Pulling the global levers
While Europe's borrowers naturally gravitate towards their domestic currency, the best advisers are able to sell bonds for their clients across multiple jurisdictions to take advantage of the best funding opportunities and to achieve genuine investor diversification. No bank was better at doing this in 2019 than HSBC, which is IFR's Western Europe Issuers Bond House and Niche-Market Bond House of the Year.
Many banks claim they are global; few truly are. HSBC is one of the few. Nowhere is this more apparent than in the bank's ability to bring its Western European clients to the capital markets.
All top-tier banks can execute in the euro, sterling or US dollar markets but can they help clients raise funds in Swiss francs, renminbi, Australian dollars, Canadian dollars, Mexican pesos, Polish zloty or South African rand?
All are markets that HSBC has taken its European clients to over the past year.
Some banks have a snotty attitude towards these non-core markets – that they are niche, not worth the effort.
Try telling that to the treasurer of Daimler or funding teams at the EIB or Portugal.
In May, for example, the latter became the first eurozone sovereign to issue onshore in China. The Rmb2bn (US$298m) June 2022 offering enabled the sovereign to broaden its investor base. It also served to illustrate the growing ties between Portugal and China. HSBC was one of two bookrunners on the trade and the only non-Chinese bank.
EIB is another SSA issuer that seeks to raise funds across the globe. HSBC has acted as a lead on its euro deals – indeed it was a lead on its €1bn three-year ESTR-linked debut, the first benchmark transaction in that format – but it can also claim to have supported the supranational in Polish zloty, Canadian dollars and South African rand over the past year, as well as sterling.
The niche types of transactions, said Hector Snuggs, head of public-sector origination at HSBC, "show how globally connected” the bank is.
It is this connectivity that wins HSBC Niche-Market Bond House.
For an award such as the Western Europe Issuers Bond House, though, a bank has to demonstrate its credentials in the core markets too. Whether it be euros, US dollars or sterling, HSBC is a force.
When Italy sought its first US dollar trade in almost a decade, a US$7bn triple-tranche offering in October comprising five, 10 and 30-year notes, HSBC was one of three banks on the deal.
Jean-Marc Mercier, vice-chair of capital markets, said the bank's experience of advising emerging markets sovereigns in the US dollar market came to the fore even if Italy was targeting a different investor base.
"We said it had to include a 30-year tranche and that was because of the EM insight that we have," he said.
In euros, some of the bank's stand-out trades have been in the SRI sector. It was a bookrunner on the 15-year tranche on Enel's €2.5bn three-part Sustainable Development Goals-linked bond, for example, while another highlight was OeKB's €500m seven-year sustainable bond in October for which HSBC acted as sole green structuring advisor
Snuggs said the bank first pitched the idea in 2014 but the transaction took off properly about a year before it launched.
"We'd been feeding them market developments and fine-tuning things," he said. Some of those market developments, such as the speed at which the SRI market is evolving, would have been gleaned from other markets.
"We get huge intelligence from other sectors," said Snuggs about the bank's public-sector efforts.
For the EIB ESTR-linked bond, for example, bankers used their knowledge and experience from the Sonia trades HSBC had worked on.
Indeed, HSBC continued to be at the forefront of post-Libor reference rates supply in the sterling market, not only bringing repeat issuers such as Lloyds Bank and Santander UK but also debut borrowers in the format, including Virgin Money, FMS and BMW.
The latter's £250m one-year FRN was the first by a corporate using the Sonia interest rate benchmark. HSBC was sole bookrunner. In the run-up to the transaction, HSBC provided advice in terms of documentation language, coupon calculation mechanisms as well as derivatives solutions.
BMW was also an example of the growing lure more generally of the sterling market to non-UK issuers thanks to the attractive arbitrage opportunity. More than 60% of sterling supply in 2019 came from non-UK domiciled issuers.
Orange kicked off the trend with an HSBC-led transaction in early January, which was its first sterling bond since 2010, with the French telecoms company issuing a 13-year sterling note alongside three euro tranches.
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