huge transition for the parent company. National Grid announced in November 2015 that it intended to sell a majority of shares in its gas distribution business. “The changing structure of the company was complex and it needed explaining,” said Christopher Lipscomb, managing director at structuring bank and bookrunner Morgan Stanley. “Many investors questioned the risks around buying debt from an entity undergoing so much change.” But despite the complexity, the company managed to raise £3bn on September 13 with a five-tranche deal ranging across the curve from five to 30 years. There were other issues that might have put investors off. First, there was an intricate sale plan that affected the credit metrics and future credit ratings of the deal. In addition, although National Grid GF was rated A3/A–/A, all its ratings were on review for downgrade or on negative watch. But investors, clearly not wanting to be underweight on such an established and well-known credit, nonetheless rushed in to place £6.4bn of orders. The result was extremely punchy pricing. “It was a fantastic result, the average cost of funding across the sterling tranches was around 2%, way lower than any other sterling bond of a substantial size,” said Lipscomb. The £3bn total nominal volume eclipsed Enel’s £2.25bn dual-tranche 15 and 31-year outing from late 2009 as the largest sterling issue ever from a corporate issuer.Sterling sweet spot National Grid GF attracted further attention by selling the deal the day after the Bank of England said that four of the issuer’s bonds were eligible for its purchase programme. The central bank intends to buy £10bn of corporate paper, initially through thrice-weekly auctions, which started on September 27. The programme, which encompasses debt from companies that make a material contribution to UK economic activity, will last for 18 months. The BoE has single-handedly “lifted the sterling market out of irrelevancy”, said one head of corporate debt capital markets. Bookrunners were Bank of America Merrill Lynch, Barclays, BNP Paribas, HSBC and Morgan Stanley. National Grid GF also launched a tender offer on nine of its sterling bonds, and raised a further €600m in the weeks after its sterling foray, all of which will be used to lever the company’s gas distribution assets, and de-risk the sale of the stake. * Syndicate titles corrected in penultimate paragraph. Correction in final paragraph as National Grid completed a tender offer for nine bonds, not a consent solicitation on 10 bonds. To see the digital version of this review, please click here. To purchase printed copies or a PDF of this review, 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> <object id="__symantecPKIClientMessenger" style="display: none;" data-install-updates-user-configuration="true" data-extension-version="0.4.0.129"></object>

The negative interest rate environment led to a fall in market volumes of SFr6bn compared with 2015, with international issuance falling by 15% and domestic deals down 11%. Despite this, Credit Suisse held on to its domestic lead with its market share of 29% (excluding the large regular Pfandbrief issuers PfZ and PSHypo, which more closely resemble quasi-sovereign issuance), its largest since 2011. In the international segment, its 36% share was in line with its five-year average, although below the exceptional levels for 2015. The reorganisation as a strengthened investment bank – under the new entity of Credit Suisse (Switzerland) AG, which grouped advisory and M&A together with ECM and DCM – and with a tighter group in syndicate, sales and trading, and some “tactical underwriting”, accounted for much of the increase in its domestic share. To kick things off, Credit Suisse reopened the utility sector with the SFr240m Nant de Drance 10-year deal, the first of the year, and continued to lead in the segment with more than SFr1bn from five other issuers. It also led the SFr200m debut from state-guaranteed railway group Rhaetische Bahn in the novel “dual-zero” nine and 15-year format. It led both Matterhorns priced in the year, for Teva and Eli Lilly’s M&A-based financings. Credit Suisse maintained its leadership in US corporate issuance in the Swiss franc, as sole or joint lead for every deal, and extended its long run as lead on every deal since the US Foreign Account Tax Compliance Act came along in 2012. This was particularly advantageous as US issuance had become the dominant region in international sector volumes. Several higher-grade issuers, which had previously been mainstays, were forced out of the market with the economics, especially on a cross-currency basis, making new issues untenable. Credit Suisse responded by targeting the small windows of opportunity with extended maturities or lower-rated issuers to achieve the yields or spreads needed by investors. A stand-out was Caribbean Development Bank’s 12-year brought by Credit Suisse as sole lead in June. It gave a pleasant pick-up to swaps and Swiss governments considering its projected repo eligibility with the SNB and the diversification opportunity afforded by a new name in the Double A supras field, which had seen very little issuance in the low rate environment. In late October, Credit Suisse reopened the dormant Canadian province segment, not seen since Quebec in 2014, with a New Brunswick 15-year that doubled its starting size to print SFr400m of 0.2% November 2031s. The issuer had not been seen in the market since 2009, and printed its latest deal in twice the tenor and with a tiny fraction of the coupon. The domestic public sector was a growth market in 2016, as cities, cantons and agencies all clamoured to lock in the very low rates at ever increasing maturities. Credit Suisse was on most of them, as well as being instrumental in both the largest public sector deal of the year and the longest. Both of those were from Kanton of Geneva, with SFr400m of April 2036s and SFr200m of October 2056s. Emerging markets were not left behind either, with the first Argentine corporate in more than two decades, from state-owned oil company YPF. The SFr300m deal was run by Credit Suisse and UBS, with the former on documents for what was a very complex execution due to the Argentine regulatory framework. Credit Suisse was also sole lead for another debut – Chile’s SME financing group Tanner. The bank held pole position in the small Swiss franc ABS market, as active manager on all three deals printed in the year. It also remained the only Swiss bank able to both structure and originate ABS deals. Finally, the market is about to say goodbye to three of the long-standing stalwarts of the Swiss bond market, with DCM’s Daniel Gut, bond syndicate, and DCM’s Andre Schmid, and the unflappable, veritable sage of Swiss deals, Jean Marc Favre on the syndicate desk. All these C

The deal made headlines for its name, size and yield. As one of the most recognised brands in the world, McDonald’s was a huge draw for investors, especially as its only outstanding bond in the Swiss franc market, a SFr250m 1.875% deal from 2010, was its last and had matured less than three months previously. Although not the largest deal of the year, at SFr400m it was one of the largest single-tranche trades to come in 2016. The yield, brought in 7bp from initial thoughts at the 0.25% level, made it one of the tightest corporates of the year, beaten only by shorter-dated or better-rated deals. At the printed level of 0.17% at par it came in line with where McDonald’s could print in its native US dollars, and inside a comparable domestic deal from Swiss retailer Coop, a rare feat for a foreign issuer, no matter how well known. Coop has average domestic bank ratings of BBB+, in line with McDonald’s Baa1/BBB+/BBB+ ratings. The issuer’s decision to only allow sales to Swiss money meant that, unlike some other deals printed over the course of the year, true diversification into the selected investor base was achieved, without cannibalisation by foreign asset swappers. The deal saw huge demand with books around SFr1.5bn, nearly four times subscribed in very short order, with an extremely granular distribution to more than 100 accounts. “It was a quick execution, as befitting a fast-food chain. The bond was massively oversubscribed in under 15 minutes as it was a rare opportunity to buy an iconic global brand,” said Stefan Boesl, director of bond syndicate at Commerzbank Zurich, which was a lead manager and bookrunner along with Credit Suisse and BNP Paribas. Asset managers took around half of the paper, while bank treasuries and insurers took about 15% each. Private banks/retail accounts also took around 15% – an impressively large amount as they generally shun longer-dated, low-yield bonds that do not even cover their portfolio fees. It is testament to the popularity of the name that they would even consider buying at those levels. Despite the tight pricing levels, the McDonald’s bonds tightened significantly in the secondary market. They were quoted 5bp tighter by the end of the week and came in even more by settlement – hitting a cash price of 100.95, 12bp tight of issuance, for a yield of only 0.05%. To see the digital version of this review, please click here. To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

Less than a year after selling Singapore’s first covered bonds in US dollars, DBS printed an upsized A$750m (US$540m) three-year floating-rate note issue at 77bp over three-month BBSW, inside guidance of 80bp area. The Aussie dollar debut made DBS the first Asian covered bond issuer to venture beyond G3 currencies, and the first international bank to sell a covered Kangaroo before visiting the more established euro market – underlining Australia’s growing relevance as a source of funds for global issuers. DBS had considered issuing in the more established euro market and even eyed a sterling deal, but the Australian market offered an opportunity to diversify at the most attractive cost, equal to a negative rate in euros. The Singapore lender reaped the rewards of an extensive marketing effort in the Asia-Pacific region that included investor meetings in Sydney, Melbourne and Brisbane through a broad syndication team, assisted by Barclays, National Australia Bank, RBC, Westpac and DBS. Orders reached a hefty A$1.3bn, dwarfing the A$400m book for a five-year covered bond from Canada’s CIBC a month earlier, and allowing DBS to increase the issue from an indicative A$500m. The deal, part of the bank’s US$10bn global covered bond issuance programme, also helped boost DBS’s presence in Australia following the opening of its Sydney branch in September 2015. “We are an Asian issuer and familiarity with the DBS name in Asia-Pacific is very strong,” said Yeoh Hong Nam, head of structured and wholesale funding at DBS. “So, from a strategic standpoint, it made a lot of sense to do this.” “Feedback from the last US dollar issue was that investors would be keen on an Australian dollar issue if we were to consider another currency. It opens up new conversations with Australian investors, but it also opens up conversations with investors that could not get into the US dollar offering.” Asian investors were important to the success of the deal, buying 57% of the bonds. The participation of local buyers, however, justified the decision to target the Kangaroo format. Australia accounted for 33% of the deal, and the remaining 10% went to Europe. Unlike senior unsecured Kangaroos from global banks, DBS’s covered bonds are repo-eligible with the Reserve Bank of Australia due to their Triple A ratings from Moody’s and Fitch Ratings. As a result, they qualify for the RBA’s committed liquidity facility. Banks took 85% of the covered Kangaroo notes, asset managers picked up 11%, official institutions 3% and others 1%. To see the digital version of this review, please click here. To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

BNP Paribas has been at the forefront of this year’s ever-changing and challenging European market, breaking new records and reaching new milestones despite the backdrop of the Brexit vote, shock US election results and ongoing bouts of political volatility. “Once again we have been firing on all cylinders in all European currencies,” said Martin Egan, global head of primary markets and origination at the bank. “We have really tested the boundaries of the market this year as events like Brexit made investors more discerning.” Throughout the year, it helped clients access markets even during the most difficult periods. It was joint bookrunner on a transaction from BP in February not long after a huge commodities sell-off. The landmark deal helped reopen the bond market for oil majors and confirmed that markets were open despite the worst start to a year for European investment-grade corporate issuance in 16 years. Without waiting for the dust to settle on that deal, BNPP went to work in the same week with a liability management exercise for troubled miner Anglo American, which was returning after a one-year absence from the capital markets. Anglo American bought back up to US$1.3bn-equivalent of bonds to help reduce its gross debt, after the three major rating agencies stripped the mining giant of its investment grade status earlier in February. “We have become a trusted adviser to Anglo, and helped it seize the opportunity to smooth out its maturity profile and help cut debt at a difficult time,” said Mark Lynagh, head of European corporate DCM at the bank. BNPP was also keen to take advantage of the post-Brexit landscape. Amid acute uncertainty, the Bank of England cut rates by 25bp, increased Gilt purchases by £60bn and said it would buy up to £10bn of corporate bonds, sending the sterling market into a momentum-led rally. Vodafone, with the help of BNPP, was quick to take advantage of the strong rally to print 2016’s largest and longest corporate sterling issue at that time, a £1bn 3% 40-year. Months later, BNPP brought to life the biggest ever corporate sterling bond, helping National Grid Gas Finance to cash in on the year’s sterling market comeback. The company raised £3bn in the sterling market with a five-tranche deal ranging across the curve from five to 30 years on September 13. And the bank also made waves in the Swiss Franc market, helping to execute a SFr400m no-grow eight-year deal from McDonald’s in September (IFR’s Swiss Franc Bond Deal of the Year), which built up a well oversubscribed book in a short space of time. “As well as our core euro market, we have offered issuers arbitrage funding solutions across sterling and Swiss francs as those markets have had to get to grips with QE and negative rates of their own,” said Fred Zorzi, global head of syndicate for bonds and loans at BNPP. BNPP was bookrunner on Sanofi’s landmark transaction. The company demonstrated what was possible by selling the first negative-yielding non-financial corporate bond in euros in September. The deal was brought about by the European Central Bank’s market-changing stimulus measures and was brought to life with the help of BNPP as bookrunning bank. Just hours later, BNPP was also a bookrunning bank for German consumer goods producer Henkel’s €500m September 2018 paper, which was also priced at a yield of –0.05%. Borrowing costs hit record lows after the ECB made its initial announcement regarding corporate purchases on March 10, which saw yields on dozens of eurozone companies’ existing bonds fall below zero. BNPP also demonstrated its ability to execute and advise on jumbo M&A deals in 2016. It was, for example, picked to be a bookrunner on Anheuser-Busch InBev’s €13.25bn bond in March. That deal became the biggest ever corporate bond deal in the European market after attracting €28bn of investor demand, a result that unleashed billions more of euro M&A funding into the market in the following months. Danone’s €6.2bn dea

“It was a ground-breaking transaction that offered super-cheap funding,” said Alex Menounos, head of EMEA IG debt syndicate at Morgan Stanley. “The question was whether a negative yield was really possible.” Although more than a quarter of euro investment-grade corporate bonds are quoted at a negative yield, according to Tradeweb data, corporate investors were still getting their heads around the idea of a negative-yielding new issue market. Borrowing costs hit record lows after the European Central Bank made its initial announcement regarding corporate purchases on March 10, which saw yields on dozens of eurozone companies’ existing bonds fall below zero. “The Sanofi deal was a stand-out and pivotal deal for the market, and what drove it was the need for investors to park cash,” said Frazer Ross, co-head of European corporate bond syndicate at lead bank Deutsche Bank. Investors at the time of the Sanofi deal said that weighing up whether to invest in negative-yielding issues seemed quite perverse, but many did participate and said negative yields can still offer some value in relation to cash holding fees. Investing in corporate bonds can be a better option than depositing cash, where investors may be charged a more negative rate on their balances. “Thoughts were that investors would be keen, but it was still not that easy to prepare the ground, given that you’re crossing into largely uncharted territory,” said David Villedieu, head of French corporate fixed income capital markets at Morgan Stanley. The French pharmaceutical firm printed deals at yields of –0.05%, on €1bn January 2020 and €500m September 2018 bonds. Sanofi’s three-year came alongside €750m–€850m six-year and €1bn–€1.15bn January 2027 deals. For the long three-year and six-year tranches alone, the average yield was only 0.01%, ie, €1.85bn of funding at an effectively zero cost. Similarly, German railway operator Deutsche Bahn sold a €350m five-year deal in July at –0.006%, but some questioned whether it counted as being the first “corporate” issuer to sell negative-yielding debt due to the company being 100% state-owned. Bookrunning banks on Sanofi’s A1/AA rated deal were BNP Paribas, Morgan Stanley, Credit Agricole, Deutsche Bank, MUFG and Natixis. * Quote attribution corrected in first and seventh paragraphs. To see the digital version of this review, please click here. To purchase printed copies or a PDF of this review, 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>