US Issuers Bond House: Barclays

IFR Awards 2019
4 min read
William Hoffman

The yanks are coming

In a flood of record-breaking reverse Yankee issuance this year, Barclays demonstrated a dominance in leading US domiciled companies in euros while holding its own in domestic US dollar issuance. For its leadership, Barclays is IFR’s US Issuers Bond House of the Year.

Euro high-grade bond supply from US issuers has tripled in the last year to nearly 30% of the total market and Barclays proved instrumental in leading those borrowers overseas.

Reverse Yankee supply flowed into Europe at a break-neck pace in 2019 as issuers all around the world took a shine to negative interest rates that provided exceptionally cheap funding in the market.

One of the starkest examples was Medtronic, which came with back-to-back jumbo euro bond deals that if combined would be the second largest transaction ever in the space.

The US medical device company priced a €7bn six-part bond in March with a 2.25% coupon on the 20-year note and a €5bn six-parter in June that went even longer and tighter with a 1.75% coupon on the 30-year tranche.

Combining the notes with a liability management exercise in US dollars allowed the creator of the pacemaker to make significant savings of interest expenses – roughly US$1m per day for the next 10 years.

“Those savings are very meaningful and improves their free cashflow so that they have less interest expense going out the door,” said Kenneth Chang, managing director at Barclays. “It gives them a lot of leeway to fund M&A and do other things.”

Medtronic’s 30-year was also the first of that duration in the euro market for four years. It broke the record for the lowest coupon on a 30-year euro note at the time and opened the door for others to issue in that duration at even tighter spreads.

“It reset the art of what was possible in euros,” said Barbara Mariniello, Barclays’ head of debt capital markets for the Americas.

Barclays also led a three-currency transaction for Fidelity National Information Service’s US$43bn acquisition of Worldpay. The Jacksonville, Florida-based payment processing company leveraged up through the transactions but was able to lower its weighted average coupon to 2.3% from 3.3% by accessing global markets.

The nine-part offering is the largest Triple B fintech issuance ever in the euro space and garnered a US$32.2bn equivalent book for the €5bn, £1.25bn and US$1bn bond offerings.

“By doing it all on one day there was a clear benefit that you are maximising momentum,” said Pete Contrucci, head of Barclays’ technology, media and telecoms debt capital markets team. “We got the order book sizes we did because people were saying ‘today is the day’ and they couldn’t wait.”

But the top bank for US issuers can’t just be strong in Europe. It has to lead state-side as well, and Barclays has.

The London-based bank is in the top five banks leading US borrowers to issue in their home currency, eclipsing some notable US institutions.

Barclays was even active bookrunners on two of the largest transactions of the year – a US$30bn bond from biopharmaceutical company AbbVie and a US$19bn bond to fund Bristol-Myers Squibb’s acquisition of Celgene.

The definition of a US issuer also becomes fuzzy when considering companies such as Anheuser-Busch InBev, which is effectively a US brewing company based in St Louis but is owned by 3G Capital in Brazil and with a headquarters in Belgium.

Barclays helped lead the brewer’s US$15.5bn bond and liability management exercise that assuaged fears about the size of Triple B corporate debt in the US. The deal is IFR’s North America Investment-Grade Bond of the Year.

The bank also proved to be a leader in the ESG space by pricing the first and largest green bond of the year – MidAmerican Energy’s US$1.5bn two-parter.

“The evolution of the [ESG bond market in the US] will happen much more rapidly than it did in Europe,” said Meghan Graper, head of US investment-grade syndicate at Barclays.

“The buyer base is rapidly changing their tune and trying to figure out a way that the US dollar market evolves in a way that is separate and distinct to what plays out in Europe.”

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