London Stock Exchange Group overcame a lack of investor familiarity in the US and a tricky bond market to raise just under US$7bn across a triple-currency deal last week.
The company, which owns IFR, was in the market with its long-awaited deal that will help refinance the £8bn-equivalent outstanding on a bridge facility used to fund its US$27bn acquisition of data and analytics business Refinitiv.
The bond offering came in line with the top end of the £4bn–£5bn range indicated in an investor presentation after the mandate was announced last week. LSEG has a £4bn agreement to sell Borsa Italiana to Euronext that will also help fund the bridge refinancing.
The company started with a US$4.5bn five-part deal on Thursday, which was its debut in the US market. It then followed with a €1.5bn triple-tranche and £500m single-note offering on Friday as it aligned its financing to fit its global revenues.
"This wasn't just about looking at the best pricing on a swapped basis," said a banker at one of the leads.
The US dollar, however, was considered the best market in which to raise most of the funds despite LSEG's lack of presence there. Several US high-grade investors and bankers said there was little name recognition with the credit.
Additionally, only sub-investment-grade investors were engaged in a US$13.5bn debt raise across bonds and loans in 2018 that funded Blackstone's US$20bn acquisition of Thomson Reuters' financial and risk business, which was quickly renamed Refinitiv.
One banker away from the deal noted that the pre-announcement marketing leading up to the LSEG trade and attractive spreads at initial price thoughts helped draw attention to the offering.
Additionally, ratings of A3/A from Moody's and S&P, respectively, helped give investors confidence in the name, said Collin Martin, director of fixed income at the Schwab Center for Financial Research.
"Single A rated names are generally going to get more interest because it’s such a Triple B heavy world," Martin said. "A higher-rated name is good diversification for portfolio managers looking to add new names to their portfolio and it's been well received given the staggered maturities that give investors plenty to choose from."
LSEG issued US dollar tranches with three, five, seven, 10 and 20-year tenors as it sought to create pricing tension through building a curve in one go. Bookrunners garnered some US$20bn of peak orders before the book settled at US$16.2bn at pricing, according to lead bankers.
Global coordinators tightened spreads by 30bp–35bp through price progression to launch a US$500m three-year at 40bp over Treasuries, a US$1bn five-year at 60bp over, a US$1bn seven-year at 75bp over, a US$1.25bn 10-year at 90bp over and a US$750m 20-year at 100bp over. Initial price thoughts were set in the area of Treasuries plus 70bp, 90bp, 105bp, 120bp and 135bp, respectively.
Despite the addition of Refinitiv to diversify the business further into financial data sales, most investors compared the notes to pure-play stock exchange peers such as CME Group, CBOE Global Markets, Intercontinental Exchange and Nasdaq, said Dan Bruzzo, managing director of bank finance at broker-dealer Amherst Pierpont.
With no outstanding US dollar curve, LSEG managed to price just inside ICE, which is slightly lower rated at A3/BBB+. For example, ICE's 2.10% June 2030s that priced last year at 145bp over Treasuries were trading at a G-spread of 96bp – 6bp wide of the new 10-year offering from LSEG, according to MarketAxess data.
LSEG also chose to target medium-duration notes and only went as far out as 20 years, which Martin said was refreshing in a year of bloated long-duration deals.
"For an inaugural push it would be more standard to go with 10s and 30s, but it could be that 20-year part of the curve is attractive right now to investors and they saw that on reverse enquiry," Bruzzo said.
He added that Nasdaq and ICE have issued at the 20-year part of the curve since August. And indeed LSEG received the greatest demand in the 20-year – despite general uncertainty at the long end given the sell-off in rates since the start of the year – that allowed it to tighten spreads by an additional 5bp from IPTs compared with the other tranches.
The European notes were also revised tighter as LSEG was able to plot a maturity profile that ensures that no particular year has an excessive refinancing burden. The only tenor tapped twice across the three currencies was the seven-year.
“What you’ll see with the euro and sterling tranches is that they are off-the-run maturities, not really available in dollars. These markets offer flexibility around maturities that dollars don’t,” said a second lead banker.
The company sold a €500m four-year at 40bp over swaps, a €500m seven-year at 50bp and a €500m 12-year at 70bp off a combined book that exceeded €5.8bn. Initial levels were 60bp area, 75bp area and 95bp area.
The capped size of each note from the outset, as well as their eligibility for the ECB's bond buying programme – the issuing entity is LSEG Netherlands BV – helped support demand.
Although LSEG was not focused on the best pricing across currencies on a swapped basis, a syndicate banker involved did point out that the seven-year euro tranche came inside its equivalent US dollar level, a rare achievement for the euro market given current conditions. The two other euro tranches priced back of LSEG's US dollar curve.
A £500m no-grow nine-year tranche was also easily placed as more than £1.25bn of demand enabled leads to tighten pricing to 95bp over Gilts from 110bp area.
Barclays, Bank of America, Citigroup and HSBC were global coordinators across all three currencies.
LSEG, despite owning IFR, had not responded to requests for comment by press time.