Europe Investment-Grade Corporate Bond House: Barclays

IFR Awards 2019
5 min read
Eleanor Duncan

Thinking big

The European investment-grade bond market in 2019 was an unusual environment to execute in. This gave issuers opportunities to explore funding in ways they have never been able to before. For its willingness to test boundaries, its expertise across currencies and its ability to achieve record-breaking outcomes, Barclays is IFR's Europe Investment-Grade Corporate Bond House of the Year.

If at the beginning of 2019 someone had predicted that as December approached the record for euro investment-grade corporate volumes would already be broken they would have been laughed out of town.

As bankers and investors headed back to their desks in the new year, the only real certainty was that 2019 was going to be a tough year.

But that was without reckoning on the big two central banks – the Federal Reserve and the European Central Bank. Both ended up espousing easing policies again, triggering a huge windfall for credit markets. Indeed the Fed signalled its intentions within days of the market's return.

"We worked out very quickly that the market had changed in a matter of a few days at the start of the year," said Marco Baldini, head of EMEA and Japan bond syndicate at Barclays.

The UK bank never looked back. Whether it was navigating ultra-low – or as the year wore on – negative-yielding supply, longer duration trades or crossborder issuance, Barclays was on hand to guide its clients.

Take reverse Yankees. Issuance in 2019 hit €73.6bn as of the end of the awards period, only €2bn shy of the full-year record of 2016, with supply from the sector accounting for more than one-fifth of total volumes of €338.4bn.

"It took on a new dimension this year," Baldini said of the reverse Yankee trend, as US issuers took advantage of attractive coupons and cross-currency arbitrage.

When medical technology company Medtronic was looking to make its debut in euros in March through a €7bn six-part deal, it tapped the UK lender as one of only two banks to lead the deal.

Usually a deal of that size would be linked to an M&A financing. But Medtronic's offering was an opportunistic reprofiling of its debt.

Such was the deal's success, with orders hitting €33bn, Medtronic returned to the euro market three months later with a €5bn trade, with Barclays also a lead.

Medtronic's second euro bond also included a very unusual 30-year tranche.

The success of Medtronic's two euro jumbos gave other issuers the encouragement to go large and long.

When German oil and gas company Wintershall Dea was looking to make its debut in euros, it turned to Barclays as one of its active bookrunners.

The resulting €4bn four-part bond in September was the largest ever offering from a debut corporate borrower – a stand-out success considering the volatility in the market at the time.

Just before the bond hit the market, oil prices surged after an attack on Saudi Aramco processing facilities that halved the kingdom's production.

"That was a tough credit … and we got €4bn done – all in euros," Baldini said.

Alongside the eye-catching debuts from Medtronic and Wintershall Dea, Barclays was also helping European corporates to make repeat visits to euros, playing a central part in an explosion of issuance for companies such as Orange and Telefonica.

In a year of such record-breaking issuance, one of the more controversial trends was the re-emergence of negative yields in primary.

In August, Siemens, with Barclays as active bookrunner, showed just how far the trend could go, pricing the most negative-yielding corporate bond ever – a two-year fixed tranche at minus 0.315%.

Certainly it did not put accounts off, with orders for the €1bn September 2021 bond peaking at more than €4.7bn.

But while absolute yields and spreads have been attractive for issuers in historic terms, market sentiment over the past year has not necessarily been one way.

In those times, Barclays has been willing to differentiate itself by supporting transactions.

It put its balance sheet to work by backstopping sterling deals in the auto sector, executing trades for Volkswagen, Toyota and BMW. This allowed each issuer to achieve a 10bp arbitrage compared with their euro curves.

These transactions are made all the more impressive by the fact that Barclays was only 11th in the EMEA investment-grade loan financing league tables for the first nine months of 2019.

"We're not the largest lender, but we punch above our weight," said Charlotte Weir, head of corporate debt capital markets.

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