Nestle made a rare appearance in its domestic market, selling a SFr1.5bn dual-tranche six and 10-year bond that exemplified one of the major themes running through the year.
Where 2017 had been a year of new corporate names coming with smaller and frequently lower-rated or unrated deals, 2018 saw a resurgence of “national champions” – household names bringing big, flashy trades.
Nestle printed one of the biggest and flashiest deals ever in the Swiss franc market in early June, after several weeks of monitoring the market.
With an investor list reading like a ”Who’s Who” of the Swiss market, the deal was launched before lunchtime as a SFr900m six-year at swaps plus 9bp and a SFr600m 10-year at plus 14bp, both upsized to nearly double the initial indicated size and 9bp inside the wide ends of initial guidance.
While it is unusual to see that degree of tightening during the marketing of a Swiss franc bond, the leads defended their decision to do so, asserting that the wider starting levels grabbed the attention of the market, giving them the traction to tighten.
The book closed just shy of SFr1.8bn, with the shorter bonds clocking up around SFr1.05bn of orders, while the longer tranche saw some SFr750m of interest.
Final new issue premiums were 4bp and 7bp versus its (longer, less liquid and out of the US entity) Swiss franc curve. Against its own euro secondaries, the bonds came nearly flat to the curve, when adjusted for cross-currency basis swaps.
Bank treasury accounts were particularly interested in the deal, especially the shorter tranche, of which they took 37.8%, piling into a top-quality corporate name giving 8bp–12bp of pick-up to their usual covered fare. Bonds from Nestle, as it is a domestic Double A rated corporate, qualify as HQLA Level 2.
All the other investor types took part as well, with asset managers, insurers, pension funds and private banks all piling in. In total, there were around 125 orders for each tranche.
The deal was huge on a relative basis, with the SFr900m six-year being the biggest single tranche in a corporate bond ever in the Swiss market, and the full SFr1.5bn total being the largest dual-tranche corporate in at least five years, according to one lead official.
It also ostensibly beat early 2017’s SFr1.5bn Roche deal, which had three tranches, although one was a “near-rates instrument” 18-month note issue.
The three powerhouses of the Swiss bond market – Credit Suisse, UBS and ZKB – were joint lead managers.