Reaching for the stars
The competition is stiffening but no other bank can match BNP Paribas’s all-round excellence across all the asset classes in the euro markets. From SSA at one end of the ratings spectrum to high-yield at the other, the French bank remains the benchmark for others. BNP Paribas is IFR’s Euro Bond House and Europe Financial Bond House of the Year.
BNP Paribas bankers like to use metaphors to describe their business. Last year, they were like astronauts, off on a mission.
“We all know how challenging the path to space exploration can be. There’s a lot of failure involved but if you want to succeed you need the team to make as few mistakes as possible and strive for perfection,” said Frederic Zorzi, global head of primary markets.
It may not have been a perfect year – it never is – but it’s fair to say the team barely put a foot wrong, leading the league tables again for all euro issuance. The league table position is the equivalent of landing on the moon, the memorable last bit of the journey.
BNPP’s task in 2021 was made even harder because of its achievements in 2020.
“Rotation cycles were against us, so I’m proud of the team maintaining its leading position,” said Mark Lynagh, co-head of debt markets for EMEA.
What makes BNPP stand out? “One of the things we pride ourselves on is the quality of advice,” said Rupert Lewis, head of European syndicate. “In 2021 there was less of a sense of emergency, but quality of advice was much more important. We have seen so many times people reluctant to go into a market on choppier days and it’s been poor advice.”
This confidence in its advice stems from having an integrated platform that enables BNPP bankers to understand issuers’ needs and investors’ appetite for risk.
A good example was a deal in May for Adler Pelzer, a sub-investment-grade company that designs and manufactures car parts. The deal itself was small – a €75m bond that mirrored the company’s €350m 4.125% April 2024 senior secured notes issued in 2017.
When the deal was announced, JP Morgan was appointed as global coordinator and physical bookrunner, with BNP Paribas as joint bookrunner. But 11 days later, JP Morgan had vanished from the line-up, and BNP Paribas had taken the reins as global coordinator.
Bankers at the time said it was the company’s decision to go with BNPP alone, though Adler Pelzer declined to comment.
Concerns around the size and the pricing level had meant execution was delayed. But BNPP found a buyer base, albeit pricing the deal at a big discount to where the original bonds were trading.
In the investment-grade corporate market, the bank was heavily involved in driving the big themes of 2021: duration, ESG, hybrids and real estate. Again, success is attributed to the quality of advice and the bank’s integrated platform.
Often the toughest deals to bring to market go under the radar at the time. A €650m five-year bond for Italian public transport provider FNM in October wasn’t especially big or pushed on tenors, and it didn’t have an ESG label.
But it was a debut deal that was critical to the company’s transformation, with the proceeds going towards paying back a €620m bridge loan that FNM used to acquire MISE, another Italian transport company. This was not an easy credit to sell and required careful marketing. The final book was more than €2.2bn.
In the SSAR business, the bank worked on some of the year’s landmark deals, including France’s first 50-year note since 2016, Italy’s debut green bond, and the EU’s debut issuance off its NextGenerationEU programme, with the €20bn bond the biggest syndicated tranche in capital markets history.
It wasn’t shy of the tougher deals either. A €500m 30-year note for Ontario Teachers’ Finance Trust in November came when markets were reeling from rates-inspired volatility. That was reflected in the outcome with the deal less than twice covered and the size the issuer’s smallest in the currency.
But the trade got done. And although pricing was wider than when the deal was first mooted, it wasn’t out of line with the rest of the market at the time.
Less than zero
Perhaps the standout area for BNPP last year was its FIG franchise. The bank is IFR’s Europe Financial Bond House of the Year as well as Euro Bond House.
The bank’s prominence in the FIG market was underpinned by its response to the challenges of low, sometimes negative, yields on one hand, but also higher funding costs during periods of volatility, especially in the first and fourth quarters.
Chris Bond, head of FIG debt capital markets in EMEA, said the impact was particularly notable in the often steady and predictable senior unsecured space, to which BNPP applied “its structuring and capital advisory mindset”.
“For every single senior or funding deal, we had a four-point checklist: will it have a positive yield, are we optimising the right tenor, how much do we need to position the issuer and do they need a roadshow, and finally on timing advice … that was the key to the success this year,” he said.
The euro senior market’s confrontation with negative rates came to a head in 2021, with some 20 BNPP-led senior unsecured offerings flirting with sub-zero yields.
BNPP helped answer questions over demand at such levels, even for those that did fall below the threshold – for example, Zuercher Kantonalbank’s €500m five-year in May.
At the other end of the scale, the senior market was also far from straightforward for a procession of lower-rated Southern European credits that began in 2021 to build buffers of MREL debt.
BNPP supported a succession of Greek and Cypriot issuers in taking advantage, including €500m senior deals for Eurobank, Alpha and Piraeus and a €300m Tier 2 for Bank of Cyprus.
While a bank with BNPP’s position and balance sheet could easily begin resting on its laurels, it repeatedly demonstrated drive and creativity.
In October the bank spotted an opportunity to lead Rothesay Life to its first non-sterling bond, a US$400m Reg S registered Restricted Tier 1, after the insurer was unable to get its targeted size with a domestic currency deal a couple of weeks earlier.
“Our analysis suggested they needed more than they got from the sterling deal, so proactively, almost as it was being priced, we were there showing them appetite we had on the US dollar side,” said Bond.
Innovation was also evident in deals structured for the likes of CNP Assurances and Groupe des Assurances du Credit Mutuel, helping to maintain the bank’s momentum in the insurance sector, alongside its role on an unprecedented €1.75bn three-tranche RT1, Tier 2 and Tier 3 transaction for Macif in June.
Similarly, the bank championed ESG capital, leading an impressive nine of the 16 green, social or sustainable sub debt offerings last year.
The capital space, Additional Tier 1 in particular, offered the best execution for much of 2021.
Maintaining its position as one of the leading houses for AT1, BNPPs’ successes during the good times included the tightest euro AT1 on record, a 3% €750m transaction priced for La Banque Postale, and a 4% US$500m Reg S blowout for Swedbank.
Perhaps most notable was a suite of Spanish AT1s, including successive deals for CaixaBank and Santander that priced with all-time-low coupons for southern Europe of 3.625%.
Those deals were soon followed by a surge of rates volatility that slammed the AT1 market.
While turbulence reigned, BNPP showed its expertise, trawling through the data provided by its AT1 secondary trading desk to identify the right time to leap back in.
With preceding deals still trading well below par, BNPP helped restore confidence in the sector with a €750m 5% reopener from Sabadell.
“We watched, we kept a very close eye on flows and the broader sentiment, then decided to go when we did,” said Damian Saunders, FIG syndicate manager. “We got the size, the price – probably an eighth tighter than [the issuer] expected – and ultimately telling people not to go sometimes works in your favour.”
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