Euro Bond and Europe Investment-Grade Corporate Bond: Roquette Freres' €1.2bn dual-tranche bond
All in one It was a bumper year for European corporate issuance. But no deal provided so many moving parts as Roquette Freres’ debut in November, a €1.2bn dual-tranche senior and hybrid deal – the first debut to involve both a senior and subordinated tranche since TenneT’s debut in 2010.
The French family-owned company, which makes plant-based ingredients for health products and food, was tapping the public market for the first time to finance its pending US$2.85bn acquisition of International Flavors & Fragrances' pharma division, expected to close in the first half of 2025.
That goal was made significantly more difficult at the end of October when S&P cut the issuer’s only credit rating to BBB with negative outlook from A– because of the announcement of the acquisition.
The deal was split across a hybrid and a senior unsecured tranche to minimise the pressure on Roquette’s rating. Those involved were not blind to the deal's challenges: an issuer with one (falling) rating and no track record in the public market.
The leads took a careful approach to execution. In what was a busy week for euro high-grade deals, Roquette ran a longer-than-usual three days of marketing, which engaged more than 80 investors, and capped the week with a fourth day to collect indications of interest.
During marketing, Roquette made several promises to dispel investor concerns, including that it would remain active in the public bond market, it would publish financial results semi-annually and it would organise semi-annual investor calls to communicate on strategy and figures.
But even after investors were appeased on the credit, negotiating both a debut hybrid and debut senior at the same time presented further challenges.
“You effectively had a live senior-sub spread,” said Duane Elgey, head of European corporate syndicate at Societe Generale. “There were investors saying they were interested, but only if it was a sub-senior spread of XYZ.”
The following Monday leads opened books with spreads on the senior at 190bp–200bp over swaps and the yield on the hybrid at 5.875%–6%. The senior note was tightened to plus 150bp with final books passing €1.6bn, while the hybrid was tightened to 5.50% on books of more than €1.5bn. Not only did both tranches tighten significantly from initial price thoughts, but both were upsized from the original expected €500m to a final €600m.
BNP Paribas, Credit Agricole and Societe Generale were global coordinators, and bookrunners with CIC, Goldman Sachs, HSBC, JP Morgan and Natixis.
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