Euro Bond House: BNP Paribas

IFR Awards 2019
4 min read
Philip Wright

Sitting pretty:

Some things have been the way they are for so long they seem to constitute the natural order. Such is the case with BNP Paribas’ top position in the euro bond market. But far from succumbing to complacency, the bank works tirelessly to ensure this remains the case. BNP Paribas is IFR’s Euro Bond House of the Year.

While barely a year goes without BNP Paribas arranging more deals in the euro bond market for more issuers than anyone else, there is no God-given right for this to be so. It takes plenty of hard work.

“What some people can forget is that we have to start every year from zero,” said Fred Zorzi, BNP Paribas’ global head of primary markets. “Just like everyone else.”

The trick, he said, is never to remain still, never risk becoming complacent, and maintaining a high level of collaboration across desks to ensure the “whole franchise works together, delivering a seamless service” while identifying market themes.

Most pervasive among these was the low-interest-rate environment. Combined with compressed credit spreads, the most obvious product was negative-yielding bonds.

Long a frontrunner in corporates, the bank demonstrated its ability to address the situation, bringing such bonds for GSK, E.ON, Engie and LVMH, among others.

“It was very much a case of hand-holding throughout the process,” said Rupert Lewis, head of European bond syndicate.

Long-dated issuance was another natural consequence as investors sought returns, and BNPP was again at the forefront with deals for the likes of Danaher, RTE, Eli Lily, Vonovia, Unilever, Total and Deutsche Telekom. Notable within this sector was the number of overseas issuers, particularly from the US.

“The reverse Yankee wave was driven a lot by liability management – buying back higher-coupon dollar debt and replacing it with cheap euros,” said Lewis.

And borrowers had confidence euros could offer them the sort of volume that has not always been the case, he said, as also demonstrated with rare Asian flavour by CK Hutchison, which sold a multi-tranche deal to fund its European telecoms operations.

Hybrid bonds found favour too, offering a relatively high return. BNPP was at the forefront, attested by transactions for Merck, Infineon, KPN, EnBW, Accor and Telefonica, the latter two combining subordinated and senior tranches to optimise market access.

The backdrop was mirrored in financials, where Additional/Restricted Tier 1 paper on occasion seemed an easier sell than secured covered bonds or senior preferred debt, given the disparity between at least some yield and none – or even less than none.

BNPP led the first euro AT1 benchmark of the year for KBC, following it with higher-yielding southern European issues, while sourcing funding for clients such as Skipton Building Society, whose covered bond in February was the first in negative-yield territory outside Germany or France.

Senior non-preferred, holdco and Tier 2 debt offered some middle-yield ground, with BNPP in the vanguard with debut SNP deals from OP Bank and Bankia, callables from Credito Emiliano and Bank of Ireland, and bail-in senior from TD and Scotiabank.

It was no different in the public sector, where BNPP was active on EIB’s debut ESTR-linked floater, Ireland’s first 30-year benchmark since 2015, Greece’s comeback 10-year, EDC’s first euro and the longest deals from AfDB and World Bank.

But investor demand for yield that brought the longer end in play was juxtaposed with a willingness go negative for the best names. BNPP capitalised, lead managing EIB’s return to the three-year sector with a €5bn deal at minus 0.267%.

Breaking further into the close-knit high-yield community saw the bank emphasise its credentials, asit did in emerging markets where it also made considerable progress.

BNPP led the way in the growing environmental, social and governance market, claiming several firsts.

In corporates there was Enel’s SDG-linker, Snam’s transition bond, BayWa’s unrated and Apple’s rated green debuts; in FIG there was green from Danske Bank and RBC, and an AT1 sustainability first from Kookmin; while SSAR provided green paper from CPPIB, and sustainable deals from OeKB and Wallonia.

While this roster showed BNPP was acutely aware of one of the market’s hottest topics, this was certainly not at the expense of other areas. The breadth of its business across asset classes and geographies and its consequent dominant position suggests a bank that’s aware of what’s required to get to number one – and in no mood to relinquish its crown.

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