Debt Issuance - Taking a closer look at recent deals
Trend of lower financing costs for longer continues plus green bonds/hybrids
While most of the market has been focused on the US Presidential debate and the raft of US data this week, issuers and DCM desks have been busy getting debt deals done.
I run through some of the deals that were the most eye-catching, not necessarily from a value perspective, but from an issuer pricing / innovation perspective.
Bonds pricing that stood out:
Investment Grade issuance only:
Adidas EU500m 8Y Sustainability Bond MS+40 | Coupon of Zero..
Best Buy $650m 10Y +135 | Coupon of 1.95%
D.R. Horton $500m 7Y +100 | Coupon of 1.4%
Fresnillo $850m 30Y +295 | Coupon of 4.25%
Repsol EU850m 4Y MS+65 | Coupon of 0.125%
Adidas securing a zero coupon on its 8 year bond was really something. This was its debut sustainable bond, from which proceeds will be used for sustainable materials, processes and community engagement.
Best Buy and DR Horton - Both large cyclical US issuers, these are stunning prices for long term bullet debt that should smooth out their debt maturities nicely.
Repsol - The oil company raised a bond with a coupon of 0.125%. Repsol is not one of the super-majors, and is looking to transition to renewables, however it is still quite far away from reaching its “end-state” in this respect. It is encouraging for them and others in the sector that it can raise financing at such astonishingly cheap levels.
Fresnillo - FTSE 100 Gold and Silver miner carried out a tender offer of just under $500million of its existing 2023 issue and issued $850mm of 30 year paper with a coupon of 4.25%. The coupon on its old 2023s is 5.5% which was issued in 10 year format in 2013. So, once again a great extension trade for the issuer.
Interesting Deals:
Japan Tobacco issued EU1bn of Corporate Hybrids which were ~6x covered.
This is the first Corporate Hybrid issuer from the Tobacco sector.
The issue is highly rated at the instrument level (expected rating A), but issued relatively wide for its pricing, presumably due to the narrower investor base that can invest in Tobacco issuers.
National Bank of Greece – Euro Green Senior Pref Bond
NBG is set to be the first Greek Financial to issue a green bond. What’s more interesting is that it is set to be the green bond sector’s lowest rated sale with announcements from the leads stating a Caa1 rating by Moody’s and a CCC- rating from S&P. There have been other subordinated bond issuers in green format that include AIB and BBVA, albeit these are much higher rated.
Disclaimer: Not investment advice, the author may have holdings in the issuers mentioned.