Sterling Bond House: Barclays

IFR Review of the Year 2017
5 min read
philip wright

While thoughts in a number of quarters were that the sterling bond market would stagnate in the midst of the uncertainty generated by the result of June 2016’s Brexit referendum, nothing could have been further from the truth.

Not only did the market display resilience but it also grew in stature. Issuance volume of some £133bn in the awards period was almost 40% higher than the previous year’s, helped in no small part by the involvement of overseas institutions from the buyside and sellside.

Barclays proved itself equal to the challenges this expansion threw up, topping the league tables across the corporate, financials and SSA sectors and lead-managing a greater number of deals than any of its competitors.

“The internationalisation of the sterling market has certainly been a theme,” said Marco Baldini, Barclays’ head of European bond syndicate, “and we had a clear dominance in cross-border issuance for recurrent and debut issuers across sectors.”

From the likes of McKesson and Procter & Gamble in the US, through AB InBev and LafargeHolcim in Europe, to Australia’s Westfield, the list of corporate borrowers that entrusted Barclays with their transactions spanned the globe. The same was true in the FIG sector, as exemplified by Wells Fargo and New York Life, Santander and Deutsche Pfandbriefbank, and NAB.

As far as the public sector was concerned, there were mandates from sterling stalwarts such as the World Bank, KfW and EIB – and, of course, the UK DMO. But non-traditional issuers also relied on Barclays’ expertise – the likes of AfDB, CDC and OeKB.

The hybrid capital sector also provided a rich seam of opportunity for Barclays throughout the year, with mandates from both FIG and corporate issuers showcasing the bank’s joined-up approach.

The most eye-catching transaction from the latter group came from UK water and waste management company Pennon in September, only the second sterling corporate hybrid of the year. (Barclays was also involved in the first – SSE’s £300m 60-year non-call 5.5 in early March.)

In conjunction with a tender offer for a £300m 6.75% hybrid callable in March 2018 that saw a take-up of over 95%, unrated Pennon placed a further £300m of a perpetual debt with a 2.875% coupon on which Barclays was structuring adviser. The combination of an unusually short 2.7-year call date and 500bp step-up proved a hit with investors, with the paper more than four times covered.

In the financials arena, Barclays – as so often – led from the front with its own name, pricing the largest new-style sterling AT1s to-date – a perpetual non-call six in February and a perpetual non-call seven in August – both coming in at £1.25bn. In between, it also worked on Santander UK’s second public AT1.

Barclays was a joint bookrunner on Nationwide Building Society’s return to the CCDS market (see Sterling Bond of the Year), while its standalone credentials were displayed by its sole structuring and bookrunning role on OneSavings Bank’s inaugural AT1 offering in May, a small but important £60m perpetual non-call five.

Liability management exercises, whether to take advantage of the funding opportunities on offer or for corporate reorganisation purposes, played an important role throughout the year. Barclays was at the forefront of the activity, most notably for Annington Homes, which replaced its entire capital stack in one fell swoop with dramatically cheaper long-term debt, transforming its business by freeing up vital cashflow.

The UK residential property company changed from whole business securitisation to unsecured bond and bank financing, the moving parts in the exercise including a £3.1bn consent solicitation across four WBS notes and two tranches of CDOs, and a £2.35bn four-tranche issue of unsecured notes with tenors of eight to 30 years.

Add to this LMEs for the likes of Walmart, Verizon, Anglo American, the AA and Motability, not to mention Pennon, and Barclays’ credentials become clearer.

A brace of deals that straddled Bupa’s acquisition of Oasis Dental Care – a 10-year Tier 2 in December 2016 and a seven-year senior in March 2017 – comprised part of what Pete Mason, co-head of FIG banking for EMEA and head of FIG DCM for the region, called “a rare example of acquisition financing from cradle to grave for a FIG name”. Barclays was sole financial adviser and debt arranger.

And away from the investment-grade sector, it boasted a notable roster of high-yield transactions, while also delving into the EM world for the likes of Mexico’s Pemex.

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Sterling Bond House: Barclays