Better conditions bring out unfamiliar corporate crowd

3 min read
Jihye Hwang

Two niche borrowers wrapped up investor calls on Thursday ahead of selling bonds in a market that appears receptive to more credit-intensive corporates despite the time of year. Italian hydropower generator CVA and Finnish minerals and metals process technology company Metso Outotec Corporation will soon test demand for less run-of-the-mill offerings, though bankers are confident there is a deep enough pool of investors wanting to buy unfamiliar or less frequent issuers.

CVA (Baa2/BBB+, Moody's/Fitch) is looking to print its debut transaction through a capped €500m five-year note via BNP Paribas, Goldman Sachs, IMI-Intesa Sanpaolo, Mediobanca and UniCredit. The deal is expected to come early next week, after the company engaged with over 60 investors during marketing, according to leads.

Metso (Baa2/BBB–, Moody’s/S&P) is also preparing a five-year will-not-grow issue but for a sub-benchmark size of €300m.

"It won't get the same attention as benchmark deals but the company is committed to doing that size – it's a well-liked name that has a strong local following, which offsets potential concerns around constraints coming from the size," said a lead banker.

Citigroup, Commerzbank, Nordea, and SEB are the lead managers. The deal comes alongside an any-and-all tender offer for Metso's €300m 1.125% June 2024s.

Liquidity has been the name of the game for bond markets this year as central banks have pulled back their support. Net asset purchases under the ECB's Corporate Sector Purchase Programme ended on July 1, although the central bank is still reinvesting proceeds from maturing bonds in both the primary and secondary markets.

"Bespoke deals have just become harder to execute," said a DCM banker. "What's the difference between a €300m and a €500m deal? The latter attracts more liquidity from index funds, and we're probably seeing less of the €300m-sized deals, especially since the Ukraine war kicked off, compared to last year." Metso's bonds will be structured to meet CSPP-eligible criteria.

Bankers are hopeful that supply will continue for a couple more weeks yet and are trying to convince some issuers to bring forward deals that were originally planned for January.

"If you asked me couple weeks ago, I would have said that we'd be done by the end of November but conditions look stable now with not too much volatility. So, some issuers are engaging and thinking about taking out some of the funding for next year earlier rather than loading it all up for next year," said the lead banker.

"It's not going to be a rush, though – there are mandates simmering but no names with a big story. Rather, they are low-beta and regular names with no adverse news attached to them," he said.