US corporate bond activity in 2021 marked a shift from the mad dash for capital in 2020 to an environment focused on rebuilding and growth opportunities. For excelling as a partner to corporate clients accessing the US dollar market with impeccable timing and execution, Morgan Stanley is IFR’s US Bond House and North America Investment-Grade Corporate Bond House of the Year.
Most of the top banks lost market share in the US investment-grade corporate bond sector last year as corporate clients broadened their roster of underwriters after relying on a smaller set of trusted counterparties in the depths of the coronavirus crisis in 2020.
Overall US investment-grade corporate bond issuance totalled US$1.46trn in 2021, down from the record annual high of US$1.86trn in 2020, according to Refinitiv data. For high-yield in US dollars it was US$463.359bn, versus US$406.169bn.
Still, Morgan Stanley maintained a top-tier status, coming in at fifth spot on Refinitiv’s US investment-grade corporate bond league table and seventh in the high-yield table.
However, it was the quality rather than quantity of the deals that Morgan Stanley led for its clients that underscored the bank’s market leadership last year.
A US$25bn nine-part deal for Verizon’s massive investment in C-band spectrum in March summed up how the bank was the go-to partner for executing large, transformational bond deals as companies started to look beyond Covid-19.
“One of the key drivers of 2021 was a shift in posture from what was previously a more defensive Covid environment to one that was much more strategic and offensive,” said Tammy Serbee, Morgan Stanley’s co-head of fixed-income capital markets in the Americas. “We saw the end of 2020 shifting into a more opportunistic environment, and also balance sheets improving and corporations wanting to be a little more forward-leaning. So we positioned for that in terms of how we staffed and in getting in front of our clients early to think about these opportunities.”
Laboratory equipment and services company Thermo Fisher Scientific raised several billion dollars over the course of the year to complete its US$17.4bn acquisition of clinical research provider PPD, hiring Morgan Stanley as active bookrunner, diversity and inclusion coordinator and billing and delivery agent on a US$3.1bn deal in August and US$5.85bn offering in October.
The bank was also joint bookrunner and D&I coordinator on Amazon’s US$18.5bn multi-tranche offering in May, lead-left on Broadcom's US$10bn, while it was sole lead on a US$5bn multi-tranche offering for Nvidia, the largest sole-led deal of the year – all deals that highlighted the bank’s leadership in the technology, media and telecoms sector.
As well as flawless execution on new issues, Morgan Stanley was a trusted partner on liability management exercises, which remained a key focus for corporate treasurers in 2021 amid record low yields.
The bank led two of the largest exchanges of the year – US$15bn for Comcast and US$8.25bn for Microsoft – alongside others from the likes of Verizon, Union Pacific and Avolon.
Morgan Stanley led the way as corporations looked to hire more diversity and inclusion banks to participate in their bond offerings.
Morgan Stanley held the D&I coordinator role on 10 investment-grade bond deals totalling more than US$65bn of issuance – more than three times any other bank during the year.
Verizon underscored Morgan Stanley’s credentials in this arena in September when it hired the bank as the only bulge-bracket lead underwriter alongside three minority and women-owned firms – Loop Capital Markets, Ramirez and Siebert Williams Shank – for a US$1bn green bond.
Few bulge-bracket banks demonstrated as close attention as Morgan Stanley to maximising the potential of D&I firms to improve the execution of bond deals.
Betanya Aklilu, head of D&I relationships and initiatives on Morgan Stanley’s debt syndicate, spearheaded the bank's efforts to work more closely with these firms to better understand their strengths and to improve communication.
“Traditionally D&I firms don’t have access to a lot of the information available to syndicate desks when it comes to the bookbuilding process,” said Aklilu. “We made sure from the moment we were out in the market there was a clear line of communication to disseminate all of the information and this allowed the D&I firms to be as efficient as possible in engaging their investors.”
The bank’s efforts on D&I did not end once the deals were done. Recognising the benefit to its client, Morgan Stanley gave performance rankings to the D&I firms that supported Raytheon Technologies' US$2bn dual-tranche offering in August.
When Raytheon returned to the market in November, it hired Morgan Stanley to repeat its role as D&I coordinator and made changes to the D&I roster based on those rankings.
“It really drove performance in the newcomers,” said Serbee.
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