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 lead manager on an £800m 33-year deal for Vodafone that attracted orders in excess of £1.3bn at 190bp over Gilts. Then came the BoE’s announcement that it was getting into the investing game on August 4. Vodafone returned just a day later, with a £1bn 40-year at plus 168bp on a book of more than £3bn. Bigger, longer, tighter, more popular, and with Barclays at the helm once more.
“Sterling has always been a historical strength for us,” said Lewellen. “We understand the issuers; we understand the borrowers; we understand the market.” Few would disagree.
To see the digital version of this review, please click here.
To purchase printed copies or a PDF of this review, please email email@example.com