Rates Spike but Credit Remains Calm: Spreads Are Tighter As Primary Remains Open

FEBRUARY 3 2018 ISSUE 2219 www.ifre.com

Rates spike but credit remains calm: spreads are tighter as primary remains open

Evergrande risks Asia’s equity-linked party as HK$18bn convert struggles over the line

Blackstone lines up US$14bn of debt to buy IFR (plus majority of TR’s F&R division)

RESTRUCTURING DERIVATIVES BONDS EQUITIES Noble Group Hedge fund 'REECEûTOûTESTû First European WORKOUTûTOûINmICTû seeks damages appetite with )0/SûOFûûmOPû MASSIVEûHAIRCUTû over Hovnanian seven-year ASûONLYûONEûPRICESû on bondholders CDS ‘fraud’ COMEBACKûDEAL ATûLAUNCHûTERMS 06 06 08 09 AWARDS FOR EXCELLENCE

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Bullying tactics OPERATORû-,0ûnûHADûTOûBEûREVISEDûANDûCONTINUESûINTOûTHISû week. vergrande’s latest capital markets outing is a stark Pricing Turkish IPOs is traditionally tricky so such Eexample of the kind of bullying tactics investors often DIFlCULTIESûAREûEASILYûBRUSHEDûOFF have to put up with in Asia. 4HEû-ETROVACESAûmOPûISûMOREûOFûAûCAUSEûFORûCONCERN û The Chinese property developer launched its latest assault ESPECIALLYûCONSIDERINGûTWOûDOMESTICûPEERSûmOATEDûINûTHEûPASTûû on the capital markets on Tuesday, asking convertible bond months so there could hardly be better clarity on the investor investors to lend it US$3bn with no maturity date and a base and likely valuation. Indeed, that is precisely the point: conversion premium of up to 60%. BANKERSûKNEWûPRECISELYûWHEREûTOûPRICEûTHEûDEALûlRSTûTIMEû4HEYû Those terms are aggressive by any measure, even ignoring JUSTûCOULDNTûCONVINCEûTHEûCLIENTûTOûTAKEûTHEIRûADVICE the fact that the stock is up over 400% in the past 12 months. It is particularly frustrating that while Europe stutters the But this approach to fundraising is straight out of US market is booming, with 20 IPOs priced in January raising Evergrande’s play-book. 53BNûnûAûRECORDûSTARTûTOûTHEûYEAR Straight debt investors know Evergrande well, and will Investors are awash with cash as more than US$100bn has remember the oversized high-yield bonds the company sold mOWEDûINTOûEQUITYûFUNDSûTHISûYEARûANDûAREûPUTTINGûITûTOûWORKû last June, raising more than US$8bn through a combination even as markets trade at record highs. of exchange offers and new issues. )TûISûCLEARûNONETHELESSûTHATûSELLERSûWHOûGETûCARRIEDûAWAYûnû The company got its money, but the deal tumbled by as ANDûIGNOREûWHATûINVESTORSûAREûTELLINGûTHEMûnûWILLûBEûSHUNNEDû MUCHûASûlVEûPOINTSûINûSECONDARYûTRADINGûAFTERûTHEûISSUERû And rightly so. STUNNEDûTHEûMARKETûWITHûAûFARûLARGERûlNANCINGûTHANûINVESTORSû had expected. Evergrande is used to having things its own way in the 2023 or bust CAPITALûMARKETS ûEVENûlGHTINGûOFFûAûCHALLENGEûFROMûSHORT sellers in 2012. Its stock and bonds have been on a tear over ust as Jamie Dimon was pledging last week to continue the past year, despite lingering concerns over its aggressive JRUNNINGû*0û-ORGANûFORûANOTHERûlVEûYEARSûANDûONûTHEûSAMEû lNANCINGûSTRUCTUREûANDûLOWûJUNKûCREDITûRATING day as the bank was picking up its Bank of the Year gong at 4HISûTIMEûAROUND ûHOWEVER û#"ûINVESTORSûREJECTEDûTHEûTERMSû THEû)&2ûAWARDSûEVENING ûTHEûVALUEûOFû*0û-ORGANûBROKEû almost immediately. THROUGHû53BNûFORûTHEûlRSTûTIME The six bookrunners then had to rethink the structure, and The value of a boss can be measured in many ways, but relaunched the deal with revised terms a few hours later. perhaps the easiest is via its share price. In his 12 years in charge, Investors ended up with a far sweeter proposition, with a JP Morgan’s market value has almost trebled from US$139bn. lXEDûMATURITY ûLOWERûPREMIUM ûSMALLERûSIZEûANDûAûPUTûOPTIONû 4HATSûINCLUDEDûWEATHERINGûTHEûlNANCIALûCRISIS ûAûTRADINGû instead of a call. scandal and Dimon’s own health worries. Citigroup was a 4HEûlNALû(+BNû53BN ûlVE YEARûCONVERTIBLEûISûSTILLû bigger bank when Dimon started, but now has barely half Asia’s biggest equity-linked deal of the year so far. But the JPM’s value after a 15% drop. Others have fared far worse, or climbdown during bookbuilding showed that even the gone belly up. mighty Evergrande needs to show the markets some respect. The risk for Dimon is that he overstays his welcome. For other wannabe heavyweights, the message is clear: Twelve years in charge is a good innings; 17 may be pushing bullying doesn’t pay. your luck. Another risk is a botched succession. Dimon has been criticised for casting off rivals, or offering them little hope of Another bully taking his throne. Daniel Pinto and Gordon Smith now appear front-runners vergrande wasn’t the only issuer believing it could dictate to succeed Dimon, but by 2023 both will be in their 60s. A Eterms to equity investors last week. BETTERûBETûMAYûBEûlNANCEûCHIEFû-ARIANNEû,AKE ûPOTENTIALLYû In the case of Metrovacesa’s IPO, bankers on the deal said MAKINGûHERûTHEûlRSTûFEMALEûINûCHARGEûOFûONEûOFûTHEûBIGû53û the sellers ignored feedback from investors who demanded a banks. And a Brit at that. discount to net asset value. Instead, the company insisted on The timing and candidate could still come down to pricing at a premium. Dimon’s political aspirations. Chatter insists that he could Investors reacted by closing their wallets and steering clear TAKEûAûRUNûATûTHEû7HITEû(OUSEûINû ûALTHOUGHûHISûLATESTû of the Spanish home-builder. COMMENTSûPERHAPSûSHOWûHEûHASûCOOLEDûONûTHATûIDEAûnûASûDOESû 7HENûTHEûBOOKSûCLOSEDûWITHOUTûSUFlCIENTûDEMANDûONû perhaps the announcement that JP Morgan is to team up 4HURSDAYûTHEûDEALûWASûQUICKLYûREVIVEDûWITHûJUSTûONEûCHANGEûnû WITHû!MAZONûANDû"ERKSHIREû(ATHAWAYûTOûIMPROVEûHEALTHCAREû pricing at a discount to NAV. for their US employees. -ETROVACESAûWASûTHEûlRSTû%UROPEANû)0/ûOFûûBUTûNOTûTHEû Whenever he decides to leave, he will go with the only one to struggle. shareholder cheers ringing in his ears. But it is clear that his /FûTWOû4URKISHûmOATSûTHATûFOLLOWEDûTHEûNEXTûDAY û%NERJISAû ultimate gift to those shareholders will be handing over to a %NERJIûWENTûTHROUGHûBUTûTHEûOTHERûûnûFORûPRIVATEûHOSPITALû person able to take his bank from strength to strength.

International Financing Review February 3 2018 1 Rabiou, 19 months old, Niger - Talitha Brauer/Save the Children Brauer/Save Talitha Niger - 19 months old, Rabiou,

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Registered charity England and Wales (213890) Scotland (SC039570) savethechildren.org.uk INTERNATIONAL FINANCING REVIEW Contents FEBRUARY 3 2018 ISSUE 2219

TOP NEWS 04 BONDS Spike Sell-off in government bonds accelerated last week, but credit seems calm with spreads still at tight levels and primary market open for business. 04 STRUCTURED EQUITY Pause for thought Evergrande’s HK$18bn convert struggles over the line, potentially knocking the wind out of Asia’s equity-linked party. 05 RESTRUCTURING Haircut Noble Group’s proposed reworking is set to inﬂict massive losses on creditors collectively holding more than US$3bn of outstanding debt. 06 DERIVATIVES Courts Hedge fund Solus is seeking damages over Hovnanian’s controversial debt swap after a judge allowed the transaction to go ahead. 06

Loans/Bonds Blackstone lines up US$14bn of debt to buy IFR. 07 Bonds Greece to test appetite with seven-year comeback deal. 08 Equities First European IPOs of 2018 ﬂop with valuation cuts needed. 09 People & Markets Eurozone lags behind in changing post-Libor reference rates. 10

PEOPLE & Dilemma Deutsche Bank lifts pay by 8% despite 15% revenue fall, raising 15 MARKETS questions about the effectiveness of its cost-cutting efforts. Stressed Europe’s banks will face their toughest “stress test” this year, including the impact of a hard Brexit, an economic slump, and a shock to markets. 19 Scrapped Eurex has ended plans for a derivatives clearing and exchange hub in Singapore, planning instead to extend trading hours in Europe. 21 Heating up Lazard sees M&A increasing in Europe, and is particularly bullish on France. 22 Taking time Delays likely to debt restructuring of Norwegian oil drilling company Seadrill. 24 Broader universe India takes steps to deepen its corporate bond market. 25

BONDS Return Greek banks could attempt to raise subordinated debt. 27 Poll Italian issuers shrug off election risk. 35 Supply Covered bonds ease past 2017 tally. 41

EMERGING Oligarchs Russian issuers brush off US Treasury list for possible sanctions. 59 MARKETS China Investors weigh up LGFV risks. 60 Poland Leads Green sovereign pack. 66

LOANS Punishment LMA introduces the prospect of penalties for late settlement. 71 Australia Soft outlook for infra lending. 72 Action Shareholders accrue latest dividend. 82

EQUITIES Debut Travel retailer Hudson stumbles early after ﬁnding willing takers. 85 Jackpot Caesars landlord raises US$1.2bn. 85 Oil FTS International sizes up to US$350m IPO. 93

STRUCTURED China Han’s Laser Technology readies convertible bond issue. 96 EQUITY CNPC Oil giant in record exchangeable. 97 Western Digital Secures US$1bn from CB. 97

International Financing Review February 3 2018 3 Top news

Noble reveals workout plan 06 Solus seeks damages from Hovnanian 06 Greece returns 08 Rates spike but credit calm

Bonds Spreads tighter as no material selling and the primary market robust

BY SUDIP ROY, HELENE DURAND The current repricing of over Treasuries, while the Europe at least the market’s government markets is more equivalent index for corporates anchor remains in place. A sell-off in government bonds measured. “If you look at the is just 20bp wide of its post- accelerated last week but credit impact of the rates sell-off on crisis low. LACK OF SUPPLY seems unperturbed, with secondary … it has been “We have continued pain in The other thing pushing spreads remaining at tight generally positive for high the US Treasury market and spreads tighter is a relative lack levels and the primary market quality spread product,” said meanwhile EM debt hasn’t of supply across many sectors. open for business. Adam Bothamley, global head really sold off,” said Michael In Europe, investment-grade Rates markets in both the US of debt syndicate at HSBC. Roche, an emerging market corporate issuance in January and Europe have come under lXED INCOMEûANALYSTûATû3EAPORT was down nearly 28%, at pressure since the turn of the CREDIT FALLS AS RATES RISE Some emerging markets €24.3bn-equivalent versus year thanks to a mix of better investors are taking the rates €33.7bn-equivalent in 2017, € % growth prospects and a 49 0.05 sell-off as a chance to add according to IFR data. withdrawal of central bank 0 duration at better levels, added In US investment-grade, 47 stimulus. –0.05 a trader. issuance volumes in January Idiosyncratic reasons are 45 –0.10 The big question is how long (including deals from emerging at play too. In the US, for 43 –0.15 this state of affairs lasts. “So as markets borrowers selling 144A or example, Donald Trump’s –0.20 long as we see this level of SEC-registered bonds) were nearly 41 tax cut plans will need to be –0.25 yields sustained, rather than US$50bn off last year’s pace. –0.30 paid for by more Treasury 39 excessive volatility, then – all There are many reasons for –0.35 37 issuance. At the same time, –0.40 else [being] equal - that’s volumes being lower on both some foreign investors are 35 –0.45 positive,” said Bothamley. sides of the Atlantic. In Europe, becoming cautious about US 13/11/17 13/12/17 13/1/18 “The challenge will be if we for example, some corporates government bonds because of iBoxx Eur non-ﬁnancials index, start to see some really wild pre-funded last year, while the asset swap spread the weaker dollar. moves in terms of yields. That dearth of M&A deals is also 5y BOBL Ten-year Treasury yields have could lead some of the IMPACTINGûmOW risen more than 30bp over the Source: Thomson Reuters insurance guys to sit on the past month, crossing the 2.80% sidelines, in which case it could THRESHOLDûFORûTHEûlRSTûTIMEû “Investment-grade spreads in become more challenging. But “We have continued since April 2014. The 10-year particular have tightened as at the moment, it’s pain in the US Treasury German Bund yield, yields have backed up and constructive.” market and meanwhile meanwhile, has jumped 30bp to encouraged yield-focused EM debt hasn’t really 0.74%, the highest since buyers into the market. FIREPOWER sold off” December 2015. Insurance companies are One reason that credit spreads While bankers and investors buying credit because yields are have continued to perform is are keeping a nervous eye on higher, so on a spread basis, it’s INVESTORûlREPOWER the moves, most are still broadly tighter [than] where it Bond funds have recorded In the US, tax reforms are sanguine about the market’s was.” MOREûTHANû53BNûOFûINmOWSû reducing the need for outlook. “The economic 4HEûI"OXXûEUROûNON lNANCIALSû this year, according to Bank of companies to raise debt to fund backdrop is very supportive and corporate index, for example, America Merrill Lynch and EPFR M&A or share buybacks. while we recognise that we are has tightened 8.5bp this year on Global data. While that is a lot less Microsoft, for example, said on in a rate rising environment, an asset swap basis, and at than the US$100bn-plus that has Wednesday’s earnings call that INmATIONûHASûNOTûRAISEDûITSûHEADû 38.5bp is less than a basis point poured into equities, the access to overseas cash means it so far which suggests there off post-crisis tights. CUMULATIVEûEFFECTûOFûINmOWSû will not be coming to the shouldn’t be a tantrum,” said virtually every week since the capital markets for now. Annabel Rudebeck, head of SAME STORY start of 2017 means that investors Those issuers accessing non-US credit at Western Asset It is a similar story in the US, have plenty of cash to deploy. MARKETSûAREûlNDINGûCONDITIONSû Management. where the average spread for “There are mounds of cash supportive. Many bonds issued The “taper tantrum” in 2013 - high-grade credit hit a post- coming in,” said one US banker. last week in the US paid when 10-year Treasury yields crisis low of 90bp over /UTmOWSûAREûUNLIKELYûTOûTAKEû negative new issue concessions jumped nearly 75bp in a little Treasuries last week, according hold as long as rates volatility - on order books that were over a month as the Fed to ICE BAML data. as opposed to rates levels - stays multiple-times covered. signalled the beginning of the In emerging markets the low, according to BAML FEDEX’s US$1.5bn two-part end of its QE programme - EMBI Global index, which strategists. deal was nearly four-times rocked both primary and monitors sovereigns, tightened And with the ECB still buying covered. That allowed the secondary markets. by 15bp in January to 295bp €30bn of bonds a month, in company to tighten spreads on

4 International Financing Review February 3 2018 For daily news stories @ visit www.ifre.com Sharjah scores Panda ﬁrst 08 European IPOs start badly 09 EU plans Green changes 10

both the 10 and 30-year bonds by nearly 20bp from initial Evergrande ends equity-linked party talk, leaving concessions at negative 1bp. Structured Equity Restructured deal gives investors pause for thought “There isn’t much concern around demand for corporate BY FIONA LAU one year do not need to be needs more investor education bonds, which have had such registered with the National and is not the best instrument supportive technicals,” said the CHINA EVERGRANDE GROUP knocked Development and Reform when issuers want to execute US banker. “As long as rates tick the wind out of Asia’s equity- Commission, the regulator for opportunistic trades.” higher gradually, that’s only a linked capital markets with an offshore bond issues. good thing for insurance opportunistic HK$18bn A day before the Evergrande SECOND ATTEMPT companies and pension funds, (US$2.3bn) convertible bond deal, FUTURE LAND DEVELOPMENT Instead, Evergrande opted for a because it will make coupons issue, which had to be hastily HOLDINGS and POWERLONG REAL vanilla CB issue on its second slightly higher.” restructured to get over the line. ESTATE HOLDINGS raised a attempt for a smaller deal of The convertible took total combined HK$4.34bn from CBs (+BNû4HEûlVE YEARûPUT DISLOCATION equity-linked issuance in Asia- last Monday. Future Land was three CBs came with a coupon The one market seeing some 0ACIlC ûEXCLUDINGû*APANûANDû particularly aggressive, as its and yield of 3.75%–4.25% and a dislocation is bank capital. domestic China shares, to deal came less than two weeks conversion premium of 40%–45%. 2ECENTû!4ûDEALSûFROMû"ELlUSû US$6.78bn in January alone, after a HK$1.56bn share The deal eventually raised and UBS are trading below almost matching the US$6.88bn placement. Both CBs traded HK$18bn after being priced at reoffer. Part of that is down to raised in the whole of 2017. below water last Tuesday, the investor-friendly end of PROlT TAKING ûESPECIALLYûASûTHEû Evergrande’s ambitions, despite strong demand. TERMSû4HEûCOUPONûWASûlXEDûATû sector has rallied hard over the however, were too rich for Country Garden Holdings and the top of the range, while the past 12 months and, with yields investors’ tastes. After #Ilû(OLDINGSû'ROUPûRAISEDû conversion premium was at the rising, had arguably got toppy. marketing a HK$23bn perpetual HK$15.6bn and HK$2.79bn, bottom of range. CB with a call option for the respectively, from CBs earlier About 70 accounts “As long as rates tick issuer, it was forced to relaunch this month. participated. Global multi- the issue at a smaller size, with a strategy investors accounted for higher gradually, that’s lower conversion premium, a SURPRISING the bulk of demand, though only a good thing for lXEDûMATURITYûANDûAûPUTûOPTIONû To the surprise of many, European outright investors and insurance companies for investors. Evergrande began marketing a private-banking clients also and pension funds, The lacklustre response may HK$23bn perpetual CB issue last participated. because it will make make investors think twice about Tuesday on aggressive terms – a Asian PB clients, especially buying the next deal from the distribution rate of 3%–4% and a those with connections to the coupons slightly sector, and bankers expect conversion premium of 50%–60%. Chinese property sector, were higher” property issuers to take a The deal immediately raised SAIDûTOûBEûBEHINDûAûSIGNIlCANTû breather before rushing to the eyebrows. Perpetual maturities portion of demand. "ELlUS ûFORûEXAMPLE ûPAIDûTHEû MARKETû3OûFARûTHISûYEAR ûlVEûOFû are rare in equity-linked Bankers away from the lowest coupon ever for a non- the eight international equity- instruments, and investors tend Evergrande deal reckon it investment grade AT1 when it linked deals have been from to avoid a high conversion remains to be seen whether the issued €500m perpetual non- Chinese developers, taking PREMIUMûONûAûDEALûWITHûNOûlXEDû episode will shut the market, call seven notes at 3.625%. The advantage of rallying stock repayment date. Perpetuals are BUTûSAYûINVESTORSûDElNITELYûWANTû bonds are rated Ba2 by Moody’s markets and strong risk appetite. also not eligible for CB indices, MOREûDIVERSIlCATION and BB by Standard & Poor’s. “With so much supply from further discouraging outright “CB investors are up to their Sectors such as AT1 will be property issues lately, there were investors. necks in property names,” said especially vulnerable to a sell- already signs of weakening in the On the other hand, the one of the bankers. off in rates precisely because sector before the Evergrande deal undated format is attractive for Evergrande’s CBs were trading the focus is on cash prices, with launched. Throwing out such a issuers as it receives accounting below par at 99.80 last Wednesday. the market driven by big deal with an unpopular treatment as equity. Evergrande’s shares have SENTIMENTû"ELlUSûISûTRADINGûATû structure at aggressive terms Around four hours after risen 417.5% over the past 12 a bid price of 99.10, while UBS could crash the market,” said an launch, Evergrande decided to months. There is a 90-day is quoted with a 98 handle. equity-linked banker. restructure the deal as the lock-up on the issuer and Bankers say the performances Buoyant stock prices have original one failed to generate shareholder Xin Xin (BVI). of the two bonds are far from a encouraged many property enough demand. The funds will be used for disaster, although they companies to consider “The combination of a complex RElNANCINGûANDûFORûGENERALû acknowledge they provide a note opportunistic trades, and the structure, aggressive terms and a corporate purposes. of caution of what could happen growing acceptance of short- huge offer worked against the Bank of America Merrill Lynch, elsewhere if volatility picks up. dated structures has allowed original deal,” said a person with Citigroup, Credit Suisse, Deutsche Additional reporting by Paul Kilby, them to seize the market window. knowledge of the issue. Bank, Haitong International Shankar Ramakrishnan and Eleanor Under Chinese rules, bond “There was simply not enough Securities and UBS were the Duncan offerings with maturities under demand for the perp. A perp bookrunners.

International Financing Review February 3 2018 5 Top news Noble reveals workout plan

Restructuring Struggling commodities trader outlines agreement with group of creditors

BY DANIEL STANTON 2022 bonds, Noble stated that Under the terms of the The analysts also questioned any changes to the maturity or proposal, Singapore-listed Noble Noble’s ability to meet its NOBLE GROUP revealed the terms coupons of its issues would will change its organisational disposal targets. of its proposed restructuring last require a vote of holders of at structure, creating a vehicle, for “Noble said these assets have a -ONDAY ûCONlRMINGûTHATû least 75% of its notes, of which now called Topco, which would NAV at 3Q17 of US$859m, but creditors are in line for heavy 75% must vote in favour for the be 70% owned by senior that is Noble’s carrying value of losses on more than US$3bn of measures to pass. creditors, 20% by Noble’s the assets, and, just to outstanding debt. management and 10% by understate the obvious, Noble The embattled commodity “Just to understate existing shareholders. Half of has a terrible history of trader said it had reached an in- the obvious, Noble the management stake is accurately valuing assets on its principle agreement with an ad dependent on Noble hitting balance sheet,” wrote hoc group of creditors to halve has a terrible history certain Ebitda targets. CreditSights. In July, Noble its senior debt and overhaul its of accurately valuing Topco will be the parent of a recognised a US$1.3bn non-cash corporate structure. assets on its balance company holding Noble’s assets impairment charge on its However, it made no mention sheet” and a separate trading entity trading book. of a rumoured strategic that will become the group’s investment, and the ad hoc Noble was due to pay a coupon main operating company. The PRINCIPAL LOSSES group’s 30% holding was far on Monday on its 6.75% 2020 trading entity will be held Holders of Noble’s US$400m short of the proportion of bonds, which might explain why through an intermediate holdco. perpetual capital securities have creditors that would be needed it made the announcement before The assets, Harbour Energy, been invited to exchange them to pass the measures. waiting to build more support. A Noble Plantations, Jamalco and for US$15m in value, equivalent The announcement moves spokesperson for Noble declined nine ships, are targeted for sale. to about four cents on the dollar. Noble a step closer to securing TOûCONlRMûWHETHERûITûHADûMADEû CreditSights pointed out that a The remaining senior its future as a going concern, the coupon payment, but a FULL BLOWNûBANKRUPTCYûlLINGû securities – US$379m of senior albeit as a far smaller company, research report from BNP Paribas would result in trading notes due March 20 2018, but sets the scene for more tense indicated that it had. COUNTERPARTIESûlLINGûLARGEûCLAIMS û US$1.177bn due in 2020 and negotiations as it looks to The company had missed giving bondholders an incentive US$750m due in 2022, plus a convince other creditors to coupon payments on perpetual to support the scheme, but revolving credit facility of support the proposal and the bonds last year but, under the warned that the management US$1.143bn – will be exchanged hefty haircut involved. terms of those notes, doing so might continue to burn through for a combination of new debt In the documentation for its did not constitute a default. cash if it was approved. and equity. Hedge fund seeks damages over CDS ‘fraud’ Derivatives Battle goes on even after US judge greenlights debt swap

BY DAVIDE SCIGLIUZZO favourable rate of just 5% - less “The court allowed the CHESS GAME than half the 11% to 13.5% other exchange offer to proceed The agreement for Hovnanian to Hedge fund SOLUS vowed to keep banks including Goldman Sachs because it found that Solus could skip a payment has raised the up its battle against HOVNANIAN’s and JP Morgan offered. be adequately compensated by hackles of many in the CDS controversial debt swap and is In exchange, Hovnanian an award of money damages,” market who believe a voluntary seeking damages after a judge agreed to miss an interest Jon Pickhardt of Quinn default distorts that market’s last week allowed the payment on a portion of its 2019 %MANUEL ûTHEûLAWûlRMû proper functioning. transaction to go through. bonds that one of its subsidiaries representing Solus, told IFR. In denying Solus’s motion, The dispute has captivated will acquire through the swap, a “We look forward to proving however, Judge Laura Taylor traders and investors in the move likely to trigger payments our case.” Swain said “any proliferation of US$1.4trn credit default swap to buyers of CDS protection on Hovnanian said around 72% of engineered defaults” could be market, whose existence, some the company. holders of its 8% 2019 bonds had mitigated by the International say, is threatened by the affair. That would deliver a big agreed to exchange them for a Swaps and Derivatives Solus failed to convince a US payout to GSO, which has combination of cash and new Association. judge to block the swap, which bought over US$330m of the longer-dated bonds, which “The court is not … persuaded is part of a complicated CONTRACTS ûANDûSIGNIlCANTûLOSSESû expired on Monday. that ISDA is so powerless to act RElNANCINGûAGREEMENTûTHATûTHEû to Solus, which sold over For every US$1,000 of 2019s in an effective way with respect company made with GSO, the US$260m of them. tendered into the exchange, to the effect of intentional CREDITûARMûOFûPRIVATEûEQUITYûlRMû The hedge fund alleges that the investors will receive US$155.79 defaults on the CDS market,” BLACKSTONE. GSO deal is fraudulent, as of cash, US$532.31 of new 13.5% she wrote. GSO offered Hovnanian an Hovnanian would not otherwise 2026s and US$529.54 of 5% ISDA’s former chief executive unsecured term loan at the have been in danger of defaulting. 2040s. Robert Pickel, who was retained

6 International Financing Review February 3 2018 For daily news stories @ visit www.ifre.com

This will include US$700m in pro rata basis, and the ad hoc 3.5-year secured bonds issued by group of creditors has agreed to Banks line up US$14bn the assetco and paying a 10% underwrite the remainder. coupon in kind. Under the proposal, the ad debt for TR acquisition The new trading company hoc group of bondholders will will issue US$685m of 4.5-year receive a “work fee” of 2%, and a Loans/Bonds Largest LBO loan since Heinz in 2013 senior secured bonds, paying 5% fee for underwriting the ûFORûTHEûlRSTûûMONTHSû TRADEûlNANCEûFACILITYû BY CLAIRE RUCKIN, ANDREW BERLIN “The market capacity for and 9.75% thereafter. For the Bondholders would receive a Europe is about €5bn between lRSTûûMONTHS ûHALFûOFûTHEû higher recovery rate if they also Banks are lining up a jumbo loans and bonds and in the US is coupon will be paid in cash and PROVIDEDûTRADEûlNANCINGûUNDERû LEVERAGEDûlNANCINGûOFûAROUNDû US$10bn-$15bn, so if there is a half in kind, with the coupon to the facility, although the US$14bn to back US private big deal that pushes capacity be paid in cash thereafter. recovery rate would drop if EQUITYûlRMû"LACKSTONEû'ROUPSû and the business has revenue The trading entity holdco will participation was very high. acquisition of a 55% stake in the globally it would make sense to issue US$270m of structurally “Based on the proposed lNANCIALûANDûRISKûBUSINESSûOFû have euro and dollars in loans subordinated senior seven-year restructuring terms, we THOMSON REUTERS. and bonds to create a bonds, secured over shares in estimate that the bond recovery Bank of America Merrill Lynch, competitive dynamic in order to the trading company and will be about 49 cents to a Citigroup and JP Morgan will lead get best execution,” a senior intercompany claims. It will dollar if participation rate is THEûDEBTûlNANCING ûWITHûSEVERALû banker said. carry a “pay if you can” coupon 100% and about 56 cents to a other banks to be added due to The deal is the largest LBO loan to be paid in cash or in kind. dollar if participation rate is the large size of the underwriting. lNANCINGûSINCEûûWHENûKETCHUPû This will be set at 5% for the 80%,” wrote Nomura in a As many as 10 banks with maker HJ Heinz raised a US$14.1bn lRSTûûMONTHSûANDûû research note. existing relationships with lNANCINGûTOûBACKûITSûBUYOUTûBYû thereafter. Noble’s 2022 bonds, issued Blackstone could be brought in Warren Buffett’s Berkshire The assetco will also issue last March, climbed six points and that process might start in Hathaway and 3G Capital. US$200m of zero-coupon on January 30 to a cash price of the next few days, a banking Thomson Reuters and unsecured preference shares, 56, following the source said. Blackstone declined to 90% of which will be issued to announcement. The stock fell Thomson Reuters will retain a comment. creditors and 10% to Topco. 11.5% to S$0.23 per share. 45% holding and will receive In addition, Noble said it had The company said it would approximately US$17bn, COST CUTTING AGREEDûAû53MûTRADEûlNANCEû invite creditors to sign a including about US$3bn in cash The news and information and hedging facility, committed restructuring support and US$14bn of debt and group, controlled by Canada’s for three years at what it said agreement, but did not give preferred equity issued by the Thomson family, has relied was competitive market terms. details of timing. new business, the companies heavily on cost cutting in recent Noble’s senior creditors will be Houlihan Lokey advised the ad said. The Canada Pension Plan years as its core customers, invited to join the facility on a hoc group of creditors. Investment Board and including banks, brokerages and Singapore’s GIC will invest investment houses, retrench in alongside Blackstone. the face of weak trading as an expert by Solus, said the subsidiary - like in Hovnanian’s 4HEû53BNûlNANCINGûISû conditions, tougher regulations CDS market faced an case - from the potential triggers expected to be led from New York and the rise of passive investing. “existential threat” from of a credit event. and comprise around 60% The partnership will be manufactured defaults. “In writing contracts that are leveraged loans and 40% in high- managed by a 10-person board Other market participants NOTûSPECIlCûTOûAûTRANSACTIONûYOUû yield bonds, denominated mainly COMPOSEDûOFûlVEûREPRESENTATIVESû who agreed to speak to IFR on invariably run into situations in US dollars, bankers said. There from Blackstone and four from condition of anonymity also where the wording of the is also expected to be some euro- Thomson Reuters. The president expressed concerns. contract is too general and clever denominated tranches. and CEO of the new partnership “It’s like playing three- PEOPLEûCOULDûlNDûWAYSûTOûARRIVEû !û53BNûlNANCINGûWOULDû will serve as a non-voting dimensional chess,” said one at the result they want,” said Julia give leverage of around 7.5 member of the board following trader at a large US asset ,U ûAûPARTNERûATûLAWûlRMû2+/ times, based on last 12-month the closing of the transaction. manager. “We will think twice Ebitda of approximately The company plans to use before we engage [using CDS], “The court is not … US$1.7bn for the F&R unit. US$9bn to US$10bn to buy back especially in credits with persuaded that ISDA is Senior leverage of roughly 4.5- shares, and use the rest to pay upcoming maturities.” 5.0 times could give a loan of down debt, invest in its legal and An ISDA spokeswoman said so powerless to act” US$8bn-$9bn, and junior debt of tax & accounting units and the group would “continue to US$4bn-$5bn, sources said. make selective acquisitions. gather feedback from its Another source familiar with Woodbridge, the Thomson members” about the matter. the matter said that leverage family’s investment company, Derivatives lawyers say “It depends on how much [an was expected to end up below will take part in the share tweaks to the existing standard issuer-created credit event] is six times. repurchase, maintaining its derivatives contracts could help going to come up again. If Although the size of the ownership in Thomson Reuters prevent engineered credit people think this is going to be a lNANCINGûISûCHALLENGING ûLIQUIDû in the 50%-60% range. events, though the process is recurring problem going banks and investors are eager to IFR is a unit of Thomson likely to take time. forward, they will have an lend to new buyouts as the Reuters. One proposal, for example, is to incentive to make rule strong level of global demand Additional reporting by Davide exclude defaults on debt owed to a changes.” continues to exceed supply. Scigliuzzo and Natalie Harrison

International Financing Review February 3 2018 7 Top news Greece to test appetite with longest comeback deal Bonds Sovereign could return this week with seven-year trade

BY MELISSA SONG LOONG “The picture is looking more upgrade is on the cards with the speculative - it is rated Caa2 by sustainable,” said an investor. “We agency’s positive rating outlook. Moody’s and B- by Fitch - and GREECE will face its biggest bond missed the opportunity when the While one banker said that a market participants warn that market test soon as it looks to growth story was getting better. I new seven-year would be more longer-term risks cast a shadow. syndicate its longest trade since wish we’d been part of it … I expensive than the ultra-cheap “You have to hand it to them - it returned from market exile suppose we still can.” loans Greece receives from they’ve made a tremendous last year. European creditors, another said lSCALûADJUSTMENTûTHROUGHû The issuer has mandated “Although … seven it was about creating a more draconian belt-tightening,” said Barclays, BNP Paribas, Citigroup, JP liquid market. Juergen Odenius, economic Morgan and Nomura for a seven- years is a long time to “It makes sense for Greece to counsellor at PGIM Fixed year transaction, according to be tied up in [Greece’s] want to extend the curve out,” Income. “But the situation in sources. The banks declined to debt” he said. “Although … seven years Greece is they’re robbing Peter comment. is a long time to be tied up in to pay Paul.” The country, which is due to [Greece’s] debt.” As the IMF looks to withdraw exit its third bailout programme from the country, that leaves in August, has been eager to )NûITSûlRSTûBONDûDEALûSINCEû BUYING TIME %UROPEANûCREDITORSûTOûlLLûTHEû prove that it can stand on its 2014, Greece priced a €3bn Greece has been focused on gap. own feet, and access to new August 2022 last July at a 4.625% tidying up its outstanding debt With Greece’s debt totalling money in the seven-year part of yield that has since rallied to over the past year. Following the 178% of its economy in 2017, the curve will be its boldest 2.84%, according to Tradeweb. õBNûlVE YEARûLASTû*ULY ûITû according to S&P data, the move yet. The sovereign will seek to swapped about €30bn in debt country is in discussions with In 2014, when it returned to capitalise on its recent S&P through an exchange of 20 small OFlCIALûCREDITORSûFORûDEBTûRELIEFû THEûBONDûMARKETûFORûTHEûlRSTû upgrade. The agency raised its BONDSûFORûlVEûNEWûBONDSûLASTû Talks started last week. time since its 2012 debt rating to B from B- on January December. Societe Generale analysts said restructuring, it did not go 19, citing improved growth and Yet, despite the progress, in a recent report that while BEYONDûlVEûYEARS AûBETTERûlSCALûOUTLOOKû!ûFURTHERû Greek debt is still highly short-term funding needs are Sharjah scores Panda ﬁrst

Emerging Markets More Middle Eastern issuers seen visiting market after emirate’s print

BY INA ZHOU, CAROL CHAN Bankers familiar with the investors under the Bond low oil prices have pushed state issue said Sharjah could have Connect scheme. BUDGETSûINTOûDElCITSûANDû SHARJAH, the third-largest achieved a lower funding cost if Orders were not particular tightened liquidity in the constituent of the United Arab it had sold US dollar bonds, but strong, the banker said, banking systems. Emirates, last Thursday became that gaining access to the DECLININGûTOûPROVIDEûAûlGUREû Moody’s said in a December THEûlRSTû-IDDLEû%ASTERNûISSUERûTOû renminbi market gave it more About 27% of the bonds were REPORTûTHATû3HARJAHSûlSCALû sell Panda bonds, paving the way lNANCIALûmEXIBILITY allocated to foreign investors, strength was constrained by a for more cash-strapped Gulf with a sizeable part handled via growing debt burden. It said the sovereigns to raise funds in NEED FOR PREMIUM Bond Connect. emirate had built up debt faster China. “Overall, Chinese onshore than revenue in the past few years, The government of the bond yields are rising. As a new Bankers familiar with the taking the debt-to-revenue ratio Emirate of Sharjah, rated A3/ issuer in the market and an from 142% in 2014 to 203% in 2017. BBB+ (Moody’s/S&P) unfamiliar name to onshore issue said Sharjah could internationally and AAA by investors, giving some premium have achieved a lower BOND TOURISM China’s Lianhe Credit Ratings, was a must,” said a banker on funding cost if it had sold Issuing renminbi bonds expands priced Rmb2bn (US$318m) of the deal, without putting a US dollar bonds Sharjah’s funding channels and three-year Panda bonds at par to number on the size of the COULDûALSOûRAISEûITSûPROlLEûINû yield at 5.80%, in the middle of premium. Foreign central banks, China to promote tourism, a the 5.40%–6.00% guidance range. 4HEûBANKERûSAIDûlNALûPRICINGû commercial banks and asset source familiar with the sale said. The bonds offered a 103bp was in line with fair value, as management companies bought “Tourism is one of the pillars premium to China Development previously estimated by the into the deal. of Sharjah’s small economy. The Bank’s three-year notes, quoted underwriters. The Sharjah offering is part of issuer did the trade partly for at about 4.77% on the same day. The issue was launched in the a rising tide of global bond issues publicity reasons to attract more The policy bank is rated Aa3/AA– interbank bond market and was from sovereigns and companies Chinese tourists,” said the (Moody’s/S&P). also available to offshore in the Gulf over the past year, as source.

8 International Financing Review February 3 2018 For daily news stories @ visit www.ifre.com

covered, over the medium term other policies in place, and the debt sustainability issue is eventually there will be IPO valuations shrink not yet resolved. elections,” he said. “[Gross funding needs] would The timing for the new bond to ﬁt investor demands only remain below 15% for a appears to have been precisely brief period of time and then engineered, coming shortly Equities Deep cuts to get first European float of 2018 away increase rapidly above 20%, well after the Eurogroup’s third before the debt-to-GDP ratio is review of Greece - which BY ROBERT VENES relaxed in the last few days of reduced to a more sustainable concluded that the country has bookbuilding, believing there level,” it said. OUTPERFORMEDûlSCALûTARGETSûOVERû #ONlDENCEûINûTHEû%-%!û)0/û were more orders still to come. Market participants said there the past three years. pipeline took a knock on Friday, Bankers observing the is hope that policies will WITHûTWOûOFûTHEûTHREEûmOATSûDUEû Metrovacesa deal expressed improve. “As long as no one to complete this week in shock at the outcome. “It was a “Sizeable and ultimate debt intensive care and requiring pretty aggressive range, but it’s relief measures are the best way runs out of the deep cuts in valuation to stay a surprise,” said a banker to get rating agencies to room screaming, alive. One of those was Spanish working on one of the other substantially upgrade Greece [negotiations around homebuilder METROVACESA, IPOs in the market. “We’re not out of sub-investment category,” debt relief] won’t be a which had been talked up as a worried about the IPO pipeline the report added. market issue” macro play on the country and at this stage, but it does suggest If that happens, it could also yet failed as investor feedback everyone needs to be a little pave the way for the European was ignored. more disciplined.” Central Bank to become a buyer Metrovacesa was due to of Greek debt. And Alpha Bank’s blowout complete a €703.8m-€762.45m “It does suggest deal last month proved that -ADRIDûmOATûONû4HURSDAY ûBUTû everyone needs to be a NO ROOM FOR FAILURE there is plenty of appetite for after radio silence throughout little more disciplined” /DENIUSûSAIDûTHATûWHILEûOFlCIALû Greek paper. the bookbuild, guidance was cut creditors are seeking to get Alpha Bank raked in orders by more than 10% at the mid- Greece to stand on its own, no four times the size of its debut point to €16.50-€17.00 from one wants it to fail. covered bond without any €18.00-€19.50 late that night. “As long as no one runs out central bank support. It was the With pricing coming later in the Some bankers involved in of the room screaming, last of the four big Greek banks day at €16.50, the deal size Metrovacesa said they had made [negotiations around debt to sell covered debt in recent dropped to €645m and the it clear early on that the price relief] won’t be a market issue. months. market capitalisation to €2.5bn range was too aggressive. The They’re buying time to put (Additional reporting by Sudip Roy) from €2.7bn-€3.0bn previously. original price range represented All other terms in the all- a 1.4%-9.9% premium to net asset secondary deal remained the value when the clear feedback !CCORDINGûTOûOFlCIALûDATA ûMOREû Eastern issuers to visit the same and trading will begin on from investors was they would than 86,000 Chinese visitors Panda market in the future. Tuesday. buy only at a discount, said one stayed in Sharjah hotels in 2016, “Just like after Poland’s Panda It was not alone in mispricing banker involved. Another up 63% from the previous year. bond issue, Hungary followed suit ITSûmOATû4URKISHûHOSPITALSû banker agreed and said the and also printed one,” he said. operator MLP SAGLIK HIZMETLERI cut seller had dug their heels in. About 27% of the 4HEûNEWûNOTESûWEREûTHEûlRSTû the price range for its Istanbul “On the face of it, the IPO bonds were allocated to under Sharjah’s Rmb3bn Panda IPO by more than 25% at the market is not as strong as the bond programme registered mid-point of guidance, dropping secondary market has been, foreign investors, with with the National Association of to TL19-TL20 from TL24-TL28.80. with blocks having gone well,” a sizeable part handled Financial Market Institutional The deal size shrinks to TL1.2bn- said the second banker. “There is via Bond Connect Investors. TL1.3bn (US$319m-$336m) from very little early momentum, The notes were issued in the TL1.5bn-TL1.8bn previously. even though investors are 3HARJAHSûDEALûWASûTHEûlRSTû name of Sharjah Finance The number of shares on offer making money, and a lot more sovereign Panda bond issue this Department. remained the same but MLP had caution. It’s similar to the less year and the fourth sovereign Proceeds will be remitted lXEDûPRIMARYûPROCEEDSûOFû expected or illiquid blocks, Panda issue after those of South offshore, converted into TL600m to cut net debt and which tend to require a heavier Korea, Poland and Hungary. dirhams and consolidated into Turkey’s Capital Markets Board discount to get done. Frankly, Hungary printed the last sovereign Sharjah’s budget, according to does not allow the number of it’s what we saw in the second Panda bonds in July 2017. the prospectus. primary shares on offer to be half of last year as the IPO Other Middle Eastern Bank of China was lead changed. As a result, sellers market got tougher.” countries are reportedly looking underwriter and lead bookrunner Turkven, Sancak Group and the Metrovacesa closed on Friday to issue renminbi bonds. on the offering, while Industrial Usta and Elbasi families will buy and trades on February 6, Reuters said last August that and Commercial Bank of China was primary shares with some of while MLP bookbuilding runs Saudi Arabia was considering joint lead underwriter and joint their proceeds to reach the until February 6. Providing one partly funding itself in Chinese bookrunner. TL600m target within the bright spot is ENERJISA ENERJI, as currency, quoting a senior HSBC (China) and Standard revised range. the Turkish electricity OFlCIALûFROMûTHEûKINGDOM Chartered (China) were also While it was apparent that distributor completed its IPO on The banker on the Sharjah joint lead underwriters on the the deals were struggling, Friday without incident (see trade expected more Mid- issue. bankers had been relatively Equities).

International Financing Review February 3 2018 9 Top news

Markets confront post-Libor landscape

People & Markets Eurozone lagging behind other currencies in changing reference rates

BY CHRISTOPHER SPINK on real transactions rather than needs to start thinking about across all tenors of the market. best estimates. However, there this now,” said ISDA chief It therefore recommended Financial instruments with a are few actual interbank executive Scott O’Malia in a moving to new alternative rates. total outstanding notional value funding transactions such as statement. The new rates are Sonia for of US$370trn are estimated to this at present. “The next step is to gather sterling, Saron for Swiss franc, be exposed to the interbank 4HEREûAREûALSOûLEGALûDIFlCULTIESû feedback from all parts of the Sofr for US dollar and Tona for offered rates, which will have to in amending contracts, which market through our global yen. be moved to alternatives such as would increase costs and survey to identify all important The eurozone has yet to Sonia or Sofr, according to operational risk. The switchover issues and propose potential CONlRMûITSûREPLACEMENTûFORû INTERNATIONALûlNANCIALûMARKETSû could potentially make hedges SOLUTIONSûFORûANûORDERLY ûEFlCIENTû Euribor but a version of Eonia is trade bodies. less effective, requiring and harmonised transition.” seen as highly likely. The update on the switchover subsequent adjustments. Martin Scheck, chief On Friday the composition of a was produced by the The change will require executive of ICMA, said the WORKINGûGROUPûWASûCONlRMEDûBYû International Swaps and SIGNIlCANTûINVESTMENTûINûNEWû REPORTûWASûAûhlRSTûSTEPûTOWARDSû the European Central Bank, Derivatives Association, the infrastructure, accounting and coordinating the transition in European Securities and Markets Association of Financial Markets regulatory measures to support such a way as to avoid market Authority, the European in Europe, International Capital the move to the new reference fragmentation or disruption”. Commission and the Financial Market Association and the rates. The trade bodies said The changeover was initiated Services and Markets Authority, Securities Industry and DERIVATIVES ûLOANS ûmOATING RATEû by global regulators in 2012 to identify and recommend a new Financial Markets Association. notes, securitised bonds and after scandals involving reference rate and related issues. The joint report said markets deposits could all be affected. misdemeanours in the The four public institutions will face several key challenges The group said it was interbank offered rates markets will act as observers of the group, during the transition. Principal planning to survey buyside and started to emerge. which consists of 21 credit among them is the potential SELLSIDEûlRMSûASûWELLûASû A report in 2014 by the INSTITUTIONS ûlVEûOTHERûNON VOTINGû lack of liquidity in derivatives providers of infrastructure Financial Stability Board, members and another invited markets as the new alternative about their concerns and how to representing G20 regulators, institution. It will be chaired by rate products replace the support the transition to the found liquidity had dried up so Koos Timmermans, chief current regime. new rate benchmarks. much in certain interbank lNANCIALûOFlCERûOFû).'û'ROUP û The new products will ideally “The task of transitioning … offered rate markets that the ANDûMEETûFORûTHEûlRSTûTIMEûONû be overnight bank rates based is immense, so the industry rates were no longer sustainable February 26 at the ECB.

There is also a risk that the EU eyes new Green standard potentially strict format of proposed measures for People & Markets Dramatic changes considered to meet carbon emission targets SUSTAINABLEûlNANCE ûSUCHûASû HLEG’s guidelines, will put BY MERLE CRICHTON as renewable energy generation SUSTAINABLEûlNANCE bankers off. ANDûEFlCIENTûBUILDINGS HLEG added that the “In the next couple of years, as The EU’s high-level expert group As part of its DElNITIONûOFûGREENûASSETSûELIGIBLEû we put these regulations into HASûPRESENTEDûTHEûlNANCIALûSECTORû recommendations, the HLEG for lower potential capital force, we are going to be with one of the most tangible suggested the establishment of CHARGESûWOULDûBEûSETûBYûOFlCIALû balancing ensuring a robust strategies in achieving the bloc’s ANûOFlCIALû%5û'REENû"ONDû public bodies. Green bond market whilst climate change targets yet. Standard. There should not be an making sure issuance criteria are “The HLEG is envisaging some Other proposed measures “unbalancing” of risks in the not too stringent,” said Stephanie major, major changes to the way include an EU taxonomy for lNANCIALûSYSTEMûJUSTûBECAUSEû Sfakianos, head of sustainable we operate,” said a syndicated SUSTAINABLEûlNANCEû ûAû there is now an incentive to capital markets at BNP Paribas. banker. “It’s going to be TECHNICALLYûROBUSTûCLASSIlCATIONû engage in projects which Other priorities include a absolutely dramatic and I think system to establish market contain a “green supporting TRANSPARENTûlNANCIALûSYSTEMûTHATû countries are starting to get that.” clarity on what is “Green” or factor” versus a “brown is accountable to EU citizens, and In the highly anticipated “sustainable”. This is to start penalising factor”, said the a “Sustainable Infrastructure report published on Wednesday, with climate-mitigation, European Banking Federation, Europe” facility to expand the the HLEG put forward proposals effective from mid-2018. which represents the region’s size and quality of the EU that seek to mobilise private It also said that capital charges main banks. sustainable assets pipeline. capital to reduce carbon for specialised lending, project h)TûISûEXTRAORDINARILYûDIFlCULTû The same day HLEG published emissions by 40% by 2030. lNANCINGûANDûMORTGAGEûLENDINGû TOûCREATEûPROPERûDElNITIONSûTHATû its report, January 31, saw The HLEG, set up in late 2016, would need to be carefully are not at odds with the need for another milestone in sustainable estimates that an additional reviewed to prevent curtailment accuracy and purity in risk lNANCE ûWITHûKFW selling the €170bn in annual investments is of European bank lending in the weights in banking,” read the largest ever Swedish Kronor- needed each year for projects such areas that are critical for EBF statement. dominated Green bond.

10 International Financing Review February 3 2018 IFR AWARDS GALA DINNER IFR AWARDS GALA DINNER

Her Royal Highness The Princess Royal, Patron of Save the Children, and Vice Admiral Sir Tim Laurence attended the IFR Awards dinner at the Grosvenor House Hotel last week. Her Royal Highness presented the Bank of the Year trophy to Viswas Raghavan, chief executive of JP Morgan in EMEA. The charity tombstone was hosted by Gyles Brandreth and raised over £1m for Save the Children. Guests contributed a further £22,810 taking the total raised for the charity at this event over the years to £26.6m. Comedian and impressionist Rob Brydon hosted the awards – with assistance from Alan Bennett and Sean Connery.

Credit: Save the Children/Matt Crossick Credit: Save the Children/Matt Crossick

International Financing Review February 3 2018 11 GALA DINNER IFR AWARDS

Credit: Save the Children/Matt Crossick

12 International Financing Review February 3 2018 IFR AWARDS GALA DINNER

Credit: Save the Children/Matt Crossick

International Financing Review February 3 2018 13 GALA DINNER IFR AWARDS

14 International Financing Review February 3 2018 People &Markets

BAML names Bellwether Matt Comyn 16 Chris Munro as 18 spots 22 will become co-head of leveraged UniCredit boss Jean CBA’s CEO, despite finance as it reshuffles Pierre Mustier taking running the retail its financial sponsors the bank’s mascot, arm at the heart of a unit Elkette, on stage to controls scandal pick up his IFR award

FRONT STORY RESULTS Deutsche lifts pay despite revenue fall Bonuses awarded in effort to keep investment bankers

DEUTSCHE BANK’s dilemma over how to cut costs Accordingly, the new management of the CIB pay more than we did in 2016 but we are still in its investment bank without hurting its will this year receive “a one-off investment”. in the lower half compared to peers.” business was laid bare in the unit’s latest “In the coming year, these kinds of bonus Deutsche fared far worse than rivals in results, which showed compensation rose 8% PAYMENTSûWILLûONLYûBEûJUSTIlEDûIFûTHEûBANKû equities, with Q4 revenues down 25% from a last year despite a 15% tumble in revenues. performs correspondingly,” Cryan said. year ago to €332m. US banks showed an A year ago, Deutsche halted bonuses, and Deutsche was hurt by the headwinds seen average fall of 7%, and at UBS revenues as a result compensation fell 18% to €3.96bn, across the industry, with record low improved 1%. a steeper fall than the 11% drop in corporate volatility in the second half of last year Cryan has earmarked equities, as well as and investment bank revenues in the year. crimping trading revenues. equity capital markets and advisory, as But for 2017, CIB revenues fell to €14.23bn )TSûFOURTHûQUARTERûlXEDûINCOMEûTRADINGû capital-light businesses where it wants to from €16.76bn in 2016, but compensation revenues fell 29% from a year ago to €554m, expand. The fruits of this have yet to ripen, ANDûBENElTSûWENTûINûTHEûOPPOSITEûDIRECTION û broadly in line with the 31% drop seen at the however, and Deutsche missed out on a rising to €4.26bn. MAJORû53ûBANKSû ûALTHOUGHûTHEYûHADûAûFARûTOUGHERû buoyant US ECM market. Its number of staff also rose, despite comparison than Deutsche, which had one of its In advisory and debt capital markets pledges by chief executive John Cryan to weakest ever quarters at the end of 2016. revenues were steadier, and Schenck said wield the axe. CIB had 41,349 staff at the end 5"3SûlXEDûINCOMEûREVENUESûFELLû although the bank had lost market share in of December, or 1,700 more than a year Schenck said there were some bright spots, some areas, primarily to US peers, its position earlier. Some 17,251 of them were costly including Deutsche’s credit business. “It had a as a European alternative was appealing. FRONT OFlCEûSTAFF ûUPûûDURINGûTHEûYEAR spectacular year in 2017. It’s hard to tell them Analysts remain pessimistic about a quick Cryan said the higher pay bill was partly why they should get no variable compensation lXûFORû$EUTSCHESûINVESTMENTûBANKû BECAUSEûlXEDûSALARIESûHADûINCREASEDûFORûJUNIORû and it’s hard for them to understand why they “Revenue attrition continues to outpace cost staff to make up for scrapping bonuses. But it should not get that,” he said. reduction and we are yet to see evidence of shows the troubled bank’s decline has h4HOSEûPEOPLEûCOULDûlNDûJOBSûELSEWHEREû this slowing,” said Andrew Coombs, analyst steepened during the past year, at the same Competitive compensation is necessary. We at Citigroup. time as pay and staff numbers are rising. don’t pay as much in 2017 as others do. We Christopher Spink Marcus Schenck, co-head of CIB, also DEUTSCHE CIB: IT’S ALL GOING THE WRONG WAY admitted that in certain areas, such as CORPORATE AND INVESTMENT BANK REVENUES FALL, BUT STAFF AND PAY STILL RISE equities in the US, key staff had gone because of the changes in compensation and 45,000 +4% had to be replaced by new people expecting 40,000 adequate variable pay. 35,000 30,000 ME TOO 25,000

Cryan also said he wanted to be considered 20,000 for a bonus by the bank’s supervisory board -15% 15,000 FORûTHEûlRSTûTIMEûSINCEûBECOMINGûCO CHIEFû 10,000 executive in July 2015. +8% “We promised everyone in the bank we 5,000 would return to normal allocation of bonuses 0 Revenues (in €m) Headcount Compensation and beneﬁts (in €m) in 2017,” Cryan said. “We have hired lots of people in 2017 and want to invest in them 2016 2017 and people who have stuck with us.” Source:Bank results

International Financing Review February 3 2018 15 “In every sector, the new tax laws are spurring discussions on capital structure and strategic planning” LAZARD CEO KENNETH JACOBS, P22

The Canadians are coming . . . slowly BANK OF MONTREAL CAPITAL MARKETS reached a BMO is not alone among Canadian banks They have taken share from European milestone last year: its revenue from in building up south of the border, where banks, partly as Deutsche Bank and Credit investment banking in the United States activity accounts for almost half of global Suisse have restructured in recent years - TOPPEDûREVENUEûFROMû#ANADAûFORûTHEûlRSTû capital markets revenues. and also the big US banks. Since 2008 all time. #ANADIANûlRMSûHAVEûINCREASEDûTHEIRû the big US banks, except Morgan Stanley, It was both a vindication of a strategy to market share in US capital markets in the have given up market share, opening the beef up its presence in the US and a signal to DECADEûFOLLOWINGûTHEûlNANCIALûCRISISûANDûAREû door for rivals from Canada, Asia and push full speed ahead. showing no signs of slowing down. BOUTIQUEûlRMS “In the last two years as we have begun to In 2008 Canadian banks pulled down scale up in terms of size of fees, size of US$443.4m in fees for M&A advisory, equity MIDCAP FIGHT CLIENTS ûPROlTABILITYûETC ûTHEûBANKûHASû and debt underwriting and syndicated loans, BMO’s growth plans are not really head-on realised that there is more opportunity to representing about 2.6% of the fee pool. That with JP Morgan and Goldman Sachs, grow in the US,” said Peter Myers, BMO co- has steadily risen and hit US$1.76bn last however. Or even RBC. head, global investment and corporate year - or 6.1% of the market. “Rather than leapfrog away to compete banking. 4HEREûWEREûlVEû#ANADIANûBANKSûAMONGû with the bulge bracket in their front yard, This month Meyers is relocating to New THEûTOPûûlRMSûFORûINVESTMENTûBANKINGûFEESû we want to compete from strength,” Myers York, shifting the heart of the US operation in the Americas last year, according to said. “We want to compete where we have from Chicago. It’s another sign the bank is Thomson Reuters data. the DNA.” LOOKINGûTOûRAISEûITSûPROlLEûINûTHEû53 RBC CAPITAL MARKETS ranked ninth in the Myers said BMO wanted to grow and “As we grow and we are on a growth path Americas with a market share of 3.6% last leverage off Harris Bank, the Chicago-based now, most of the people we hire will be in year, up from 11th spot and a 3.3% share in business it bought in 1984 and has used as .EWû9ORKû)TSûPARTûOFûBUILDINGûTHEûlRMû 2016. BMO Capital Markets moved up to its US beachhead. “They have a great lending culture presence,” Myers said. Having a 13th from 14th as its share rose to 2% from OPERATION ûGREATûSPONSORûlNANCEûOPERATION vû substantial senior staff presence based in 1.6%. In the US alone, BMO’s share was 1.2% he said. New York will help the culture and speed last year, up from 0.4% in 2008. Despite an effort to get away from being the build-up. TD SECURITIES ranked 14th last year in the KNOWNûASûAûBANKûTHATûJUSTûSERVICESûMIDDLE How big and how fast? The answer Americas, SCOTIABANK was 17th and CIBC WORLD market clients, BMO is looking to that core resembles more Midwestern modesty than MARKETSûJUMPEDûTOûTHûFROMûTHûINû û client base for a large part of its growth New York braggadocio. Thomson Reuters estimated. during the next two years.

Morrison to head BAML ﬁnancial sponsors BANK OF AMERICA MERRILL LYNCH named Kevin sponsors since 2013. Chris Munro will replace Sherlock as co- MorrisonûCHAIRMANûOFûGLOBALûlNANCIALû BAML tapped Kevin Sherlock to replace HEADûOFûGLOBALûLEVERAGEDûlNANCE ûWORKINGû sponsors, the business that deals with -ORRISONûASûCO HEADûOFûGLOBALûlNANCIALû alongside Sarang Gadkari. PRIVATEûEQUITYûlRMS sponsors with Nazar. -UNROûWILLûREMAINûINû,ONDONû(EûJOINEDû Morrison will work in San Francisco. He 3HERLOCKûJOINEDû"!-,ûINûûFROMû BAML in 2015 as head of EMEA leveraged had been co-head of the bank’s global Deutsche Bank as co-head of leveraged lNANCEûANDûLOANS practice alongside Saba Nazar since 2016, lNANCEûCAPITALûMARKETSûANDûWASûNAMEDûCO "ANKSûAREûBUILDINGûUPûTHEIRûlNANCIALû ANDûPREVIOUSLYûHEADûOFû!MERICASûlNANCIALû HEADûOFûGLOBALûLEVERAGEDûlNANCEûINû sponsor teams to win business from private Who’s moving where…

NOMURA has hired He has worked at ICBC Daniel Louis has been and tax. He joined the Charles Wang as International, named head of bank in 2012 from chairman of China Deutsche Bank, Zhong strategy at NATIXIS, in Societe Generale, investment banking. De Securities and charge of coordinating where he was deputy Based in Hong Kong, Merrill Lynch. corporate M&A for the chief financial officer of Wang reports to Kenji French bank as well its its corporate and Teshima, head of latest strategic plan, investment bank. investment banking for unveiled in November. Asia ex-Japan. Wang He will report to chief was most recently financial officer Nicola executive director and Namias. Louis is vice-chairman of BEP currently head of International Holdings. financial management

16 International Financing Review February 3 2018 People &Markets

Myers estimated BMO has about 1.75% of the midcap fee pool. The goal is to get JP Morgan promotes pair as Dimon that to 3% in the next three years, he said. signs on for ﬁve more years “We don’t want to be constrained by that JP MORGAN named Daniel Pinto and Gordon Pinto, 55, is chief executive of JP Morgan’s term middle market. We don’t want our Smith co-presidents, setting up a clear line corporate and investment bank. He is a CLIENTSûTHINKINGû"-/ûISûAûMIDCAPûlRMû7Eû of succession for current chief executive member of the bank’s operating committee, can and will grow with our clients,” Myers Jamie Dimon - but maybe not until at least and has spent his 35-year career at JP Morgan said. 2023. #HASE ûRUNNINGû#)"ûFORûTHEûPASTûlVEûYEARS BMO has been able to hang on to Pinto and Gordon have also been named Smith, 59, is CEO of consumer and Broadcom as a client as the company grew CO CHIEFûOPERATINGûOFlCERSûREPLACINGû-ATTû community banking at Chase. He is also a and accessed other global banks. BMO was Zames, who left the bank in June. member of the bank’s operating committee among a lending syndicate backing the At the same time, however, Dimon ANDûJOINEDû#HASEûINûûFROMû!MERICANû bank’s acquisition of Brocade in 2016. BMO signalled he had no intention of going Express. also advised Spectra Energy on its US$28bn anywhere soon and said he plans to stay )NûlVEûYEARSû$IMONûWILLûBEûNEARLYûû purchase by Canada’s Enbridge. FORûANOTHERûlVEûYEARS ûREPEATINGûGUIDANCEû Based solely on age, Pinto looks to have an That’s the reputation BMO hopes to build, he has given in recent years. edge in the succession race, but JP Morgan as a bank that can take clients that are That has been too coy a ploy for many COULDûBECOMEûTHEûlRSTûMAJORû53ûBANKûTOû private and mid-sized and help them grow - potential successors to stick around. Zames name a woman chief executive. and continue to bank them. was the latest in a line of potential Patrick Cronin, CEO and group head of successors to exit the bank, rather than “The board and Dimon both BMO Capital Markets, said there are plenty wait. believe that under all timing OFû%UROPEANûBANKS ûMID TIERûlRMSûANDû The list also includes Jes Staley, who boutiques with a 0.5% to 1.5% market share now runs Barclays, and Mike Cavanagh, scenarios ... the company in the US. WHOûLEFTû*0û-ORGANûTOûJOINûPRIVATEûEQUITYû has several highly capable Much of that could be up for grabs as SHOPû4HEû#ARLYLEû'ROUPûANDûLATERûJOINEDû successors in place” lRMSûRETRENCHûORûRESTRUCTUREûTOûBOOSTû Comcast. returns, Cronin said, adding that BMO’s “The board and I have agreed that I will strong capital, lower-cost funding and continue in my current role for #HIEFûlNANCIALûOFlCERû-ARIANNEû,AKE û expanded coverage left it well placed to take APPROXIMATELYûlVEûMOREûYEARS vû$IMONû 48, is always mentioned as a possible advantage. said in a memo announcing the successor. So too is Mary Erdoes, 50, CEO of Philip Scipio promotions for Pinto and Smith. “The asset and wealth management. The pair, PROMOTIONSûREmECTûTHEûENORMOUSû along with Doug Petno, 52, CEO of the JP contributions that Gordon and Daniel have Morgan’s commercial bank, split the EQUITYûlRMSûSUCHûASû"LACKSTONE û++2ûANDû made to the continuing success of our duties of COO after Zames retired. The Carlyle Group. company. “The board and Dimon both believe that Financial sponsor fees across the industry Dimon has run JP Morgan for a dozen under all timing scenarios, whether today or hit US$12.2bn last year, up 24% from 2016, years. Last week’s statement dampened in the future, the company has several highly according to data from Thomson Reuters. speculation he could consider a run for US capable successors in place,” the bank said. BAML ranked fourth for fees, up from president in 2020, but did not completely “Many of the company’s top leaders lFTHûINûû)TûBROUGHTûINû53MûINû killed the chatter. HAVEûTAKENûONûlRM WIDEûRESPONSIBILITIESûINû lNANCIALûSPONSORûFEES ûUPûûONûTHEûYEAR û Dimon said having Pinto and Smith as ADDITIONûTOûTHEIRûSPECIlCûMANDATESûANDû the data showed. Goldman Sachs tops the co-presidents and co-COOs demonstrates have demonstrated their ability to manage rankings with fees of US$1.1bn last year. the strength of JP Morgan’s bench and at the highest level.” Philip Scipio formally recognises the roles they play. Philip Scipio

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Charlie Nunn has been and has been acting Eva Zhong, head of August after Jim promoted to chief head of the retail convertible bonds McDonnell retired as executive of HSBC’s banking and wealth origination for Asia- head of equity-linked retail banking and management business Pacific at CREDIT origination for Asia- wealth management and previously had SUISSE, is leaving the Pacific. Zhong leaves business, filling the senior roles in retail bank, according to at a time when equity- position left vacant by and wealth. He joined sources. They said linked issuance in the the elevation of John HSBC from McKinsey Zhong would be region has picked up Flint to group CEO. after starting his career joining another bank. significantly, with Asia- Flint takes over from at Accenture. Zhong assumed Pacific issuance in Stuart Gulliver on leadership of the January almost February 21. Nunn convertible bond matching the total for joined HSBC in 2011 origination business in 2017.

International Financing Review February 3 2018 17 Bellwether Bellwether: n. From the practice of placing a bell around the overheard a story about when Mustier, shortly after neck of a castrated ram so that it might lead its ﬂock becoming CEO, tried to order 2,000 replica Elkettes from a factory in Sweden for €2 each. When the WHEN JP MORGAN’S hard-charging CEO for EMEA Viswas factory discovered the customer was a pre-rights issue Raghavan stepped up to collect the IFR Bank of the UniCredit, it insisted on cash up-front. Year award, his acceptance speech was devoid of the usual triumphalism that used to mark these sort of OH TO HAVE BEENûAûmYûONûTHEûWALLûINû(3"#SûCORPORATEû achievements. lNANCEûDEPARTMENTûWHENû"LACKSTONESûPARTNERSHIPûWITHû Rather than waving the award and crowing about the Thomson Reuters was announced. Former deal-makers bank’s success, Vis was at pains to point out that far from James Simpson and Matteo Canonaco founded boutique being adversaries, the assembled throng were in fact Canson Capital Partners last year after leaving HSBC and “partners”, who all do deals “together”. Was this evidence advised Blackstone on the US$17bn deal – a role that will of a new dawn in touchy-feely banking? Is Vis going soft? land it a share of the US$20m in fees. Does that mean he was about to start sharing out some of “Very proud to announce Canson Capital Partners’ those bookrunner and M&A mandates to his competitors in lead advisory role in Blackstone’s Partnership with 2018? Thomson Reuters,” said Simpson on his LinkedIn account. !NYûHOPESûOFûTHATûWEREûDASHEDûWHENûJUSTûBEFOREûLEAVINGû Proud indeed. And given that Simpson left as HSBC’s the stage, Vis asked that the bank, which generously %UROPEANûHEADûOFû-!ûAFTERûAûRESHUFmEûLEFTûHIMûSHARINGû donated half of the total raised at Tuesday’s dinner for management duties with a colleague, he’s well within his Save The Children, be installed as sole global coordinator, rights to be. rather than simply lead bookrunner at the top of the virtual tombstone. $%543#(%û"!.+û(!3ûPOSTEDûANûANIMATEDûJUSTIlCATIONûFORû the industry’s continuing existence on its website. Entitled )&û9/52%û,//+).' for peak cuddly in investment banking, “Why Banks matter”, Deutsche points out that banks solve then look no further than UniCredit’s lucky mascot and global problems, which is a very strong argument in their uber-schmoozer Elkette, which was among the guests at the favour. IFR awards. Seated at the top table with the bank’s CEO Jean It then adds that “Without banks, the economy would Pierre Mustier, the most photographed soft moose looked collapse”. It’s as if the global economic collapse of 2008–09, ASûATûEASEûASûAûmUFFYûTRINKETûCOULDûBEûASûITûRUBBEDûSHOULDERSû which came about because of the banking crisis, never with Her Royal Highness The Princess Royal – and some happened. Cynics might say the campaign, which came bankers. ahead of Deutsche reporting a full-year loss on Friday, With UniCredit winning an award for its might be a case of the German lender getting its retaliation restructuring, Elkette was living the dream. It hasn’t INûlRSTû0ERHAPSûNEXTûUPûWILLûBEûh7HYû*OHNû#RYANûSHOULDû always had such a warm welcome, however. Bellwether remain CEO”. Who’s moving where…

MOELIS hired Nate head of fintech. He has ICBC STANDARD HOULIHAN LOKEY EATON VANCE head of fixed income Stulman away from nearly 15 years of BANK has appointed has appointed Jim MANAGEMENT is for 27 years. The team Greenhill to provide investment banking Tim Wilson as head of McKnight to lead hiring a five-person currently advises about advice to financial, experience advising base metals, replacing financial restructuring global fixed-income US$830m and will commerce and banks, credit card Steve Reece, who will in Australia. Since 2013 team to bolster its remain in Frankfurt. technology companies issuers, speciality step down but stay he has been head of global income group. on lending, payments finance companies, with the firm until restructuring at Fort Team leader Astrid and financial and commerce and March. Wilson joins Street Advisers. Before Vogler, who previously technology. He will join technology companies. from Hannam & that he was head of led the team at the firm in March and Partners and Asia-Pacific Oechsle International work out of New York. previously worked at restructuring at UBS Advisors, will be lead At Greenhill, Stulman Standard Chartered and head of debt portfolio manager. At was most recently co- and JP Morgan. advisory for Australia. Oechsle, Vogler was

18 International Financing Review February 3 2018 People &Markets Antonio Weiss takes league table by storm Former Lazard deal maker Antonio Weiss between US$35m and US$45m, with the )TSûNOTûCLEARûIFûHISûASSIGNMENTûFORû+EURIGû borrowed a page out of Paul Taubman’s bulk going to Goldman as the lead advisor. provides clues about what’s next for Weiss. playbook and parlayed a one-off M&A Fees on the sell side could be between In 2013 Paul Taubman advised Verizon as ADVISORYûASSIGNMENTûINTOûMAJORûLEAGUEûTABLEû US$50m and US$60m. a free agent on its US$130bn acquisition of credit. Weiss, a long time Lazard M&A banker, ITSû53ûJOINTûVENTUREûWITHû6ODAFONEûAFTERû !LTHOUGHûJUSTûAûMONTHûINTOûTHEûYEAR û HASûLAIDûLOWûSINCEûHISûLASTûJOBûADVISINGûTHEû53û leaving Morgan Stanley. Weiss’ company AFW is 12th on the Treasury Department under the Obama That single deal, based on his strong ties worldwide M&A league table after advising administration. to Verizon, put Taubman on the M&A league +EURIGû'REENû-OUNTAINûONûITSû53BNû 7EISSûJOINEDû,AZARDûINûûANDûWORKEDû table in 2013. It also marked the beginning cash offer to buy Dr Pepper Snapple Group. in New York and Paris, rising to become of the PJT investment banking group, which +EURIGûISûOWNEDûBYû,UXEMBOURG BASEDû*!"û global head of investment banking. His was later merged with Blackstone Holding. work there included advising Reynolds RESTRUCTURINGûSHOPû#URRENTLYû0*4ûISûlVEû 'OLDMANû3ACHSûWASûLEADûlNANCIALûADVISERû American on a US$26.5bn purchase of spaces behind AFW. Byron Trott’s merchant TOû+EURIGûALONGûWITHû!&7 û"$4 û*0û-ORGANû Lorillard, and InBev on its US$52bn takeover bank BDT Capital Partners is also currently and Bank of America Merrill Lynch. Credit of Anheuser-Busch in 2008. RANKEDûTHûFORûITSûWORKûONûTHEû+EURIGûDEAL 3UISSEûWASûlNANCIALûADVISERûTOû$Rû0EPPERû He is currently a senior fellow at the 'IVENûTHEûSIZEûOFûTHEû+EURIG$Rû0EPPERûDEAL û Snapple. Mossavar-Rahmani Center for Business and AFW will likely remain in the top 25 rankings Freeman Consulting estimated buy-side 'OVERNMENTûATûTHEû(ARVARDû+ENNEDYû for 2018 even if it doesn’t work on another deal. FEESûFORûBANKERSûADVISINGû+EURIGûSHOULDûTOTALû School. Philip Scipio Brexit, recession and bonds shock for EU stress test Europe’s banks will face their toughest an 8.3% cumulative fall in growth by 2020 where there are concerns about debt levels. “stress test” yet this year, including the from the baseline scenario based on real Overall, long-term interest rates in the EU impact of a hard Brexit, an economic slump central bank forecasts. would be higher by 83bp in 2018, 85bp in and a shock to bond and equity markets, the 5NDERûTHEû%32"SûTESTûSCENARIO ûINmATIONû 2019 and 80bp in 2020. In Italy, the test EU’s banking watchdog said last week. FALLSû ûUNEMPLOYMENTûJUMPSûBYûû assumes rates are 121bp above baseline in Banks are put through the test every two and home prices tumble on aggregate by 2018, while in Greece rates are 131bp above years to see how they could cope, and the about 19%, all by 2020. but in Germany they are only 62bp above. European Banking Authority said the 2018 There will be a shock to bond yields and &ORûTHEûlRSTûTIME ûTHEû%5ûTESTûWILLûREmECTû health check will be more severe than past EQUITYûPRICESûINûlNANCIALûMARKETSûUNDERûTHEû new IFRS 9 accounting standards that force efforts. scenario, including a 41% slump in equity banks to make up front provisions on loans There will be no pass or fail mark for the prices in the United States and a 30% fall in case they turn sour. 48 banks taking part, but the outcome will from the baseline for European equities. The test also looks at how banks cope shape capital requirements policed by In bond markets, yields on long-term US with political uncertainty that could regulators like the European Central Bank, Treasuries are assumed to rise sharply, theoretically be triggered by Britain leaving which supervises 33 of them. deviating by 235bp from the baseline in the EU in March 2019. “The adverse scenario The EBA said results would be released by 2018. encompasses a wide range of November 2. 4HATûSPILLSûOVERûTOû%UROPEANûlXED INCOMEû macroeconomic risks that could be The scenarios – devised by the EBA and instruments and sovereign credit spreads in associated with Brexit,” the ESRB said. the European Systemic Risk Board – include EU countries widen, especially in countries Steve Slater, Huw Jones

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Former Avista India. Gulati has yet to Arnould Fremy is NOMURA has hired KKR appointed Eurobank’s chief Advisory Group hire staff for his rejoining UBS as a Charlie McElligott as Jacques Veyrat as a economist Platon managing director venture. He was head managing director in its managing director and senior adviser to Monokroussos is Amit Gulati is of the south-east Asia industrials group after cross asset strategist support its activities in leaving to join hedge launching his own investment banking seven years at Nomura. for the financial France. Veyrat fund BREVAN HOWARD, Singapore-based advisory team at He will be responsible services group’s global manages his own sources said. boutique advisory firm, Avista. He had for GIG’s transportation markets business. investment company Monokroussos worked AUCTUS GROWTH previously also been and logistics activities McElligott joins called Impala SAS, at Eurobank for 18 CAPITAL. The firm will with DBS Bank, GE in EMEA, industries Nomura from RBC which has about €1bn years. He will target focus on structured Capital and Standard that he also covered at Capital Markets, where in net asset value. investments in debt financing and Chartered. Nomura. Fremy was he was most recently Before founding Impala commercial real estate restructuring, primarily previously with UBS for head of US cross-asset in 2011, Veyrat was CEO and listed equities via in south-east Asia and 11 years. macro strategy. of Louis Dreyfus. two new funds.

International Financing Review February 3 2018 19 h4HOSEûPEOPLEûCOULDûlNDûJOBSûELSEWHEREû#OMPETITIVEû compensation is necessary” DEUTSCHE BANK CIB CO-HEAD MARCUS SCHENCK AFTER INCREASING BONUSES, P15 Capital markets week ahead: Thomson Reuters, Dermapharm, Greece

a seven-year transaction, its longest trade since Cactus designs, manufactures, sells and rents it returned from market exile last year. Greece wellheads and pressure control equipment is due to exit its bailout in August, and has been principally for onshore oil and gas drillers. eager to prove that it can stand on its own two feet. Access to new money in the seven-year GREEN SUKUK Indonesia is expected out with US part of the curve will be its boldest move yet. dollar sukuk, which will include a Green portion. The sovereign has appointed Abu WORKING THE WEEKEND All eyes will be on Algeco Dhabi Islamic Bank, CIMB, Citigroup, Dubai Scotsman to see whether it pulls the trigger on Islamic Bank and HSBC for the offering. It held AûõBNûBONDûSALEû4HEû5+ûMAKERûOFû MEETINGSûWITHûlXED INCOMEûINVESTORSûINû!SIA û prefabricated building modules had been Europe and the Middle East at the end of expected to wrap up a roadshow last Friday, but January for the proposed notes, which are TERMINAL BUILDINGû"ANKSûWILLûBEGINûJOSTLINGûTOûBEû decided to extend it over the weekend. It is EXPECTEDûTOûHAVEûMATURITIESûOFûlVEûANDûû PARTûOFûTHEûlNANCINGûPACKAGEûBEINGûLINEDûUPûTOû raising debt alongside an equity raise, as it years. fund Blackstone’s purchase of a controlling SEEKSûTOûGETûITSûlNANCESûINûORDERûFOLLOWINGûAû STAKEûINû4HOMSONû2EUTERSûlNANCIALûTERMINALSû series of downgrades last year due to debt and data business. At US$14bn, it is the largest worries. LEVERAGEDûBUYOUTûLOANûlNANCINGûSINCEû û when ketchup maker HJ Heinz raised IN FULL RIG Norwegian drilling rig company US$14.1bn to back its buyout by Warren Seadrill is set to appear in a Texas court on Buffett’s Berkshire Hathaway and 3G Capital. Wedneday for an initial hearing on its Although large, competition to be part of restructuring plan. Once the largest drilling the deal is expected to be intense – many RIGûOPERATORûBYûMARKETûVALUE û3EADRILLûlLEDû banks are saturated with liquidity, while for bankruptcy protection in September investors are eager to lend to new buyouts. after being hit hard by cutbacks in oil Around 10 lenders could make the grade. company investment following a steep drop Thomson Reuters, which owns IFR, will use a in crude prices. big chunk of the proceeds from the sale to buy back shares, and use the rest to pay down debt and invest in its legal, tax and accounting CLOSE QUARTERS It’s a busy week for European businesses. bank results, with BNP Paribas, Societe Generale, Commerzbank and UniCredit all JUST THE MEDICINEû'ERMANYûSEESûITSûlRSTû)0/ûOFû set to report fourth-quarter numbers. The the year on Thursday, with pharmaceutical releases come after Deutsche Bank shares lRMû$ERMAPHARMûHOPINGûTOûRAISEûABOUTû sank last Friday following worse-than- €350m. The deal will allow founder expected results. Italian bank Intesa Wilhelm Beier and his family to sell almost Sanpaolo also releases earnings on Monday, MûSHARESûnûEQUIVALENTûTOûABOUTûAûlFTHûOFûTHEû ALONGSIDEûAûNEWûlVE YEARûBUSINESSûPLAN company – while additional funds are being raised to improve production facilities. It’s THEûlRSTûOFûAûSERIESûOFûSIZEABLEû)0/SûEXPECTEDû LAST WEEK IN NUMBERS out of the country this year. CHINESE WHISPERSû(UAMI ûWHICHûMAKESûlTNESSû 2.8% – Yield on 10-year Treasuries on trackers for smartphone maker Xiaomi, is set Friday, the highest in almost four years PIPE DREAM? Undaunted by the threat of US TOûBECOMEûTHEûlRSTû#HINESEûLISTINGûINûTHEû53û sanctions on his homeland and its oligarchs, this year with its US$120m IPO on Wedneday. US$6.15bn – Investment banking fees Russian billionaire Dmitry Pumpyanskiy is Founded in 2014 and headquartered in earned by banks in January, with pushing ahead with a New York IPO of his "EIJING ûITûMAKESûWEARABLEûDEVICESûUNDERûTHEû Goldman Sachs top US pipe and tube-making business IPSCO Mi brand. The deal comes ahead of Xiaomi’s Tubulars. The deal, which is set to price on own IPO later this year, which is expected to 50% – Expected haircut for bondholders Thursday, is set to raise US$535m. Investors BEûTHEûWORLDSûBIGGESTûTECHûmOATûINû under Noble Group’s proposed will need to be comfortable with a minority restructuring stake – Pumpyanskiy will still own 60% of WELL, WELL, WELLû/ILlELDûSERVICESûCOMPANYû the business even after the IPO. Cactus is eyeing proceeds of over US$400m US$1.4trn – Size of credit default market from its New York IPO on Wednesday. Funds threatened by a legal spat involving GREECE-PROOF PAPER Athens faces a challenge in from the all-primary deal will be used to pay hedge fund Solus bond markets this week, as it looks to syndicate down debt and for general business purposes.

20 International Financing Review February 3 2018 People &Markets Eurex scraps Singapore plan

EUREX has scrapped plans for a derivatives had prompted a rethink, since this allowed including German government bond futures clearing and exchange hub in Singapore. the exchange operator to extend trading and contracts linked to various MSCI indices, Instead, it intends to extend its trading hours in Frankfurt. although Peters said these would be hours in Europe to capture more business “We received a clearing licence from MAS available to Asian investors through from Asian investors. in the summer of 2015 and were preparing to Frankfurt. The Deutsche Boerse subsidiary received receive a licence to operate as an exchange,” He said the outcome was more Monetary Authority of Singapore approval in he said. “But the proposed merger between straightforward for investors in the region. 2015 to operate as a clearing hub, but had Deutsche Boerse and the London Stock “It’s important to remember that our repeatedly pushed back the start date. Exchange led to a change in priorities. members would have had to apply The derivatives exchange also applied for v&OLLOWINGûTHEûENDûOFûTHEûPROJECT ûWEû separately for clearing and trading a MAS licence to operate as an exchange, looked at our strategic priorities. One of the membership to these two entities and build though it dropped the plans after rethinking outcomes was that we no longer needed two up the necessary infrastructure. It would its priorities. Singapore entities since our new have led to additional cost burdens, which is Eurex deputy CEO Michael Peters told IFR the infrastructure could deliver the same no longer the case,” Peters said. proposed merger between Deutsche Boerse and solutions for our clients.” Eurex’s decision comes as a number of the London Stock Exchange, which fell apart Peters said Eurex planned to extend derivatives exchanges struggle to gain a after EU regulators blocked it, had delayed the trading to 21 hours from 14 hours sometime foothold in Singapore. Intercontinental launch of the Singapore-based exchange. in this year’s fourth quarter to accommodate Exchange launched a trading and clearing He said the migration of Eurex’s clearing Asian investors. platform in November 2015, but has systems for derivatives and securities in May Eurex planned to launch a number of attracted only four members so far. 2016 to the company’s C7 clearing system contracts targeting Asian investors, Thomas Blott Nomura proﬁt up despite FICC pain Japan megabanks NOMURA HOLDINGS reported a 26% surge in pre- equity capital market underwriting businesses TAXûPROlTûFORûITSûLATESTûlNANCIALûQUARTER û in Europe and slashing headcount in Asia. aided by although that belied a stuttering showing in The bank has been vocal about expanding its wholesale division. in the US, however. Last week it said it had stockmarket rally Japan’s largest investment bank and hired 15 senior staff in its IB business in the BROKERAGEûlRMûSAIDûPRE TAXûPROlTûFORûTHEûTHIRDû Americas over the past year, including for A steadily improving Japanese economy and quarter from October to December at its -!ûANDûLEVERAGEDûlNANCE a stockmarket rally helped to counter the wholesale division, which includes global Its US expansion could include impact of low interest rates on two of the markets and investment banking, tumbled acquisitions, as well as organic growth or COUNTRYSûMAJORûBANKS ûBOOSTINGûTHEIRû more than two-thirds to ¥14bn (US$127m) and picking up teams, people familiar with the bottom lines in the third quarter. WASûAûSIGNIlCANTûDRAGûONûITSûINTERNATIONALûARM matter have said, though competing with SUMITOMO MITSUI FINANCIAL GROUP, Japan’s 0RE TAXûPROlTûFORûITSûINTERNATIONALûBUSINESSû the US banks will be tough. second-largest bank by market valuation, fell 95% to ¥1.7bn, though it remained in the Nomura took a hit from the same and MIZUHO FINANCIAL GROUP, the third-largest BLACKûAFTERûLASTûYEARûBOOKINGûITSûlRSTûANNUALû DIFlCULTIESûINûlXEDûINCOME ûCURRENCIESûANDû lender, both reported hefty gains in their OVERSEASûPROlTûFORûSEVENûYEARS commodities trading as its US peers in the stock portfolios last week. The bank recorded an unrealised loss of third quarter, amid a lack of client activity or .ETûPROlTûATû3-&'ûROSEûûTOûcBNû ¥14bn relating to a single margin loan, which due to market volatility. (US$2.1bn) in the quarter ended in weighed on its international results. The loss )TSû1ûREVENUEûFROMûlXEDûINCOMEûWASûDOWNû December. was linked to South African retailer Steinhoff, a 32% year on year at ¥79.4bn, although activity SMFG’s gains from its stock portfolio more source told IFR. It was similar to losses taken by picked up after the US Federal Reserve raised than doubled in the nine months, as OTHERûINTERNATIONALûBANKSûTOûTHEûTROUBLEDûlRM interest rates in mid-December. Japanese banks actively reduced holdings of The company, which owns more than 40 Its equities revenue rose 9% to ¥60.8bn, their corporate clients’ shares, originally brands including Poundland in Britain, following a decent quarter in cash and purchased to cement business ties, a practice admitted “accounting irregularities” last derivatives. criticised as exposing the banks to market month, sparking an 85% share price slide that IB revenue grew 5% to ¥25.5bn as a result swings. wiped more than US$10bn off its market of buoyant equity markets and an increase MUFG, the country’s top lender, posted the capitalisation. in M&A mandates. most disappointing earnings of the big banks Nomura bought Lehman Brothers’ The bank’s earnings had support from the as low interest rates dragged its third-quarter equities and investment banking business in performance of its dominant retail business PROlTûDOWNûûTOûcBN Europe and Asia in 2008 as it sought to grow and gains in asset management, and group MUFG and its peers have been trying to its business overseas, though for several PRE TAXûPROlTûFORûTHEûTHIRDûQUARTERûWASû offset weak domestic lending with years the integration struggled. ¥121bn (US$1.1bn), up from ¥96bn a year accelerated build-ups in their overseas It made deep cuts in 2016 to its international earlier. businesses. business, shuttering most of its equities and Thomas Blott Taiga Uranaka

International Financing Review February 3 2018 21 “The adverse scenario encompasses a wide range of macroeconomic risks that could be associated with Brexit” THE EUROPEAN SYSTEMIC RISK BOARD ON THIS YEAR’S BANK STRESS TEST, P19

Lazard sees M&A heating up in Europe LAZARD saw its fourth quarter revenue from earnings expectations,” Jacobs told analysts. of US$374.8m, up 8% from the year ago M&A advisory slip 17% to US$335m “In every sector, the new tax laws are period and better than analysts were compared with last year as the pace of deal spurring discussions on capital structure expecting. For the year, advisory fees rose mOWûSLOWEDû3TILL ûREVENUEûFORûûROSEûû and strategic planning.” 21% to US$1.3bn. from the year before to US$1.4bn. “Fourth quarter strength was pretty much “We gained market share in global M&A FRANCE UNLEASHED across-the-board,” said Evercore CEO Ralph announcements, our volume increased 3% In Europe, an improving economy is raising Schlosstein. Evercore includes restructuring while the market decreased 4%,” said growth forecasts, driving increased revenue in its overall advisory revenue, ,AZARDûCHIEFûEXECUTIVEû+ENNETHû*ACOBSû CONlDENCEûINû-!ûACTIVITY û*ACOBSûSAIDû(Eû which could skew performance in any given “Our M&A activity was strong in Europe, is particularly bullish on France. quarter if restructuring is stronger than where economic growth is driving “I think France is about as ebullient an expected. INCREASEDûCONlDENCEûAMONGûDECISION environment as I can remember, really Pushed by analysts during the earnings makers.” since the early ’90s,” Jacobs said. “It really call, Schlosstein would only say Jacobs said the year is off to a great start. looks to us like more investment dollars are restructuring had a decent quarter. “The current global macroeconomic going into France. There is tremendous ,AZARD ûTHEûONLYûINDEPENDENTûlRMûTOû environment continues to strengthen with human capital in France that’s being break out restructuring revenue, reported synchronized growth across the world’s unleashed.” revenue of US$33m for the segment in the MAJORûECONOMIES ûTHEû53ûECONOMYûREMAINSû 2IVALûBOUTIQUEûADVISORYûlRMûEVERCORE fourth quarter. healthy and tax reform has boosted reported fourth quarter advisory revenues Philip Scipio Despite scandal, CBA picks internal man for CEO COMMONWEALTH BANK OF AUSTRALIA has handed proceedings against CBA in federal court Daniel Mueller, portfolio manager at the CEO role to retail banking chief Matt for alleged breaches of anti-money Vertium Asset Management, said CBA Comyn in a move that surprised observers, laundering and counter-terrorism was right to opt for an internal but drew praise from most. lNANCINGûLEGISLATION appointment. Comyn, 42, will take over the reins on Austrac alleges that, from 2012 to 2015, “My initial reaction was that it was a April 9 from Ian Narev, who announced in CBA oversaw tens of thousands of illicit surprise given that Narev effectively fell August that he would be standing down transfers, amounting to A$624.7m, on his sword and his direct report from after the biggest scandal to hit the including some involving known criminal the division that was responsible for the Australian banking sector in years. gangs. scandal is now his successor,” he said. Analysts and investors expected CBA to CBA has blamed a coding error for most “CBA has a history of picking its CEO turn to an outsider, as a symbolic gesture of the alleged breaches, although it is internally, though, and it’s the best- to turn the page on the crisis that hit the contesting some of the other charges. performing bank among the big four. bank last year over allegations of money- 4HEûSCANDALûTRIGGEREDûAûmOODûOFû Whenever other Australian banks have laundering. resignations, including Narev’s, and the looked externally, it usually hasn’t CBA chairman Catherine Livingstone scrapping of bonuses for senior executives, worked out.” said last week the board had looked for a and laid the groundwork for a Royal #OMYNûJOINEDû#"!ûINûûANDûHELDûAû candidate with the ability to “restore the Commission, which will look at the number of senior positions before bank’s reputation in areas where trust has CONDUCTûOFûlNANCIALûSERVICESûlRMS leaving in 2010 to head Morgan Stanley’s been damaged” and “renew and cultivate wealth business in Australia. the right culture”. RIGHT MAN FOR JOB He returned after less than a year to As the head of the retail unit, where the Comyn’s appointment surprised analysts lead CBA’s local business banking unit lapses in controls occurred, Comyn was a and investors, although most agreed that and was appointed CEO of its retail counter-intuitive choice, but Livingstone he was the best person for the position. division in 2012. INSISTEDûHEûWASûTHEûRIGHTûMANûFORûTHEûJOB “Comyn is very capable and a high- The Australian Prudential Regulation “There are aspects of the bank and its quality candidate,” said Omkar Joshi, Authority released a progress report into culture that we absolutely want to portfolio manager at Regal Funds its own inquiry into the alleged money- preserve and nurture and Matt is very well Management, a CBA shareholder. laundering breaches at CBA, but said it aware of those, as he is equally aware of “During any other time, he would have would reserve its observations on the issues which have led to our current GOTûTHEûJOBûWITHOUTûQUESTIONû4HEûONLYû governance, culture and accountability reputational issues,” Livingstone said. reason we’re having this conversation is FORûITSûlNALûREPORT ûDUEûBYûTHEûENDûOFû ,ASTûYEAR û!USTRALIASûlNANCIALûCRIMEû because of what’s happened with April. agency Austrac initiated civil penalty Austrac.” Thomas Blottt

22 International Financing Review February 3 2018 People &Markets FEE TABLES JANUARY 2018 DCM helps Goldman take early fees lead

GLOBAL INVESTMENT BANKING FEES GOLDMAN SACHS has taken an early lead in THEûlRSTûTIMEûSINCEûTHEûlNANCIALûCRISIS ûANDû Managing No of Total Share 2018 for fees from M&A advisory, capital perhaps ever. The larger commercial banks bank or group issues US$(m) (%) markets underwriting and syndicated normally lead in DCM, helped by the ability 1 Goldman Sachs 173 518.7 8.4 lending after being one of only a few banks to use large balance sheets. 2 JP Morgan 238 465.0 7.6 TOûENJOYûAûBETTERû*ANUARYûTHANûAûYEARûAGO Goldman was well ahead in fees for ECM 3 Morgan Stanley 213 353.5 5.7 Fees across the industry in January totalled in January after bringing in US$207.6m for a 4 BAML 234 348.7 5.7 US$6.15bn, down 20% from a year ago, global market share of 14.1%. 5 Citigroup 249 290.3 4.7 according to data from Thomson Reuters. Its fees across M&A, DCM, ECM and 6 Credit Suisse 142 262.4 4.3 Goldman was the leading bank for syndicated loans were US$518.7m in January for 7 Barclays 193 242.3 3.9 underwriting both equities and, unusually, a market share of 8.4%, the Thomson Reuters 8 UBS 110 200.2 3.3 bonds at the start of the year. It worked on data showed. 9 RBC CM 130 171.0 2.8 104 DCM issues, bringing in fees of JP MORGAN, which topped the fee rankings 10 Deutsche Bank 152 169.0 2.7 US$169m for a market share of 6.9%, ahead for 2017, slipped to second in January, with 11 Wells Fargo 166 129.0 2.1 of CITIGROUP with a 6% share. fees of US$465m and a market share of 7.6%. 12 BNP Paribas 125 117.5 1.9 )TûREmECTSûAûPUSHûBYû'OLDMANûTOûBEEFûUPûITSû MORGAN STANLEY ranked third and BANK OF 13 HSBC 187 108.5 1.8 debt advisory offering in the past four years. AMERICA MERRILL LYNCH and Citigroup kept US 14 Jefferies 47 72.2 1.2 The bank had underperformed in the area, but BANKSûINûTHEûTOPûlVEûSPOTS ûASûUSUAL 15 Citic 150 68.6 1.1 set about improving that as it saw providing CREDIT SUISSE ranked sixth and BARCLAYS was 16 SG CIB 70 67.3 1.1 debt advice as becoming more strategic and seventh, and the British bank topped fees from 17 Nomura 151 63.3 1.0 integral to M&A transactions and advisory the Europe, Middle East and Africa region. 18 Mizuho Financial 171 61.6 1.0 work. It has particularly targeted acquisition DEUTSCHE BANK slipped to 10th in the global 19 Credit Agricole CIB 81 60.3 1.0 lNANCEûANDûCOMMITTEDûMOREûCAPITALûFORûCLIENTS rankings for the month, with fees down 33% 20 CIBC 40 57.2 0.9 Goldman brought in more DCM revenues from a year earlier. Total 2,905 6,150.2 in the fourth quarter than all its rivals for Steve Slater

AMERICAS INVESTMENT BANKING ASIA-PACIFIC & JAPAN INVESTMENT BANKING EMEA INVESTMENT BANKING

Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%) bank or group issues US$(m) (%) bank or group issues US$(m) (%) 1 Goldman Sachs 96 312.0 10.1 1 Goldman Sachs 38 108.4 7.7 1 Barclays 54 107.6 6.6 2 JP Morgan 153 298.9 9.6 2 JP Morgan 23 82.1 5.8 2 Goldman Sachs 40 98.4 6.0 3 BAML 162 269.3 8.7 3 UBS 33 77.4 5.5 3 JP Morgan 62 83.9 5.1 4 Morgan Stanley 97 244.3 7.9 4 Citic 149 61.1 4.3 4 Credit Suisse 49 80.6 4.9 5 Citigroup 134 164.3 5.3 5 Citigroup 45 60.3 4.3 5 UBS 43 74.4 4.5 6 RBC CM 91 143.2 4.6 6 Morgan Stanley 79 54.2 3.8 6 BNP Paribas 61 73.5 4.5 7 Credit Suisse 64 133.5 4.3 7 Credit Suisse 29 48.2 3.4 7 Citigroup 70 65.7 4.0 8 Barclays 118 130.7 4.2 8 BAML 34 43.7 3.1 8 Deutsche Bank 63 65.3 4.0 9 Wells Fargo 157 122.1 3.9 9 Nomura 70 35.1 2.5 9 Morgan Stanley 37 55.1 3.4 10 Deutsche Bank 69 77.8 2.5 10 Sumitomo Mitsui 77 32.8 2.3 10 HSBC 67 51.3 3.1 Total 1,157 3,102.6 Total 1,152 1,408.6 Total 621 1,639.0

GLOBAL BONDS GLOBAL EQUITIES GLOBAL LOANS

Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%) bank or group issues US$(m) (%) bank or group issues US$(m) (%) 1 Goldman Sachs 104 169.0 6.9 1 Goldman Sachs 33 207.6 14.1 1 JP Morgan 39 83.9 12.2 2 Citigroup 192 146.2 6.0 2 Morgan Stanley 32 133.4 9.1 2 BAML 48 51.1 7.4 3 JP Morgan 155 134.9 5.5 3 BAML 27 102.6 7.0 3 Citigroup 30 35.6 5.2 4 Deutsche Bank 117 113.2 4.6 4 JP Morgan 30 86.0 5.8 4 Credit Suisse 22 34.1 4.9 5 BAML 148 110.8 4.5 5 RBC CM 16 61.3 4.2 5 Goldman Sachs 20 25.8 3.8 6 Morgan Stanley 155 109.8 4.5 6 UBS 19 60.7 4.1 6 RBC CM 17 25.6 3.7 7 Barclays 150 105.6 4.3 7 Citigroup 19 58.4 4.0 7 BBVA 8 21.9 3.2 8 Credit Suisse 94 89.2 3.6 8 Credit Suisse 14 48.7 3.3 8 Barclays 22 21.4 3.1 9 HSBC 162 84.0 3.4 9 Barclays 14 45.1 3.1 9 Deutsche Bank 18 20.5 3.0 10 BNP Paribas 92 77.6 3.2 10 Citic 4 35.0 2.4 10 Morgan Stanley 17 19.9 2.9 Total 1,904 2,443.5 Total 348 1,471.3 Total 266 688.5

1/1/2018 to 31/1/2018 Source: Thomson Reuters

International Financing Review February 3 2018 23 “It would have led to additional cost burdens, which is no longer the case” EUREX DEPUTY CEO MICHAEL PETERS AFTER SCRAPPING PLANS FOR A HUB IN SINGAPORE, P21 Delays seen at Seadrill restructuring

Wrangling between bondholders of US$5.7bn, have agreed to back the proposal, years, but kept whole, and retain security Norwegian oil drilling rig company SEADRILL, which would see unsecured bondholders pledges albeit in a different form. Any ITSûMAJORûSHAREHOLDERû*OHNû&REDRIKSENûANDû converted into equity and Fredriksen put in reworking would have to be approved by potential investor Centerbridge is likely to US$1bn of new money for equity alongside this secured loans group. DELAYûCONlRMATIONûOFûTHEûCOMPANYSûPLANûTOû US fund Centerbridge. “The banks want to see the group out of exit Chapter 11 when it comes before a US But only about 40% of bondholders by Chapter 11 as soon as possible and do not court on February 7. value had pledged their support initially want to have an engineered default,” said One adviser involved in the restructuring and, despite efforts to persuade them, it is the adviser, dismissing more dramatic said the preliminary hearing was “a understood an ad hoc group with 30% of scenarios as “hopeful thinking” by SIGNIlCANTûMILESTONEûBUTûNOTûAûDElNITIVEû the notes would prefer an alternative bondholders. He expected the dispute over ONEvû3EADRILLûlRSTûPUTûOUTûAûPLANûTOû solution that would see them receive more the new money to be resolved within weeks. restructure its debts of over US$8bn shortly equity than the 15% under the original If that happens, then Seadrill should still AFTERûITûlLEDûFORûBANKRUPTCYûPROTECTIONûLASTû scheme. be on track to exit Chapter 11 after the September. The adviser said this was unlikely to derail CONlRMATIONûHEARINGûOFû-ARCHû ûWITHûANû Over 97% of the most senior creditors, the main principle of the deal, which would end date of early August envisaged. holding secured loans with a face value of see the secured loans extended for several Christopher Spink Some details revealed on StanChart gets China Banco Popular resolution Belt & Road backing

Documents released by the European Union’s Single Resolution Board STANDARD CHARTERED has signed an agreement with CHINA on Friday still left questions about why the body recommended Spanish DEVELOPMENT BANK allowing the state-owned institution to provide bank BANCO POPULAR be put into resolution and sold last June to up to Rmb10bn (US$1.59bn) to the London-listed bank for SANTANDER for €1 after its liabilities had been converted into equity. PROJECTSûUNDERû#HINASûmAGSHIPû"ELTûû2OADûINITIATIVE Junior bondholders who were in effect wiped out by the transaction had 4HEûMEMORANDUMûOFûUNDERSTANDING ûCOVERINGûTHEûNEXTûlVEû successfully called for more details of the valuation report compiled by YEARS ûWASûSIGNEDûLASTûWEEKûDURINGûAûMEETINGûBETWEENû5+ûPRIMEû Deloitte for the SRB ahead of the resolution to be made public. They wanted MINISTERû4HERESAû-AYûANDû#HINESEûPREMIERû,Iû+EQIANG it to assist their efforts to challenge the decision and get compensation. 3TANDARDû#HARTEREDûHASûBEENûKEENûTOûlNANCEûTHEû The SRB published a redacted version of the report together with INFRASTRUCTUREûPROJECTSû)Nû$ECEMBERûITûOUTLINEDûPLANSûTOûEXTENDûAû other material giving more background on the reason it came to the further US$20bn to the initiatives over the next three years, after decision, which was backed by the European Commission and the CONTRIBUTINGûTOûûPROJECTSûUNDERûTHEûSCHEMEûINû Spanish bank restructuring fund FROB. 4HEû5+ûBANKûSAIDûITûWOULDûUSEûTHEûFACILITYûhTOûSUPPORTûLOANSû It showed Deloitte was told by the SRB how it intended to deal with THATûWILLûFUNDûCORPORATEûlNANCEûPROJECTSûANDûTRADEûlNANCEû the situation – by selling Popular to another bank – ahead of the transactions” in the 45 countries covered by the Belt & Road plan consultant’s work. One SRB document also revealed it considered the in which it operates. original sales process untenable during the week of May 29 2017. “Standard Chartered will make the drawdown decisions, and That left Popular with the options of raising capital from existing or take the credit risk of the borrowers,” said the statement. potential new shareholders, or being sold for a lesser sum at a CDB has earmarked Rmb250bn (US$40bn) for Belt & Road distressed valuation. The new documents still redact information about PROJECTSûUNTILû the possible capital raise, but outline two potential bidders. StanChart chief executive Bill Winters said: “This MoU brings Deloitte also admitted its valuation was quicker than its usual work USûCLOSERûTOGETHER ûANDûOFFERSûMOREûmEXIBILITYûOFûFUNDING û INûTHEûlELDûANDûSAIDûITûHADûLIMITEDûACCESSûTOûMANAGEMENTû4HEû ESPECIALLYûRENMINBIûFUNDING ûTOûSUPPORTûPROJECTSûALONGûTHEû"ELTûû documents do not detail the extent of the liquidity run, which Road initiative routes.” eventually forced the SRB to act quickly on June 7. 3TAN#HARTûISûNOTûTHEûlRSTûNON #HINESEûBANKûTOûSUPPORTûTHEû “The SRB wiped out our clients’ investments, based on a report which, in initiative formally. CDB signed a similar agreement in June with Deloitte’s own words, was prepared in an extremely short period of time DEUTSCHE BANKûTOûPROVIDEûlNANCINGûFORû53BNûOFûPROJECTS and which it admits should be regarded as ‘highly uncertain and Standard Chartered Bank (China) has also been granted a PROVISIONAL vûSAIDû2ICHARDû%AST ûLEADûPARTNERûATûLAWûlRMû1UINNû%MANUEL LICENCEûTOûLEADûUNDERWRITEûNON lNANCIALû0ANDAûBONDSûINû#HINA û Quinn Emanuel is acting for a group of affected bondholders, including becoming the second foreign bank to receive the privilege. Anchorage Capital, Algebris Investments and Ronit Capital, which have The People’s Bank of China approved the licence, which brought the action against the SRB forcing the extra disclosure. regulates corporate bonds in China’s interbank market. The “It is now obvious why the SRB didn’t want to disclose this report as it licence means Standard Chartered Bank’s Chinese unit can now clearly shows the absence of any real analysis and a proper valuation,” East EXPANDûITSûACTIVITYûASûJOINTûLEADûARRANGERûBEYONDûlNANCIALûANDû said. sovereign Panda bonds. Christopher Spink Christopher Spink

24 International Financing Review February 3 2018 People &Markets

Goldman loses more traders in IN BRIEF Thunder road commodities overhaul Australia has taken a baby step on the path to a domestic total loss-absorbing capacity (TLAC) Several key commodities traders are leaving as co-head of commodities trading in regime, but the journey is likely to take several GOLDMAN SACHS, the latest wrinkle as the Wall September after 26 years with the bank. years. In a paper last week outlining banking 3TREETûlRMûSEEKSûTOûTURNûAROUNDûITSû The bank has been working to reduce risk policy priorities in 2018, Australia’s regulator struggling commodities unit. and manage assets that were hurting results recommended starting consultations later this Don Casturo, operating chief of global towards the end of 2017. year on implementing a TLAC framework. commodities, is one of those leaving, sources #OMMODITYûTRADINGûlRMSûANDûBANKSûPOSTEDû TLAC regimes are already at work in the US, SAIDû(EûlRSTûJOINEDû'OLDMANûINû MAJORûLOSSESûINûûDUEûTOûMUTEDûCLIENTû Europe and parts of Asia. The aim is to reduce the Other people leaving include Saad Usmani, a activity and volatility in energy markets. A need for taxpayer-funded bailouts of lenders in London-based managing director who traded NUMBERûOFûlRMSûSUFFEREDûHEAVYûLOSSESûINûTHEû the future by making banks hold additional buffers crude oil and natural gas; Rahul Dhir, who traded lRSTûHALFûOFûTHEûLASTûYEARûAFTERûTHEûSLIDEûINû through the use of new bail-in instruments. RElNEDûOILûPRODUCTSûANDûWill Evans, a global natural gas prices, while others lost money in European banks now regularly issue senior franchise manager, according to people familiar the second half due to swings in oil prices non-preferred bonds that are typically rated with the matter, and a memo last week during Hurricane Harvey, analysts said. two notches below standard senior bonds by announcing Casturo’s departure, seen by Reuters. Last month Jamison Capital Partners, a the three main rating agencies. US banks have %VANSûISûJOININGûHEDGEûFUNDû#ITADELûASû US$1.5bn commodity hedge fund, told issued TLAC-eligible instruments through their COMMODITIESûCHIEFûOPERATIONûOFlCER ûAûSOURCEûSAID investors it was closing. It follows other big holding companies. The latter option is not open Goldman had an awful year in names that have closed, including Andy to Australia’s four major banks since they do not commodities in 2017 and the unit was the Hall’s Astenbeck Capital Management and operate under holding companies, though non- MAINûDRIVERûOFûAûûDECLINEûINûITSûlXEDû Texas tycoon T Boone Pickens. majors Suncorp and Macquarie do. income, currency and commodities Goldman is the only large US bank that business. Analysts and investors have been has continued trading and investing in closely watching the decline of its trading COMMODITIESûINûAûMAJORûWAYû2IVALSû Catalan comfort book for evidence of an improvement in including Morgan Stanley pulled back years People kept their money in Spanish lenders commodities. ago after a public outcry over banks CAIXABANK and BANCO SABADELL in the last three Goldman hired several new senior traders POTENTIALLYûINmUENCINGûCOMMODITIESûPRICES û months of 2017, despite intense uncertainty over late last year to turn around the business and as regulatory scrutiny increased. Catalonia’s independence bid. But while deposit and replace people like Greg Agran, who left #ATHERINEû.GAI û$EVIKAû+RISHNAû+UMAR levels were stable, income remained under pressure at the two banks, which both moved their headquarters out of the north-eastern Spanish India deepens corporate bond market region in October after regional leaders pursued a secession campaign. India has taken steps to deepen the Jayen Shah, head of DCM at IDFC Bank, said Although the banks said they suffered corporate bond market in its budget for Employees’ Provident Fund Organisation, deposit outﬂows in the days after the October 1 ûALTHOUGHûTHEûSLIPPAGEûOFûlSCALû Pension Fund Regulatory and Development referendum, which was ruled illegal by Spain’s targets is likely to worsen the current sell-off Authority and Insurance Regulatory and constitutional court, these were quickly reversed. in the short term. Development Authority are expected to make Sabadell, Spain’s ﬁfth-biggest bank, said its Finance Minister Arun Jaitley said last necessary regulatory announcements on deposits grew 1% in Q4, while Caixabank, the week in the annual budget the government investments in bonds up to a rating of A grade. country’s third-largest, said its had fallen by would work to make a broader universe of Jaitley also said the Securities and 0.2% BONDSûlTûFORûINSTITUTIONALûINVESTMENT Exchange Board of India would consider “In India, most regulators permit bonds with mandating that companies, beginning with the ‘AA’ rating only as eligible for investment. It large ones, meet about a quarter of their Bitcoin bashed is now time to move from ‘AA’ to ‘A’ grade lNANCINGûNEEDSûFROMûTHEûBONDûMARKET Cryptocurrencies plunged last week, with bitcoin ratings. The government and concerned Market participants will be awaiting sliding below US$8,000 to head for its worst regulators will take necessary action,” he said. FURTHERûCLARIlCATIONûFROMûTHEûREGULATOR û week since 2013 as worries about a regulatory Corporate bonds rated BBB or equivalent including whether they will complement clampdown sent investors scrambling to sell. are investment grade, Jaitley pointed out. Reserve Bank of India guidelines on limits Bitcoin, the biggest and best-known Investors praised the measure as it will on bank’s exposure to corporates. cryptocurrency, fell 12% early on Friday to a two- allow a broad range of corporations to access But while the budget announcement month low of $7,910 on the Luxembourg-based long-term money in the debt markets. raised hopes for the future, the sell-off in the Bitstamp exchange. It was down more than 30% “This is a welcome move, insurance bond market escalated. over the week. companies have long-term capital and are in The yield on 10-year government bonds Retail investors have poured money into digital a position to take on risks of corporate paper maturing in January 2028 went up 24bp to coins, enticed by the huge run-up in prices, but in a scenario when the economy is expected ûAFTERûTHEûGOVERNMENTûREVISEDûTHEûlSCALû regulators are clamping down. India on Thursday to pick up and corporate earnings are set to DElCITûTARGETûTOûûOFû'$0ûFROMûûFORû vowed to eradicate the use of crypto-assets, improve,” said Sandeep Bagla, associate FY18-19. joining China and South Korea in promising to ban director at Trust Capital. Krishna Merchant parts of the market.

International Financing Review February 3 2018 25 NOW AVAILABLE IN THOMSON REUTERS EIKON

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SSAR 29 Corporates 33 FIG 38 Covered Bonds 40 High-Yield 41 Structured Finance 44

FRONT STORY FINANCIALS Greek sub debt return conceivable Buoyant market receptive to weaker credits Greek issuance unlikely prior to May’s stress tests

Greek banks could attempt to raise looks for Greece, and re-examine all the “These ratios are ultimately derived from subordinated debt after strong conditions options.” risk assets, and you need to trust those reopened the door for many of the banking numbers and the underlying risk,” he said. sector’s black sheep, though some say it is HIDDEN RISKS? far too early and that they will have to wait It is easy to see the source of bankers’ “The rational thing here is to until after May’s stress tests. optimism. Some of Europe’s weakest institutions !ûõMûû YEARûNON CALLûlVEû4IERû wait for the stress test results, charged back into the bond market in 2017 2 (Caa2/CCC+) sold by Italian problem child and see how the next day looks and early 2018, touting cleaned-up balance Banca Monte dei Paschi earlier in January for Greece, and re-examine all sheets and helped by investors’ desperation for was more than three-times subscribed, the options” decent yields in a world of central bank easing. despite previous bondholders seeing their IKB Deutsche Industriebank, one of the securities wiped out to permit the injection “We’ve seen it several times where lRSTûLENDERSûTOûTOPPLEûINûTHEûûlNANCIALû of government funds. It was bid at 5.22% last typically it’s not the erosion of capital ratio CRISIS ûWASûTHEûLATESTûSUCHûEXAMPLE ûlNDINGû Friday. which leads to panic, it’s more the over €1.3bn of demand on January 22 for an But numerous question marks hang over perception that there are some hidden risks UNRATEDûõMûû YEARûNON CALLûlVE YEARû the Greek economy and the recovery of its and that credit portfolios might be worse Tier 2. banking system. The country has struggled than anticipated, and then all of a sudden, After successful bank transactions out of to reduce its pile of non-performing loans, those banks die of liquidity death.” Spain, Italy and Portugal, the spotlight has Europe’s highest, which stood at 44.6% of inevitably shifted to the Greek lenders after total exposures at end-September 2017, PATIENCE IS A VIRTUE their debt was effectively wiped out in 2015 according to Bank of Greece data. While the cost of subordinated debt has to help plug a €14.4bn capital hole. Furthermore, their comparatively high plummeted in the past year, it is arguably The big four - National Bank of Greece, capital ratios are tempered by a heavy still too punitive for Greek lenders. Eurobank, Piraeus Bank and Alpha Bank - reliance on deferred tax assets, the value of Eurobank gave a glimpse into where a Tier have all issued covered bonds since October, which could be undermined by regulatory 2 might clear in the public market when it but bankers believe a sale of riskier changes, leaving banks vulnerable. replaced €950m of government-held subordinated debt is also feasible. Michael Hunseler, managing director at preference shares that had lost regulatory “The Greek banks are looking into re- Assenagon Asset Management, said he value with Tier 2 in January. entering the market,” said one. “Some are would not buy Greek bank subordinated Those securities, also sold to the state, even thinking they can get an Additional DEBTûNOWûEVENûIFûCAPITALûRATIOSûLOOKûlNE carried a 6.4% coupon, but bankers said that Tier 1 done. If IKB can do Tier 2, the Greek MAYûNOTûHAVEûBEENûSUFlCIENTûTOûTWISTûTHEû banks can as well.” arm of private investors. But others view a comeback before the BUFFERING UP “What do the banks get from putting Tier European Central Bank’s stress tests of the FULLY-LOADED CET1 RATIOS OF GREEK BANKS 2 out there at 7% or 8%, prior to the stress Greek banks as impossible. The results are (LAST REPORTED) tests?” said a third banker. “If they have a expected in May. good stress test, is it really a good return to % “I don’t know if the term ‘no smoke market at a punitive level [before]?” 20 WITHOUTûlREûAPPLIESûHERE vûSAIDûAûSECONDû He reckoned AT1 would be a stretch given banker. 18 the pools out of which coupons are paid look While the rally in Greek sovereign debt is 16 too low, years of accumulative losses having ENCOURAGING ûONEû'REEKûBANKûOFlCIALûSAIDû 14 depleted reserves. there are no plans to issue at this stage. His 12 On the other hand, that situation should bank would ideally issue debt before 10 improve as the Greek banks edge into returning to the equity market, but that is by 8 PROlTABILITY no means a given. 6 “Banks might start considering some “It depends really, if it is something we 4 nominal payments at some point, as have to do, or if it is something we do out of 2 shareholders have been injecting capital for 0 our own initiative - these are two different Alpha National Eurobank Piraeus the last few years with no return things,” he said. Bank Bank of Greece Bank whatsoever,” said Nondas Nicolaides, a “The rational thing here is to wait for the SENIORûCREDITûOFlCERûATû-OODYS stress test results, and see how the next day Source: Company results Alice Gledhill

International Financing Review February 3 2018 27 Al Rayan Bank readies WEEK IN NUMBERS 76bp UK’s ﬁrst Islamic RMBS THE YIELD ON 10-YEAR BUNDS, UP 30bp SINCE THE START OF THE YEAR AND THE Sukuk securitisation arrives in the UK HIGHEST LEVEL SINCE DECEMBER 2015

4HEû5+SûlRSTû3HARIA COMPLIANTû2-"3ûWASû are all regulated under English law, meaning bp 80 announced on Monday, offering investors it is highly unlikely a local jurisdiction 75 4RIPLEû!ûPAPERûBACKEDûBYûHOMEûlNANCEû would interfere. 70 products marked by key differences from !Lû2AYANû"ANKûWILLûSECURITISEûHOMEû 65 60 typical residential mortgages. purchase plans (HPPs), a Sharia-compliant 55 The deal is from AL RAYAN BANK, based in TOOLûTOûlNANCEûHOMEûOWNERSHIPû)TûHASû 50 Birmingham. It was formerly the Islamic around £660m of HPPs on its books. 45 Bank of Britain until it was bought in 2014 With HPPs, a client and the bank itself 40 35 BYûTHEû1ATARIû-ASRAFû!Lû2AYANû13#û'ROUP jointly buy a property, and over time the 30 “We’re aiming to grow from around client pays instalments to the bank to 1/2/18 2/1/18 6/1/18 4/1/18 8/1/18 12/1/18 16/1/18 14/1/18 18/1/18 £1.8bn currently to over £3bn over the next increase its share in the property. 10/1/18 22/1/18 24/1/18 26/1/18 28/1/18 30/1/18 20/1/18 couple of years and that growth needs to be Until its stake is fully bought out, the bank funded,” said Amir Firdaus, treasurer at Al itself holds legal title to the property, and in 2AYANû"ANK fact leases the property to the client. This The products the bank offers to clients are means that as well as the acquisition all Sharia-compliant, and its funding sources instalments, the client also pays rent to the 2.82% must be too, meaning that unlike many bank, which is linked to the Bank of England THE YIELD ON 10-YEAR TREASURIES, UP other challenger banks it was unable to BASEûRATEûBUTûCANûBEûlXEDûFORûAûPERIODûOFûTIME 36bp SINCE THE START OF THE YEAR AND borrow money under the Bank of England’s The securitisation SPV, itself a Sharia- THE HIGHEST SINCE APRIL 2014 Funding for Lending Scheme and Term compliant vehicle called TOLKIEN FUNDING SUKUK % Funding Scheme programmes. NO.1 PLC, will buy the HPPs and sell a maximum 2.85 aMû#LASSû!ûCERTIlCATES ûRATEDû4RIPLEû!ûBYû 2.80 Moody’s and S&P. They have a WAL of 2.87 2.75 “An asset-backed deal ﬁts years and a call date in April 2021. 2.70 perfectly with traditional 4HEûCERTIlCATESûAREûBACKEDûBYûAûaMû 2.65 2.60 portfolio secured on properties in England asset-based sukuk issuance, 2.55 and Wales. There are 1,672 customers, with and in fact because our deal is 2.50 governed by English law it was the top 20 making up 4% of the pool. The 2.45 average balance is £180,000. 2.40 easier to structure than one Seasoning is low at 1.86 years, the current structured in, for example, the ‘Finance to Value’ level is 64.1% and there 12/01/18 16/01/18 14/01/18 18/01/18 10/01/18 22/01/18 24/01/18 26/01/18 28/01/18 30/01/18 20/01/18 02/01/18 01/02/18 06/01/18 04/01/18 08/01/18 Middle East” are no HPPs in arrears, no right to buy and 02/02/18 no buy-to-let HPPs. Some 56% of the HPPs INVOLVEûAûlXED RATEûRENTALûPERIOD ûWITHûTHEû Firdaus said the bank aims to become a rest on standard variable rate. REGULARû2-"3ûISSUERûANDûISûPLANNINGûTOûBRINGû 4HEûRATINGûAGENCIESûNOTEûTHATû!Lû2AYANû £3.3bn a second deal next year, but was also looking Bank has a limited arrears history, and all THE AMOUNT OF DEMAND FOR at the possibility of securitising the Sharia- previous arrears have been cleared before WELLCOME TRUST’S £750m CENTURY compliant buy-to-let and commercial real enforcement, meaning it has no practical BOND, ONLY THE FOURTH SUCH BOND ESTATEûlNANCINGûTHATûTHEûBANKûORIGINATESû!Lû experience in enforcing HPPs. There is a IN THE STERLING MARKET FOLLOWING 2AYANû"ANKûRECEIVEDûANû!AûRATINGûFROMû backup servicer, Homeloan Management MEXICO, EDF AND OXFORD UNIVERSITY Moody’s in November, potentially also Ltd, in place. opening the door to unsecured funding. The joint lead managers are Al Rayan Bank h!NûASSET BACKEDûDEALûlTSûPERFECTLYûWITHû and Standard Charteredû2EGULARû5+û2-"3û traditional asset-based sukuk issuance, and investors will be targeted although there 90bp in fact because our deal is governed by may also be participation from regular THE AVERAGE SPREAD OVER English law it was easier to structure than sukuk buyers inside and outside the UK. TREASURIES FOR US HIGH-GRADE BONDS, one structured in, for example, the Middle The originator held investor meetings on ACCORDING TO ICE BAML DATA, A NEW East,” said Firdaus. Thursday and Friday, and pricing is expected POST-CRISIS LOW 5!%ûENERGYûlRMû$ANAû'ASûLASTûYEARûHALTEDû mid-February. Pre-marketing has already payments on an Islamic bond after receiving taken place to introduce the bank and the advice that its structure was no longer Sharia- HPP product to investors. compliant and was declared unlawful under Internal meetings about the securitisation €2.301bn UAE law, though the purchase undertaking took place in a meeting room at the bank THE AMOUNT THE ECB BOUGHT the contract is regulated by English law. NAMEDûAFTERû"IRMINGHAMûAUTHORû*22û4OLKIEN û THROUGH ITS CSPP IN TRADES SETTLED Moody’s says that in the case of the Al whose name is now used by the SPV. IN THE WEEK UP TO JANUARY 26 2AYANû2-"3 ûTHEûDEALSûASSETSûANDûLIABILITIESû Chris Moore In total, it has bought €136.926bn

28 International Financing Review February 3 2018 BONDS SSAR

successful trade by Norway’s bank selling requiring a higher term KOMMUNALBANKEN on Tuesday. Leads Citigroup, premium, we expect 10-year US Treasury SSAR JP Morgan and TDûSETûlNALûTERMSûONûTHATû yields to rise to 3% by year-end,” it said. US$700m long three-year deal at 4bp over “We strongly resist more bearish calls three-month Libor. though – as a 3% handle should attract US DOLLARS Indications of interest were in excess of enough willing buyers. The much more US$680m for the NWB deal and over subdued increase in 30-year US Treasury SOLID DEMAND FOR US DOLLAR US$500m for Kommunalbanken. yields, which are still below 3%, is a case in FLOATERS AS SSA SUPPLY DRIES UP Spreads are coming in aggressively, said a point and the much lower yields in other banker away from the deals. developed markets should cap the upside in Investors poured into NEDERLANDSE “The front end is becoming more the US.” WATERSCHAPSBANKSû53ûDOLLARûmOATERûONû anchored but there is no slackening in Wednesday, proving that the market is still demand. Investors are buying at the longer SHORT BREATHER wide open for paper in that currency. end in dollars for sure - just look at recent SSA supply was limited last week, which The 18-month deal represented the 10-years like KfW’s (2.875%, US$3bn) and bankers said had to do with the fact that the SHORTESTûmOATERûTHEûPUBLICûMARKETûHASûSEENû Asian Development Bank’s (2.75%, lRSTûBIGûWAVEûOFûISSUANCEûHADûALREADYûCOME û this year, and the issuer was able to size it at US$1.5bn) trades, which were very well with issuers are now planning around Lunar US$1bn via Bank of America Merrill Lynch, received.” New Year, which will fall on February 16. Nomura and RBC. The market is so buoyant that nothing “SSA benchmarks are down 15% year-on- “It’s a pretty solid outing,” said a lead. seems to derail it, said a second banker away year in both dollars and euros - it’s just that h)SSUERSûAREûHAPPIERûTOûTAKEûlXED RATEûOVERû from both deals. expectations are lower for this year,” said mOATERSûGIVENûWHEREûYIELDSûAREû"UTûmOATERSû “My only concern would be if spreads the third banker. are the easiest approach in terms of swaps tightened so much they could be getting Sovereign and supranational issuers are and there’s an ease of execution,” said a close to zero, and you can’t sell at negative rumoured to be coming to the market next lead. rates.” week, with names such as Greece, Finland, The yield on two-year Treasuries rose to A February 1 report by Commerzbank ANDû"ELGIUMûmOATINGûAROUND 2.14% on January 31 from 2.08% on January said that Treasuries yields will likely And the EUROPEAN FINANCIAL STABILITY FACILITY ûACCORDINGûTOû4HOMSONû2EUTERS continue to rise. has sent a request for proposals to banks for The issue, for which the spread was set at “With the tax reform more front-loaded a euro-denominated transaction scheduled 2bp over three-month Libor, followed a and uncertainty about corporate and central for the week of February 5.

ALL INTERNATIONAL BONDS (ALL CURRENCIES) ALL BONDS IN EUROS ALL US DOLLAR FIXED-RATE GLOBALS BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%) bank or group issues €(m) (%) bank or group issues US$(m) (%) 1 JP Morgan 101 28,720.10 6.4 1 BNP Paribas 35 10,272.38 6.1 1 Goldman Sachs 9 6,224.06 10.2 2 Citigroup 106 28,072.59 6.3 2 Barclays 25 10,202.63 6.1 2 Morgan Stanley 7 6,146.93 10.1 3 Barclays 69 27,293.16 6.1 3 Credit Agricole 30 9,627.88 5.8 3 JP Morgan 15 5,835.50 9.6 4 HSBC 101 23,522.44 5.3 4 UniCredit 34 9,558.24 5.7 4 Barclays 6 5,531.65 9.1 5 Goldman Sachs 54 21,845.53 4.9 5 JP Morgan 31 9,309.44 5.6 5 Citigroup 15 4,577.03 7.5 6 BNP Paribas 73 20,941.05 4.7 6 NatWest Markets 15 8,560.76 5.1 6 BAML 12 4,508.17 7.4 7 Morgan Stanley 61 20,796.25 4.7 7 SG 31 8,418.41 5.0 7 TD Securities 8 4,288.83 7.0 8 Deutsche Bank 77 20,098.95 4.5 8 Citigroup 28 8,018.83 4.8 8 Deutsche Bank 6 3,690.47 6.1 9 BAML 73 18,113.70 4.1 9 Deutsche Bank 29 7,962.00 4.8 9 HSBC 4 2,626.41 4.3 10 Credit Agricole 43 13,601.76 3.0 10 Goldman Sachs 15 7,553.91 4.5 10 BNP Paribas 5 2,427.48 4.0 Total 533 447,084.96 Total 162 167,415.91 Total 31 60,850.43

Including Euro, foreign, global issues. Excluding equity-related debt, Including Euro-preferreds. Excluding equity-related debt, Excluding equity-related debt, ABS/MBS. US Global ABS/MBS. US Global ABS/MBS.

Source: Thomson Reuters SDC code: J1 Source: Thomson Reuters SDC code: N1 Source: Thomson Reuters SDC code: O5

EUROPEAN SOVEREIGN BOND AUCTION RESULTS WEEK ENDING FEBRUARY 1 2018 Pricing date Issuer Size Coupon (%) Maturity Average Yield (%) Bid-to-cover Jan 30 2018 Italy €1.75bn 0.900 Aug 1 2022 0.660 1.61 Jan 30 2018 Italy (FRN) €2bn 0.342 Apr 15 2025 0.420 1.63 Jan 30 2018 Italy €4.5bn 2.000 Feb 1 2028 2.060 1.25 Jan 30 2018 Italy €750m 2.800 Mar 1 2067 3.190 1.85 Jan 31 2018 Germany €3.304bn 0.000 Apr 14 2023 0.080 1.33 Feb 1 2018 Spain €1.19bn 0.050 Jan 31 2021 -0.021 2.57 Feb 1 2018 Spain €1.208bn 2.150 Oct 31 2025 1.039 2.08 Feb 1 2018 Spain (i) €755m 0.650 Nov 30 2027 0.000 2.69 Feb 1 2018 Spain €895m 4.700 Jul 30 2041 2.262 1.65 Feb 1 2018 France €3.621bn 0.750 May 25 2028 0.980 2.02 Feb 1 2018 France €3.31bn 1.250 May 25 2034 1.330 1.34 Feb 1 2018 France €1.943bn 1.750 May 25 2066 1.910 1.24 Source: IFR

International Financing Review February 3 2018 29 So far, the EFSF has raised €10.5bn spread move. There’s a lot of cash - the curve Bund swap [spread] tightening. What says a through three deals - a seven-year, a 22-year ISûEXTRAORDINARILYûmATv lot is that KfW’s latest [10-year] trade started ANDûAûlVE YEARû ûWHICHûLEAVESûANOTHERûõBNû EDC sold its second deal of the year, a at minus 20.5bp and is now minus 18bp,” he in funding requirements for the rest of the US$1bn 2020 note, with the spread set at said. quarter. 4bp through mid-swaps via Citigroup, Another banker said that issuance has Goldman Sachs and RBC. Books were over slowed down because there is no pressing EDC AIMS TIGHT FOR OPPORTUNISTIC US$500m at the last update. need for funding. TWO-YEAR )TûPRICEDûAû53BNûlVE YEARûONû*ANUARYû “Issuers are not in a rush,” he said. “We 17, which drew orders over US$1.55bn. don’t have a Brexit vote or French elections, EXPORT DEVELOPMENT CANADA sold a two-year US A lead on last week’s EDC deal said that it so there isn’t as big a push to front-load this dollar bond last week, an opportunistic was an arbitrage-type deal, capitalising on year. Spreads are a bit wider and trade that printed right in line with fair demand for shorter-dated debt. recalibrating. Supply will eventually go value. “It’s right on top of fair value, which is not where demand comes in.” The market was digesting the outcome of unusual in the context of [other deals from the FOMC meeting that saw the US central peers] we’ve seen,” he said. bank leave rates unchanged for now while Two weeks ago, issuers honed in on the EUROS the base case for three rate hikes in 2018 three-year segment, with Cades pricing a was also unchanged. US$2bn trade, Nordic Investment Bank a EUROPEAN UNION MAKES RARE 6OLATILITYûINû4REASURIESû û4HOMSONû2EUTERSû US$1bn transaction and CPPIB Capital a APPEARANCE WITH €2.4bn TRADE DATAûSHOWûTHATûTHEûlVE YEARûYIELDûCLIMBEDûTOû US$2bn. Books were twice subscribed. 2.55% on February 1 from 2.45% on January While US dollar issuance continues at a Uncertainty hit sovereign markets last 26 - means that issuers were avoiding the steady pace, issuers in euros are adopting a week, but that did not stop SSA issuers from SEGMENTûLASTûWEEK ûINSTEADûOPTINGûFORûmOATERSû wait-and-see approach. Ten-year Bund yields powering on. ORûlXEDûRATESûINûTHEûSHORTERûSEGMENT rose 16bp between January 22 and February Movements in government bond markets h3HORT DATEDûDOLLARSûCONTINUEûTOûmY vûSAIDû 1, while the 10-year swap rate went to saw the yield on the 10-year Bund reach its a banker away from the deal. 1.085% from 0.95% over the same period. highest since December 2015. The moves “There is plenty of liquidity at the front “The market is not that good right now followed comments by Klaas Knot, president end, where there hasn’t really been a swap for primary issuance. It’s mostly driven by of the Dutch central bank, over the previous

ALL EURODOLLAR STRAIGHTS ALL INTERNATIONAL US$ BONDS ALL SOVEREIGN BONDS IN EUROS BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%) bank or group issues US$(m) (%) bank or group issues €(m) (%) 1 Citigroup 45 9,120.20 8.3 1 Citigroup 73 16,984.33 8.5 1 NatWest Markets 4 5,400.28 13.3 2 JP Morgan 39 8,037.53 7.3 2 Morgan Stanley 39 16,711.89 8.4 2 Citigroup 7 4,684.84 11.5 3 BAML 38 6,947.84 6.3 3 JP Morgan 63 15,664.10 7.9 3 Barclays 4 4,619.36 11.3 4 HSBC 35 6,825.45 6.2 4 Barclays 33 12,773.46 6.4 4 JP Morgan 4 4,158.21 10.2 5 Credit Suisse 34 6,262.68 5.7 5 BAML 55 12,746.63 6.4 5 Goldman Sachs 4 2,611.56 6.4 6 Goldman Sachs 26 5,488.26 5.0 6 Goldman Sachs 37 12,252.20 6.1 6 Santander Global 3 2,434.05 6.0 7 Deutsche Bank 24 4,593.97 4.2 7 HSBC 47 11,311.84 5.7 7 HSBC 3 2,184.10 5.4 8 BNP Paribas 19 4,291.89 3.9 8 Deutsche Bank 33 9,053.31 4.5 8 ING 1 1,795.79 4.4 9 Morgan Stanley 26 4,209.57 3.8 9 Credit Suisse 37 7,293.49 3.7 =8 Banca IMI 1 1,795.79 4.4 10 Wells Fargo 21 3,854.53 3.5 10 BNP Paribas 25 6,830.08 3.4 10 BNP Paribas 3 1,724.48 4.2 Total 143 110,477.19 Total 217 199,377.83 Total 11 40,714.57

Including Euromarket preferreds. Excluding equity-related debt. Including Euro, foreign and global issues. Excluding equity-related debt, Excluding ABS/MBS. US Global ABS/MBS.

Source: Thomson Reuters SDC code: J12 Source: Thomson Reuters SDC code: O1 Source: Thomson Reuters SDC code: N4

ALL AGENCY BONDS IN EUROS ALL SUPRANATIONAL BONDS IN EUROS MUNICIPAL, CITY, STATE, PROVINCE ISSUES IN EUROS BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues €(m) (%) bank or group issues €(m) (%) bank or group issues €(m) (%) 1 BNP Paribas 3 1,978.63 9.4 1 Barclays 4 2,983.10 20.4 1 DGZ-DekaBank 3 1,294.13 55.6 2 JP Morgan 6 1,960.02 9.3 2 Credit Agricole 3 2,856.94 19.5 2 UniCredit 2 199.31 8.6 3 Goldman Sachs 2 1,900.66 9.0 3 UniCredit 2 2,608.20 17.8 3 JP Morgan 2 195.28 8.4 4 Citigroup 6 1,723.88 8.2 4 Goldman Sachs 2 2,094.44 14.3 4 Nord/LB 1 99.31 4.3 5 Commerzbank 1 1,654.82 7.8 5 Commerzbank 2 1,607.24 11.0 =4 BayernLB 1 99.31 4.3 6 Credit Agricole 5 1,442.80 6.8 6 NatWest Markets 1 1,481.08 10.1 =4 DZ Bank 1 99.31 4.3 7 UniCredit 2 1,272.62 6.0 7 DZ Bank 2 313.49 2.1 7 HSBC 1 95.97 4.1 8 Natixis 3 1,096.96 5.2 8 Deutsche Bank 1 248.73 1.7 =7 Commerzbank 1 95.97 4.1 9 HSBC 4 1,079.99 5.1 =8 BNP Paribas 1 248.73 1.7 =7 Citigroup 1 95.97 4.1 10 Nomura 2 913.14 4.3 10 Natixis 1 98.39 0.7 10 LBBW 1 53.26 2.3 Total 19 21,140.18 Total 7 14,638.74 Total 7 2,327.79

Excluding equity-related debt. Including publicly owned institutions. Excluding ABS/MBS. Excluding ABS/MBS. Source: Thomson Reuters SDC code: N6 Source: Thomson Reuters SDC code: N5 Source: Thomson Reuters SDC code: N7

30 International Financing Review February 3 2018 BONDS SSAR

Fast start for Kauri market SSAR Issuers return to New Zealand to lock in demand-led pricing beneﬁts

Pent-up investor demand has fuelled a rapid sweet spot, where they benefited from tight mid- NZ$67.1bn as of June 30 2021, or 20.2% of start to the year in New Zealand’s Kauri swap spreads between 33bp and 37bp, down forecast GDP. bond market, with five regular Triple A rated from 41bp–50bp in the first two months of 2017. Offshore investors are drawn to the high supranationals and agencies making visits “Five years is where Kauri markets have absolute yields available in New Zealand, as in January followed by two further trades on historically found the broadest and deepest well as the additional pick-up SSAs pay over February 2 to take year-to-date issuance up to demand. Domestic bank liquidity books have sovereign paper, compared with the Kangaroo A$2.8bn (US$2.04bn). been a strong contributor to Kauri books in early market. This is just NZ$100m shy of the 2017 full- 2018 and this is a tenor that typically appeals to Last Wednesday, five-year New Zealand year total of NZ$2.9bn, with the 2014 and 2015 them,” said Sorensen. government bonds, rated Aaa/AA/AA, were annual record of NZ$6.3bn potentially in reach “I would describe the offshore participation as yielding 2.45%. This was 3bp lower than the as the year wears on. high-quality and fairly diverse by Kauri standards, 2.48% for Australian five-year Treasury bonds. The lack of Kauri supply since last September, but it is the large volume of domestic demand However, new Triple A rated five-year Kauris yield A$2.325bn of redemptions coming up in that has driven deal sizes to record levels,” about 3.05% versus around 2.75% for new five- February alone and the postponement of a Sorensen said. He estimated locals contributed year SSA Kangaroos, according to syndication planned syndicated sale of new sovereign April 60%-70% of orders for the four Kauri trades that desks. 20 2029 bonds mean the New Zealand market ANZ helped to arrange this year. New Zealand recently lost its absolute yield is ripe for a rush of new offerings. Cash-rich domestic investors have only a advantage over US Treasuries, with five-year “January brought strong demand, small amount of potential Triple A and/or notes at 2.51% last Wednesday, but it still compounded by redemptions and more Double A rated assets available to acquire, provides plenty more juice than five-year Gilts, conducive New Zealand dollar swap spreads and given the lack of local securitisations and limited Bunds and JGBs, which yield 0.97%, negative basis, all combining to make the Kauri market government supply. 0.01% and negative 0.07%, respectively. sufficiently attractive to issuers, many with new Gross central government issuance is A new annual Kauri issuance record may funding programmes,” said Glen Sorensen, expected to total NZ$28bn from fiscal 2017- prove to be out of reach, however. Historically, syndication manager at ANZ Bank New Zealand. 2018 to 2020-2021 (NZ$7.0bn for each fiscal January and February are the busiest months This year’s hefty issues from Nordic year), but, with redemptions of NZ$35.3bn for the Kauri market and things are likely to slow Investment Bank, Asian Development Bank, over that period, net issuance is set to decline down after that, especially with only NZ$225m Inter-American Development Bank, the World NZ$7.3bn over the period for an outstanding of redemptions due from March onwards. Bank and Rentenbank all targeted the five-year New Zealand government bond total of John Weavers

weekend that the ECB should clarify when it “Issuers always come with size “Issuers have broadly done a bit of would end asset purchases. expectations in mind and €2.4bn was the funding so far. It makes sense that agencies The yield on Germany’s benchmark bond maximum they could take for this are now stepping in after sovereigns have had jumped to 0.70% on Tuesday compared maturity,” said a lead. led the way,” the banker said. with a high of 0.74% at the end of 2015, A second lead estimated fair value at “The depth you saw with Spain shows ACCORDINGûTOû4HOMSONû2EUTERSû4HEûYIELDû minus 24bp or minus 25bp. THATûDEMANDûISûDElNITELYûOUTûTHEREv was 0.42% at the start of this year. The EU’s 0.625% November 2023s were FADE set the spread for its €1.5bn deal at A banker said that while the rates sector trading at minus 24.5bp on Tuesday, 15bp over interpolated Spanish government has not shown signs of entering a bear according to Tradeweb, and its 1.875% April bonds, with books in excess of €2.5bn. Its market, investors may be keeping a close 2024s at minus 29.7bp. ratings are BBB+/A-/A (low) from S&P, Fitch eye on price action. “It’s very fairly priced,” said a banker ANDû$"23 “The Bund has hit a level we haven’t seen away from the deal. “It’s a good book and SFIL chose a somewhat unusual tenor for in a while and I hope it will stabilise here. that part of the curve hasn’t been active for them - an eight-year - which a lead banker The next level is 30bp away - and that could a while.” said was the issuer’s decision. be brutal,” said the banker. “An eight-year comes with a more Amid these conditions, the EUROPEAN UNION AGENCIES FOLLOW IN FOOTSTEPS interesting yield, maybe 0.8%,” he said. made a rare appearance with a €2.4bn OF SOVEREIGNS The spread on SFIL’s deal was set at 20bp seven-year that drew books of over €4.75bn over interpolated OATs via BNP Paribas, via Barclays, Commerzbank, HSBC and Agencies stepped into the bond market last HSBC, JP Morgan, LBBW and NatWest Markets. UniCredit. week following well received recent Books were over €1.75bn at the last update. The spread was set at 23bp through mid- offerings from countries like Spain. The issuer is rated Aa3/AA/AA- (Moody’s/S&P/ swaps, a tightening of 3bp from guidance. FONDO DE AMORTIZACION DEL DEFICIT ELECTRICO, Fitch). The EU is rated Aaa/AA/AAA/AAA. guaranteed by the Kingdom of Spain, came A banker away from the deals said pricing A lead said that the proceeds of the on the heels of a €10bn 10-year blockbuster was still tight in SSA despite sell-offs in the FUNDINGûOPERATIONûWILLûBEûUSEDûTOûRElNANCEû from the sovereign the previous week that sovereign space. Ireland’s European Financial Stability was more than four times subscribed. “Spreads of sovereigns versus swaps have Mechanism loan, which made raising &!$%ûWASûINûTHEûMARKETûWITHûAûlVE YEARû seen big moves, but by no means should we money with a seven-year maturity a benchmark, with BBVA, Citigroup, HSBC and worry about the market being closed,” he deliberate choice. Santander acting as leads. said.

International Financing Review February 3 2018 31 “Timing, maturity choice and relative travel has been for spread compression,” sector, and this offered something different value are going to be a theme. The market said an investor. to investors.” has become a bit dynamic. We don’t see any Portugal’s economy minister said growth The deal was priced at 26bp over the PANICKYûVIBESûAROUNDûlXEDûINCOMEû7HATû forecasts for 2018 were between 2% and 1.50% July 2026 Gilt via Bank of America Merrill ITSûDONEûISûCAUSEûAûBIGûmATTENINGûATûTHEû 2.5%. The country grew by 2.6% in 2017. Lynch, Deutsche Bank, HSBC and TD. longer end.” Portugal is seeking to establish a more As the EIB has lending activities in the UK, liquid curve. STERLINGûISûCOST EFlCIENTûFORûTHEûISSUER û PORTUGAL LOOKS AT ISSUING LONGER It is also looking to make a statement in according to Byrne. MATURITY BOND !SIAûWITHûITSûlRSTû0ANDAûBOND ûWHICHûISû Another lead said appetite for sterling was awaiting approval from authorities. driven by the basis swap. PORTUGAL is considering the sale of a longer But the bond will not be part of Portugal’s “There was more demand for EIB and they dated bond as part of its 2018 funding 2018 funding plan, whereas a longer dated just didn’t want to do more on that trade,” programme, 2ICARDOû-OURINHOû&ELIX û euro issue would be. he said. 0ORTUGALSûDEPUTYûlNANCEûMINISTER ûTOLDû)&2 “We have a very prudent debt MUNICIPALITY FINANCE also sought to take While the sovereign tends to borrow in MANAGEMENTûSTRATEGY ûREPLACINGûOFlCIALû advantage of strong demand in sterling, THEûlVEûTOû YEARûSPACE ûITûCOULDûCONSIDERû investment by market investment without PRICINGûAûaMûlVE YEARûATûBPûOVERûTHEû going longer if there is enough investor cutting down the average maturity of our 1.75% September 2022 Gilt and drawing appetite. debt,” said Mourinho Felix. orders of more than £480m via leads “We have conveyed to the DMO that Nomura, RBC and Scotiabank. we’re open to looking at possibilities of CLOSING WINDOW LONG TERMûISSUANCEûOFûBONDSûIFûITSûPROlTABLE û Market participants think other sovereigns HIGHER YIELDS adequate, and stable enough to be part of could also be looking at the longer end. Market participants expect yields to rise this our yield curve,” said Mourinho Felix on “While there is uncertainty over the exact year, in line with expectations of a rate hike. January 12. timing the ECB will adopt, even a material However, that does not mean that bonds “We can look at concrete proposals that sell-off in long-end bonds is unlikely to deter are in a bear market, said Chris Bowie, investors may have, but [20 to 30 years] are issuers from selling longer dated debt, since partner and portfolio manager at the type of maturities that other countries those levels would still remain ultra-low on TwentyFour Asset Management. [have issued] that are very long [and] that’s any multi-year view,” said the investor. “Our view would be that a modest sell-off the type we can look at.” h2ATHER ûITûMAYûEVENûACCELERATEûMATURITYû to something like 1.75% is quite likely over Going longer could help issuers lock in extension from issuers if perceived as a the course of the year,” he said in a February low yields for an extended period before the closing window of opportunity.” 1 note. ECB raises interest rates, which the market Portugal’s net borrowing needs are “In return terms, that would equate to a is expecting will start to happen next year. expected to be around €10.9bn for 2018. It is total return of -3.5%. For yields to go higher While Portugal already has a February rated Ba1/BBB-/BBB/BBB(low) (positive/stable/ than that would require stronger than 2045 bond, Italy has eight bonds with tenors STABLESTABLE ûBYû-OODYS30&ITCH$"23 EXPECTEDûDATA ûORûGLOBALûINmATIONARYû longer than 20 years, extending out to pressures to come to the fore, and we March 2067. BELIEVEûITûWILLûBEûSOMEûTIMEûBEFOREûINmATIONû Portugal’s latest issue, a €4bn long 10-year STERLING comparisons in the US start to bite.” in January, came at a yield of just inside 2.14% - a far cry from the 4.23% it paid at the STERLING MARKET SEES MORE SSA same tenor last year in January. BENCHMARKS NON-CORE CURRENCIES 4HEûSOVEREIGNûHASûPROlTEDûFROMûRATINGû upgrades to investment grade from S&P and The SSA sterling market is going from LOCAL BANKS LAP UP QTC FLOATER Fitch, in September and December 2017, strength to strength this year, with recent respectively. deals either being upsized, tightening, or Domestic banks bought the vast majority of Portugal’s current weighted average yield both. last Tuesday’s A$2.0bn (US$1.62bn) four-year is estimated at close to 3%, according to Sterling is functioning as a large mOATING RATEûNOTEûISSUEûFROMûQUEENSLAND $"23 benchmark market at the moment, TREASURY CORPORATION, in the largest single- according to Mark Byrne, SSA syndicate at tranche semi-government offering for STRONGER GROWTH TD Securities. ALMOSTûlVEûYEARS The success of Italy’s recent €9bn long 20- “Volumes are probably up 30% this month Despite the large size, joint lead managers year showed how keen investors are to buy on last year, yet it feels quite orderly. There ANZ, CBA, NAB and Westpac were able to peripheral sovereigns. It drew books of over doesn’t appear to be a rush of supply and price the February 7 2022 notes at the tight €31bn. investor demand is still very strong.” end of three-month BBSW plus 14.5bp– As peripherals show improving growth The EUROPEAN INVESTMENT BANK visited the 16.5bp guidance. ANDûGOVERNMENTûlNANCES ûINVESTORSûAREû market for the third time in a month, with a Investors in Australia bought 83% of the increasingly comfortable holding paper £500m tap of its September 2026s, after notes, while those in Asia took 10% and from outside core Europe. previously selling a £1bn three-year and those in EMEA got 7%. Bank balance sheets, “There’s a very high chance of good tapping its December 2023s by £1bn. Books anxious to pick up one of the few eligible performance in bond markets if Portugal on last week’s tap were over £1.1bn. Level 1 liquid assets for Basel III purposes in continues to deliver on the data front,” said “There’s an attractive pick-up in asset !USTRALIA ûWEREûALLOTTEDû ûOFlCIALû a banker. swaps versus shorter-dated bonds,” said institutions 16%, asset managers 3% and “There is a pattern of overall improved Byrne. “An eight-year isn’t the usual tenor trading desks 2%. growth in Europe. This, alongside a for primary SSA in sterling. We’re seeing At the same time QTC, rated Aa1/AA+ compliant ECB, has meant the direction of MOSTûOFûTHEûSUPPLYûINûTHEûTHREEûTOûlVE YEARû (Moody’s/S&P), tapped its 3.25% July 21

32 International Financing Review February 3 2018 BONDS CORPORATES

2028s for A$500m. The reopening was SSA ISSUERS TARGET LONG END The tap priced at 99.834 for a yield of priced at 99.297 for a yield of 3.33%, the 2.7375%, 30bp wide of asset swaps and middle of 45bp–47bp guidance at 46bp over Supranationals and agencies mostly 42.25bp over the July 2022 ACGB. EFP (10-year futures) and 46.5bp wide of the targeted the long end of the Kangaroo May 2028 ACGB. market last week. IFC TAPS MASALAS FOR Rs5.5bn Of the additional notes, 59% went to local Dutch agency Bank NEDERLANDSE GEMEENTEN accounts, 25% to Asia, 15% to the US and 1% (AAA/Aaa/AA+) tapped its 3.30% July 17 INTERNATIONAL FINANCE CORP has reopened its to EMEA. In terms of investor types, 49% 2028s for A$200m (US$160m) on Monday to Masala bonds maturing in November 2024 were trading desks, a combined 18% were lift the issue size to A$630m. FORûAû2SBNû53M ûTAP asset managers and insurers, 17% were bank Deutsche Bank and RBC Capital Markets were IFC has yet to announce the yield on the balance sheets and 16% were hedge funds. joint leads on the reopening, priced at new offshore rupee notes. The 2024 notes 4HEûTWOûISSUES ûWHICHûAREûBOTHû2ULEû 98.026 for a yield of 3.5275%, 60bp wide of trade at a yield of 6.49%, according to 144A-eligible, completed QTC’s 2017/18 asset swaps and 68.25bp over the May 2028 4HOMSONû2EUTERSûDATA A$7bn term debt borrowing programme ACGB. The outstanding size of the November and raised an additional A$1.5bn of AFRICAN DEVELOPMENT BANK raised A$360m û-ASALASûHASûINCREASEDûTOû2SBNû prefunding for borrowing requirements in on Tuesday from a 10.5-year bond via sole following the tap, which was arranged by TD future years. lead Daiwa. The 3.35% August 8 2028s priced Securities. at 99.737 for a yield of 3.38%, 45bp and “The rupee has become a popular NTTC REOPENS 2042s FOR A$70m TAP 51.75bp wide of asset swaps and ACGBs. currency and is well accepted by the global ASIAN DEVELOPMENT BANK did the week’s investor base,” said a source. “There is NORTHERN TERRITORY TREASURY CORP, rated Aa2 largest and tightest print on Thursday, reasonable demand for Masala bonds across (Moody’s), tapped its 4.10% November 2042 when it issued a A$500m 10.5-year Kangaroo Asia, Europe and the US.” bond issue for A$70m (US$56m) last with Mizuho as sole lead manager. 4HEûBONDSûOFûTHEû7ORLDû"ANKûAFlLIATEûAREû Tuesday, increasing the issue size to The 3.30% August 2028 note priced at rated Aaa/AAA (Moody’s/S&P), both with A$225m. 99.868 to yield 3.315%, 43bp and 49.5bp over stable outlooks. UBS was sole lead manager for the asset swaps and ACGBs. reopening, which was priced at 98.124 for a Also on Thursday, Norwegian local yield of 4.2225%, 90bp wide of the June 2039 government funding agency ACGB. KOMMUNALBANKEN added A$50m to its 3.40% NTTC raised A$155m from the initial sale July 24 2028 line, taking the total CORPORATES on November 3, priced at 99.689 to yield outstanding to A$250m. The tap, via sole 4.12%, or 95bp over ACGBs. lead RBC Capital Markets, priced at 99.433 for a yield of 3.465%, 57bp and 64.875bp wide of US DOLLARS LGFV READIES NON-DEAL ROADSHOW asset swaps and ACGBs. On Friday, German agribusiness agency HIGH-GRADE BOND SUPPLY WELL OFF The LOCAL GOVERNMENT FUNDING VEHICLE, rated 2ENTENBANKûTAPPEDûITSûû!PRILûûSû LAST YEAR’S PACE Aa2 (Moody’s), has hired CBA and NAB to for A$50m to lift the size to A$575m. arrange a non-deal roadshow for investors The reopening, through Deutsche Bank, The US high-grade bond market is off to a in Sydney on February 12 and in Melbourne priced at 99.269 to yield 3.335%, 44bp and disappointing start in 2018, with new on February 14. 50bp over asset swaps and ACGBs. issuance volumes down more than 26% from LGFV, a funding platform for local Further up the curve, EXPORT DEVELOPMENT a year ago as corporates remain largely on authorities in the state of Victoria, issued CANADA tapped its 2.70% October 24 2022s for the sidelines. A$100m (US$81m) of 3.64% 10-year medium- A$125m on Thursday. Nomura, arranged the High-grade issuance totalled just under term notes in June 2016, using the same two sale, which took the size of the issue to US$130bn in January. Financials accounted lead managers. A$1bn. for the overwhelming majority of that

ALL INV-GRADE US CORPORATE BONDS ALL US INVESTMENT GRADE CORPORATE DEBT ALL CORPORATE BONDS IN EUROS BOOKRUNNERS: 1/1/2018 TO DATE (EXCLUDING SOLE SELF FUNDED DEALS) BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share bank or group issues US$(m) (%) Managing No of Total Share bank or group issues €(m) (%) 1 BAML 9 2,346.33 16.5 bank or group issues US$(m) (%) 1 BNP Paribas 15 2,751.30 10.5 2 JP Morgan 8 1,500.45 10.6 1 JP Morgan 35 9,717.23 10.8 2 UniCredit 9 2,019.78 7.7 3 HSBC 5 1,490.72 10.5 2 Citigroup 33 8,638.02 9.6 3 BAML 8 1,880.14 7.2 4 Morgan Stanley 4 1,397.99 9.8 3 Morgan Stanley 26 8,299.48 9.3 4 Deutsche Bank 9 1,562.39 6.0 5 Citigroup 5 1,268.39 8.9 4 Goldman Sachs 23 7,617.40 8.5 5 SG 9 1,393.47 5.3 6 Mizuho 3 848.26 6.0 5 BAML 33 7,597.50 8.5 6 HSBC 10 1,341.54 5.1 7 Wells Fargo 6 831.60 5.9 6 Barclays 15 4,943.59 5.5 7 Credit Agricole 8 1,318.03 5.0 8 MUFG 2 588.30 4.1 7 HSBC 14 3,502.27 3.9 8 MUFG 5 1,263.82 4.8 9 SG 1 499.58 3.5 8 Deutsche Bank 12 3,428.24 3.8 9 JP Morgan 8 1,254.65 4.8 10 Scotiabank 2 478.33 3.4 9 Wells Fargo 17 3,178.45 3.5 10 Santander Global 6 1,237.66 4.7 Total 14 14,211.82 10 Credit Suisse 11 2,987.88 3.3 Total 39 26,170.52

Excluding equity-related debt, ABS/MBS, all foreign issues, global issues Total 73 89,671.97 Excluding equity-related debt. FIGs, ABS/MBS. and non corporates.

Source: Thomson Reuters SDC code: F6a Source: Thomson Reuters SDC code: F09a Source: Thomson Reuters SDC code: N8

International Financing Review February 3 2018 33 volume, which fell well short of the US$400m and price it a whopping 22bp Hubbell’s US$1.1bn purchase of Aclara US$176.4bn seen for the same month in the inside IPTs, at Treasuries plus 158bp. Technologies. PRIORûYEAR ûACCORDINGûTOû)&2ûDATA Hubbell, meanwhile, upped its 10-year In a public letter in January, the Credit While some corporates have emerged M&A bond to US$450m from $400m, while 2OUNDTABLEûSAIDûTHEûûCASHûREDEMPTIONû from blackout with new bond deals in the NATIONAL RURAL UTILITIES COOPERATIVE FINANCE price is inadequate compensation when an past few days, the pipeline, at least for the increased its 10-year trade to US$700m from M&A deal is not consummated. next few weeks, remains fairly modest. US$500m. Citing risks including rising interest rates Many lay the blame on tax reform, which and regulatory approval uncertainty, the has reduced the need for companies to raise HUBBELL KEEPS STANDARD COVENANTS group called on issuers to move towards debt to fund M&A or share buy-backs. IN NEW M&A BOND SPREAD BASEDû3-2ûLANGUAGE “Bond buyers have been expecting -!ûlNANCINGSûAREûNOWûTYPICALLYûPRE INDUSTRIALûSUPPLYûTOûlLLûINûHEREûASûCOMPANIESû Electrical products company HUBBELL stuck funded well in advance, often before a deal come out of blackout,” said Jason Shoup, to convention last week with the covenants has received regulatory or shareholder senior portfolio manager at Legal & General ONûITSûACQUISITIONûlNANCINGûDESPITEûAûRECENTû approval. Investment Management America. “But push by investors to get better terms. And with spreads so tight, the pre-funding we’re still in a situation where supply is 4HEû#REDITû2OUNDTABLE ûWHOSEûMEMBERSû window has stretched out even longer – running lower.” have more than US$4trn under increasing the rates risk for bond buyers. 4HEûENDûOFûTAXûONûFOREIGNûPROlTSûINû management, wants more favourable But David Knutson, co-leader of the particular could be a game-changer for special mandatory redemption clauses 2OUNDTABLEûANDûHEADûOFûCREDITûRESEARCHûATû corporate bond issuers - especially when mergers end up not closing. Schroders, acknowledges it has been an technology companies. But Hubbell retained the typical change of “uphill battle” in the current hot market US tech companies have around CONTROLûPUTûANDû3-2ûLANGUAGEûATûAûCASHû climate. US$700bn of cash held offshore, more than price of 101 - and that did not seem to affect “Although market technicals currently ANYûOTHERûNON lNANCIALûTECHûSECTOR û demand. favour issuers, it is important for both the according to a recent CreditSights report. The company was still able to upsize the 10- sellside and the buyside to work towards fair Those companies are expected to issue year offering by US$50m to US$450m and and balanced prospectus language,” he said. less debt in the corporate bond market in bring the spread in 17bp from initial thoughts At least six large M&A deals funded by favour of using this cash instead to boost to price the trade at 83bp over Treasuries, with new debt have fallen through in the past shareholder returns, fund M&A and to pay just a 3bp new issue concession. down outstanding debt. Bank of America Merrill Lynch, HSBC and JP ALL INVESTMENT-GRADE BONDS IN EUROS Microsoft said on its earnings call last Morgan were lead banks, which priced on BOOKRUNNERS: 1/1/2018 TO DATE Wednesday that new access to its US$132bn Wednesday and which was over three times Managing No of Total Share overseas cash pile means it will not need to COVEREDû0ROCEEDSûWILLûHELPûlNANCEû bank or group issues €(m) (%) access the capital markets. The company 1 Barclays 19 9,293.24 6.9 sold a bumper US$17bn seven-part bond ALL CORPORATE BONDS IN STERLING 2 BNP Paribas 25 8,993.50 6.7 DEALûLASTû*ANUARYûTOûHELPûlNANCEûITSûPURCHASEû BOOKRUNNERS: 1/1/2018 TO DATE 3 Credit Agricole 23 8,686.75 6.4 of LinkedIn. Managing No of Total Share 4 JP Morgan 23 8,491.63 6.3 bank or group issues £(m) (%) 5 NatWest Markets 12 8,114.13 6.0 EVEN SLOWER 1 Barclays 2 200.00 29.4 6 Citigroup 24 7,643.74 5.7 Bankers reckon February will be even =1 Lloyds Bank 2 200.00 29.4 7 Goldman Sachs 12 7,308.06 5.4 slower, with syndicate desks forecasting 3 Morgan Stanley 1 160.00 23.5 8 UniCredit 21 7,195.10 5.3 US$85bn-$100bn for the month. The slower 4 NatWest Markets 1 40.00 5.9 9 SG 22 5,877.41 4.4 pace has left the buyside in a conundrum as =4 Credit Suisse 1 40.00 5.9 10 Deutsche Bank 16 5,807.41 4.3 CASHûCONTINUESûTOûmOWûINTOûTHEûASSETûCLASS =4 HSBC 1 40.00 5.9 Total 118 134,908.95 Another US$2.2bn poured into US high- Total 2 680.00 Excluding ABS/MBS, equity-related debt. grade bond funds in the week ended January Source: Thomson Reuters SDC code: N8a Source: Thomson Reuters SDC code: N9 ûTAKINGûYEAR TO DATEûINmOWSûTOûALMOSTû US$15bn, according to Lipper data. ALL INTERNATIONAL STERLING BONDS Of course, the imbalance of supply and EXCLUDING SECURITISATIONS ALL SWISS FRANC BONDS EXCLUDING demand has been good for issuers. Average BOOKRUNNERS: 1/1/2018 TO DATE SECURITISATIONS high-grade bond spreads hit a post credit-crisis Managing No of Total Share BOOKRUNNERS: 1/1/2018 TO DATE low of 91bp over US Treasuries on Wednesday, bank or group issues £(m) (%) Managing No of Total Share and are now 7bp tighter year-to-date. 1 HSBC 13 2,445.58 14.4 bank or group issues SFr(m) (%) The smattering of corporate deals that 2 NatWest Markets 14 2,147.37 12.6 1 Credit Suisse 16 1,641.51 27.9 have come to market - including a debut 3 RBC 12 2,036.04 12.0 2 UBS 13 1,334.31 22.7 deal from AMERICAN HOMES 4 RENT, as well as 4 Barclays 9 1,500.22 8.8 3 Verband Schweizerischer 1 1,317.69 22.4 others from known issuers such as 5 UBS 1 999.67 5.9 4 ZKB 7 486.30 8.3 CONSTELLATION BRANDS, HUBBELL and FEDEX - have 6 Lloyds Bank 7 975.70 5.7 5 BNP Paribas 5 395.01 6.7 all been well received. 7 JP Morgan 2 949.05 5.6 6 Raiffeisen Schweiz 2 349.81 5.9 FedEx’s deal, for example, was nearly four 8 Nomura 7 915.42 5.4 7 Deutsche Bank 3 182.79 3.1 times covered. 9 TD Securities 6 834.09 4.9 8 HSBC 2 95.01 1.6 !MERICANû(OMESûû2ENTûSAWûlNALûINVESTORû 10 BAML 3 700.03 4.1 9 Commerzbank 1 87.57 1.5 orders of US$1.6bn for its debut offering on Total 31 16,990.84 Total 27 5,890.00 Wednesday, allowing the company to upsize Including preferreds. Excluding equity-related debt. Including preferreds. Excluding equity-related debt. the 10-year trade to US$500m from Source: Thomson Reuters SDC code: K05a Source: Thomson Reuters SDC code: K06b

34 International Financing Review February 3 2018 BONDS CORPORATES

Italian issuers shrug off election risk CORPORATES/SSAR Different from run-up to December 2016’s constitutional referendum

Italian issuers came to the market last week with Banca IMI, BNP Paribas, JP Morgan, “It’s a bit of a sideshow without meaningful benchmark bonds, avoiding potential volatility Mediobanca and UniCredit were joint risk attached to it,” said a banker. around Italy’s general election, which will be bookrunners. “The rise of populist parties has taken on held on March 4. Another issuer that saw solid demand was greater importance, but the overall backdrop of Italian corporates have been relatively ACEA, which lured in €1.2bn of orders for a rising yields is overshadowing that. We’re getting unmoved in the secondary market, a €300m five-year floating-rate tranche, the same some profound navel-gazing in terms of economic combination of the ECB’s aim to maintain level of demand as for its €700m 9.5-year fixed- growth numbers and what this could mean.” geographic diversity of its CSPP and the relative rate leg. Another banker said SSA issuers tended to be scarcity of investment-grade Italian credit, “Acea is a name that we like,” an investor said. insulated from Italian risk. according to CreditSights. “They’re relatively conservative as an Italian “Political risk contagion is very limited. You Investors poured over €1.9bn of orders into utility and they’re diversifying away from water.” won’t see an impact on the likes of the European SIAS’s upsized €550m 10-year bond issue, The strong demand meant leads were able to Investment Bank and KfW,” he said. shrugging off the fast-approaching vote. tighten pricing, from three-month Euribor plus Despite the fact that the market seems “The Italian election is still a month away 50bp–55bp area at IPTs to plus 37bp at the final unconcerned by the elections, Italian issuers may and geopolitical risks haven’t had much of an terms. opt to raise funding ahead of a potential minor impact recently, especially on that type of stable, In comparison, the longer leg, which extended correction. concession-based business,” said a lead. Acea’s curve, only moved 10bp from IPTs and CASSA DEPOSITI E PRESTITI priced a €750m That limited impact is, however, recent. In printed at mid-swaps plus 70bp. eight-year trade at 103bp over mid-swaps via the run-up to the constitutional referendum in BNP Paribas, Citigroup, Credit Agricole, Banca IMI, Credit Suisse, Deutsche Bank, JP December 2016, Italian sovereign and corporate Deutsche Bank and Societe Generale were leads Morgan, Mediobanca and Morgan Stanley. curves steepened significantly, with utilities the on the transaction. “The eight-year space is definitely the place to worst affected sector, CreditSights analysts wrote. be in terms of roll-down and spread to govvies,” Leads on SIAS’s deal saw fair value at around NAVEL-GAZING said a banker away from the deal. 70bp, and strong demand meant they were able In the SSA market, market participants also “CDP doesn’t necessarily need a benchmark to hit that level, having tightened from the initial said they were not worried about political risk and they’ve got quite a liquid curve. ” 85bp–90bp IPT range. emanating from Italy’s election. Melissa Song Loong, Pauline Renaud

three years or so, often leaving bondholders maturity ambitions and after less tightening Furthermore, the coupon step-up ruing the terms they agreed to. than other corporate trades last week. language, 125bp in the event of a Before the Aetna-Humana merger was Buyers’ interest was piqued by the downgrade to junk, means the deal is not blocked by the US courts last year, Aetna’s mandate announcement in late January, ECB-eligible. LONG DATEDû3-2ûBONDSûWEREûTRADINGûATûAûCASHû given the likely yield on offer for the unusual Having initially expressed some concern price of 108. security. It came last Friday afternoon with a about the dividend issue and lack of In 2015, when Sysco’s merger with US 1.75% coupon at 140bp over mid-swaps, or a security, by Friday, the investor was more &OODSûWASûABANDONED ûITSû3-2SûWEREûTRADINGû yield to maturity of 1.884%. sanguine. “Even if dividends are cut by 50%, above 113. In both cases, holders were “There’s not much else that trades above it still leaves seven to eight times cover.” cashed out at the 101 level. BPûINûlXEDûINVESTMENT GRADE ûSOûWELLûBEû As positives, he also pointed to Bevco’s Investors such as Jason Shoup, senior putting in an order,” an investor said. low loan-to-value ratio at 8%, its conservative portfolio manager at Legal & General “I don’t mind the risk as long as you’re track record and its solid business. Investment Management America, say they getting paid for it. Short and wide is good; I While leads tightened pricing, the 10bp AREûWATCHINGûTHEû3-2ûCLAUSEûlGHTûVERYû would have been less keen on eight years.” move was smaller than other issuers were closely. Bevco is owned by the Colombian Santo able to achieve last week. “If there’s a surge of supply, the market Domingo family, whose wealth mainly SIAS’s €500m February 2028s, for could turn really quickly,” he said. comes from its investment in the world’s example, printed at swaps plus 70bp, 15bp “Issuers should be thinking of the risks largest beer company, AB INBEV. inside the tight end of IPTs, while Prosegur they’re transferring to buyers of debt - and Lead bankers said the trade, mandated as a €700m February 2023s launched at 62bp whether it’s really appropriate for buyers to lVEûTOûEIGHT YEARûBENCHMARK ûWASûSIMILARûTOûANYû over swaps, 23bp tighter. be assuming that much acquisition risk.” other investment holdco bond. But investors Leads suggested investors consider JAB HADûmAGGEDû"EVCOSûLACKûOFûDIVERSIlCATIONû û)N"EVû Holdings, Wendell and Exor to gauge fair represents 95% of its assets. value. The investor instead looked at the EUROS 7ITHûNOûUNDERLYINGûCASHmOWS û"EVCOûWILLû differential between corporate senior and service bonds using dividends it receives sub spreads and added that to InBev’s curve, BEVCO DEBUT WINS INVESTORS OVER from InBev. But bondholders have no COMINGûUPûWITHûlVE YEARûFAIRûVALUEûOFûBP WITH JUICY SPREAD security over the restricted shares if 135bp over swaps. dividends were to be cut. CreditSights analysts, however, were not BEVCO LUX overcame investor concerns to sell /THERûREDûmAGSûINCLUDEDû"EVCOSûSINGLEû as enthusiastic about the deal. a debut bond, attracting over €2.1bn of rating - at BBB- (negative) from S&P - and the “While there might be a temptation to see orders, although at the short end of its covenant-lite aspect. the new Bevco bonds as a cheap way to play

International Financing Review February 3 2018 35 Alliander new issue and tender bode well for hybrids CORPORATES First deal since S&P revised methodology on hybrids

ALLIANDER found strong demand for a perpetual bonds, even if the final decision will come down CreditSights analysts had calculated that non-call 7.4-year, a deal coming alongside a to the transaction economics, optimisation of with a sub-senior differential equivalent to the tender offer and the first such issue since S&P debt costs and balance sheet management,” 110bp achieved by Engie, Alliander would come revised its methodology on the early refinancing wrote CreditSights analysts, who saw the deal as inside 2%. of hybrids. expensive for investors. “Technicals, including low supply, have Marketing on the €500m no-grow started in been favourable, that’s why they moved a little the 2%-2.125% yield area, ahead of guidance at ESTIMATING FAIR VALUE bit earlier than the call date,” the banker said 1.75%-1.875% - equivalent to swaps plus 95bp- Engie currently holds the record for the lowest early in the trade. “Rates have been going up 107.5bp - with orders at the time over €2.5bn. hybrid yield. The French utility priced a €1bn but it hasn’t impacted the overall demand yet. The paper priced at the tight end. perpetual NC5.25 Green bond at 1.50% in early The concurrent tender is also helping because Proceeds will be used to buy back a 3.25% January, but it has since sold off to over 1.60% bid, it allows investors to keep exposure [to the issue callable in November 2018 at a yield of according to Thomson Reuters data on Tuesday. instrument].” -0.25%, a premium of about 20bp, according to A syndicate banker reckoned fair value on However, Sparrow pondered whether some BNP Paribas analyst James Sparrow. Alliander’s deal, expected A2/A, could be investors would have reservations about In mid-January, S&P relaxed rules related anywhere between swaps plus 90bp and 100bp, tendering in order to move into instruments with to the refinancing of hybrids within five years depending on the reference points used. record low reset rates. of issuance and also withdrew a proposed Total was flagged as one of the main The tender ends on February 5. The new requirement that replacements have lower all-in comparables. Leads spotted its €2.5bn non-call bonds are expected to receive 50% equity credit costs than existing deals. 7.1-year (A2/A-) at 1.77% ahead of the trade. Stedin’s from both Moody’s and S&P. “Not having to worry about how S&P would €500m non-call 3.9-year (BBB) was at 1.10%. ING (B&D) and Morgan Stanley were joint have calculated whether the all-in cost of the Leads reckoned an Alliander 7.4-year structuring advisers, together with MUFG and replacement hybrid is lower has increased the senior would come at about swaps plus 8bp, Rabobank as joint bookrunners. likelihood of other issuers tendering for hybrid extrapolating between 2024s and 2026s. Pauline Renaud

the AB InBev credit, we would rather see them four and seven-year tranches, the last However, a second banker expects the as an expensive alternative to buying AB reverse Yankee trades of 2017. overall impact to be relatively modest as InBev’s stock unless you are prepared to pay The transaction comes as speculation issuers are likely to continue tapping the up to eliminate equity volatility,” they wrote. remains as to how much the US tax law single currency for their European businesses. BNP Paribas and Citigroup were global reform will impact reverse Yankee issuance. Similarly, the repatriation of funds coordinators, and joined as leads by Bank of Last year saw around €47.5bn brought to onshore from US tech companies is not America Merrill Lynch and Deutsche Bank. market against €49bn in 2016. The number anticipated to have a substantial bearing. of issuers also decreased in 2017, down to 32 “The tax impact is still a moving feast,” a FORD KICK-STARTS REVERSE FROMû ûACCORDINGûTOû)&2ûDATA third banker said. “Let’s see if primary YANKEE MARKET For 2017, the bonds represented about supply warms up once people have released one sixth of total euro issuance. THEIRûQUARTERLYûlNANCIALSv FORD MOTOR CREDIT COMPANY woke the reverse 7HILEûITûISûSTILLûEARLYûDAYSûTOûMAKEûlRMû Total investment-grade corporate supply Yankee market up last Thursday, coming predictions for the remainder of the year, a in January was down nearly 30%, at €24.3bn- with a combined €1.25bn two-part deal split number of underwriters and investors equivalent versus €33.7bn-equivalent in BETWEENûlVE YEARû&2.ûANDûSEVEN YEARûlXEDû believe the impact will be at the margins. ûACCORDINGûTOû)&2ûDATA tranches. Under the new law, interest deductions ,EADSûLAUNCHEDûTHEûmOATERûBPûINSIDEû have been capped at 30% of income in a PROSEGUR REFI DEAL GAINS MOMENTUM IPTs at a discount margin of plus 42bp and year, a change that could encourage upsized it from an expected €500m to borrowers to issue debt in more favourable PROSEGUR COMPANIA DE SEGURIDAD easily covered €750m. jurisdictions than the US. Previously, THEûBOOKSûFORûITSûõMûlVE YEARûLASTû The bond left no premium on the table, interest was fully deductible. Thursday, attracting over €3.2bn of orders. according to a syndicate banker, who saw h(OWEVER ûTHISûSHOULDûMAINLYûBENElTû The Spanish security services company fair value in the low 40s. high-yield issuers because of their higher MANDATEDûTHEûTRADEûASûAûlVEûTOûSEVEN YEARû The €500m no-grow seven-year printed at interest tax expenses as a percentage of maturity, before picking the shorter option swaps plus 60bp, from IPTs of plus 70bp- their Ebitda,” an investor said. and upsizing by €100m from the expected 75bp area, offering an estimated 5bp A potential negative impact on the volume of €600m amount at the guidance stage. concession, the lead said. reverse Yankees in 2018 could come from last 4HEûDEAL ûWHICHûWILLûRElNANCEûITSûOUTSTANDINGû BNP Paribas, Deutsche Bank, HSBC and Societe YEARSû53û'!!0ûCHANGESûTHATûSIMPLIlEDûHEDGEû €500m April 2018s, came shortly after a €600m Generale were mandated as active joint lead accounting rules on cross-currency swaps. long eight-year from Prosegur Cash, spun off managers. “More US borrowers may therefore be from its parent company in March last year. In November, the company sold a tempted to issue in dollars and swap them Prosegur focuses on manned guarding, COMBINEDûõBNûINûmOATERSûSPLITûBETWEENû into euros,” a banker said. security technology, security consulting and

36 International Financing Review February 3 2018 BONDS CORPORATES

residential security; Prosegur Cash deals The tender ran from January 24 to January Its £300m September 2022s were trading SPECIlCALLYûWITHûCASH IN TRANSITûSECURITY 30 and was funded with an €800m bond tighter pre-announcement at 70bp, Both entities are rated BBB (stable) by S&P. OFFERING ûTHEû'ERMANû2%)4SûFOURTHûHELPINGû according to Tradeweb. It also has £500m The offering printed at 62bp over mid- in the market this year. April 2021s, which were quoted at 65bp. swaps from IPTs of plus 85bp-90bp. Initially marketed at 115bp area over mid- The bonds are guaranteed by Volkswagen With no real curve, a lead suggested swaps, the 10-year benchmark later launched Financial Services AG, which manages looking at recent Spanish trades, as well as 20bp tighter on orders of over €2.1bn. lNANCIALûSERVICESûFORûTHEûCARMAKERûINû services companies including Securitas, ISS Goldman Sachs and JP Morgan were the Europe, APAC and South America. and Edenred. dealer managers for the tender offer and Deutsche Bank and HSBC (B&D) were the ISS, for example, has a Baa2/BBB rated Lucid Issuer was the tender agent. active bookrunners on the deal, expected to €600m 1.50% August 2027 bid around swaps be rated A3/BBB+ by Moody’s/S&P, in line plus 62bp and a €500m 2.125% December with the guarantor ratings. 2024 at 44bp. STERLING Volkswagen Bank, which was bought by He also said investors may look at where Volkswagen from Volkswagen Financial Prosegur should be in relation to its spun-off WELLCOME TRUST PROVIDES NEW Services AG a few months ago, printed in entity. STERLING CENTURY MARKER December a €2bn triple trancher which In November, Prosegur Cash printed attracted €7.3bn of orders. February 2026s at 87bp over mid-swaps. Investors rushed to WELLCOME TRUST’s rare The parent company successfully They were bid unchanged from that level on offering last Wednesday, pumping £3.3bn of returned to the bond market in 2017 and Thursday, according to Tradeweb data. orders in to its Century bond. even sold deeply subordinated hybrid debt, Barclays and Santander were global The Aaa/AAA rated UK-based biomedical a clear sign that investors have put the coordinators, along with BBVA, BNP Paribas, research charity launched the £750m deal at emissions scandal behind them. Deutsche Bank and Goldman Sachs as joint 80bp over the July 2068 Gilt, 20bp inside Last Friday’s offering was only this year’s bookrunners. IPTs. third sterling deal, coming after Dwr Pricing was reminiscent of Oxford Cymru’s £300m Mar 2036s and The BOOKS JUST COVERED FOR S IMMO University’s £750m 100-year bond in Wellcome Trust’s £750m Century bond. DUAL-TRANCHER December. After an initial 110bp-115bp Both sterling and euro supply were down marketing level, the spread was set at 85bp about one third in January versus last year, S IMMO received combined €150m orders for over the 2068 Gilt on books of some £2.8bn. with bankers speculating that issuers have its dual-tranche €100m six-year and €50m 12- It was quoted at 77bp-74bp on Wednesday. so far had fewer funding requirements year, though this was enough to allow the The sole bookrunner on both deals was JP because of strong levels of pre-funding in lead to tighten pricing levels on the trades. Morgan. November. While guidance was unchanged from IPTs “Although we wouldn’t want to go for The small amount of M&A-driven at 2% area for the shorter leg and 3% area for Wellcome Trust given the duration, it’s lNANCINGûASûWELLûASûTHEûLACKûOFûCONCERNû the longer one, the coupons were 1.75% good to have a few more deals for the comps over an imminent change of the ECB (1.80% yield to maturity) and 2.875%, at the super-long end,” an investor said policy on corporate purchases have RESPECTIVELY ûATûTHEûlNALûTERMS ahead of the trade. also been mentioned as contributing The unrated Austrian real estate company So far, only three sterling Century bonds factors. mandated ErsteGroup Bank as sole have printed - Oxford, Mexico’s £1bn 2114s bookrunner for an investor call on Monday ANDû%$&SûaBNûS ûACCORDINGûTOû)&2û last week. data. SWISS FRANCS S Immo’s lacklustre result contrasts with Wellcome’s offering was only the second recent unrated trades, which attracted large sterling issue of the year and came 10 days AMAG LEASING BRACKETS THE SESSION demand. On January 22, Pirelli upsized an after Dwr Cymru Welsh Water sold a £300m expected €500m offering by €100m on a March 2036 deal. AMAG LEASING opened and closed the week for book that peaked in excess of €3.25bn. Wellcome Trust last hit the market in the Swiss market. A few days later, investors piled orders January 2015 with a €400m 12-year at swaps It started the session with a SFr150m INTOû5BISOFTû%NTERTAINMENTSûlRSTûPUBLICû plus 40bp, now bid at 9bp over. 53M ûlVE YEARûTHATûPRICEDûAROUNDûTHEû unrated bond, which attracted over €2.2bn middle of the initial guidance range of mid- OFûDEMANDûFORûAûõMûNO GROWûlVE YEAR VW ADDS TO SPARSE STERLING SUPPLY swaps plus 50bp-55bp, at plus 52bp, or The response also contrasted with the one 93.3bp over government paper. SEENûONû!ROUNDTOWN ûANOTHERû2%)4û4HEû VOLKSWAGEN FINANCIAL SERVICES provided some At reoffer, it came on the bid side of the Triple B rated German issuer, which was welcome sterling supply last Friday, with curve. Asset managers took the majority of back in the market on January 24 for the volumes in the currency having dropped paper. fourth time this year, raised €800m on some 35% in January compared with last The issuer came again on Friday morning orders of €2.1bn. Initially marketed at 115bp YEAR ûACCORDINGûTOû)&2ûDATA with a smaller and shorter “money for area over mid-swaps, the 10-year Although an investor mentioned the tight (almost) nothing” trade. It priced a SFr100m benchmark went on to price 20bp tighter. pricing at IPTs - Gilts plus 80bp-85bp - given two-year 0.05% deal at par, coming just the overhang of the emissions scandal that inside its guidance of mid-swaps plus 51bp AROUNDTOWN BUYS BACK €319m OF broke in September 2015, books were easily area, at plus 50.8bp. MAY 2022s covered. It was last in the market with a dual- Demand for the 4.5-year deal, marketed tranche four and eight-year in October of AROUNDTOWN has announced that €319m of its as a benchmark, reached over £500m at 2017. Those both came wider than the new €600m 1.50% May 2022s were validly tendered GUIDANCEûFORûAûlNALûaMûSIZEû4HEûDEALû deal, at swaps plus 65bp and 85bp, in a repurchase offer at mid-swaps plus 23bp. printed at 75bp over Gilts. respectively. Previous to that it had only

International Financing Review February 3 2018 37 funded in the secured space with ABS under thing you want to do is loads of cheap sub “Clearly, as part of the resolution applied its Swiss Car SPV. debt and reprice your senior.” to Popular before they were sold to Although unrated by the international “Also, if you look at the correlation of SNP Santander, all of the subordinated was majors, AMAG has internal ratings from CS spreads with total capital ratios, there is IMPAIRED vûSAIDûAûlNANCIALSûCREDITûANALYST at mid BBB and ZKB at BBB- zero correlation because everything is “Hence, while Santander raised equity Credit Suisse was joint lead and sole trading on geography, ratings and basically capital post the acquisition, the plan to issue bookrunner, with ZKB as joint lead no books trading to best, and the market is not really AT1 and Tier 2 will make the capital structure ONûTHEûlRSTûDEAL ûWHILEûBOTHûWEREûJOINTûLEADSû differentiating. The question is: what is the MOREûEFlCIENTûFORû3ANTANDERûASûAûWHOLEv and bookrunners on the second. value of Tier 2?” BETTER LUCK THIS TIME SCARCITY VALUE Another banker away said Thursday’s Tier 2 NON-CORE CURRENCIES Santander’s trade (rated Baa2/BBB/BBB+) was was a strong outcome, particularly after a only the second European bank euro €1bn 5.25% perpetual NC2023 (Ba1) AT1 sold AUSNET MARKETING 10.5-YEAR ISSUE benchmark Tier 2 this year after Banca in September failed to gain much traction in Monte dei Paschi’s €750m 5.375% 10NC5, primary. It has fared better in secondary, AUSNET SERVICES HOLDINGS, rated A3/A- (Moody’s/ which came with a considerably lower trading up at a bid price of 109. S&P), has been holding investor meetings in rating (Caa2/CCC+ Moody’s/Fitch). “Getting a book of €2.5bn here and Asia and Australia for a potential 10.5-year “Senior in most cases looks quite rich,” moving 15bp, I think it’s an unbelievably domestic bond issue through arrangers ANZ, said an investor. “There is more supply good trade,” he said. “You’re at 110bp for a CBA, NAB and Westpac. scarcity around Tier 2, so you’d rather hold 10-year bullet for Santander - it’s really The AusNet Services subsidiary, Victoria’s that; that scarcity protects to the downside.” impressive.” largest energy delivery service, sold a Santander said in September last year that It was the second euro bond sale from A$425m (US$338m) 4.40% 10.5-year bond on it planned to issue €2bn of AT1 and €2bn of Santander this year. The €1.25bn 1.125% February 7 last year, priced 165bp wide of Tier 2 in 2018. That is higher than the €2bn January 2025 senior non-preferred (Baa1/ asset swaps. to €3bn hybrid target it guided for 2018 at BBB+/A-) priced last month has rallied from the start of last year, prior to acquiring failed its swaps plus 60bp reoffer level to 53bp. lender Banco Popular for just €1. The bank said last Wednesday that it is )TûHASûSINCEûIDENTIlEDûhADDITIONALûNEEDSvû already in line with loss-absorbing of €750m of AT1 and €1bn of Tier 2 in REQUIREMENTSûKNOWNûASû-2%,ûBASEDûONûTHEû FIG relation to that acquisition, having taken on information available. an additional €55bn of risk-weighted assets. TLAC - a similar global standard - presents Popular’s own AT1 and Tier 2 bonds were the more imminent deadline, however, with EUROS wiped out as part of its resolution. ALL INTERNATIONAL YEN BONDS SANTANDER TAKES €1.25bn IN ALL SAMURAI BONDS BOOKRUNNERS: 1/1/2018 TO DATE UNDERSUPPLIED TIER 2 SECTOR BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share Managing No of Total Share bank or group issues ¥(m) (%) BANCO SANTANDER priced a €1.25bn 10-year bank or group issues ¥(m) (%) 1 Daiwa Securities 6 23,220.00 20.0 bullet last Thursday, only the second euro 1 Daiwa Securities 6 23,220.00 20.0 =1 Mizuho 6 23,220.00 20.0 Tier 2 benchmark from a European bank =1 Mizuho 6 23,220.00 20.0 =1 Mitsubishi UFJ MS 6 23,220.00 20.0 this year, and carving out more than half of =1 Mitsubishi UFJ MS 6 23,220.00 20.0 =1 Nomura 6 23,220.00 20.0 THEûõBNûTARGETûFORûûITûIDENTIlEDûLASTû =1 Nomura 6 23,220.00 20.0 =1 Natixis 6 23,220.00 20.0 September. =1 Natixis 6 23,220.00 20.0 Total 6 116,100.00 Final books were over €2.3bn for a print Total 6 116,100.00 Including all Euro, foreign and global issues. Excluding equity-related debt. at mid-swaps plus 110bp, IPTs having come Excluding equity-related debt. at 125bp area. Source: Thomson Reuters SDC code: K11 Source: Thomson Reuters SDC code: K12 The outcome proved there is plenty of demand for Tier 2. ALL FINANCIAL INSTITUTION BONDS IN EUROS ALL SUBORDINATED FINANCIAL INSTITUTION “Tier 2 has been on an absolute tear since BOOKRUNNERS: 1/1/2018 TO DATE BONDS (ALL CURRENCIES) the beginning of the year,” said a banker Managing No of Total Share BOOKRUNNERS: 1/1/2018 TO DATE away. bank or group issues €(m) (%) Managing No of Total Share “Santander’s Tier 2 is investment-grade 1 UBS 7 4,108.59 15.5 bank or group issues US$(m) (%) but it trades super-cheap to the core IG 2 Deutsche Bank 5 3,066.25 11.6 1 UBS 6 2,946.23 24.9 names. Stuff from the Netherlands and 3 BNP Paribas 8 2,697.28 10.2 2 Credit Agricole 1 1,225.79 10.4 France trades in the 50s-60s over mid-swaps. 4 SG 8 2,360.67 8.9 3 BAML 4 780.96 6.6 This is almost double the spread for a 5 Natixis 3 2,097.51 7.9 4 Goldman Sachs 3 741.40 6.3 jurisdiction that people quite like and still 6 Lloyds Bank 1 1,493.59 5.6 5 Barclays 3 580.54 4.9 offers a bit of upside.” 7 Credit Agricole 3 1,124.21 4.2 6 BNP Paribas 2 548.76 4.6 Many banks have been focusing on senior 8 Morgan Stanley 5 973.18 3.7 7 SG 2 490.67 4.2 non-preferred instead of Tier 2, giving rarity 9 JP Morgan 6 870.33 3.3 8 JP Morgan 3 480.96 4.1 value to the trades that come. 10 Santander Global 3 809.70 3.1 9 Citigroup 3 441.67 3.7 “A lot of issuers are doing a lot less than Total 32 26,516.93 10 Natixis 1 389.14 3.3 the theoretical Tier 2 requirements,” said Including banks, insurance companies and finance companies. Excluding Total 14 11,820.12 equity-related and covered bonds. Excluding publicly owned institutions. the banker. “For names like Santander that are rolling out SNP programmes, the last Source: Thomson Reuters SDC code: N11 Source: Thomson Reuters SDC code: J3a

38 International Financing Review February 3 2018 BONDS FIG

phased-in requirements starting from “But it feels like the lull before the storm mid to high 3s, but it priced at a semi-annual January 2019. on SNP in the Nordic region and it could last yield of 3.519%. “Some international It guided the market towards a €10bn- a little while, so it’s full steam ahead with demand has come in as well, which is very 12bn senior non-preferred issuance target regular funding projects for the moment. pleasing,” he added. for 2018 in March last year, and issued Doing a senior preferred is testament to that “Something in sterling at a 3.5%-type yield €19bn of TLAC-eligible instruments in 2017. - you strike a balance between not going too is a bit of a sweet spot. I think there were h&ORû-2%, ûWHICHûHASûNOTûBEENûFULLYû long-dated and paying up, but equally, some high-yield funds interested in this that calibrated, the expectation is that it comes in keeping your funding ticking over.” might not have bought FIG in the past, so line with TLAC, so there should no incremental Nordea last came to the euro senior it’s quite interesting to see some of the issuance requirement for that,” the analyst said. market with a €2bn dual-tranche trade in names coming in.” Barclays, Natixis, Santander and Societe September. It sold a €1bn 10-year at swaps While the pool of Tier 3 issuers remains Generale were leads on the Tier 2. plus 28bp, bid last Wednesday at 11bp, and small - only Phoenix in sterling, and CNP AûõBNûFOUR YEARû&2.ûATûTHREE MONTHû Assurances and BNP Paribas Cardif in euros - NORDEA KEEPS FUNDING TICKING OVER Euribor plus 15bp that had rallied to 11bp. many investors like the structural features. BNP Paribas, Deutsche Bank, JP Morgan and The asset class offers issuers a way to NORDEAûPRICEDûAûõBNûFOUR YEARûSENIORûmOATERû Nordea were joint leads. fortify their capital and reduce the average last Wednesday, kick-starting its funding for cost of their subordinated debt. The risk of 2018 as it pushes ahead with its proposed re- mandatory coupon deferral is lower domiciliation to Finland from Sweden. STERLING compared with Tier 2, and there is also no )TûWASûTHEûYEARSûlRSTû.ORDICûEUROûSENIORû optional coupon deferral and no extension unsecured benchmark after a relatively EASIER RIDE FOR JUST GROUP AFTER risk. quiet start for the region, covered bonds GRUELLING TIER 2 “I think the extra risk you’re taking in accounting for the only supply so far. Tier 3 versus senior is minimal, but Tier 3 Books had passed €1.6bn as guidance was Tier 3 proved a considerably easier sell for still currently prices off Tier 2 rather than revised to three-month Euribor plus 15bp JUST GROUP, which had to battle hard to get a senior and there is not a lot of it around,” area (+/-2bp) from an initial 20bp area. £250m Tier 2 10-year bullet over the line in said Gordon Shannon, a portfolio manager Demand dropped to a little over €1.3bn late 2016 despite the lure of a 9% coupon. at TwentyFour Asset Management. when the trade launched at plus 13bp. 4HEû5+ûlNANCIALûSERVICESûCOMPANY û “It’s got the right kind of relative value, The bank proposed moving its PREVIOUSLYûKNOWNûASû*20û'ROUPûANDûFORMEDûINû it’s got a rating, and I think they give a fairly headquarters to Finland last September to ûTHOUGHûTHEûMERGERûOFû*USTû2ETIREMENTû compelling story.” cut the costs of complying with Swedish and Partnership Assurance, began a roadshow There is also better clarity around the REGULATIONûANDûPUTûITûONûAûLEVELûPLAYINGûlELDû last Tuesday. Such was interest in the deal, group’s strategic direction, with growth in with European peers. leads hit the accelerator on Thursday just as the sterling investor base and a better bid The re-domiciliation was tentatively THEûlNALûMEETINGSûWEREûBEINGûWRAPPEDûUP for paper also helping. pencilled in for October 2018 but it has not Books were over £1.3bn as the spread Phoenix’s Tier 3, a £300m 4.125% July yet been rubber-stamped, adding a layer of lXEDûATûBPûOVERûTHEû-ARCHûû'ILT ûAû 2022 which it later tapped, was also vastly complexity to the bank’s funding and long way inside IPTs of plus 262.5bp area oversubscribed, and issuers such as capital planning. and guidance of 237.5bp/250bp. The size OneSavings Bank, Direct Line and Nordea started laying some of the was set at £230m, the upper end of the Sainsbury’s Bank all managed to clear groundwork last year, when it undertook a approximate £200m expected. sterling deals last year alongside more consent solicitation to make technical That response was a far cry from October established names such as Barclays. AMENDMENTSûREmECTINGûTHEûPROPOSEDûMOVEû 2016, when its unrated high-yielding Tier 2 NatWest Markets acted as structuring on certain outstanding instruments, such as priced at the wide end of talk and was only adviser and was also lead manager alongside the governing law. marginally oversubscribed. ABN AMRO and Barclays. It also changed subordination provisions “The Tier 2 was a tough transaction, so I in certain securities to permit issuance of think for Just, this was a hugely important senior non-preferred debt, a new asset class transaction - to come back to the market NON-CORE CURRENCIES designed to help banks across Europe beef and prove they’ve got access,” a lead said. up their loss-absorbing capacity in a more WESTPAC MARKETS LOCAL AT1s cost-effective way. RATINGS BAIT The legislation permitting SNP issuance The outcome highlights the change both in WESTPAC has mandated ANZ, CBA, JP Morgan, has not yet been passed in any Nordic market backdrop and in Just Group itself. Morgans, NAB, UBS and its own syndication jurisdiction, although European Union The company has since gained a rating, team to market a potential Australian member states like Finland must push it with Fitch starting its coverage at A+ in dollar ASX-listed Additional Tier 1 note through by the end of 2018. August last year. That saw the Tier 2s snap offering. While banks could get ahead by issuing tighter from around 6.70% to 5.30% in a Any new issue is likely to include a contractually subordinated senior in the matter of days, since rallying further to reinvestment offer for eligible holders of manner of Santander, a banker on Nordea’s around 4.60%, or 315bp over Gilts. Westpac’s A$1.19bn AT1 notes due to be &2.ûDOWNPLAYEDûTHEûURGENCYûTOûISSUEûGIVENû Fitch rates the Tier 3 bond at BBB, called on March 31. the estimated size of their targets. immediately opening it up to a broader The last Australian major bank to sell “I’m sure behind the scenes they’re investor base than an unrated Tier 2. The domestic AT1 notes was ANZ with last working pretty hard and through all the TRADEûALSOûBENElTEDûFROMûAûDEARTHûOFû September’s A$931m ANZ Capital Notes 5. possibilities, like in all jurisdictions that sterling subordinated insurance supply. The perpetual non-call 7.5-year (March 20 HAVENTûGOTûTHEûFACILITYûTOûISSUEû-2%,ûSTUFFû h4HISûONEûREALLYûCAUGHTûlRE vûSAIDûAûSECONDû ûmOATING RATEûNOTEûPRICEDûBPûWIDEû yet,” he said. lead. He had expected the deal to land in the of 90-day BBSW.

International Financing Review February 3 2018 39 NEWCASTLE PRINTS SECOND FIVE-YEAR, “There is no doubt that lots of accounts “They can afford to be quite aggressive based SUNCORP STAYS SHORT have room available to add some risk here,” on size, swaps and scarcity value,” he said. said a banker away. Spanish covered issuance has barely got NEWCASTLE PERMANENT BUILDING SOCIETY, rated 2ABOSûNEWûISSUEûSWIFTLYûATTRACTEDûINVESTORû off the ground this year, though Santander !""" ûSOLDûAû!Mû53M ûlVE YEARû interest, garnering orders of more than and CaixaBank have sold a combined mOATING RATEûNOTEûLASTû4UESDAYûVIAûJOINTûLEADSû õBNûANDûALLOWINGûTHEûSPREADûTOûBEûlXEDû €2.25bn of senior non-preferred debt and NAB and Westpac. at 10bp through mid-swaps for a €1.25bn further supply is expected as more lenders The offering priced inside 145bp area deal. Guidance was minus 7bp area at the emerge from blackout. guidance at three-month BBSW plus 140bp. start. h3PANISHûBANKSûSTILLûHAVEûAûLOTûOFû-2%,û Newcastle previously issued a domestic h)TûISûAûVERYûCLINICALûSTANDARDû2ABOû and TLAC issuance to do to get up to speed lVE YEARûmOATERûONû*ANUARYûûLASTûYEARûnûAû execution that gets investor engagement,” with capital ratios, and this has a negative A$150m print priced 165bp wide of three- said a lead banker. IMPACTûONûCOVEREDS vûSAIDûTHEûlRSTûBANKER month BBSW. “The tenor complements the seven and Banks prefer to tap the covered market to The same day, SUNCORP-METWAY (A1/A+/A+), YEARûCURVE ûNICELYûlLLINGûINûTHEûGAPû lock in the cheapest funding possible and Australia’s largest non-major bank, raised There’s been a nice back-up in swap rates for treasury management purposes. A$200m from the sale of one-year and therefore you are offering a better With €114bn outstanding in the Cedulas mOATING RATEûNOTES coupon.” Hipotecarias market, volumes have come The ANZ-led issue priced in line with Its May 2024s and May 2032s were trading down from the high of 2010, Societe guidance at three-month BBSW plus 35bp. at minus 17bp and minus 3bp, respectively, Generale analysts said. Pricing was 5bp wider than the 30bp according to Tradeweb. This, combined with But despite the lack of issuance so far, the margin that Aa3/AA- rated (Moody’s/S&P) THEûRELATIVEûmATNESSûOFûTHEû$UTCHûCOVEREDû analysts forecast a boost in Spanish covered 2OYALû"ANKûOFû#ANADA û3YDNEYûBRANCH ûPAIDû bond curve, put fair value on the paper - due bonds. FORûITSû53MûONE YEARû&2.ûONû*ANUARYû February 2028 - at minus low 10bp, ABN “After very low volumes in 2017, we ANZ (Aa3/AA-/AA-) issued the last major !-2/ûANALYSTSûSAID expect covered bond issuance in Spain to BANKûONE YEARûmOATERûONû.OVEMBERû ûAû A second lead saw fair value in the minus pick up in 2018,” said the analysts. A$650m print priced 25bp wide of three- 12bp to minus 14bp area, with the 2bp or “Wide senior unsecured spreads and month BBSW. 3bp new-issue premium at the lower end of potential pre-funding ahead of the ECB QE the range year-to-date. exit, combined with continued CBPP3 RABOBANK PRINTS DIM SUM NOTES Credit Suisse, HSBC, Rabobank and UniCredit support, should favour issuance, particularly ran the deal. at the longer end of the curve.” RABOBANK, rated Aa2/A+/AA-, has printed Prior to last Tuesday, Dutch covered bond 2MBMû53M ûOFûTHREE YEARû$IMû issuance in 2018 amounted to €2.5bn, GERMAN COVEREDS SCRAPE THROUGH 3UMûBONDSûATû ûmATûTOûlNALûPRICEû comprising only a €500m conditional pass- guidance. through 10-year from NIBC, and ABN HELABA launched a six-year euro Pfandbrief at Standard Chartered Bank was arranger and !-2/SûõBNû*ANUARYû the lower end of the expected €750m-€1bn lead manager on the trade. SIZEûRANGE ûAFTERûTHEûlNALûõMûORDERûBOOKû The issue has expected ratings of Aa2/A+ BANKINTER RETURNS TO BARREN PROVEDûINSUFlCIENTûFORûAûLARGERûDEAL (Moody’s/S&P). SPANISH COVERED MARKET The issuer opted for an unusual start, indicating a range on guidance from the BANKINTER returned to the covered bond outset, at minus 18bp area (+/-2bp). market after more than two years away, “This looks a bit odd, to be honest,” said a becoming only the second Spanish issuer in banker away. “I found it started a bit too COVERED BONDS that sector this year, after Caixabank. tight. Minus 16bp at the start would have The €500m no-grow February 2028 been a good approach, as normally Helaba is launched at 18bp over mid-swaps. Guidance looking to do size.” EUROS was 20bp area (+/-2bp), marketing having 4HEûlNALûSPREADûWASûTHENûPUSHEDûTOûLESSû started in the mid-20s. 20bp, among the tightest seen in the MARKET WELCOMES RABOBANK’S One banker away said that Bankinter’s covered sector. SECOND COVERED VISIT outstanding €1bn 1% February 2025, which is very illiquid and trading fairly wide at ALL COVERED BONDS (ALL CURRENCIES) RABOBANK last week priced its second covered 20bp over mid-swaps, was not a good BOOKRUNNERS: 1/1/2018 TO DATE bond transaction, the tightest 10-year euro indicator for fair value, which should be Managing No of Total Share benchmark from a non-German bank since more in the context of the high teens to bank or group issues US$(m) (%) the 2008 crisis. 20bp. 1 UniCredit 14 3,249.75 7.5 Issuers have hit the 10-year tenor hard in “Bankinter is not a bad name in terms of 2 Natixis 11 3,017.67 7.0 2018, offering a combined €7.65bn year-to- credit,” he said. That said, a second banker 3 SG 9 2,313.12 5.3 date as they lock in long-term funding often argued it should price wide of CaixaBank’s 4 LBBW 10 2,280.48 5.3 at historically tight levels. There has been 10-year that came at 22bp over mid-swaps 5 Barclays 10 2,171.84 5.0 limited supply from national champions, earlier this month, and is now trading at 6 Commerzbank 11 2,136.62 4.9 however. 20bp. 7 Credit Suisse 7 2,127.34 4.9 2ABOBANK ûONEûOFûTHEûMARKETSûBEST LIKEDû But he acknowledged that the deal’s 8 HSBC 10 2,063.74 4.8 credits, made a triumphant entry into the technicals - the size being capped, for 9 Deutsche Bank 8 2,029.78 4.7 covered market last May with a dual-tranche example - meant leads Bankinter Securities, 10 UBS 8 1,986.03 4.6 deal, selling a €1.5bn seven-year at swaps minus Deutsche Bank, HSBC, Santander and Societe Total 45 43,261.51 11bp and a €1bn 15-year at swaps plus 9bp. Generale could push it tighter. Source: Thomson Reuters SDC code: J15a

40 International Financing Review February 3 2018 BONDS HIGH-YIELD

Supply pushes past January 2017 tally COVERED BONDS Long end looks heavy but access for peripherals

Covered bond supply tailed off in recent days Credit Agricole Cariparma and Westpac pushing MORE SENSITIVE but January’s €27.8bn total just eclipsed the out even longer. While the rise in government yields can make €26.6bn raised in the first month of 2017 despite But similar trades may be off the cards for now. covered bonds look less attractive from a an uptick in rates volatility muddying the waters “Markets have become a little bit more relative value perspective, it is the sheer in credit markets. difficult and everything looks very tight,” said tightness of spreads that has prompted Such was the pace of euro benchmark one syndicate official. LBBW’s €1bn January greater price sensitivity among certain buyers. issuance last month that 27% of UniCredit 2025 at mid-swaps minus 20bp was the sector’s “We have seen large numbers of investors analysts’ full-year supply forecast target has tightest deal in memory, for example. dropping out of recent trades just on the back already been raised. “We have seen rates on the rise every day, so of issuers squeezing one more basis point,” French and German names dominated, some people are a bit more cautious and waiting said the syndicate official. accounting for a combined €10.2bn. But in a for spreads to increase as well.” Books for HELABA’s €750m six-year last promising development, the latest peripheral But a second banker reckoned the Additional Thursday peaked over €1bn but fell back to deals were better received than earlier in the year. Tier 1 sector is more susceptible to rising rates than €900m at the swaps minus 20bp reoffer. “This highlights that relative value and credit covereds, given these trade on a yield basis. Recent But even if conditions may not be as positioning currently is the major driver for AT1 trades have struggled to remain above par, straightforward as in recent months, banks are a new covered bond’s success,” according to with UBS’s perpetual non-call 2023s bid at 98 and still expected to prioritise issuance in the first Commerzbank analysts. Belfius’s €500m non-call 2025s at 99.67 last Friday. half of the year rather than wait for the second BANKINTER, for example, returned to the “It’s been quite a heavy week in AT1, to be half, when the ECB is set to start tapering. market last week for the first time since 2015, honest,” said a second banker. Last February’s supply fell to €9.4bn, just pricing a €500m February 2028 with no new “But if you look at where Belfius is trading under a third of January’s volume, but the issue concession. It was bid in line with reoffer at now versus the reset it’s probably flat or a couple banker said he would not rule out seeing a swaps plus 18bp last Friday. of basis points wider, so a lot of it is to do with decent flow. On the other hand, volatility in rates markets the rates moves. There has definitely been a “The covered space is working well, and could stymie long-dated trades, bankers said. reasonable degree of softness in AT1 this week we’ve seen no major signs of investor fatigue,” Some €8.9bn of 10-year supply has emerged but it’s not been on heavy selling. It’s just a bit of he said. year-to-date, with banks such as ABN AMRO, an adjustment to the rates environment.” Merle Crichton

The banker thought the pricing target Sparkasse Pforzheim Calw emerged from new notes at minus 9bp-10bp, in line with was too ambitious, speculating that Helaba the woodwork with a renewed need to fund, where Societe Generale priced a €750m 10- had the same headline spread in mind as having not issued covered debt since 2015. year earlier this year at minus 9bp. LBBW’s €1bn 0.25% January 2025, which Its €250m 0.25% October 2020 is bid at 2.5bp “I’d be surprised if La Banque Postale gets to priced at minus 20bp last month. It is bid over mid-swaps. this level,” he said before launch. “Not because marginally tighter, at minus 20.6bp. DEUTSCHE HYPOTHEKENBANK tapped its €500m their credit is worse, but simply because the “Adjusting the spread to minus 20bp April 2022 Pfandbrief by €250m, bringing market is a couple of points wider.” risked investors dropping out because it’s the new total to €750m. Books closed at The deal ended up pricing at minus 8bp too aggressive,” he added, suggesting the õMûATûAûlNALûSPREADûOFûMID SWAPSûLESSû last Monday. central bank would take a large allocation. 18bp, following less 17bp area at guidance. Credit Agricole, Commerzbank, LBBW, NatWest A lead defended the pricing strategy, Markets and Societe Generale ran the deal. arguing they wanted to show the market LA BANQUE POSTALE EDGING WIDER that it would price within this range without ratcheting any tighter. LA BANQUE POSTALE continued the steady 'UIDANCEûWASûLEFTûUNCHANGEDûATûTHEûlRSTû supply of French covered issuance, update since the issuer was undecided on launching a €750m 10-year - a change from HIGH-YIELD spread or size. It went on to take a smaller its usual €500m. deal at a tighter level. The no-grow February 2028 OFH racked ABN AMRO, Erste Group, Helaba, Natixis and up over €1.1bn in orders, allowing the UNITED STATES Societe Generale were joint lead managers. SPREADûTOûBEûlXEDûATûSWAPSûMINUSûBPû SPARKASSE PFORZHEIM CALW muddled through Guidance was 7bp area (+/-1bp) through WESTERN DIGITAL GETS RATING UPLIFT with a €250m no-grow February 2023 deal mid-swaps after an initial 4bp area inside. WITH REFI on orders just topping €250m. A banker on the deal reckoned the deal Final terms came at 15bp through swaps, BENElTEDûFROMûAûMOVEûINûTHEûUNDERLYINGû WESTERN DIGITALûPUTûITSELFûlRMLYûONûTHEûWAYûTOû in line with minus 15bp area guidance. swap spreads, going from around 1.02% to investment-grade status on Tuesday, as it LBBW was the sole bookrunner. 1.07% over the course of the morning. returned to the market with a US$2.3bn 'IVENûTHIS ûTHEûlRSTûBANKERûSAIDûITûWASûANû La Banque Postale’s €500m eight-year, JUNKûBONDûSALEûTOûRElNANCEûDEBT ûPROMPTINGû achievement to print just 1bp wide of fellow issued a year ago, is trading considerably an upgrade from Moody’s. German savings bank DekaBank, which is tighter at minus 14bp, from minus 2bp at The new eight-year bond priced at a yield BETTERûKNOWNû)TSûRECENTûõMûlVE YEARûISû issuance, according to Tradeweb. of just 4.75%, which was a touch wide to talk BIDûmATûTOûITSûMINUSûBPûREOFFERûLEVEL 4HEûlRSTûBANKERûVIEWEDûFAIRûVALUEûONûTHEû of 4.625% though still less than half the

International Financing Review February 3 2018 41 10.50% the company was forced to pay just SENIORûSECUREDûEUROûmOATER ûINûADDITIONûTOû KME is offering the highest reoffer yield TWOûYEARSûAGOûTOûlNANCEûITSû3AN$ISKû the US dollar senior unsecureds. on a Single B new issue in the European acquisition. 4ALKûONûTHEûSENIORûSECUREDûEUROûlXED RATEû high-yield market since Almaviva priced a )TSûCREDITûPROlLEû ûANDûRATINGSû ûHAVEû notes is 6.50%-6.75%, 8% area on the US €250m senior secured 2022 note at 7.25% in steadily improved since then, thanks to DOLLARûSENIORûSECUREDûlXED RATES ûBP September. US$6bn of debt reduction and cost cuts. BPûOVERû%URIBORûONûTHEûEUROûmOATERûANDû “This is the new reality; the last few Total debt would be just 2.2 times Ebitda 10% area on the US dollar senior unsecureds, weeks have shown that we’re going back to after the new debt deal, according to in line with price whispers. a more traditional high-yield market with Moody’s. The potential unsecured euro note had traditional high-yield deals,” one syndicate The agency propelled Western Digital to been whispered at eight handle pricing, banker said. investment grade the day the new bond sale according to a second banker on the deal. The iBoxx euro liquid high-yield index has was announced by upgrading the company’s “The US market is generically better at widened 14bp since last Friday, now yielding unsecured rating to Baa3 from Ba2. riskier situations,” said a portfolio manager. ûACCORDINGûTOû4HOMSONû2EUTERSûDATA û “The upgrade incorporates Moody’s “Some of the moves in bonds in Europe compared with 1.99% in early November, its expectation that [Western Digital]’s recently have been very severe, considering tightest level ever. lNANCIALûPOLICIESûWILLûREMAINûCONSISTENTû the level of news headlines,” he said, This year, euro and sterling new issues with its goal of reducing leverage to 1.5x pointing to the drop in VIRIDIAN’s bond over with a Single B rating from Moody’s and S&P between 2019 to 2021,” the agency said in a the last two days. have offered an average coupon of 5.75%, note on Tuesday. The Irish energy company’s outstanding compared with last year’s 5.49%, according Proceeds from the new convertible and bonds, issued in September, lost up to nine TOû)&2ûDATAû.EWûISSUESûACROSSûTHEûRATINGû the unsecured bond sale will be used for a points last week, according to Tradeweb spectrum have offered 4.81% on average, tender offer for the 10.50% notes, redeem data, on news reports that the company compared with 4.42% last year. the company’s secured 2023s and buy back plans to close two of its factories this year. “We’ve seen weakness in cash price shares. Bankers on the deal said the unsecureds traded products such as [bank] AT1 and #REDIT3IGHTSûANALYSTû*ORDANû#HALlNûSAIDûINû were always meant to be issued in one high-yield for example,” said another a note he would have bought the new notes currency only, given their small size. syndicate banker. at any yield above 4.375%, given the “We’ve had constructive interest at “Some recent new issues are trading in potential for an upgrade to investment- constructive levels in US dollars, so we’ve the low 99s but are outperforming Bunds so grade territory from the agencies. seen that that’s the way to go,” said a second it’s not a disaster by any stretch but that S&P kept its BB+ unsecured rating on the banker. market is much more driven by sentiment company with a stable outlook, while Fitch The deal will price on Monday, with a US rather than spreads. That’s where I’d AFlRMEDûTHEûCOMPANYûATû"" ûBUTûREVISEDûTHEû West Coast roadshow added to the schedule probably have a note of caution.” outlook to positive. on Friday. The company will meet investors Bank of America Merrill Lynch was the lead- in Milan and Amsterdam on Monday. THORNY CREDITS left on the trade. It is not just the rates market backdrop that YIELD RETURNS TO HIGH-YIELD AS has weighed on deals, investors are also RATES SELL-OFF looking to be compensated for the riskier EUROPE/MIDDLE EAST/ nature of the credits on offer. AFRICA Yields on European high-yield deals are In the case of KME, the deal was met with creeping up as a sell-off in the underlying concerns around the company’s size, business ALGECO SCOTSMAN ESCHEWS EUROS, rates market pushes levels up, a change in model and leverage level in particular. EXTENDS ROADSHOW fortunes for junk issuers that have enjoyed Ebitda was €49.8m for the year ending on benign market conditions over recent times. September 30, though adjusted Ebitda was ALGECO SCOTSMAN has extended marketing for German industrial group KME, rated B3/B, €77m, mostly due to restructuring expenses. ITSûJUMBOûRElNANCINGûTRADEûOVERûTHEû SETûTALKûONûAûDEBUTûõMûlVE YEARûNON CALLû And while its offered memorandum said weekend, a rarity in the high-yield market two senior secured note at the 7% area. It it is 2.5x levered, Moody’s analysts put the in recent times, while the €295m-equivalent later priced in line with that level. lGUREûATûX XûASûOFû SENIORûUNSECUREDûPORTIONûOFûTHEûlNANCINGû will be issued in US dollars only. ALL NON-DOLLAR DENOMINATED HIGH-YIELD BONDS ALL EUROPEAN HIGH-YIELD ISSUERS The original offering memorandum had 1/1/2018 TO DATE 1/1/2018 TO DATE PRESENTEDûTHEûDEALûASûAûlVE TRANCHER ûWITHû Managing No of Total Share Managing No of Total Share senior unsecured tranches in both euros and bank or group issues €(m) (%) bank or group issues US$(m) (%) US dollars. The roadshow that started on 1 Morgan Stanley 2 580.43 12.0 1 Credit Suisse 7 722.00 8.3 January 26 was due to end on February 2 but 2 Credit Suisse 5 402.49 8.3 2 Morgan Stanley 2 716.57 8.2 has now been extended to February 5. 3 Barclays 4 343.16 7.1 3 Citigroup 5 473.18 5.4 “It is building more slowly than the banks 4 BNP Paribas 5 342.34 7.1 4 ING 3 463.89 5.3 would hope. There is a path to getting it 5 Deutsche Bank 4 313.01 6.5 5 BNP Paribas 5 421.34 4.8 done but it will probably have to come a 6 Goldman Sachs 3 273.12 5.7 6 Barclays 4 419.12 4.8 little wider,” said one banker close to the 7 Lloyds Bank 3 261.46 5.4 7 Deutsche Bank 4 383.31 4.4 deal. 8 JP Morgan 4 257.09 5.3 8 JP Morgan 5 372.66 4.3 The US company, which sells and leases 9 ING 2 226.42 4.7 9 Goldman Sachs 3 334.36 3.8 MOBILEûOFlCEûBUILDINGS ûISûNOWûSEEKINGûTOû 10 UniCredit 2 190.55 3.9 10 Lloyds Bank 3 319.58 3.7 raise €1.415bn-equivalent through four Total 12 4,826.06 Total 17 8,725.92 TRANCHESûCOMPRISINGûSENIORûSECUREDûlXED Excluding equity-related debt. Excluding equity-related debt. rate notes in euros and US dollars and a Source: Thomson Reuters SDC code: B6 Source: Thomson Reuters SDC code: B06c

42 International Financing Review February 3 2018 BONDS HIGH-YIELD

Investors push back on covenant erosion EUROPE HIGH-YIELD Drawing a line at payments in default

Investors who have had little success in pushing contextually, depending on the circumstances of “It’s as if the equity sponsor sees such a high back against the erosion of covenant protections the credit in question. probability of this going pear-shaped that it needs in the high-yield market are trying to draw the “It shouldn’t be one-size-fits-all, but there the escape hatches and second chances that line at a clause that allows issuers to take money should be differentiation,” said one investor. these covenants provide the bottom of the capital out of the business even when in default. “For better-rated, large-cap structures, they structure,” a second investor said of Selecta’s deal. The no-default covenants, amended in at may be able to support a more aggressive or But it is not just riskier credits that have tried least three deals since the start of the year, lenient covenant structure. This should not be to include this level of flexibility as crossover would allow companies to pay dividends and applied to the mid-market.” credit Summit’s trade, rated Ba1/BBB-, showed. make other distributions, known as restricted So far, the view has been that push-back occurs “It’s not even necessarily the case that there’s payments, even if they are in technical default. as a result of scepticism about the names and an intention behind the term, but the intention “I think it’s the combination of a term that trades, and that challenged credits and deals are is to take advantage of whatever flexibility is issuers don’t feel strongly about and investors the ones expected to see meaningful push-back. available,” Fox said. do,” said Sabrina Fox, head of European research Well-liked credits continue to push through Buyside participants often say that the European at credit research firm Covenant Review. aggressive terms: the default clause sailed through high-yield market is highly precedent-driven, French packaging firm ALBEA had to make in British gym operator PURE GYM and German real meaning that once a clause makes it into several amendments to the terms of its €150m 6.5- estate firm SUMMIT’s trades in the same week as it deals, it very quickly becomes market standard. year non-call two senior holdco pay-if-you-can was taken out from Selecta and Lowell. “Which clauses make it in or out depends on offering on Wednesday, the latest issuer to do so. “If an investor comes to us and says, I really which precedent documents the lawyers use In January, Swiss vending machine operator don’t want that covenant and I need it out, our when they start drafting the prospectus,” the SELECTA and British debt collector LOWELL had to duty then is to assess if that is a market view,” banker said. remove the term from their documentation. said a syndicate banker involved with some of “It’s not that management teams, sponsors “It’s so clear to investors the potential damage the trades. or banks sit down and say ‘how do we use that this could cause during a time that you really “If it’s just one guy and you have a 10 times the clauses in a downside scenario?’, but the don’t want an issuer to have that much flexibility,” subscribed book, it’s very difficult to go to an precedent that they use.” Fox said. “Even if it’s a technical default, you want issuer and tell them to make a change.” The default provision was not the only one them focused on curing the default.” to see push-back last week, however. German ESCAPE DOOR metals group KME had to amend its definition CASE-BY-CASE ASSESSMENT Some question whether the weakness of the of senior secured debt, which had originally There is a growing understanding among credit in question is the reason why the default included short-term financial receivables. investors that covenant risk should be assessed provision is included in deals. Yoruk Bahceli

Investors said this was because of the The acquisition was agreed following Albea also had to amend its no-default COMPANYSûHIGHûPENSIONûDElCITû!ROUNDû AûlRST ûFAILEDûBIDûTOûSELLûTHEûCOMPANYûINû covenant, which would have otherwise €193m of the company’s pension plans were 2016 by private equity owner Sun allowed it to make restricted payments even unfunded as of the end of 2016, according to Capital. The deal was supported by if it were in technical default. the notes’ prospectus. a US$470m equity injection by PAI While Albea’s note is rated CCC+, the +-%ûALSOûHADûTOûAMENDûITSûDElNITIONûOFû Partners. company is B2/B. senior secured debt, which had originally One investor said the sale process was Deutsche Bank (B&D), BNP Paribas, Credit INCLUDEDûSHORT TERMûlNANCIALûRECEIVABLESû less of an issue now that a buyer had been Suisse and KKR were joint bookrunners. !NALYSTSûATû#OVENANTû2EVIEWûHADûWARNEDû secured. earlier in the week that this could have The most recent PIK note from a ELIS NAMES BANKS FOR SENIOR allowed the company to reduce its leverage packaging issuer in the high-yield market is UNSECURED OFFERING ratio test for incurring secured debt and from Kloeckner Pentaplast, although Albea, making restricted payments. with pro forma leverage at 5.3x, was seen as ELIS has mandated BNP Paribas, Credit Agricole KME will use proceeds to repay a borrowing a better credit than Kloeckner, whose deal and HSBC as global coordinators and ING, base facility and shareholder loans. pushed leverage up to 8x. Natixis and Societe Generale as active joint Goldman Sachs (B&D), BNP Paribas and Kloeckner’s PIK was bid at 8.8% when bookrunners to arrange a series of investor Deutsche Bank are joint global coordinators on Albea began marketing, but was at 9.7% at meetings starting on February 5. BBVA, KME. Wednesday’s close, when Albea priced, Commerzbank, Mediobanca and MUFG are according to Tradeweb data. passive bookrunners. ALBEA FUNDS BUYOUT BY PAI PARTNERS “We view the transaction as aggressive A euro senior unsecured benchmark as it leads to a further increase in leverage TRANSACTIONûWITHûEXPECTEDûMATURITIESûOFûlVEû &RENCHûPACKAGINGûlRMûALBEA priced a €150m at Albea less than a year after it upsized to eight years in one or two tranches will 6.5-year non-call two senior holdco pay-if- its debt in April 2017 and paid a debt- follow, subject to market conditions. Elis SA, you-can note at 6.75% to back its buyout by lNANCEDûDIVIDENDûTOûITSûFORMERû guaranteed by MAJ, is the issuer, under Elis’ PAI Partners. shareholder,” S&P analysts wrote in a new EMTN programme. Pricing came at the tight end of 6.75%-7% note, estimating that leverage would be 0ROCEEDSûWILLûBEûUSEDûTOûRElNANCEûTHEûBRIDGEû talk. about 7x for 2018. loan put in for the BERENDSEN acquisition.

International Financing Review February 3 2018 43 ALL US$ DENOMINATED HIGH-YIELD BONDS ALL INTL AUSTRALIAN DOLLAR BONDS AUSTRALIAN DOMESTIC BONDS BOOKRUNNERS – 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%) bank or group issues A$(m) (%) bank or group issues A$(m) (%) 1 Wells Fargo 18 2,681.30 10.4 1 RBC 13 997.38 16.5 1 CBA 6 4,946.12 23.2 2 JP Morgan 15 2,358.69 9.2 2 TD Securities 11 896.57 14.8 2 ANZ 5 4,018.29 18.9 3 Credit Suisse 14 2,163.54 8.4 3 Daiwa Securities 7 744.13 12.3 3 UBS 6 3,727.15 17.5 4 Citigroup 17 1,900.34 7.4 4 Deutsche Bank 8 735.72 12.2 4 Deutsche Bank 3 2,862.57 13.5 5 BAML 15 1,678.84 6.5 5 ANZ 4 600.60 9.9 5 Citigroup 2 2,639.51 12.4 6 Morgan Stanley 9 1,550.08 6.0 6 Nomura 6 531.48 8.8 6 National Australia Bank 7 1,695.95 8.0 7 Barclays 7 1,544.32 6.0 7 BAML 1 348.44 5.8 7 Westpac 4 574.99 2.7 8 Deutsche Bank 10 1,481.06 5.8 8 UBS 1 249.19 4.1 8 BAML 1 330.30 1.6 9 Goldman Sachs 9 1,207.01 4.7 9 CBA 3 247.70 4.1 9 JP Morgan 1 239.51 1.1 10 BNP Paribas 4 701.93 2.7 10 JP Morgan 3 148.03 2.4 =9 TD Securities 1 239.51 1.1 Total 43 25,712.84 Total 37 6,053.08 Total 13 21,273.87

Including US domestics, Euro, foreign, globals. Excluding equity-related debt. Including preferreds. Excluding equity-related debt. Source: Thomson Reuters SDC code: B5 Source: Thomson Reuters SDC code: K1 Source: Thomson Reuters SDC code: AJ02

ALL ASIAN HIGH-YIELD ISSUERS ALL INTL SWEDISH KRONA BONDS ALL INTL CANADIAN DOLLAR BONDS 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%) bank or group issues SKr(m) (%) bank or group issues C$(m) (%) 1 Citic 5 419.11 6.5 1 Danske Bank 4 3,063.16 24.3 1 BMO 4 823.37 25.2 2 BAML 4 344.17 5.4 2 Swedbank 7 2,871.21 22.7 2 BAML 2 696.68 21.4 3 Bank of China 3 300.81 4.7 3 Nordea 2 1,182.86 9.4 3 TD Securities 4 500.88 15.4 4 Citigroup 4 274.42 4.3 4 BNP Paribas 1 991.15 7.8 4 HSBC 3 499.19 15.3 5 JP Morgan 2 251.85 3.9 5 Credit Agricole 3 855.25 6.8 5 RBC 3 375.88 11.5 6 Deutsche Bank 3 243.44 3.8 6 SEB 1 746.21 5.9 6 CIBC 3 301.36 9.2 7 Goldman Sachs 2 238.97 3.7 7 JP Morgan 2 688.43 5.5 7 Natl Bank of Canada Fin’l 2 51.40 1.6 8 Credit Suisse 3 230.13 3.6 8 HSBC 1 505.57 4.0 8 Scotiabank 1 1.69 0.1 9 Agricultural Bank of China 3 217.63 3.4 9 Handelsbanken CM 1 408.54 3.2 =8 Echelon Wealth Partners 1 1.69 0.1 10 BNP Paribas 1 211.85 3.3 10 DNB 1 400.00 3.2 =8 Desjardins Securities 1 1.69 0.1 Total 14 6,425.70 Total 19 12,626.65 Total 6 3,262.24

Excluding equity-related debt. Including preferreds. Excluding equity-related debt. Including preferreds. Excluding equity-related debt. Source: Thomson Reuters SDC code: B06d Source: Thomson Reuters SDC code: K16 Source: Thomson Reuters SDC code: K2

SCIENTIFIC GAMES BRINGS EURO DEBUT The most recent gaming company out in this year to offer dollars alongside sterling the European high-yield market was and looks set to push dollar issuance back SCIENTIFIC GAMES sold a €575m dual-trancher Germany’s Loewen Play, which brought a out to longer maturities. last week to redeem US dollar debt - its €350m senior secured 2022 note at 5.375% The announcement says Nationwide will debut in the European high-yield market. despite concerns about the impact of explore issuance from its Silverstone master The company priced a €325m eight-year German gaming regulations. TRUSTûINûTHEûTWOûCURRENCIESûATûTHREEûTOûlVEû non-call three senior secured note at 3.375% The offering came in conjunction with a year maturities. and a €250m eight-year non-call three US$900m tap of the company’s 5% senior )TûWILLûALSOûCONSIDERûAûLONGER DATEDûlXEDû senior unsecured at 5.5%. secured notes due 2025, upsized from rate sterling tranche, likely targeting The secureds are rated Ba3/B+ while the US$500m. pension fund and insurance company unsecureds are rated Caa1/B-. The issuer is Deutsche Bank (B&D), JP Morgan, Bank of money. rated B2/B. America Merrill Lynch, Fifth Third, Credit Suisse, Last month Clydesdale Bank’s Lanark “They have some European businesses so Citizens, PNC, Macquarie and Goldman Sachs are 2-"3ûSOLDûAûSHORTûDOLLARûTRANCHEûATûJUSTû it made sense to match off European joint bookrunners. UNDERûTWOûYEARS ûASûWELLûASûAûlVE YEARû revenues with European debt,” said a sterling note. Pricing was 42bp over the banker on the deal. respective dollar and sterling Libor 3CIENTIlCû'AMESûDERIVEDûABOUTûûOFûITSû benchmarks. revenues from sales outside the US in 2016. 4HEûSOLEûDOLLARû5+û2-"3ûTOûBEûPRICEDûINû “Even pro forma for this deal, only 7% of STRUCTURED FINANCE 2017, Virgin Money’s Gosforth 2017-1, had their debt stacking is in euros, so it’s still used a similar structure, selling 1.87-year pretty low,” the banker added. dollars and 4.85-year sterling bonds. The company is an established US dollar EMEA MBS In 2016 Nationwide sold a three-currency borrower, with US$7.5bn of bonds outstanding, 3ILVERSTONEû2-"3 ûOFFERINGûDOLLARSûANDû ACCORDINGûTOû4HOMSONû2EUTERSûDATA SILVERSTONE EXPLORING MIX OF STERLINGûATûTHREEûYEARSûANDûEUROSûATûlVEû “Against a competitor set that has MATURITIES IN DOLLARS AND STERLING years. heightened regulatory and concentration The new deal has been mandated to RISKS û3CIENTIlCû'AMESûSTANDSûOUTûFORûITSûFREEû NATIONWIDE BUILDING SOCIETY announced a Barclays, BAML, Citi and HSBC. US and CASHûmOWûGENERATIONûANDûDIVERSIlCATION vû return to its SILVERSTONEûPRIMEû2-"3ûVEHICLEû London roadshow meetings are available CreditSights analysts wrote in a note. on Wednesday. The deal will be the second this week.

44 International Financing Review February 3 2018 BONDS STRUCTURED FINANCE

ALL EUROPEAN ISSUERS ALL INTL ISSUERS (EXCLUDING SELF-FUNDED) GLOBAL SECURITISATIONS IN STERLING BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%) bank or group issues US$(m) (%) bank or group issues £(m) (%) 1 Cooperatieve Rabobank 1 1,309.36 18.4 1 JP Morgan 8 2,293.95 12.4 1 Citigroup 3 531.28 24.0 =1 SG 1 1,309.36 18.4 2 BAML 6 1,741.02 9.4 2 BNP Paribas 3 507.47 23.0 3 Citigroup 3 806.44 11.4 3 Cooperatieve Rabobank 1 1,309.36 7.1 3 Lloyds Bank 4 464.49 21.0 4 BNP Paribas 3 766.94 10.8 =3 SG 1 1,309.36 7.1 4 JP Morgan 1 175.00 7.9 5 Lloyds Bank 4 717.42 10.1 5 Citigroup 6 1,206.08 6.5 5 HSBC 1 157.14 7.1 6 BAML 2 293.85 4.1 6 BNP Paribas 4 1,016.90 5.5 6 BAML 2 156.16 7.1 7 UniCredit 1 284.10 4.0 7 Wells Fargo 4 889.82 4.8 7 RBC 1 133.33 6.0 =7 DZ Bank 1 284.10 4.0 8 Credit Suisse 6 852.72 4.6 8 Natixis 1 84.91 3.8 =7 ING 1 284.10 4.0 9 Morgan Stanley 1 807.32 4.4 Total 6 2,209.78

=7 BBVA 1 284.10 4.0 10 BMO 3 794.92 4.3 Including Euro, foreign, global and domestics, excluding CDOs. Total 8 7,100.73 Total 29 18,524.48

Includes securitisations, credit-linked notes (Euro, foreign, global and Includes securitisations, PFI bonds and credit-linked notes. Excludes US Source: Thomson Reuters SDC code: B16i domestics) and excludes CDOs. global ABS/MBS, CDOs and self funded issues.

Source: Thomson Reuters SDC code: B16n Source: Thomson Reuters SDC code: J10d GLOBAL STRUCTURED FINANCE IN EUROS BOOKRUNNERS: 1/1/2018 TO DATE CLIFDEN NOT BACKING DOWN DESPITE CMBS deals, and there is also a third loan Managing No of Total Share PARATUS CALL included in the portfolio. bank or group issues €(m) (%) Deutsche Bank is lead manager. 1 Cooperatieve Rabobank 1 1,074.57 35.1 2EALûESTATEûINVESTORûCLIFDEN said on Monday =1 SG 1 1,074.57 35.1 THATûITSûHOSTILEûTENDERûOFFERûFORûLEGACYû2-!#û 3 UniCredit 1 229.12 7.5 bonds, part of a wider £2bn offer for non- EMEA ABS =3 BBVA 1 229.12 7.5 CONFORMINGû2-"3ûSERVICEDûBYû =3 DZ Bank 1 229.12 7.5 Fortress-backed PARATUS AMC, remains open. VW’S DRIVER ESPANA FIVE STEERS =3 ING 1 229.12 7.5 Earlier this year Clifden announced a SPREADS TIGHTER Total 2 3,065.60 tender for all bonds issued under the RMAC Includes securitisations, credit-linked notes (Euro, foreign, global and domestics) and excludes CDOs. and RMACS series. Paratus then said it would VOLKSWAGEN FINANCIAL SERVICE’s latest Spanish CALLûTHEû2-!#ûDEALSûONû-ARCHû ûTHEIRûNEXTû auto ABS took advantage of limited supply Source: Thomson Reuters SDC code: B16g INTERESTûPAYMENTûDATESû4HEû2-!#3ûDEALSû in euros to haul spreads to levels far inside are not yet callable. its previous deal from the country. both +/–1bp and to price in range. Clifden’s tender offer was widely seen as a Excluding leveraged loan CLO issuance, At the bottom of the capital structure is a bid to seize control of the special purpose the deal is just the second securitisation in €51m unrated subordinate tranche, which vehicles and their underlying mortgages EUROSûTHISûYEAR ûAFTERûõBNû$UTCHû2-"3û was retained. from Paratus. The decision to call by Paratus Storm 2018-I, which came in the second Distribution stats for the Class A showed was itself interpreted by market week of January. investors from Germany buying 37%, France participants as an attempt to prevent that The new issue, DRIVER ESPANA FIVE, was 28%, Spain 15%, the Benelux region 9%, the UK happening. priced on Tuesday. It sold seniors 2.8x 7% and others 4%. Asset managers accounted Monday’s statement by Clifden covered at a discount margin of plus 24bp, for 51%, banks 30%, CB/OI 11%, insurance and acknowledges the call announcement, but which is 14bp tighter than the plus 38bp pension funds 6% and others 2%. said the offer remained open, and restated print on the equivalent tranche from its May On the Class B, Benelux investors bought the timetable for the offer. 2017 transaction. 37%, France 20%, UK 19%, Italy 15%, The early tender deadline was January 26, The mezzanine notes came 6.2x Germany 5% and Spain 4%. Asset managers THEûlNALûDEADLINEûISû-ARCHû ûTHEûRESULTSûAREû subscribed at plus 54bp, compared with plus were 71% of the book and insurance and to be announced one day later on March 8, 75bp in May. pension funds 29%. and the settlement date is March 12, the Like the last deal, it was initially There are 106,189 loans in the portfolio, SAMEûDAYûASûTHEû2-!#ûDEALSûAREûDUEûTOûBEû announced at around €750m before an with an average discounted principal redeemed by Paratus. increase in size to around €1bn in total. The balance of €11,773. The WALs assume 4% Class A, rated Aa2/AA+ (M/S) and with a 1.71- delinquencies, 2% gross losses, 0.32% write- BLACKSTONE ITALIAN CMBS DUE year WAL, weighed in at €888m. It has OFF ûûCLEAN UPûCALLûEXERCISEDûANDûû#02 THIS WEEK coupon of one-month Euribor plus 40bp and The WA contract interest rates are 10.17%, was priced at 100.277. WA original term 57.84 months, WA remaining A two-day site visit for BLACKSTONE Italian The Class B is rated A2/AA– and sized at term 48.75 months, and WA seasoning 9.1 CMBS PIETRA NERA UNO ended on Friday and a €26m, for a 3.06-year WAL. It was priced at months. There are no balloon payments pricing is expected at the end of this week. par. securitised and no replenishment period. The capital structure is due out early this The deal was roadshowed the previous DZ and ING were joint leads. ING, DZ, WEEKû)TûWILLûSHOWûlVEûTRANCHESûOFûRATEDû week from Wednesday to Friday. On BBVA and UniCredit were placement agents. notes and one unrated Class Z. The notes Thursday IPTs were released at plus high 20s will have an initial expected maturity of on the senior notes and plus mid 60s on the LEASEPLAN TURNS TO FRANCE FOR May 2020, and there are three extension mezzanine. LATEST BUMPER AUTO LEASE ABS options of one year each. On Monday morning formal guidance was 4HEûDEALûRElNANCESûTWOûLOANSûCURRENTLYû plus 27bp area and plus 60bp area, later LEASEPLAN CORPûISûINûTHEûMARKETûWITHûITSûlRSTû securitised in outstanding Blackstone Italian RElNEDûTOûPLUSûBPûAREAûANDûPLUSûBP û public securitisation of auto leases from

International Financing Review February 3 2018 45 Life yet in US CMBS UNITED STATES Sector shows resilience in face of retail woes

New structures and increased vigilance has As such, the disruption in the sector pushed were also getting attention as were lower- helped US CMBS to withstand the retail sector investors to increase their focus on due- margin retailers, including those covering autos meltdown and players are looking forward to diligence, differentiate between collateral and and the pets business. another year of robust business with volumes then use it as an opportunity to grab some yield The industrial market is also seen as especially only a little below 2017’s tally. while the retail sector consolidates. attractive now, as e-commerce has positively Last year primary CMBS volumes exceeded The percentage that retail collateral in affected distribution centres and warehouses. expectations to touch US$85bn and while this new CMBS accounts for is now just 20%-25% And the approach has worked so far. Trepp year supply is projected at US$70bn this is down compared with much as 50% in previous years. data show CMBS delinquency rates in January to a smaller refinancing requirement rather than Clearly this reduction could affect the use of were 4.83%, a decrease of six points from retail woes. CMBS as a platform for a number of mall owners December. The rate has declined each month Those woes were caused partly by unbridled and REITs. since June 2017. In retail, the delinquency rate expansions and a sharp increase in the adoption “Limits [on collateral composition] make it difficult was 6.3%, higher than December’s 6.13% but of e-commerce driven by online giant Amazon, for issuers to fill out pools with the few remaining lower than 6.79% in November. that forced traditional retailers to significantly property types that investors readily accept,” said reshape their business models. Kevin Mammoser, senior vice-president at DBRS. STILL ENGAGED Top tenants and big-box retailers like SEARS, “This changed mindset on retail might not Short-sellers placed heavy bets against the retail MACY’S and JC PENNEY shut locations, and many impact overall CMBS volumes in 2018, however, sector via the CMBX 6 index in particular but the franchises filed for bankruptcy. because many of these concerns have already trade has not been very successful so far. And these headlines hit CMBS hard as many manifested in structures.” “Writers of insurance were already looking deals were heavily exposed to retail. at the risks of the CMBS pools much more “The incredibly negative CMBS market reaction CLEAR DIFFERENTIATION conservatively post-crisis, and this led them to the retail sector early last year or so was a “There is a tendency to paint the whole retail to charge accordingly – knowing some sort of knee-jerk reaction as investors became more sector with the same brush but increased unanticipated risk would emerge,” said Trepp fully aware of the risks,” said Alan Todd, CMBS research at deal launch and ongoing senior managing director Manus Clancy. strategist at Bank of America Merrill Lynch. surveillance provides investors the means to According to Clancy, Trepp thinks there is a But prices on Triple B minus and Double B differentiate within the sector,” said Huxley fairly even number of long versus shorts in CMBX. CMBX 6 and 7 series – that have substantial retail Somerville, head of US CMBS at Fitch Ratings. A December Trepp report noted only 40 retail concentrations – after hitting a low of 73–87 in Preference was being shown for malls that loans in deals tied to the CMBX 6 and 7 series the fourth quarter last year are now around 90. had a mix of high-scale restaurants, theatres have paid off, and four incurred losses totalling “The CMBS market has gone through a structural or establishments that got people out of their US$4.3m. shift in that spreads of deals that were most homes, into these malls and kept them there. Each of those notes disposed was in the 6 impacted by retail bankruptcies have repriced and Retail businesses such as furniture series while no losses were attributed to deals new deals are structured to satisfy the changed warehouses or grocery stores that still seemed tied to CMBX 7. investor mindset towards the sector,” Todd added. relatively unscathed by the rise in e-commerce Shankar Ramakrishnan

French subsidiary LeasePlan France. The The residual value component of the 2ETAILûCUSTOMERSûMAKEûUPû û3-%Sûû deal will be the 10th off the Bumper series, portfolio is high at 55%. LeasePlan France will and corporates 2.4%. The WA portfolio which has previously securitised assets from SERVEûASû26ûGUARANTOR ûMEANINGûITûWILLûPAYû interest rate is 14.23%. the Netherlands, the UK and Germany THEûDIFFERENCEûBETWEENûTHEûESTIMATEDû26û 4HEûDEALûISûEXPECTEDûTOûCLOSEûINûTHEûlRSTû BUMPER 10 is offering €483.2m Triple A amount and the amount actually realised. half of the year. notes with a 1.87-year WAL. The coupon is already set at one-month Euribor plus 40bp VW FINANCIAL SERVICES STRUCTURES and is expected to price above par. A €40.8m DRIVER TURKEY MASTER EMEA CLO Class B is also being offered, rated Aa3/AA and with a 2.81-year WAL. Turkish auto loan originator VOLKSWAGEN HSBC SYNTHETIC CLO METRIX A roadshow started on Friday and ends on DOGUS FINANSMAN, which is 51% owned by DOWNGRADED AFTER TAKING CARILLION HIT Tuesday with pricing expected later this Volkswagen Financial Services, is readying a week. The joint leads are BNP Paribas and SG. PRIVATEûPLACEMENTûOFûITSûlRSTûAUTOû!"3ûSMBC Moody’s has downgraded provisional ratings The portfolio has a one-year revolving Nikko is arranger and lead manager for the on an unfunded CDS from an HSBC CLO hit period. It pools 40,817 lease contracts with deal, DRIVER TURKEY MASTER S.A. by the collapse of Carillion. Carillion went an aggregate discounted balance of €653m. The securitisation is structured as a into liquidation in January. Diesel vehicles account for 94% of the leases. REVOLVINGûMASTERûVEHICLEû4HEûlRSTûISSUEûHASû The CLO is METRIX PORTFOLIO DISTRIBUTION PLC. Corporate customers make up 76% of the provisional ratings from Moody’s of Baa1 for Although the CLO was closed in 2015, the portfolio, with SMEs at 22% and government its Class A notes. These are sized at TL1.5bn Moody’s ratings on three of its CDS remain and retail making up the rest. WA seasoning (US$396m). There is also an unrated portion provisional because the swaps have not is 14.8 months and the WA remaining term of subordinate notes sized at TL440m. been executed. is 27.8 months. The top 10 lessees make up The initial portfolio holds 65,554 auto One swap was executed: a junior, unrated 17.1%. More than 99% are new vehicles. loans, with a new/used split of 94.7%/5.3%. layer sitting below the other three and sized to

46 International Financing Review February 3 2018 BONDS STRUCTURED FINANCE

US ASSET-BACKED SECURITIES GLOBAL STRUCTURED FINANCE IN US$ STRUCTURED FINANCE – ALL INTL ISSUERS BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%) bank or group issues US$(m) (%) bank or group issues US$(m) (%) 1 Citigroup 10 5,346.40 20.8 1 JP Morgan 22 7,076.71 13.4 1 JP Morgan 8 2,293.95 11.8 2 JP Morgan 10 2,941.43 11.4 2 Citigroup 17 7,003.83 13.3 2 BAML 6 1,741.02 8.9 3 BAML 8 2,604.00 10.1 3 BAML 16 4,725.51 9.0 3 Cooperatieve Rabobank 1 1,309.36 6.7 4 RBC 5 2,311.73 9.0 4 Morgan Stanley 8 4,066.76 7.7 =3 SG 1 1,309.36 6.7 5 MUFG 5 1,836.85 7.1 5 Wells Fargo 15 4,025.02 7.6 5 RBC 3 1,264.53 6.5 6 Deutsche Bank 7 1,478.17 5.8 6 Credit Suisse 11 3,673.29 7.0 6 Citigroup 6 1,206.08 6.2 7 Barclays 5 1,388.48 5.4 7 RBC 7 2,861.09 5.4 7 Wells Fargo 5 1,071.88 5.5 8 Mizuho 4 1,279.05 5.0 8 Goldman Sachs 10 2,812.41 5.3 8 BNP Paribas 4 1,016.90 5.2 9 BMO 4 1,171.67 4.6 9 Deutsche Bank 10 2,570.26 4.9 9 Credit Suisse 6 852.72 4.4 10 Wells Fargo 6 1,155.68 4.5 10 Nomura 7 2,528.85 4.8 10 Morgan Stanley 1 807.32 4.1 Total 31 25,703.53 Total 89 52,761.03 Total 31 19,456.52

Excludes MBS. Including securitisations (Euro, foreign, global and domestics, excluding Includes securitisations, PFI bonds, self-funded issues and credit-linked CDOs) and PFI bonds. notes. Excludes US global ABS/MBS and CDOs.

Source: Thomson Reuters SDC code: F14 Source: Thomson Reuters SDC code: B16b Source: Thomson Reuters SDC code: J10c

ABSORBûTHEûlRSTûûOFûLOSSESûONûTHEûUNDERLYINGû even as the broader market adjusted Net losses have ticked up recently in portfolio of US$5bn corporate loans. to an expected tick upwards in interest equipment ABS, which account for half of A loan to Carillion features in the rates. commercial ABS volume, and could rise in portfolio and its default hit that junior CDS, “The underlying credit fundamentals are 2018, but are likely to remain low and wiping out some of the support it provides very supportive of ABS at the moment but stable, said a S&P report last week. to the tranches above it. one of the drivers is the shorter maturities h#OMBINEDûWITHûTHEûUPCOMINGûSIGNIlCANTû That has caused Moody’s to downgrade on these tranches (WALs on the lowest-rated corporate tax rate reductions, we expect the US$375m Class C from Baa2 to Baa3 tranches are up to 3.5 years),” said one stable credit quality for the sector in 2018,” (both provisional). The Classes A and B are senior banker. the report said. NOTûAFFECTEDûANDûWEREûAFlRMEDûBYû-OODYS “With rates expected to rise, the investors S&P expects commercial ABS issuance seem to be adopting a defensive posture by volumes in 2018 of US$30bn-$35bn, in increasing their exposure to such short- line with US$31bn last year as real GDP US MBS dated securities.” and equipment investment are forecast Indeed many of the ABS last week priced to grow, given lower corporate rates US CMBS AND RMBS DEAL PRICINGS up to 10bp below their guidance levels, and the immediate expensing of which some bankers said was unique. equipment made possible under the Just one CMBS priced during the week. “You don’t typically see the kind of new tax code. pricing movements we now see in the “While this new code also limits non- FREDDIE MAC SPC K-I01 market,” said another banker. interest expense deductibility, we expect FREDDIE MAC priced a US$502.611m multi- .OTABLEûINûTHEûWEEKSûmOWûWASûSOCIAL the overall effect on commercial ABS FAMILYûmOATINGûRATEûAGENCYû#-"3ûCALLEDû FINANCE’s US$734.825m unsecured consumer volume to be tempered,” it said. FREMF SPC SERIES K-I01. Wells Fargo and JP Morgan loan ABS, which was increased in size from In focus next week and further testing are the joint bookrunners. an initial US$561.9m. demand for esoterics will be VANTAGE DATA Collateral: 21 subordinate liens backed by Four tranches were on offer and although CENTERS’ US$1.1bn ABS, which securitises 21 properties. the highest Double A rated tranche with a primarily real estate and tenant lease Largest tranche: Class A US$502.611m, 0.99-year WAL priced at the tight end of payments for space in six completed and with 3.81-year WAL, rated Triple A; priced at guidance at EDSF plus 50bp, the others operating wholesale data centres in Silicon one-month Libor plus 16bp. lower down the stack had spreads that were 6ALLEYûANDûTHEû0ACIlCû.ORTHWEST inside guidance. Guggenheim is structuring lead and 4HEûlNALûSPREADSûWEREûALSOûWAYûINSIDEûTHEû bookrunner with Barclays and Deutsche US ABS levels on the company’s November deal, Bank. which had a similar structure. SHORT-DATED ABS IN DEMAND The SCLP 2018-1’s Class Bs (rated A/A/A) with INVESTORS EMBRACE TESLA’S DEBUT a 4.28-year WAL priced at swaps plus 115bp or IN ABS MARKET 53û!"3ûmEWûOFFûTHEûSHELVESûANDûPRICEDûWAYû inside 120bp-130bp guidance, and 45bp below below guidance last week, spurring SCLP 2017-6’s Bs of 4.7 years at 150bp. Name recognition and a robust primary optimism about the fundamentals of the Similarly UNITED AUTO priced a US$171.73m market helped ensure an overwhelming various businesses securitising auto loans, sub-prime auto ABS transaction, which reception Thursday for investor darling unsecured consumer loans, equipment again priced inside guidance and where its TESLA’s debut auto-loan securitisation. receivables and data centres. last deal priced. As did WORLD OMNI, which Order books were 7.3 times the size of the Demand was strong across the board, increased the size on its deal to US$1bn US$546.05m transaction, again with particular attention being paid from US$801m. underscoring the buyside’s warm embrace to lower-rated tranches in the capital The pipeline includes equipment loans of the innovative electric-car maker. stack that had a bit more pick-up in and leases, and they could get a similar One tranche was nearly 19 times covered yield. And this enabled tight ABS pricing reception, said bankers. at the time of guidance, a market source

International Financing Review February 3 2018 47 said, though that had dropped to 13.4 times value of electric vehicles - what they may be and used automobiles, light-duty trucks, and after pricing was ratcheted in 15bp. worth once the leases expire. vans. “The transaction was met with robust “It seemed like many investors Largest tranche: Class A US$206.910m, investor enthusiasm, driven by the high- participated based on the novelty of the with 1.07-year WAL, rated Single A; priced at PROlLEûNAMEûANDûBROADûINTERESTûINûINAUGURALû collateral and name recognition of the EDSF plus 75bp. TRANSACTIONS vûONEûSYNDICATEûBANKERûTOLDû)&2 issuer,” said Peter Kaplan, portfolio manager The bulk of the deal was in the Class A at Merganser Capital Management. SOCIAL FINANCE US$422.61m Aaa rated tranche, which has a “However we felt that there were several SOFI priced an upsized US$734.825m 0.84-year weighted average life. It priced at AREASûOFûCONCERNû.AMELYûINSUFlCIENTûDATAû (increased from US$561.925m) unsecured EDSF plus 30bp, some way inside guidance on the residual values, a limited history of consumer loan ABS deal called SCLP 2018-1. of 40bp-43bp. ORIGINATINGûLEASESûBYûTHEûlNANCEûCOMPANYû û Structurer was Deutsche Bank and, alongside Orders for that piece were about and the fact that the sponsor is not Goldman Sachs, JP Morgan and Mizuho, joint US$2.3bn, making it 5.5 times covered, PROlTABLEv bookrunners. according to one source. Even though the deal is offering pick-up Collateral: Fixed-rate (98.7%) and variable- The Class Bs (Aa2) were 15.5 times over other auto ABS trades of late, “these rate (1.3%) unsecured consumer loans covered; the Class Cs (A2) 13.4 times levels didn’t provide enough compensation” Largest tranche: Class A1 US$397.1m, covered; the Ds (Baa2) 10.7 times; and the Es for the risks, he said. with 0.99-year WAL, rated AA/AA/AA+; (Ba3) 12.9 times, the source said. Joint bookrunners on the deal were priced at EDSF plus 50bp versus guidance at The large money managers that are Citigroup and Deutsche Bank who also acted as EDSF plus 50bp-55bp. traditional ABS buyers came to the deal with co-structurers. Direct comp: SCLP 2017-6 (11/07/17) Class as much as US$100m in single orders, A US$387.65m, with 0.99-year WAL; rated according to the source. US ABS DEAL PRICINGS AA/AA/AA+; priced at EDSF plus 57bp. “Broadly the market has been highly supportive for esoteric ABS deals,” said Gil Issuance activity in the US ABS market was TESLA FINANCE Libling, portfolio manager at Semper Capital red-hot last week, led by a stellar auto loan TESLAûPRICEDûAû!2EGû3û53MûNOû Management. ABS debut by Tesla. Continued strong grow) inaugural prime auto lease ABS “At its core this is an auto deal with an investor demand is encouraging more transaction called TESLA AUTO LEASE TRUST OVERLAYûOFûNUANCESûSPECIlCûTOû4ESLA ûWHICHû companies to come to the market. (TESLA) 2018-A via Citigroup and Deutsche Bank. makes it unique.” Below is a summary of ABS pricings last Collateral: Closed-end prime retail week. automobile leases originated by TFL. EXTRA COLLATERAL Largest tranche: Class A US$422.61m, The syndicate banker noted in particular GLOBAL LENDING SERVICES LLC with 0.84-year WAL, rated Triple A; priced at the deal’s credit enhancement, “which GLOBAL LENDING SERVICES PRICEDûAû!2EGû3û was more than what is seen in the US$266.450m sub-prime auto ABS deal, GLS wider group of auto lease ABS by prime AUTO RECEIVABLES TRUST (GCAR) 2018-1. Deutsche SECURITISATIONS – ALL EUROPEAN RMBS issuers”. Bank was structurer and, alongside Wells BOOKRUNNERS: 1/1/2018 TO DATE According to a Moody’s report the Fargo, joint books. Managing No of Total Share enhancement includes overcollateralization Collateral: Sub-prime retail automobile bank or group issues €(m) (%) of 10.20% of the initial pool balance, which instalment sales contracts secured by new 1 Cooperatieve Rabobank 1 1,074.57 24.2 will increase to 12.20%; a reserve fund of =1 SG 1 1,074.57 24.2 0.75% of pool balance; and 20.30% in GLOBAL CDOs 3 Citigroup 3 661.91 14.9 subordinated notes. BOOKRUNNERS: 1/1/2018 TO DATE 4 BNP Paribas 2 483.02 10.9 These levels will grow as the pool Managing No of Total Share 5 Lloyds Bank 3 437.24 9.8 amortises, which would act as additional bank or group issues US$(m) (%) 6 BAML 2 238.59 5.4 credit enhancement for all notes, the rating 1 Citigroup 4 1,962.10 65.5 7 JP Morgan 1 198.65 4.5 agency said. 2 Deutsche Bank 1 632.95 21.1 8 HSBC 1 178.89 4.0 The high credit quality of the lessees, who 3 Credit Suisse 1 402.38 13.4 9 Natixis 1 96.34 2.2 have a weighted average FICO score of 767, Total 6 2,997.42 Total 6 4,443.79 was another positive. Including Euro, foreign, global, US domestics. Including Euro, foreign, global and domestics, excluding CDOs. But Moody’s noted risks associated with the limited data available on the residual Source: Thomson Reuters SDC code: B12 Source: Thomson Reuters SDC code: B10a

NEW ASSET–BACKED SUMMARY DETAILS: WEEK ENDING 2/2/2018 Issuer Amount (m) WAL Coupon (%) Bookrunner(s) Rating Asset type Driver Espana Five €888 1.71 1mE+40bp ING/DZ Bank/BBVA/UniCredit Aa2/AA+/NR ABS Driver Espana Five €26 3.04 1mE+54bp ING/DZ Bank/BBVA/UniCredit A2/AA–/NR ABS GCAR 2018-1 US$206.91 1.07 2.820 Deutsche Bank/Wells Fargo NR/A/NR ABS GCAR 2018-1 US$34.98 3.03 3.520 Deutsche Bank/Wells Fargo NR/BBB/NR ABS GCAR 2018-1 US$24.56 3.36 5.020 Deutsche Bank/Wells Fargo NR/BB/NR ABS SCLP 2018-1 US$397.1 0.99 2.550 Deutsche Bank/Goldman Sachs/JP Morgan/Mizuho NR/AA/NR ABS SCLP 2018-1 US$177.65 2.83 3.140 Deutsche Bank/Goldman Sachs/JP Morgan/Mizuho NR/AA/NR ABS SCLP 2018-1 US$100.7 4.28 3.650 Deutsche Bank/Goldman Sachs/JP Morgan/Mizuho NR/A/NR ABS SCLP 2018-1 US$59.375 4.81 3.970 Deutsche Bank/Goldman Sachs/JP Morgan/Mizuho NR/NR/NR ABS

48 International Financing Review February 3 2018 BONDS STRUCTURED FINANCE

EDSF plus 30bp versus guidance at EDSF All the notes were sold at the respective plus 40bp-43bp and whispers at low-mid ASIA-PACIFIC MBS lowest accepted prices of 100.505, 100.493, EDSF plus 40bp. 100.755, 100.460 and 100.845. NAB SET FOR GREEN RMBS DEBUT !TûITSûlRSTûREVAMPEDû2-"3ûAUCTIONûONû UNITED AUTO CREDIT November 23, the AOFM raised A$394.5m UNITED AUTO priced a US$171.73m sub-prime NATIONAL AUSTRALIA BANK has released price from the sale of seven securities. It raised auto ABS transaction called UNITED AUTO CREDIT talk for an indicative A$750m securitisation !MûFROMûTHEûSECONDûAUCTIONûOFûlVEû SECURITIZATION TRUST (UACST) 2018-1. JP Morgan THROUGHû.ATIONALû2-"3û ûINCLUDINGû securities on December 14. (structuring lead) and Wells Fargo were joint THEûlRSTû'REENû2-"3ûTRANCHEûINû!SIAû0ACIlC In May 2015, the Australian government bookrunners. The self-led offering of Australian dollar ORDEREDûTHEû!/&-ûTOûSELLûDOWNûITSû2-"3û Collateral: Sub-prime auto loan 2-"3 ûDUEûTOûBEûLAUNCHEDûTHISûWEEK û holdings of A$4.6bn, in amortised face value receivables. includes Class A1G notes, expected to be terms, to lift its coffers and increase Largest tranche: Class A US$78.84m, with CERTIlEDûASûCLIMATEûBONDSûUNDERûTHEû#LIMATEû liquidity in these instruments. 0.54-year WAL, rated Triple A; priced at Bonds Initiative standards. The AOFM initially targeted monthly sales EDSF plus 35bp versus guidance at EDSF Guidance for the standard A$577.5m Class of A$300m–$500m in AFV terms, but, in June plus 37bp-39bp. A1A notes and the A$112.5m Class A1G ûRAISEDû!MûTHROUGHûTHEûlRSTû Direct comp: UACST 2017-1 (6/6/17) Class notes, each with a weighted-average life of auction and, in September, sold only A$78m. A US$69.2m, with 0.51-year WAL, rated 3.0 years, is 88bp area over one-month BBSW. In October 2015, the AOFM either Triple A; priced at EDSF plus 60bp. For the A$26.25m Class A2s, A$17.25m Class accepted no bids or received none before Bs, A$6m Class Cs, A$5.25m Class Ds, A$3m cancelling planned November and WORLD OMNI Class Es and A$2.25m Class Fs, all with 5.7-year $ECEMBERûAUCTIONSûANDûlNALLYûABANDONINGû WORLD OMNI priced an upsized US$1bn WALs, respective price talk is one-month BBSW the initial programme in February 2016. (from US$800.97m) prime auto loan ABS plus 135bp area, 185bp area, 235bp area, 335bp The AOFM, saying the auction revival deal for WORLD OMNI FINANCIAL (WOART 2018-A). area, 455bp area and 575bp area. REmECTEDûTHEûIMPROVEMENTûINû2-"3ûMARKETû Joint leads were Wells Fargo (structuring), conditions, made three key changes to the Bank of America Merrill Lynch, Mitsubishi-UFG, RMBS AUCTION RAISES A$361.6m process. and Suntrust. It now discloses a reserve price and no Collateral: Prime retail auto loan The AUSTRALIAN OFFICE OF FINANCIAL MANAGEMENT longer gives notice of the forward auction receivables. raised A$361.6m from last Tuesday’s third pipeline, while the level sold is the amount One of the largest tranches: Class A3 AUCTIONûUNDERûITSûREVAMPEDû2-"3û offered at or above the reserve price, subject US$272m, with 2.65-year WAL, rated Triple disinvestment policy. TOûSUFlCIENTûVOLUME A; priced at Interpolated swaps plus 12bp The AOFM sold A$126.5m of the Apollo Between 2008 and 2013, the AOFM versus guidance at swaps plus 14bp-16bp. 2010-1 A2 notes, A$91.3m of the Puma P-16 supported the country’s mortgage market in $IRECTûCOMPû7/!24û "û û !ûNOTES û!MûOFûTHEû2EDSû û!û earmarking a total of A$20bn for purchases Class A-3 US$229m, with 2.95-year WAL; notes, A$13.5m of the Torrens 2010-1 A notes OFûNON MAJORûBANK ORIGINATEDû2-"3 û rated Triple A; priced at plus 22bp. and A$48.4m of the Torrens 2011-2 A2 notes. eventually buying A$15.5bn.

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International Financing Review February 3 2018 49 GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 2/2/2018 Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%) SSAR US DOLLARS Jan 30 2018 KBN US$700m Mar 12 2021 3mL+4 100 3mL+4 -

Jan 31 2018 NWB US$1bn Aug 9 2019 3mL+2 -

Feb 1 2018 EDC US$1bn Feb 10 2020 2.3 99.988 MS-4, 2.306 T+15.65 EUROS Jan 29 2018 CEDB €250m incr Oct 27 2022 0.375 100.935 MS-26, 0.176 (€1.25bn) B+21.3 Jan 30 2018 The EU €2.4bn Apr 4 2025 0.5 99.692 MS-23, 0.544 B+21.2

Jan 30 2018 FADE €1.5bn Mar 17 2023 0.5 99.529 BONOs+15 0.594

Jan 30 2018 NRW €400m incr Feb 16 2043 1.45 95.966 MS+8, 1.648 (€900m) B+45.1 Jan 30 2018 SFIL €1bn Feb 6 2026 0.75 99.483 OATs+20 0.817

Jan 31 2018 EIB €250m incr Nov 13 2037 0.5 86.039 MS-18.5, 1.306 (€1.25bn) B+27.5 Jan 31 2018 CDP €750m Feb 7 2026 1.875 99.845 MS+103 1.896

STERLING Jan 30 2018 EIB £500m incr Sep 21 2026 1 95.031 G+26 1.616 (£1.5bn) Jan 30 2018 Muni Fin £350m Dec 7 2022 1.25 99.758 G+33 1.298 NON CORE Jan 24 2018 NRW.BANK A$30m incr May 8 2028 3.5 99.314 ASW+70, 3.58 (A$160m) ACGB+77 Jan 26 2018 KfW (Green) SKr5bn Feb 2 2028 1.375 - - -

Jan 29 2018 BNG A$200m incr Jul 17 2028 3.3 98.026 ASW+60, 3.528 (A$630m) ACGB+68.25 Jan 30 2018 Queensland A$2bn Feb 7 2022 3mBBSW+14.5 100 3mBBSW+14.5

Jan 30 2018 Queensland A$500m incr Jul 21 2028 3.25 99.297 EFP+46, 3.33 (A$2.848bn) ACGB+46.5

Jan 30 2018 NTTC A$70m incr Nov 21 2042 4.1 98.124 ACGB+90 4.223 (A$225m) Jan 30 2018 AfDB A$360m Aug 8 2028 3.35 99.737 ASW+45, 3.38 ACGB+51.75 Jan 30 2018 Ontario C$750m incr Jun 2 2027 2.6 97.883 GOC+57 2.866 (C$7.65bn) Jan 31 2018 Manitoba C$300m incr Sep 5 2048 3.4 104.823 GOC+77.5 3.153 (C$1.8bn) Feb 1 2018 ADB A$500m Aug 8 2028 3.3 99.868 ASW+43, 3.315 ACGB+49.5 Feb 1 2018 EDC A$125m incr Oct 24 2022 2.7 99.834 ASW+30, 2.738 (A$1bn) ACGB+42.25 Feb 1 2018 NIB SKr500m May 12 2025 1.05 - - - Feb 1 2018 KBN A$50m incr Jul 24 2028 3.4 99.433 ASW+57, 3.465 (A$250m) ACGB+64.875 Feb 2 2018 Rentenbank A$50m incr Apr 12 2028 3.25 99.269 ASW+44, 3.35 (A$575m) ACGB+50 Feb 2 2018 KBN NZ$100m incr Jun 7 2023 3.375 100.725 MS+44, 3.226 (NZ$200m) NZGB+80.05 Feb 2 2018 NIB NZ$375m incr Jan 19 2023 3 99.685 MS+34, 3.069 (NZ$775m) NZGB+63.9

50 International Financing Review February 3 2018 BONDS SUMMARY DETAILS

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

3mL+5 area (I), - - Aaa/AAA Citi/JPM/TD EMEA 44%, N.Amer 21%, Latam 20%, 3mL+5 area (G) Asia 15%. CB/OI 52%, Bks 30%, AM 18%. 3mL+2 area (I), - - Aaa/AAA BAML/Nomura/RBC - 3mL+2 area (G) MS-4 area (I), - - Aaa/AAA Citi/GS/RBC - MS-4 area (G)

MS-26 -1 - Aa1/AA+/AA+ Baec/CMZ -

MS-20 area, 2 >€4.75bn, >115 acs Aaa/AA/AAA Barc/CMZ/HSBC/Uni UK 27%, Benelux 25%, Ger/Aus 14%, MS-22 area Nordics 11%, Asia 9%, Fr 7%, It 4%, Other 3%. FM/AM 41%, CB/OI 33%, Bks 25%, Ins 1%. BONOs+high teens, - >€2.5bn -/BBB+/A-/AL BBVA/Citi/HSBC/Santan Iberia 33%, Fr 18%, Ger/Aus 15%, MEA BONOs+17 area 10%, UK/Ire 6%, Switz 6%, RoEur 12%. FM 46%, Ins/PF 21%, CB/OI 17%, Bks/ PB 16%. MS+8 area - >€440m Aa1/AA-/AAA Citi/CMZ/HSBC/JPM -

OATs+24 area, 0 >€1.8bn, 55 acs Aa3/AA/AA- BNPP/HSBC/JPM/LBBW/NatWest Ger/Aus 39%, Fr 32%, UK 14%, It 12%, OATs+22 area Benelux 2%, Other 1%. Bks 74%, AM 23%, Ins 3%. - - - Aaa/AAA/AAA DZ -

- - - Baa2/BBB/BBB/ IMI/CS/DB/JPM/Medio/MS It 45%, Fr 28%, Iberia 13%, Ger/Aus Scope A- 5.5%, Switz 4.5%, UK 3%, Other 1%. AM 47%, Bks/PB 44%, Ins 8%, Other 1%.

G+28 area, - >£1.1bn Aaa/AAA/AAA BAML/DB/HSBC/TD - G+27 area G+35 area - >£480m Aa1/AA+ Nomura/RBC/Scotia -

ASW+70 - - Aaa/AAA/AAA TD -

- - - Aaa/AAA/Scope SEB - AAA ASW+60 Aaa/AAA/AA+ DB/RBC -

3mBBSW+14.5/16.5 Aa1/AA+/- ANZ/CBA/NAB/UBS AU 83%, Asia 10%, EMEA 7%. Bks 79%, OIs 16%, AM 3%, trading 2%. EFP+45/47 Aa1/AA+/- ANZ/CBA/NAB/UBS AU 59%, Asia 25%, US 15%, EMEA 1%. Trading 49%, AM/Ins 18%, Bks 17%, HF 16%. ACGB+90 Aa2/-/- UBS

ASW+45 area Aaa/AAA Daiwa

- - - Aa2/A+/-/AAL Scotia -

- - - Aa2/A+/-/AH BMO/CIBC/TD -

Aaa/AAA/AAA Miz

ASW+30 Aaa/AAA/- Nom

- - - Aaa/AAA Danske - Aaa/AAA RBC

ASW+44 Aaa/AAA/AAA DB

MS+44 Aaa/AAA/AAA CBA/TD

MS+34 Aaa/AAA/AAA ANZ/BNZ

International Financing Review February 3 2018 51 GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 2/2/2018 (CONTINUED) Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%) CORPORATES US DOLLARS Jan 29 2018 Constellation Brands US$600m Feb 15 2023 3.2 99.91 T+72 3.22

Jan 29 2018 Constellation Brands US$700m Feb 15 2028 3.6 99.81 T+92 3.623

Jan 29 2018 Constellation Brands US$600m Feb 15 2048 4.1 99.66 T+117 2.95

Jan 29 2018 FedEx US$500m Feb 15 2028 3.4 99.81 T+72 3.423

Jan 29 2018 FedEx US$1bn Feb 15 2048 4.05 99.58 T+112 4.074

Jan 29 2018 MidAmerican Energy US$700m Aug 1 2048 3.65 99.13 T+75 3.698

Jan 31 2018 American Homes 4 Rent US$500m Feb 15 2028 4.25 99.44 T+158 4.319

Jan 31 2018 Hubbell Inc US$450m Feb 15 2028 3.5 99.44 T+83 3.567

Jan 31 2018 National Rural Utilities US$700m Feb 7 2028 3.4 99.71 T+70 3.435 Cooperative Finance Corp Jan 31 2018 United Airlines (Class AA) US$677.175m Mar 1 2030 3.5 100 0.04 3.5

Jan 31 2018 United Airlines (Class A) US$257.965m Mar 1 1930 3.7 100 0.04 3.7

Feb 1 2018 Canadian National Railway US$300m Feb 3 2020 2.4 99.96 T+25 2.419 Co Feb 1 2018 Canadian National Railway US$600m Feb 3 2048 3.65 98.97 T+70 3.701 Co Feb 1 2018 Comcast Corp US$1bn Mar 1 2028 3.55 99.65 T+80 3.59

Feb 1 2018 Comcast Corp US$1.2bn Mar 1 2038 3.9 99.52 T+90 3.935

Feb 1 2018 Comcast Corp US$1bn Mar 1 2048 4 98.19 T+107 4.105

Feb 1 2018 Crane Co US$350m Mar 15 2048 4.2 99.99 T+120 4.2 Feb 1 2018 Enterprise Products US$750m Feb 15 2021 2.8 99.95 T+50 2.819 Operating Feb 1 2018 Enterprise Products US$1.25bn Feb 15 2048 4.25 99.87 T+125 4.258 Operating Feb 1 2018 Enterprise Products US$700m Feb 15 2078 5.375 100 0.05 5.375 Operating Feb 1 2018 IBM Credit US$450m Feb 5 2021 3mL+16 100 3mL+16 3mL+16

Feb 1 2018 IBM Credit US$800m Feb 5 2021 2.65 99.95 T+35 2.667

Feb 1 2018 IBM Credit US$750m Feb 6 2023 3 99.96 T+45 3.011

EUROS Jan 30 2018 Alliander €500m Perpetual (Jun 2025) 1.625 99.144 MS+95.2, 1.75 B+142.1

Jan 30 2018 S IMMO €100m Feb 6 2024 1.75 99.718 MS+117.4, 1.8 B+160.6

Jan 30 2018 S IMMO €50m Feb 6 2030 2.875 100 MS+165, 2.875 B+219.2

Jan 31 2018 SIAS €550m Feb 8 2028 1.625 98.844 MS+70, 1.752 B+113.6

Feb 1 2018 Acea €300m Feb 8 2023 3mE+37 100 3mE+37 -

Feb 1 2018 Acea €700m Jun 8 2027 1.5 98.138 MS+70, 1.718 B+113

52 International Financing Review February 3 2018 BONDS SUMMARY DETAILS

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

T+85 area, -1 US$6.4bn Baa3/BBB- BAML/JPM - T+75 (+/-3) T+110 area, 0 $6,400 total Baa3/BBB- BAML/JPM - T+95 (+/-3) T+135 area, 0 $6,400 total Baa3/BBB- BAML/JPM - T+120 (+/-3) T+90 area, -1 US$2.7bn Baa2/BBB BAML/Citi/GS/JPM/MS - T+75 (+/-3) T+130 area, -1 US$3.2bn Baa2/BBB BAML/Citi/GS/JPM/MS - T+115 (+/-3) T+90/95, -3 US$1.9bn Aa2/A+/A+ Barc/BNPP/Scotia/USB/WFS - T+78 (+/-3) T+180 area, debut US$1.6bn Baa3/BBB- BAML/Citi/JPM - T+160 (+/-2) T+100 area, 3 US$1.4bn Baa1/BBB+/A- BAML/HSBC/JPM - T+85 (+/-2) T+85 area, 4 US$1.6bn A1/A/A+ Key/JPM/Miz/PNC/STRH - T+75 (+/-5) 3.70% area, N/A US$1.4bn Aa3/AA CIT/CS/GS(a)DB/MS/Barc/BAML/ - 3.55% (+/-5) BNP/CA-CIB/JPM/SCB/WFS 3.90% area, N/A US$700m A2/A CIT/CS/GS(a)DB/MS/Barc/BAML/ - 3.75% (+/-5) BNP/CA-CIB/JPM/SCB/WFS T+30/35, 3 US$800m A2/A BAML/Citi/RBC - T+25 (the #) T+80/85, 3 US$1.3bn A2/A BAML/Citi/RBC - T+70/72 T+95/100, 3 US$3.3bn A3/A-/A Barc/TD/WFS - T+83 (+/-3) T+110 area, 4 US$3.3bn A3/A-/A Barc/TD/WFS - T+93 (+/-3) T+125 area, 6 US$3bn A3/A-/A Barc/TD/WFS - T+110 (+/-3) T+145/150 0 US$1.9bn Baa2/BBB JPM/WFS - T+65/70, 0 US$2bn Baa1/BBB+/BBB+ BAML/JPM/Scotia/DB(a)MS/TD/ - T+55 (+/-5) SG/DNB(p) T+140/145, 2 US$3.55bn Baa1/BBB+/BBB+ BAML/JPM/Scotia/DB(a)MS/TD/ - T+130 (+/-5) SG/DNB(p) 5.625% area, N/A US$2.15bn Baa2/BBB-/BBB- BAML/JPM/Scotia/DB(a)MS/TD/ - 5.375% (the #) SG/DNB(p) 3mL equiv, FRN US$625m A1/A+/A+ BNP/JPM/Santan/USB - 3mL equiv T+45bp area, 3 US$1bn A1/A+/A+ BNP/JPM/Santan/USB - T+37 (+/-2) T+55 area, 3 US$1.15bn A1/A+/A+ BNP/JPM/Santan/USB - T+47 (+/-2)

2%/2.125%, - - A2/A ING/MS/MUFG/Rabo - 1.75%/1.875%, 1.75% 2% area(I), - >€150m combined, >75 - Erste - 2% area(G), acs 1.875% (+/-12.5), 1.75% (cpn) 3% area(I), - >€150m combined, >75 - Erste - 3% area(G), acs 2.875% MS+85/90, 0 >€1.9bn Baa2/-/BBB+ JBs BNPP/IMI/JPM/Medio/Uni, + Fr 26%, UK/Ire 25%, Ger/Aus 22%, It MS+70/75 Barc/BBVA/Citi/CA-CIB/DB/MS/ 14%, Benelux 5%, Switz 3%, Nordics 2%, Nomura/Santan Iberia 2%, Other 1%. FM/AM 75%, Ins/ PF 19%, Bks/PB 6%. 3mE+50/+55, 0 >€1.1bn Baa2/-/BBB+ IMI/BNPP/CA/Citi/DB/Medio/Natx/ Iberia 24%, Fr 23%, It 22%, Ger/Aus 3mE+40 (+/-3) SG/UBI/Uni 17%, UK/Ire 8%, Switz 2%, Nordics 1%, Benelux 1%, Other 2%. FM 81%, Bks/CB 12%, Ins./PF 3%, Other 4%. MS+80 area, 5 >€1.1bn Baa2/-/BBB+ IMI/BNPP/CA/Citi/DB/Medio/Natx/ Fr 31%, UK/Ire 30%, Ger/Aus 20%, Switz MS+70/75 SG/UBI/Uni 4%, Nordics 4%, It 3%, Benelux 2%, Iberia 1%, Other 5%. FM 65%, Ins/PF 23%, Bks/CB 12%.

International Financing Review February 3 2018 53 GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 2/2/2018 (CONTINUED) Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)

Feb 1 2018 Ford €500m Feb 7 2025 1.355 100 MS+60, 1.355 B+100.9 Feb 1 2018 Ford €750m Dec 7 2022 3mE+42 100 DM+42 -

Feb 1 2018 Prosegur Compañía de €700m Feb 8 2023 1 99.56 MS+62, 1.091 Seguridad B+109.6 Feb 2 2018 Bevco Lux €800m Feb 9 2023 1.75 99.366 MS+140, 1.884 B+187.8 STERLING Jan 31 2018 Wellcome Trust £750m Feb 7 2118 2.517 100 G+80 2.517 Feb 2 2018 VW FS £300m Jun 9 2022 1.625 99.559 G+75 1.725

SWISS FRANCS Jan 29 2018 AMAG Leasing SFr150m Feb 12 2023 0.55 100.04 MS+52, 0.542 Eidg+93.3 Feb 2 2018 AMAG Leasing SFr100m Feb 12 2020 0.05 100 MS+50.8 0.05

NON CORE Jan 29 2018 RioCan REIT C$300m Sep 29 2023 3.209 99.995 OTC+105 3.209 Jan 30 2018 BMW Canada C$200m Feb 6 2020 3mCDOR+10 100 3mCDOR+10 - Jan 30 2018 BMW Canada C$300m Aug 6 2021 2.57 99.97 OTC+59 2.579 Feb 1 2018 Castellum SKr525m Aug 12 2020 3mSt+80 100 3mSt+80 - Feb 2 2018 Vasakronan SKr300m Mar 1 2024 3mSt+72 100 3mSt+72 - FINANCIALS US DOLLARS Jan 26 2018 Canadian Imperial Bank of US$750m Feb 2 2021 2.7 99.87 T+50 2.744 Commerce Jan 26 2018 Canadian Imperial Bank of US$600m Feb 2 2021 3mL+31.5 100 3mL+31.5 3mL+31.5 Commerce Jan 26 2018 SunTrust Bank US$750m 3NC2 2.59 100 T+48 2.59

Jan 26 2018 SunTrust Bank US$500m Feb 2 2023 3 99.66 T+60 3.073

Jan 29 2018 JPMorgan Chase Bank US$1.25bn 3NC2 2.604 100 T+48 2.604

Jan 29 2018 JPMorgan Chase Bank US$1bn 3NC2 3mL+29 100 3mL+29 3mL+29

Jan 31 2018 Bank of America Corp US$1.5bn 8NC7 3mL+77 100 3mL+77 3mL+77 Jan 31 2018 Discover Bank US$800m Feb 6 2023 3.35 99.99 T+82 3.352

Feb 1 2018 ERP Operating LP US$500m Mar 1 2028 3.5 99.4 T+80 3.571

EUROS Jan 31 2018 Nordea €1bn Feb 7 2022 3mE+50 101.506 DM+13 -

Feb 1 2018 Santander (T2) €1.25bn Feb 8 2028 2.125 99.555 MS+110, 2.175 B+147.4

STERLING Feb 1 2018 Just Group £230m Feb 7 2025 3.5 99.883 G+225 3.519

SWISS FRANCS Jan 31 2018 ANZ NZ SFr200m Oct 22 2024 0.35 100.225 MS+13, 0.316 Eidg+57 NON CORE Jan 30 2018 Newcastle BS A$225m Feb 6 2023 3mBBSW+140 100 3mBBSW+140 - Jan 30 2018 Suncorp A$200m Feb 5 2019 3mBBSW+35 100 3mBBSW+35 - Jan 26 2018 Rabobank (NZ Branch) NZ$100m Feb 2 2023 3.375 99.62 MS+73 3.459 Jan 29 2018 TD C$1bn Jul 31 2019 3mCDOR+5 100 3mCDOR+5 - Jan 29 2018 NBC (sub) C$750m Feb 1 2028 (Feb 2023) 3.183 100 OTC+108 3.183 Jan 30 2018 Rabobank Rmb500m Feb 8 2021 4.3 100 - 4.3 Jan 31 2018 Central One Credit Union C$350m Feb 5 2021 3mCDOR+35 100 3mCDOR+35 - Jan 31 2018 Scotiabank C$2bn Feb 2 2028 3.1 - OTC+80 - Feb 1 2018 CIBC Feb 7 2020

54 International Financing Review February 3 2018 BONDS SUMMARY DETAILS

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

MS+70/75, 5 Baa2/BBB/BBB BNPP/DB/HSBC/SG (a), CMZ/Uni(p) - MS+60/65 DM+60 area, 0 Baa2/BBB/BBB BNPP/DB/HSBC/SG (a), CMZ/Uni(p) - DM+45 (+/-3) MS+85/90, - €3.25bn -/BBB GCs Barc/Santan, +BBVA/BNPP/ - MS+65 (+/-3) DB/GS. MS+150 area - >€2.1bn -/BBB- GCs BNPP/Citi, JBs BAML/DB -

G+85 area 3 c.£3.3bn Aaa/AAA JPM - G+80/85, 8 >£500m A3/BBB+ DB/HSBC - G+75/80

MS+50/55, 0 SFr150m, 51 acs CS mid BBB/ZKB CS Switz 100%. AM 67%, Ins 14%, Retail/PB MS+52 area BBB- 13%, PF 7%. MS+51 area 0 - CS mid BBB/ZKB CS/ZKB - BBB-

OTC+110 (+/-5) - - -/BBB/-/BBBH BMO/RBC/TD - 3mCDOR+11 (+/-2) - - A1/A+ CIBC/RBC - OTC+61 (+/-3) - - A1/A+ CIBC/RBC - - - - - Danske - - - - - Danske -

T+60bp area, 6 US$1bn A1/A+/AA- BAML/CIBC/Citi/DB/WFS - T+50 (the #) 3mL equiv, FRN US$800m A1/A+/AA- BAML/CIBC/Citi/DB/WFS - 3mL equiv T+65 area, 5 US$1.2bn Baa1/A-/A- CS/GS/STRH/UBS - T+50 (+/-2) T+75 area, 6 US$1bn Baa1/A-/A- CS/GS/STRH/UBS - T+60/62/5 T+55 area, 2 - Aa3/AA- JPM - T+50 (+/-2) 3mL+36 area, FRN - Aa3/AA- JPM - 3mL equiv 3mL+80 area FRN US$2.4bn A3/A-/A BAML - T+100 area, 5 US$2.5bn Baa3/BBB/BBB+ BAML/Citi/DB - T+85 (+/-3) T+hi 90s, 5 US$1.35bn A3/A-/A- DB/JPM/UBS - T+85 (+/-5)

DM+20 area, 1 >€1.6bn, >110 acs Aa3/AA-/AA- BNPP/DB/JPM/Nordea Ger/Aus/Switz 38%, Fr 26%, S.Eur 10%, DM+15 (+/-2) UK/Ire 9%, Nordics 5%, Asia 1%, Other 11%. AM 45%, Bks 37%, CB/OI 10%, Ins 5%, Corp 3%. MS+125 area 3 >€2.3bn Baa2/BBB/BBB+ Barc/Natx/Santan/SG Fr 27%, Nordics 13%, Ger/Aus 13%, UK/ Ire 13%, It 11%, Iberia 10%, Switz 6%, Benelux 4%, Other 3%. AM 67%, Ins/PF 19%, CB/OI 9%, Bks/PB 5%.

G+262.5 area, - >£1.3bn -/-/A ABN/Barc/NatWest - G+237.5/250

MS+13 area 0 SFr200m, 58 acs A1/AA-/AA- CS/UBS Switz 100%. AM 38%, Ins 32.5%, PB 15.5%, PF 14%.

3mBBSW+145 area - - A3/BBB/- NAB/WBC - 3mBBSW+35 area - - A1/A+/A+ ANZ - MS+73 area - - Aa2/A+/AA- CBA/Rabo/TD - 3mCDOR+6 area - - Aa2/AA/AA- TD - OTC+110 (+/-3) - - Baa3/-/BBB/BBBH NBC - 4.30% - Aa2/A+/- StCh - 3mCDOR+37 (+/-2) - - -/A-/-/AH RBC/TD - OTC+83 (+/-3) - - A1/A+/AA- Scotia - 3mCDOR+8 area - - A1/A+/AA-/AA CIBC -

International Financing Review February 3 2018 55 GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 2/2/2018 (CONTINUED) Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%) COVERED BONDS EUROS Jan 29 2018 Bankinter €500m Feb 7 2028 1.25 100 MS+18, 1.25 B+56.6

Jan 29 2018 La Banque Postale €750m Feb 7 2028 0.875 98.938 MS-8, 0.987 B+36.7

Jan 30 2018 Deutsche Hypotekenbank €250m incr Apr 20 2022 0.125 99.9 MS-18, 0.149 (€750m) B+31.4 Jan 30 2018 Rabobank €1.25bn Feb 8 2028 0.875 99.137 MS-10, 0.966 B+28.6

Feb 1 2018 Helaba €750m Feb 8 2024 0.375 99.669 MS-20, 0.431 B+21.7

Feb 1 2018 Sparkasse Pforzheim Calw €250m Feb 8 2023 0.25 99.599 MS-15 0.331 HIGH YIELD US DOLLARS Jan 26 2018 Hunt Companies US$600m Feb 15 2026 (Feb 2022) 6.25 100 0 6.25 Jan 29 2018 Viking Ocean Cruises US$275m Sep 15 2027 5.875 100.5 T+310 5.791 Jan 29 2018 Viking Ocean Cruises US$675m Feb 15 2028 (Feb 2023) 5 100 T+231 5 Jan 30 2018 Western Digital Corporation US$2.3bn Feb 15 2026 4.75 100 T+205 4.75 Jan 31 2018 Scientiﬁc Games US$900m Oct 15 2025 (Oct 2020) 5 100 T+229 5

Jan 31 2018 Shelf Drilling Holdings US$600m Feb 15 2025 (Feb 2022) 8.25 100 T+557 8.25 Jan 31 2018 American Woodmark Corp US$350m 46096 4.875 100 T+216 4.875 Feb 1 2018 Indigo Natural Resources US$650m Feb 15 2026 (Feb 2021) 6.875 100 - 6.875 Feb 1 2018 JBS USA US$900m Feb 15 2028 (Feb 2023) 6.75 100 T+396 6.75 Feb 1 2018 Oceaneering International US$300m Feb 1 2028 6 100 T+323 6 Feb 1 2018 MPC Container Ships US$100m incr Sep 22 2022 3mL+475 99.25 - - (US$200m)

EUROS Jan 30 2018 Infopro (IPD 3 BV) €150m incr Jul 15 2022 (Jul 2019) 4.5 102.75 B+388 3.818 (€475m) Jan 31 2018 Scientiﬁc Games (secured) €325m Feb 15 2026 (Feb 2021) 3.375 100 B+292 3.375

Jan 31 2018 Scientiﬁc Games (unsecured) €250m Feb 15 2026 (Feb 2021) 5.5 100 B+505 5.5

Jan 31 2018 Albea €150m Jun 30 2024 (Feb 2020) 6.75 100 B+651 6.75

Feb 2 2018 Sunborne €50m Feb 9 2023 (Feb 2021) 3mE+485 100 3mE+485 - Feb 2 2018 KME AG €300m Feb 1 2023 (Feb 2020) 6.75 98.953 B+693 7

SWISS FRANCS Jan 29 2018 Rallye SFr10m incr Feb 8 2024 3.25 100 - 3.25 (SFr95m) NON CORE Jan 30 2018 Superior Plus C$220m Aug 27 2025 (Feb 2021) 5.125 100 GOC+287.5 5.125 Feb 2 2018 Ellevio SKr3bn Feb 12 2025 2.875 99.345 MS+190 2.98

56 International Financing Review February 3 2018 BONDS SUMMARY DETAILS

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

MS+mid 20s, 1 €1.5bn Aa2/A+ Bankinter/DB/HSBC/Santan/SG Ger/Aus 26%, Iberia 18%, Benelux 17%, MS+20 (+/-2) Fr 10%, UK/Ire 9%, It 9%, Nordics 4%, ME 4%, Switz 3%, Other 1%. FM 40%, Bks/PB 26%, CB/OI 19%, Ins/PF 14%, Other 1%. MS-4 area, 2 >€1.1bn -/AAA CA/CMZ/LBBW/NWM/SG Fr 53%, Ger/Aus 36%, Nordics 4%, MS-7 (+/-1) Benelux 3%, Other 4%. CB/OI 57%, Bks/ PB 19%, Ins 14%, AM 9%, Other 1%. MS-17 area 0 >€300m, >20 acs Aa1 BLB/CA-CIB/CMZ/DZ/NordLB Ger 82%, Asia 10%, Switz 8%. CB/OI 62%, Bks 21%, FM 10%, Ins/PF 7%. MS-7 area - >€1.7bn, c.60 acs Aaa CS/HSBC/Rabo/Uni Ger/Aus 44%, Benelux 34%, Asia 7%, Switz 5%, UK 5%, Fr 3%, Nordics 1%, Other 1%. CB/OI 53%, Ins/PF 18%, Bks/ PB 17%, AM 12%. MS-18 (+/-2) 1 c.€900m, >40 acs -/-/AAA ABN/Erste/Helaba/Natx/SG Ger/Aus 79%, UK/Ire 13%, Benelux 3%, Asia 2%, Switz 2%, Other 1%. CB/OI 47%, Bks/PB 41%, FM 11%, Ins 1%. MS-15 area - - -/-/AAA LBBW -

6.125%/6.25% - - B2/BB- Jeff/JPM/HFS - - - - B3/B BAML/WFS/CS - - - - Ba2/BB- BAML/WFS/CS - 4.625% area - - Baa3/BB+/BB+ BAML/JPM/RBC/Miz/WFS - $99.5-100.00 - - Ba3/B+ JPM/DB/BAML/FT/CS/Citi/PNC/ - MQB/GS 8.25%/8.5% - - B2/B- CS/HSBC/JPM/RBC - 5% area - - Ba3/BB WFS (sole) - - - - B3/B+ JPM - 6.75% area - - - Barc/RBC/BMO - - - - Ba1/BBB CS/WFS/JPM/DNB/HSBC/BAML - 98.00-98.75, - >US$275m - DNB/Fearnley - 98.75-99.00, 99.00-99.50, 99.25

102.75-103.00 - - B2/B JPM/BNPP -

3.5% area, - - Ba3/B+ DB/JPM/BAML/FITB/CS/Citizens/ - 3.375% PNC/MQB/GS 5.5% area, - - Caa1/B- DB/JPM/BAML/FITB/CS/Citizens/ - 5.5% PNC/MQB/GS 6.75%/7%, - - B2/B DB/BNPP/CS/KKR - 6.75% 3mE+450/500 - - - DNB/OP - 7% area, - - B3/B GCs GS/BNPP/DB, JB Akros - 7%

- - - - UBS -

- - - -/BB/-/BBL BMO/NBF/Scotia - - - - -/BB+ Danske/SEB/Swed -

International Financing Review February 3 2018 57 Trusted answers for trusted advisors.

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China 60 India 65 Singapore 66 Kazakhstan 66 Romania 67 Israel 67 Qatar 68 UAE 68 Brazil 69 Colombia 70 Dominican republic 70 Peru 70 Uruguay 70

FRONT STORY RUSSIA Russian issuers brush off US list Business as usual for non-sanctioned entities

!ûmOWûOFû2USSIANûANNOUNCEMENTSû 2021s are bid at 104.75 to yield 4.488%. according to a Fitch report published demonstrated that the market was unfazed #ORPORATEûFUNDINGûISûNOTûRESTRICTEDûTOû January 30. by the US Treasury’s publication of a so- dollars, with RusHydro (Ba1/BB+/BB+) setting Fitch marks the lender’s issuer default called ‘oligarchs list’ on Tuesday. out its stall to bring a Eurorouble. The rating one notch higher than its viability The US administration issued a public list Russian hydropower company has arranged rating, due to a large volume of junior debt of Russian oligarchs close to the Kremlin AûROADSHOWûAHEADûOFûAûTHREEûTOûlVE YEARû that will protect depositors in case of a who could be sanctioned, as well as a offering. material capital shortfall at the bank. CLASSIlEDûANNEXûSENTûONLYûTOû#ONGRESSû RusHydro was active in the Eurorouble Moscow dismissed the public document as market last year, printing Rbs20bn due “Until we actually see any little more than a “telephone directory” of September 2022 notes at 8.125%. the rich. On the banking side, privately-owned [further] sanctions being One investor described the list as a “total #REDITû"ANKûOFû-OSCOWû"A "" ûHASûNAMEDû introduced I don’t think the non-event.” LEADSûFORûAûNEWûSENIORûUNSECUREDûDOLLARûlVE market will pay any attention” He added: “Until we actually see any year. [further] sanctions being introduced I don’t Russia’s lenders came under scrutiny A banker familiar with the matter expects think the market will pay any attention.” during 2017 after the central bank stepped the trade to receive a positive reception. MOSCOW DOMODEDOVO AIRPORT, RUSHYDRO and in to save Promsvyazbank, B&N Bank and “I still think there is some consolidation CREDIT BANK OF MOSCOW all added their names Otkritie, all within a matter of months. to come in the Russian banking sector, but to the pipeline last week. With Gazprom Ekaterina Sidorova, analyst at Sberbank, the position looks rather positive now from also rumoured to be returning soon, there is says that the situation in the Russian local WHEREûWEûSTAND vûSAIDûTHEûBANKERûh#"/-ûISû no sign of Russian issuance slowing. banking sector appears to have stabilised CONlDENTûABOUTûCOMINGv Domodedovo (Ba1/BB+/BB+) will use the AFTERûAûDIFlCULTûFEWûMONTHS Credit Suisse, Raiffeisen Bank International, PROCEEDSûOFûAûlVE YEARûDOLLARûBONDûTOûREPAYû “We believe the new issue will be Societe Generale and UBS are joint leads for its outstanding US$221.5m notes due this interesting for investors if the borrower Domodedovo. November, with the remainder used for offers some yield concession to the RusHydro has mandated Gazprombank, JP capital expenditure. secondary market, given that further spread Morgan, Sberbank and VTB Capital. The airport kicked things off with compression of the outstanding senior Credit Suisse, JP Morgan and Societe Generale investors over a breakfast in Moscow, and bonds over higher quality credits does not AREûGLOBALûCOORDINATORSûFORû#"/-û4HEYûAREû will visit London, Zurich and Frankfurt. seem likely,” she said. joined as bookrunners by ING, Sova Capital, Domodedovo raised US$350m through #"/-SûBONDûWILLûBEûUSEDûTOûREPAYûTHEû Region BC and UniCredit. 5.875% due November 2021s in 2016. The outstanding US$500m notes due this month, Robert Hogg Investors pile into Pemex

Oil company sees orders reach US$25-plus on dual-tranche

PEMEX dived into the market with a long “(Pemex) are coming to the market at the The bond was done in combination with a awaited US dollar bond deal on Thursday, right time,” one investor told IFR. “The fact tender for all or a portion of its outstanding leading the charge in a resurgence of Latin THATû3HELLûWILLûINVESTûISûAûVOTEûOFûCONlDENCEû 2019s and 2020s. American primary activity. and dilutes the scare from AMLO.” It is also offered investors the opportunity Investors piled into the state-owned oil The strong demand allowed leads to to exchange its 5.5% 2044s and 5.625% 2046s company’s US$4bn two-part trade, with tighten pricing a good 40bp from initial price for the new 2048 - which could be a way to order books breaching US$25bn as thoughts, before pricing a US$2.5bn 10-year avoid the high one-off costs of a new issue investors shrugged off any risk related to to yield 5.35% and a US$1.5n 30-year at 6.35%. and tender combination. this year’s elections. At those levels, the 30-year came inside “If you do a tender, you have to expense Royal Dutch Shell’s recent decision the company’s curve, where the 2047s have the premium in the current year,” said a to invest in a string of Mexican oil and been trading at around 6.40%. banker away from the deal. GASûBLOCKSûHASûINSTILLEDûSOMEûCONlDENCEû The 10-year paid around 10bp over its “But if you do an exchange, you can at a time when leftist candidate existing 2027s, which are trading at 5.25%. amortize that premium (over time).” Andres Manual Lopez Obrador The deal also offered an attractive pick-up to BNP Paribas, Bank of America Merrill Lynch, consolidates his lead heading into the the sovereign curve, where Mexico’s 10 and 30- Citigroup and SMBC acted as leads on the deal. July vote. year bonds are trading at around 4% and 4.75%. Paul Kilby

International Financing Review February 3 2018 59 ASIA-PACIFIC Investors weigh up CHINA LGFV risks SOFT MARKET DIGESTS CINDA JUMBO CHINA Recent admissions of unreliable accounting add to headaches for bond investors CHINA CINDA ASSET MANAGEMENT managed to push a US$2.5bn jumbo bond offering Recent revelations that some Chinese regions are raising the risk that the ranking of different through a soft market by paying a in poorer financial shape than earlier thought are municipalities could change in future. premium on some tranches and leading investors to take a harder look at the risks It estimated that Rmb1.5trn (US$237bn) of emphasising its strategic importance to involved in debt linked to local governments. LGFV bonds would mature this year and said the #HINASûDELEVERAGINGûEFFORTS In January, Fitch downgraded INNER MONGOLIA risk of defaults was “significantly higher”. Beside The A3/A–/A rated bad-debt manager, HIGH-GRADE HIGHWAY CONSTRUCTION AND redemptions, LGFVs will need to service total which has the Ministry of Finance and DEVELOPMENT after the government of Inner Mongolia interest payments of Rmb300bn this year. other state-owned entities as controlling Autonomous Region said it had overstated industrial A Beijing-based investor with a Chinese SHAREHOLDERS ûPRICEDûAû53MûlVE YEARû output and fiscal revenue for 2016. securities house said he expected onshore at Treasuries plus 140bp, a US$300m The same month, the official People’s LGFV bonds to be repriced to show greater yield seven-year at Treasuries plus 170bp, a Daily wrote that Tianjin’s BINHAI NEW AREA had differentiation among the issuers. US$1.2bn 10-year at Treasuries plus 200bp overstated its GDP for 2016, while, last year, the However, he said the timing of significant and a US$200m 30-year at 5.1%. north-eastern province of Liaoning admitted to repricing might depend on when the first defaults The outcome was smaller than the faking fiscal data from 2011 to 2014. of LGFV bonds happened. estimated US$3.2bn that an investor “In provincial SOEs [state-owned enterprises], “Investors definitely have become more had mentioned, but a banker on the people need to be more selective,” said Jimond cautious towards LGFVs from those regions that deal said the more modest size was Wong, managing director and senior portfolio reportedly inflated their fiscal numbers. After all, appropriate given poor sentiment in manager for fixed income at Manulife Asset LGFVs link directly to local economic strengths,” Asian primary debt markets because Management. “A number of provinces have been the investor said. of higher rates, a supply glut and confessing their numbers as reported are not correct.” Some Chinese local government-owned tight valuations. enterprises may expect to benefit from implied “We’ve seen quite a sell-off in equities DEFAULT RISK support, but in theory, LGFVs are off local and an adjustment in rate adjustments so CICC said in a note that more confessions from government balance sheets and should not be we thought, if we wait, the market could local governments could not be ruled out, bailed out. worsen,” said the banker. “Next week is also a much shorter window because of #HINESEû.EWû9EARû7EûWANTEDûTOûTAKEû #REDIT3IGHTSûPLACEDûFAIRûVALUEûATû4REASURIESû insurers who were looking for yields above ADVANTAGEûOFûTHISûTIMEûWITHûTHEû&/-#ûOUTû plus 165bp and 202bp, respectively, for the û#INDASûûPERPûNON CALLûlVESûWEREû of the way. Technicals are still strong.” seven and 10-year portions, factoring in bid at 5.0%, while Huarong Asset 4HEûlNALûPRICINGûOFFEREDûAûBUFFERûOFû about 5bp for the large issue size and weak Management’s 30-year notes were bid at AROUNDûBPnBPûONûTHEûlVE YEARûANDûOFû MARKETûBACKDROPû4HEûREPORTûSAIDûTHEûlVEû 5.29%, according to Tradeweb. 10bp or more on the seven and 10-year and 30-year tranches came inside fair value The order book reached US$16.5bn at tranches, said one of the joint global estimates of Treasuries plus 140bp and 5.22%, lNALûGUIDANCE ûGIVINGûTHEûLEADSûTHEû coordinators, who based those calculations respectively. MOMENTUMûTOûTIGHTENûlNALûPRICINGûBYûBPû ONûCURVEûEXTENSIONSûOVERû#INDASûEXISTINGû 4HEû YEARûBONDSûWEREû#INDASûlRSTûATû ACROSSûTHEûlVE ûSEVENûANDû YEARûTRANCHES û notes. this tenor thanks to demand from life and 20bp on the 30-year. The 2023s were 2bp tighter and the ALL INTL EMERGING MARKETS BONDS ALL INTL EMERGING MARKETS BONDS remaining bonds were trading near reoffer BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE on Friday morning. The seven-year tranche Asia-Pacific Managing No of Total Share had tightened up to 10bp before widening Managing No of Total Share bank or group issues US$(m) (%) back to reoffer. bank or group issues US$(m) (%) 1 Citigroup 37 9,645.94 11.5 #INDAûBEGANûMARKETINGûTHEûBONDSûINûAû 1 HSBC 28 2,695.75 7.0 2 HSBC 41 6,623.09 7.9 challenging market. “Despite the backdrop, 2 Standard Chartered 23 2,559.77 6.7 3 Standard Chartered 30 5,585.61 6.6 we thought the weak sentiment was 3 Bank of China 17 2,321.17 6.1 4 BNP Paribas 25 4,966.66 5.9 TARGETEDûAROUNDûHIGH YIELDûBONDS ûBUTû#INDAû 4 BNP Paribas 15 2,071.52 5.4 5 Deutsche Bank 21 4,582.87 5.4 is a well-known issuer that people are 5 Citigroup 17 2,063.02 5.4 6 BAML 23 4,263.94 5.1 comfortable with and is one of the two- 6 Credit Suisse 11 1,894.37 4.9 7 JP Morgan 20 4,073.96 4.8 LARGESTû!-#S vûSAIDûAûBANKERûONûTHEûDEAL 7 Deutsche Bank 13 1,630.53 4.3 8 Credit Suisse 16 3,390.26 4.0 While S&P and Fitch initially rated the 8 BAML 11 1,497.98 3.9 9 Sumitomo Mitsui Finl 5 2,891.77 3.4 new notes on par with the issuer, Moody’s 9 Morgan Stanley 9 1,382.16 3.6 10 Goldman Sachs 12 2,786.53 3.3 has issued preliminary ratings one notch 10 UBS 10 1,178.60 3.1 Total 116 84,107.36 LOWERûTOûREmECTûTHEûABSENCEûOFûAûGUARANTEEû Total 68 38,315.97 Excluding equity-related debt. from the onshore parent and the possibility Excluding equity-related debt. that the keepwell provider may face hurdles Source: Thomson Reuters SDC code: L4 Source: Thomson Reuters SDC code: L1 in getting approval to send funds to the

60 International Financing Review February 3 2018 EMERGING MARKETS ASIA-PACIFIC

“A lot of the rating assessment of LGFVs is FIELD TRIPS economic development of their regions, but based on expected support,” said Fernando In addition to written information, face-to-face looking at the bigger picture may give less Mayorga, global head of international public visits may even be required. incentive for them to push growth where finance at Fitch. “At lower levels, we will “We tend to visit some issuer cities to see growth may not be. see support is not always going to be there, the infrastructure construction activities, “These are still very much isolated particularly for second-tier or third-tier LGFVs property market developments, consumer incidents, and China is certainly not the only where there are other LGFVs in the same area sentiment and have a tour on the projects country where local governments have had that can take over their roles.” of local LGFVs,” said Leo Hu, senior portfolio to restate figures – look at Latin America and A Hong Kong-based offshore investor noted manager for emerging markets debt at NN Europe.” that LGFVs used to have two ratings for US dollar Investment Partners. So far, offshore investors have not notes, but, recently, investors were becoming “By doing so, we get a better sense of panicked about the news of unreliable data more comfortable with only one rating, or no the local government financial condition at local governments. There has been no sign rating at all. (via taxes and land sales) and the strategic of a sell-off in LGFV bonds, and even Inner “Foreign investors’ participation in LGFV important of respective LGFV to the local Mongolia High-Grade’s yield on its US$400m US dollar bonds is actually getting bigger, governments.” unrated 2020 bonds rose only 35bp, to 4.9% attracted to the juicy yields they offered,” he said. Generally, local governments have benefited on January 29, according to Thomson Reuters “However, I don’t believe there will be such a from China’s booming property market, which data, in the weeks since its inaccurate data thing – higher yields but lower risks.” has allowed them to bolster their balance were revealed. The risks related to local governments mean sheets through land sales. According to China Central Depository bond investors need to put in more work to “Land sales for local governments increased & Clearing, yields on AAA rated three-year understand state-linked credits. around 30% last year, and a double-digit onshore LGFV bonds have risen 12bp to 5.48% “We know what kind of industries certain growth for the last two,” said Terry Gao, senior (January 30) since January 8. provinces are strong in and how they have been director for international public finance at Fitch. Since November 2017, yields on AAA rated affected in this cycle, whether they are aggressive “While their financials are in good shape, some three-year onshore LGFV bonds have gone in their spending, and whether they have planned would like to push through reforms, ahead of up 58bp to 5.48%, showing that the Inner a project that is not economic,” said Manulife’s any rainy days.” Mongolia High-Grade news was not the only Wong. In addition to individual local government factor moving bonds. “We don’t invest in China muni bonds action, the central government can also play a “In the case of China’s local government per se, but we invest in corporations operating in role in applying tighter standards. financial figures, we have a reasonable degree the province if we have a clear sense of “The central government needs to tighten of confidence,” said NNIP’s Hu. “While there what business they are in, and how it is doing. up processes, whether it is reporting or may be some exceptions, overall the data If it is listed then even better, so we can auditing,” said Mayorga at Fitch. quality is acceptable.” cross-check.” “Previously, officials were assessed on the Ina Zhou, Carol Chan

OFFSHOREûENTITYûDUEûTOû#HINASûCAPITALû #ITICû'ROUPû(ONGû+ONG LISTEDûmAGSHIPû The benchmark-sized Reg S issue, with an controls. #ITICûPRICEDû53MûOFûTWO TRANCHEû53û expected rating of Ba2 (Moody’s), had yet to #REDIT3IGHTSûHASûANûUNDERPERFORMûONû dollar notes on January 4, while Beijing be priced before IFR Asia went to press. #INDAûASûTHEûSPREADûPICK UPûBETWEENûTHEû #APITALû'ROUPûDIDûTHEûSAMEûFORû53MûOFû 0ROCEEDSûWILLûBEûUSEDûFORûDEBTûRElNANCINGû ASSETûMANAGEMENTûCOMPANYûANDûTHEûBIGûlVEû three-year US dollar bonds on January 24 as and general corporate purposes. bank seniors is at an all-time low, but the 10- DIDû#HINAû0OLYû'ROUPûPROPERTYûUNITû0OLYû Greenland Holding Group has received from YEARû#INDAûCURVEûHASûWIDENEDûANDûISûNOWû 2EALû%STATEû'ROUPûFORû53MûOFûlVE YEARû the National Development and Reform trading at a pick-up of around 80bp. notes on January 29. #OMMISSIONûANûOFFSHOREûDEBTûQUOTAûOFû53BN û The notes will be issued off a US$10bn -EANWHILE û#HINESEû""ûE COMMERCEû expiring this March, according to Nomura. MTN programme, which was been increased OPERATORû(#û)NTERNATIONALûHASûHIREDûTWOû Nomura said its understanding was that from US$3bn last month. banks for a proposed offering of US dollar the company would use the proceeds mainly Reg S senior notes and will meet investors in TOûRElNANCEûTWOûSHORT TERMûBONDSûISSUEDû SEVEN TO SELL OFFSHORE NOTES Hong Kong from Monday. last year and maturing in May and June, Logan Property also conducted a non-deal respectively, for a total of US$820m. 3EVENû#HINESEûISSUERSûHAVEûREGISTEREDûWITHû roadshow in late January. Nomura saw fair values on the two bonds state planning agency National at 5.1% for the three-year tranche and 5.7% $EVELOPMENTûANDû2EFORMû#OMMISSIONûTOû GREENLAND MARKETS DOLLAR DOUBLE FORûTHEûlVE YEARûPIECE issue offshore bonds. BOC International and China Citic Bank 4HEûSEVENûAREû#ITICû'ROUP û#HINAû0OLYû #HINESEûPROPERTYûDEVELOPERûGREENLAND International are joint global coordinators on 'ROUP û"EIJINGû#APITALû'ROUP û,OGANû HOLDING GROUP, rated Ba1/BB/BB, is marketing the issue, as well as joint bookrunners and Property Holdings, Southwest Securities two tranches of US dollar senior unsecured joint lead managers with Industrial Bank Hong )NTERNATIONALû3ECURITIES û(#û)NTERNATIONALû notes off its US$3bn guaranteed MTN Kong branch, China Chengtong and VTB Capital. ANDû#HANGXINGû&INANCIALû(OLDINGû'ROUP û programme. ACCORDINGûTOûSTATEMENTSûPOSTEDûONû.$2#Sû Pricing indication on a three-year piece is MANDATES PILE UP website. ATûûAREAûANDûTHATûONûAûlVE YEARûPORTIONû Some among the seven have printed US is at 6.375% area. State-owned HUBEI SCIENCE & TECHNOLOGY dollar bonds recently, while others have Greenland Global Investment is the INVESTMENT GROUP, rated Baa2/BBB+ (Moody’s/ mandated banks for meetings with issuer, while Greenland Holding Group is Fitch), has hired banks for a proposed offering investors. the guarantor. of US dollar Reg S senior unsecured notes.

International Financing Review February 3 2018 61 GLOBAL EMERGING MARKETS BOND DETAILS: WEEK ENDING 2/2/2018 Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)

Jan 29 2018 Emirates NBD SFr235m Feb 9 2023 0.625 100.012 MS+60, 0.623 Eidg+105 Jan 29 2018 Chile US$1.015bn Feb 6 2028 3.24 99.941 T+55 3.247

Jan 29 2018 Yes Bank US$600m Feb 6 2023 3.75 99.657 T+130 3.826

Jan 29 2018 Poly Real Estate US$500m Feb 5 2023 3.95 99.426 T+155 4.078

Jan 30 2018 Gol US$100m incr Jan 31 2025 7 99.967 - 7 (US$600m)

Jan 30 2018 Dubai Islamic Bank (DIB US$1bn Feb 6 2023 3.625 99.588 MS+115 3.716 Sukuk) Jan 31 2018 Poland (Green) €1bn Aug 7 2026 1.125 99.776 MS+23, 1.153 B+64.1

Jan 31 2018 Credito Real SFr170m Feb 9 2022 2.875 100 MS+299.5 2.875

Jan 31 2018 Emirates NBD SFr50m incr Feb 9 2023 0.625 100.012 MS+60, 0.623 (SFr285m) Eidg+105 Jan 31 2018 Zhongtai International US$200m Feb 4 2019 4.1 100 - 4.1

Feb 1 2018 Emirates NBD A$450m Feb 9 2028 4.75 99.646 ASW+190 4.795 Feb 1 2018 Romania €750m Feb 8 2030 2.5 99.133 MS+133, 2.585 B+184.9

Feb 1 2018 Romania €1.25bn Feb 8 2038 3.375 98.929 MS+190, 3.45 B+234.7

Feb 1 2018 PEMEX US$2.5bn Feb 12 2028 5.35 100 T+256 5.35

Feb 1 2018 PEMEX US$1.5bn Feb 12 2048 6.35 100 T+332.5 6.35

Feb 1 2018 Emirate of Sharjah Rmb2bn Feb 2 2021 5.8 100 - 5.8 Feb 1 2018 Banco Safra US$500m Feb 8 2023 4.125 98.888 - 4.375

Feb 1 2018 JBS USA Lux US$900m Feb 15 2028 (Feb 2023) 6.75 100 T+396 6.75

Feb 1 2018 China Logistics Property US$100m incr Feb 4 2019 9 100 - 9% (US$600m) Feb 1 2018 Future Land US$300m Feb 11 2019 4.75 100 - 4.75

Feb 1 2018 China Cinda Asset US$800m Feb 8 2023 3.875 99.591 T+140bp 3.966 Management

Feb 1 2018 China Cinda Asset US$300m Feb 8 2025 4.375 99.732 T+170bp 4.42 Management

Feb 1 2018 China Cinda Asset US$1.2bn Feb 8 2028 4.625 99.717 T+200bp 4.786 Management

Feb 1 2018 China Cinda Asset US$200m Feb 8 2048 5 98.472 - 5.1 Management

Feb 2 2018 CCB Sydney A$100m incr Nov 24 2020 3mBBSW+95 100.112 3mBBSW+91 - (A$500m)

62 International Financing Review February 3 2018 EMERGING MARKETS ASIA-PACIFIC

Pricing steps NIP (bp) Book size Ratings Bookrunners Distribution

MS+60 area 0 (vs EUR) SFr235m A3/-/A+ BNPP/DB/HSBC Switz 99%, Other 1%. AM 53%, Bks/PB 33%, Ins/PF 13%, Other 1%. T+75 area, - - Aa3/A+/A BAML/Citi/GS/JPM - T+60 (+/-5) T+150 area - US$1.1bn Baa3 BAML/CLSA/HSBC/JPM/Nomura/ Asia 58%, EMEA 41%, Offshore US 1%. StCh/Yes FM 46%, Bks 38%, Ins 11%, PB 5%. T+185 area - US$1.2bn Baa3/BBB-/BBB+ BoC/Everbright HK/Guotai Junan/ Asia 92%, Eur 8%. FM/AM/SWF 61%, HSBC/ICBCA Bks 32%, Ins/PB/Other 7%. 7.25% area, - - -/B-/B BAML/CS/MS/BTGPactual/BCP. - 7.125% (+/-12.5), Evercore/ISI/Safra/Santan 7% MS+130 area, 7 c.US$1.7bn A3/-/A ABC/DIB/1ADB/HSBC/JPM/KFH/ - MS+115/120 SIB/StCh MS+35 area, 5 >€3.1bn, >185 acs A2/BBB+/A- BNPP/Citi/CMZ/SG/PKO Fr 23.5%, Ger 19%, UK 13.9%, Poland MS+25/30, 9.6%, Switz 5%, Scandi 4.8%, Aus 3.9%, MS+23/25 US 3.5%, ME 2%, Benelux 1.9%, RoEur 8.1%, Other 4.9%. AM 66.5%, Bks 15.9%, CB/OI 9.2%, Ins/PF 7.8%, HF 0.3%, Other 0.2%. 41% Green. 3% area, - SFr170m, 43 acs -/BB+/BB+ CS Switz 82.24%, RoW 17.76%. AM 48.79%, 2.875%/3% Retail/PB 48.51%, Ins 1.76%, PF 0.93%. - 0 (vs EUR) - A3/-/A+ BNPP/DB/HSBC -

4.25% area, - - - Zhongtai/Guotai Junan/Wing Lung/ - 4.1% CISI/Haitong/ICBCA ASW+200 area - - A3/-/A+ ANZ/ENBD/Nomura - MS+150 area, 1 >€5.3bn combined Baa3/BBB-/BBB- Barc/Erste/ING/SG/Uni - MS+140 area, MS+135 (+/-2) MS+210 area, 1 >€5.3bn combined Baa3/BBB-/BBB- Barc/Erste/ING/SG/Uni - MS+200 area, MS+190/195 5.75% area, 5 >US$11bn Baa3/BBB+/BBB+. BNPP/BAML/Citi/SMBC - 5.4% (+/-5), 5.35% 6.75% area, -5 >US$7.7bn Baa3/BBB+/BBB+. BNPP/BAML/Citi/SMBC - 6.4% (+/-5), 6.35% 5.4%/6% - - A3/BBB+ BoC/ICBC/HSBC/StCh - Mid 4%, - - Ba2/BB- Citi/JPM/MS - 4.375% 6.75% area, - - Barc/RBC/BMO 6.75% 9% area, - - - UBS/Haitong/Fosun Hani/Guotai - 9% Junan/Miz/AMTD 5.2% area, - US$1.6bn - CS/Haitong/Guotai Junan/CNCBI Asia 89%, Eur 11%. AM 66%, Bks 24%, 4.8% area PB 7%, Ins 3%. T+170 area, 5-10 US$16.5bn combined Baa1/A-/A BoC/BAML/CCB/ICBC/ABCHK/Miz/ - T+140 BNPP/DBS/BoCom/CLSA/Haitong/ Cinda Intl/CNCBI/CICC/MS/ANZ/ Industrial/HSBC/Everbright HK/ StCh/CMSHK/DB/Wing Lung Bank T+200 area, 10+ US$16.5bn combined Baa1/A-/A BoC/BAML/CCB/ICBC/ABCHK/Miz/ - T+170 BNPP/DBS/BoCom/CLSA/Haitong/ Cinda Intl/CNCBI/CICC/MS/ANZ/ Industrial/HSBC/Everbright HK/ StCh/CMSHK/DB/Wing Lung Bank T+230 area, 10+ US$16.5bn combined Baa1/A-/A BoC/BAML/CCB/ICBC/ABCHK/Miz/ - T+200 BNPP/DBS/BoCom/CLSA/Haitong/ Cinda Intl/CNCBI/CICC/MS/ANZ/ Industrial/HSBC/Everbright HK/ StCh/CMSHK/DB/Wing Lung Bank 5.3% area, - US$16.5bn combined Baa1/A-/A BoC/BAML/CCB/ICBC/ABCHK/Miz/ - 5.1% BNPP/DBS/BoCom/CLSA/Haitong/ Cinda Intl/CNCBI/CICC/MS/ANZ/ Industrial/HSBC/Everbright HK/ StCh/CMSHK/DB/Wing Lung Bank - - - A1/A/A NAB -

International Financing Review February 3 2018 63 Bank of China and China International Capital Corporation have been named joint global coordinators, as well as joint lead managers Rate spike winds Asian G3 and joint bookrunners with Societe Generale and Wing Lung Bank for the offering and ASIA Demand turns ‘tepid’ after bumper start to year started meeting investors in Hong Kong and Singapore from Friday. Asian G3 debt markets hit a speed bump last week Yes Bank’s 3.75% 2023s had widened 4bp Wholly owned subsidiary Hubei Science & as rising Treasury yields and a supply glut brought against Treasuries come mid-week. Technology Investment Group (Hong Kong) issuance to a momentary stop at a time when tight Not a single deal was live on Tuesday, and only will issue the bonds and the state-owned valuations have been raising concerns of a correction. ZHONGTAI FINANCIAL INTERNATIONAL braved the weak company will be guarantor. After a dizzying start to the year with issuance backdrop on Wednesday with a heavily anchored The bonds have expected ratings of Baa2/ topping US$39bn by January 26, well above last issue. CINDA ASSET MANAGEMENT was one of three BBB+ (Moody’s/Fitch). January’s US$28bn total, according to Thomson issuers that priced a deal on Thursday. It printed a The guarantor is 81.55% under the control Reuters data, sentiment turned weaker last week. US$2.5bn jumbo that was smaller than expected, of the Wuhan East Lake High-tech Only seven Asian issuers priced US dollar bonds, despite support from the joint lead managers. Development Zone Administrative three with less than one-year maturities, while Issuers who had completed roadshows were #OMMITTEE ûAûRESIDENTûAGENCYûOFûTHEû(UBEIû Chinese property developer YANGO GROUP became also said to have postponed plans to issue last provincial government. the ﬁrst to scrap an offering after bookbuilding. week. It supports the development of Wuhan Shenzhen-listed, Single B rated Yango failed to The slowdown marked a sharp contrast from city and the East Lake High-tech Zone in draw enough orders for US$250m three-year Reg two weeks earlier, when nine deals priced in the areas, such as infrastructure construction S notes on Monday after releasing initial price region on a single day. and strategic industries. guidance of 8.875% area – one of the highest “At the moment, demand for Asian US dollar GUORUI PROPERTIES, rated B/B (S&P/Fitch), yields in the offshore bond market so far this year. bonds is tepid,” said Owen Gallimore, corporate has hired banks for a proposed offering of “The spike in US Treasury yields has affected credit analyst for ANZ. “January is seasonally a US dollar Reg S senior unsecured bonds and market sentiment and investors are becoming subdued month ahead of Chinese New Year but has started to meet investors in Hong Kong more cautious,” a banker on the deal said, adding this year is exceptional. US Treasury moves, a and Singapore from Friday. that recent heavy supply of new issues also weaker US dollar and a near-50% increase in Credit Suisse, Morgan Stanley, Haitong caused indigestion among investors. supply year on year, plus the price insensitivity International and Standard Chartered Bank are POLY REAL ESTATE GROUP and YES BANK were the of issuers keen to fund offshore, has made this a joint global coordinators, as well as joint only issuers to sell US dollar bonds on Monday. difﬁcult market to navigate.” lead managers and joint bookrunners with Bank of America Merrill Lynch, BOC International, China Merchants Securities (HK), China Securities Zhanglong Group, a local government TAIZHOU HUAXIN PHARMACEUTICAL INVESTMENT, International, Guotai Junan International and lNANCINGûVEHICLEûINû:HANGZHOUûCITYûOFû rated BB+ (Fitch), has hired banks for a VTB Capital. #HINASûSOUTH EASTERNû&UJIANûPROVINCE ûISû proposed offering of Reg S US dollar senior The notes are expected to be rated B–/B involved in trading, water supply, real estate unsecured notes. (S&P/Fitch). and construction businesses. BNP Paribas and SPDB International are joint 0ROCEEDSûWILLûBEûUSEDûFORûDEBTûRElNANCINGû HC INTERNATIONAL, rated B2/B (Moody’s/S&P), global coordinators, as well as joint and general working capital purposes. has hired two banks for a proposed offering bookrunners and joint lead managers with On December 4, S&P revised the Hong of US dollar Reg S senior notes. China Minsheng Banking to arrange meetings +ONG LISTEDû#HINESEûREAL ESTATEûCOMPANYSû"û 4HEû#HINESEû""ûE COMMERCEûOPERATORû WITHûlXED INCOMEûINVESTORSûINû(ONGû+ONG û rating outlook to negative from stable. The will meet investors in Hong Kong from which started on January 31. REVISIONûREmECTSû'UORUISûWEAKENINGû Monday. The notes, with an expected BB+ rating from liquidity stemming from its larger land Haitong International is sole global Fitch, will be issued in the name of Huaxin acquisitions last year than S&P had coordinator and, along with Zhongtai Pharmaceutical (Hong Kong) with Taizhou expected. International, is joint bookrunner and joint Huaxin Pharmaceutical Investment as guarantor. State-owned FUJIAN ZHANGLONG GROUP, rated lead manager. ,ASTû/CTOBER ûTHEû#HINESEûPHARMACEUTICALû BB+ (Fitch), has hired banks for a proposed The notes will be issued through wholly wholesaler and distributor issued US$120m issue of US dollar Reg S senior unsecured OWNEDûSUBSIDIARYû(#û)NNOVESTû(OLDINGSû of 363-day US dollar unrated senior notes and will start related investor with a guarantee from the Hong Kong-listed unsecured notes at par to yield 4.50%. meetings in Singapore and Hong Kong on PARENTûANDûCERTAINûSUBSIDIARIESûOFû(#û SHANGRAO INVESTMENT HOLDING GROUP has Monday. )NTERNATIONALûINCORPORATEDûOUTSIDEû#HINA hired SPDB International as sole global CEB International is sole global coordinator, The notes have expected ratings of B2/B coordinator, along with BOC International as as well as joint bookrunner and joint lead (Moody’s/S&P). joint bookrunner and joint lead manager, to manager with Mizuho Securities, China 30ûEXPECTSû(#û)NTERNATIONALûTOûUSEûTHEû ARRANGEûMEETINGSûWITHûlXED INCOMEû Industrial Securities International, China proceeds for general purposes, including investors in Hong Kong, starting January 30. Minsheng Banking Corp, Chiyu Banking Corp, DEBTûRElNANCING A Reg S offering of US dollar senior Fortune (HK) Securities, Guosen Securities (HK), (#û)NTERNATIONALSû:/,ûZOLCOMCN ûISûTHEû unsecured bonds through wholly owned SPDB International and Wing Lung Bank. largest web publisher of technology-related Shangrao Investment Holdings International, Wholly owned unit Full Dragon (Hong CONTENTûINû#HINAûWITHûAûSTRONGûANDûWELL with parent SIHG as guarantor, may follow. Kong) International Development will be recognised brand, according to S&P. The Parent SIHG, based at Shangrao in Jiangxi the issuer of the notes and Zhanglong Group company’s B2B electronic commerce province, is an investment company with will be the guarantor. PLATFORM û(#ûHCCOM ûISûAûDISTANTû assets in urban construction, transportation, The notes have expected rating of BB+ number two in a very competitive market TOURISM ûlNANCE ûAUTOMOTIVES ûNEWûENERGY û (Fitch), the same as the guarantor. with a dominant player. agriculture, and other businesses.

64 International Financing Review February 3 2018 EMERGING MARKETS ASIA-PACIFIC

YIELD JUMPS investment grade, while high yield offers value in YANGO NOWHERE The 10-year Treasury yield soared to 2.79% the shorter maturities.” Still, issuers remain reluctant to pay higher levels, intraday on Friday, a near four-year peak, after As a precaution, Briscoe said he also planned bankers report – as Yango demonstrated last week’s Federal Reserve policy meeting. to rotate out of US dollar credits in the mining “Bookrunners have told the issuer that Financial markets are largely betting that the and commodities sector and back into China. sentiment was worse than the week before, but next rate increase could come as early as March. Even Chinese investors, who account for a Yango Group’s management was unwilling to pay “The market had expected Treasury yields large portion of Asian US dollar bond liquidity, a premium for the notes and decided to postpone to rise this year and were only looking at have turned more selective in recent days, and the deal,” a banker said. a 2.7%–2.8% range for end-2018, but the have decided to wait out the volatility until better “Even if it could price at IPG, it was not what jump in Treasury yields has surpassed market value emerges. the issuer was looking for. It aimed to price at a expectations,” said an investor, who admitted “We still have net inflows, but we prefer to lower yield.” he had turned more cautious about buying in wait for better new-issue premiums after this Yango struggled to convince investors that offshore bonds. correction,” said a bond fund manager at a it offered good relative value after Ronshine Rising rates have eroded the region’s returns Chinese real-money investment firm. “Equity China Holdings priced a US$325m 8.25% three- year-to-date, with the JP Morgan Asia Credit markets are also consolidating and there’s also year put two note at 98.066 to yield 9.00% on Index clocking in –0.49% as of January 30, versus some rebalancing in Treasury markets.” January 25, the highest yield an offshore bond 4.35% for the same period last year. This week may be the last window to issue issuer has paid so far this year. CHINA LOGISTICS This has put pressure on investors, who have offshore bonds before Lunar New Year, with PROPERTY HOLDINGS also priced a US$100m 362- recently been offered razor-thin new-issue a week-long Chinese holiday beginning on day note at 9.0% last Thursday, after failing to premiums in the primary market. February 15. Given the short window, Cinda tighten guidance. “From a total return sense, you’re underwater decided to pull the trigger last week, while “Ronshine priced effectively two-year bonds at due to the upward yield pressure from the GREENLAND HOLDING GROUP COMPANY began 9% with notes rated a notch higher than Yango’s. US rates market, and that’s got some people marketing three and five-year US dollar notes There is no ground to convince investors,” the stepping away and waiting for better value,” said on Friday at 5.75% area and 6.375% area banker said. Hayden Briscoe, head of Asia Pacific fixed income respectively. Ronshine is rated B2/B/B+, while Yango is for UBS Asset Management. After this week, some mainland issuers B2/B/B. Fitch rated Ronshine’s new notes B+ “Credit spread valuations have tightened may anxiously wait to tap the market after the and gave an expected B– rating to Yango’s across Asia Pacific ex-Japan and it’s difficult holidays before their offshore debt quotas expire proposed issue. to see credit spreads rallying significantly in at the end of March. Frances Yoon

CHINESE AIRLINE FILES TO The outstanding amount of the 7.50% said a source. “We should see more issuers tap PRO-BOND MARKET 2020s is US$427.254m, according to the Masala bond market in the coming weeks.” Thomson Reuters data. Indian Renewable Energy Development CHINA EASTERN AIRLINESûHASûlLEDûTOûTHEû4OKYOû Shanshui defaulted on both onshore and Agency was the last Indian issuer to print Masala Pro-bond market programme information offshore bonds in 2015 amid a power bonds last September, when it raised Rs19.5bn under which the carrier can issue bonds of struggle among major shareholders. FROMûlVE YEARû'REENû-ASALASûATû up to ¥50bn (US$457m). 3OMEûHOLDERSûOFûTHEûûSûlLEDûAû The proceeds from the Indiabulls issue The scheduled issuance period is from lawsuit in the US last November to demand will be for affordable housing under the February 2 2018 to February 1 2019. the repayment of principal and interest, social bond principles of the International The Pro-bond market is for professional plus related costs. #APITALû-ARKETû!SSOCIATION investors and has lighter disclosure 4HEû#HINESEûCEMENTûPRODUCERSûSHARESû Indiabulls has also mandated Barclays, Citigroup, requirements for issuers than the Samurai have under trading suspension since April Credit Suisse, HSBC, MUFG Securities and Yes Bank to market, such as accepting English 16 2015. SELLûlVE YEARû-ASALAûBONDS ûACCORDINGûTOûSOURCES documentation. Last December, the Hong Kong stock The issuer recently received approval from exchange initiated a procedure to cancel the Reserve Bank of India to sell Masala bonds of SHANSHUI WORKS ON DEBT CHANGE Shanshui’s listing if it was not able to restore a up to US$50m at a minimum three-year tenor MINIMUMûPUBLICûmOATûOFûûOFûITSûISSUEDûSHAREû ANDû53MûATûAûMINIMUMûlVE YEARûTENOR Embattled CHINA SHANSHUI CEMENT said two capital and address its audit issues by mid-2018. In September 2017, Indiabulls raised Rs13.3bn holders of its US$500m 7.50% US dollar from three-year Masala notes at 8.567%. bonds due 2020 had agreed to support its debt-rescheduling plan. INDIA The Hong Kong-listed company, as issuer, INDONESIA and subsidiary guarantors of the notes INDIABULLS SELLS THREE-YEAR MASALAS entered into a rescheduling-support SULFINDO ADIUSAHA HIRES FOR agreement with the pair on January 24, it INDIABULLS HOUSING FINANCE has raised Rs3.15bn DOLLARS SAIDûINûAûSTOCKûEXCHANGEûlLING (US$50m) from three-year Masala bonds at The terms of the proposed rescheduling 7.8%, according to a release to exchanges. SULFINDO ADIUSAHA hired two banks to arrange AREûTOûBEûlNALISEDûBETWEENûTHEûCOMPANYû HSBC was the sole arranger on the MEETINGSûWITHûlXED INCOMEûINVESTORSûINû(ONGû and bondholders. offering. Kong, Singapore and London, starting January 30. Shanshui did not reveal how much of the The notes will be issued under a EMTN The Indonesian chloralkali producer, bonds the two own, but said it would programme set up earlier this month. rated B2/B (Moody’s/Fitch), named BNP continue to seek the support of other “There is good demand for Masala notes Paribas and Credit Suisse as joint bookrunners holders. because of the lack of supply in the market,” and joint lead managers.

International Financing Review February 3 2018 65 Republic leads Green SINGAPORE RHODIUM HIRES FOR DOLLAR SENIOR

sovereign pack with Singapore-based commodities trader RHODIUM RESOURCES, rated B/B– (S&P/Fitch), comeback trade has hired two banks to arrange meetings ANDûCALLSûWITHûlXED INCOMEûINVESTORSûINû POLAND First sovereign Green bond issuer brings sequel Singapore, Hong Kong and Europe. ANZ and BNP Paribas were named joint POLAND further grew its credentials as one of the clearly,” said Kirill Dikijs, an emerging markets global coordinators and joint bookrunners leading sovereign Green bond issuers, becoming origination banker at BNP Paribas. for the meetings and calls, starting January the only state to tap that market twice as others While Poland’s trade came at 23bp over mid- 29. have yet to show their hand. swaps, much tighter than the 35bp area IPTs, it !û2EGû3ûOFFERINGûOFû53ûDOLLARûSENIORûlXED The issuer, which was the first to bring a was flat to a hypothetical 8-1/2-year conventional rate notes may follow. sovereign Green bond back in 2016, successfully bond pricing according to Piotr Nowak, The notes are expected to be rated B/B– printed a €1bn August 2026 deal on more than undersecretary of state in the Ministry of Finance. (S&P/Fitch). €3.4bn of demand, a much larger book than it “We saw very strong demand from investors,” received for its inaugural Green bond. he said, despite the price tightening. While many sovereigns were said to be lining “The strong interest allowed us to raise the up Green bonds in 2017, France is the only other size of the transaction to €1bn from €500m European sovereign to have raised a Green bond initially planned. The structure of buyers was well and the asset class has yet to reach a critical diversified both geographically and institutionally EUROPE/AFRICA mass. with 41% of the allocation going to designated “Poland committed very strongly in 2016 that Green accounts.” it would come on a yearly basis in the Green Nowak added that in comparison with its KAZAKHSTAN format,” said Cecile Camilli, head of CEEMEA previous issuance, there was higher participation debt capital markets, Societe Generale. from French and Polish investors. KAZAKH ISSUERS PREPARE THE GROUND “This was a very strong message that they are honouring their commitment – even more so by NOT AN EASY PATH NOSTRUM OILûISûSEEKINGûTOûRElNANCEûTHEûDUEû issuing a larger size, printing at the upper end of One of the reasons why sovereign issuers have 2019 notes issued by its subsidiary what they were considering.” been reluctant to do Green bonds is the fear of Zhaikmunai with a seven-year dollar trade. The Climate Bond Initiative estimates that having orphan instruments that are illiquid and The company is intending to call its Green bond issuance will reach US$250bn in trade at odds with the rest of their curves. 6.375% February 2019s and 7.125% 2018, an increase of almost 95% versus 2017. “The future will involve ensuring issuers – November 2019s. Most of this supply is expected to come from particularly sovereign issuers with sizeable The company passed a big test in July corporates and banks in developed countries but funding needs that are concerned about optimal when it followed up a tender and consent emerging markets, sovereigns, municipals and funding – about how they can do Green without offer with a new issue that gave it breathing green securitisations will see an increase. sacrificing the benefits of generally being SPACEûASûITûTRIEDûTOûPUTûSOMEûDIFlCULTûTIMESû “Emerging markets are starting to become the largest issuer in their local markets,” said behind it. more and more aware of this trend and also Stephanie Sfakianos, head of sustainable capital The US$725m 8% notes, due July 2022 and interested in the benefits that it can bring,” said markets at BNP Paribas. callable in 2019, priced at par. They are bid Camilli. For Poland however, this second Green bond is at 105.523 according to Tradeweb. “We will see on the trading side if there’s only just the beginning. Nostrum is rated B2 by Moody’s and B by stronger performance. We’re seeing benefits for “After having issued Green bonds S&P. Both rating agencies have the company Green bonds there.” denominated in euros we can think of launching on negative outlook. But in primary, issuers have not yet been able dollar bonds,” said Nowak, who added the Meetings will begin in Europe and the US to get a pricing benefit from doing a Green bond sovereign was keen to diversify its investor base on February 2. versus a non-Green one. but also achieve tight pricing. Banca IMI, Citigroup, Deutsche Bank and VTB “Once there is growth in both issuance and BNPP, Citigroup, Commerzbank, Societe Capital are joint bookrunners. investor demand, we will see the difference Generale and PKO Bank were bookrunners. In addition to Nostrum, state-owned oil between Green and conventional pricing more Merle Crichton, Robert Hogg and gas company KAZMUNAIGAS has sent a request for proposals to banks for a Eurobond issuance, according to sources. A Reg S offering of US dollar notes may and bookrunner to arrange meetings with KMG raised US$2.75bn through the issue follow. lXED INCOMEûINVESTORS OFûlVE ûûANDû YEARûNOTESûINû!PRIL The roadshow in Hong Kong, The 2022s are bid at 100.96 to yield 3INGAPORE û,ONDONûANDû.EWû9ORKûSTARTEDû 3.626%, the 2027s are bid at 104.029 with a MONGOLIA last Monday for a potential offering of 4.217% yield and the 2047s are up at US dollar bonds. 106.603, yielding 5.303%. MONGOLYN ALT GOES SOLO WITH JPM An offering of unrated 144A/Reg S In November, S&P commented that the SENIORûlVE YEARûNON CALLûTHREEûNOTESû Kazakh government is planning to privatize Mining group MONGOLYN ALT mandated may follow, subject to market a minority stake in KMG in the coming JP Morgan as sole global coordinator conditions. years.

66 International Financing Review February 3 2018 EMERGING MARKETS MIDDLE EAST

The company tried more than once in 2017 to amend the terms of its bonds and strip out restrictive covenants. The moves Etihad scrambles to shore up achieved mixed results, with investors giving the green light to only some of the US$1.2bn bonds before coupon crunch consent solicitations. UNITED ARAB EMIRATES Abu Dhabi airline explores ways to avert technical default ROMANIA ETIHAD AIRWAYS is urgently examining ways to Etihad spent billions of dollars on airline SOVEREIGN STANDS ON TWO LEGS avert a technical default of some US$1.2bn in acquisitions that failed to deliver expected bonds indirectly linked to the Gulf airline, sources returns. The state-owned airline once owned ROMANIA crunched in pricing and took close to the situation told Reuters. minority stakes in eight other carriers. advantage of solid demand as it raised €2bn An Amsterdam-based special purpose vehicle At the time of the bond issues through through a dual-tranche issue on Thursday. called SPV Equity Alliance Partners (EAP) was EAP, they were seen as strengthening Etihad’s The sovereign offered 12 and 20-year set up in 2015 and issued two bonds for Etihad partnerships with the other airlines. However, it notes. There was a slight skew in investor and other airlines it partially owned at the time, has since sold two, while Alitalia and Air Berlin INTERESTûTOWARDSûTHEûLONGERûBONDû#OMBINEDû including ALITALIA and AIR BERLIN, which are both have declared insolvency. books closed at over €5.3bn. now insolvent. Etihad posted its first loss in six years in 2016 “A lot of sovereign supply has been The bonds are quoted at a discount of more and began a strategic overhaul. Last month it around 10 years, so the books for the 20-year than 25 cents on the dollar after Alitalia entered pulled its Airbus freighter fleet from service and probably outperformed based on pent-up special administration and Air Berlin filed for asked some pilots to take unpaid leave. demand,” said a lead. bankruptcy protection last year. “Maybe it’s a different rating category to Etihad could now end up spending hundreds COMPLEX SOLUTIONS [Western European] names, but you’ve also of millions of dollars to keep the bond structure None of the potential solutions are got the long-end guys hunting for yield.” alive, although it is not legally obliged to do so straightforward, the sources said, but Etihad Romania (Baa3/BBB-/BBB-) began as there is no cross-default provision in the bond could reach one over the next few weeks and one marketing the February 2030s at 150bp area documentation, the sources said. idea being considered, two sources said, is that over swaps. Leads sent out pre- With more than US$400m of EAP debt in the Etihad could buy Alitalia’s mini-bond within EAP. announcement levels showing Romania’s hands of United Arab Emirates investors, there Etihad agreed at the end of 2016 to repay 2028s at plus 119bp. is political and reputational pressure on the Abu the principal of Alitalia’s portion of debt issued The sovereign also initially offered Dhabi carrier to avoid a default in March and by EAP, equivalent to US$235m. But this was February 2038s at swaps plus 210bp area. Etihad is holding internal talks to assess whether signed before Alitalia’s workers rejected a Leads saw Romania’s October 2035s at plus and how to support the bonds, the sources said. restructuring plan for the Italian carrier in early 173bp. An Etihad spokesman declined to comment 2017, leading the company to bankruptcy. A banker away from the deal said the on the bonds, the proceeds of which were used With Alitalia now under administration, it is bonds were offering a new issue premium of to enter into separate debt obligations with each not clear whether the agreement would succeed 25bp on both legs. entity involved, with those of Alitalia and Air in repaying Alitalia’s debt in the EAP bonds, as “Maybe a little bit on the defensive side, Berlin each amounting to around 19%. it could be used by the administrator to repay but I wouldn’t have gone tighter than 20bp Until now a credit enhancement mechanism Alitalia’s more senior creditors. anyway,” he said. “Given how well received has covered coupon payments that were due Alitalia did not respond to a request for recent euro sovereign deals were, I think to be paid by the defaulting airlines, but if this comment. there is scope for a massive tightening here. “liquidity pool” is used to pay coupons due in Another option might be for Etihad to pay I would be shocked if they don’t tighten by March and June it will drop below 75% of the directly into the EAP bonds’ liquidity pool, to at least 15bp.” original balance. guarantee coupon payments. Romania beat those expectations, This would trigger a “remarketing event” “If Etihad does nothing, they’ll end up paying a bringing in pricing by 17bp on the 12-year in which defaulted debt obligations would lot. If they don’t try to save EAP, their reputation and 20bp on the longer leg. be auctioned for cash, according to the for sophisticated financial management would The two prints both came at the tight end documentation of the EAP bonds, a US$700m take a battering,” one source said. OFûlNALûGUIDANCE ûATûBPûOVERûSWAPSûFORû bond maturing in 2020 and a US$500m bond Davide Barbuscia. Stanley Carvalho €750m 2.50% February 2030s and at plus due to be repaid in 2021. Additional reporting by Alexander Cornwell 190bp for €1.25bn 3.45% February 2038s. The lead saw the deals coming with a concession of just 1bp on both tranches, The company, 99.846% owned by the based on the pre-announcement levels. government, is aiming to place a US dollar h9OUûUSUALLYûLOSEûORDERSûDURINGûTHEû MIDDLE EAST medium-tenor bond. process with an aggressive outcome but a Israel Electric has several US dollar bonds lot of real money stayed in there,” he said. outstanding. Its last trip to the international h7EûLOSTûROUGHLYûûAFTERûTHEûlNALû ISRAEL bond markets was in 2014, when it sold revision, but demand was still really good.” US$1.25bn 5% November 2024 notes in the The €2bn deal took out a major part of the ISRAEL ELECTRIC GETS BOND lRMSûLARGEST EVERûSINGLE TRANCHEûBOND õBN õBNûTARGETûTHATû2OMANIASûlNANCEû GEARS WHIRRING Those bonds are bid at 107.25 to yield ministry said in December it plans to sell in 2018. 3.775%, according to Tradeweb. Barclays, Erste, ING, Societe Generale and ISRAEL ELECTRIC is hitting the road on Monday, Citigroup and JP Morgan are joint UniCredit were the bookrunners. starting investor meetings in the US and Europe. bookrunners.

International Financing Review February 3 2018 67 The government of the Emirate of liquidity in the countries’ banking QATAR Sharjah, rated A3/BBB+ (Moody’s/S&P) systems. INTERNATIONALLYûANDû!!!ûBYû#HINASû,IANHEû Moody’s said in a December report that CBQ IN TALKS FOR LOAN OR BOND #REDITû2ATINGS ûPRICEDû2MBBNû53M û 3HARJAHSûlSCALûSTRENGTHûWASûCONSTRAINEDû three-year Panda bonds at par to yield at by a growing debt burden. It said the COMMERCIAL BANK OF QATAR, the Gulf state’s 5.80%, inside price guidance of 5.40%– emirate had built up debt faster than third-largest lender by assets, is in talks 6.00%. revenues in the past few years, taking the with banks about a syndicated loan of up The bonds offered a 103bp premium to debt-to-revenue ratio from 142% in 2014 to to US$500m, two sources familiar with the #HINAû$EVELOPMENTû"ANKSûTHREE YEARû 203% in 2017. matter told Reuters. notes, quoted at around 4.77% on the same Issuing renminbi bonds expands Sharjah’s Raising money through a loan was one day. The policy bank is rated Aa3/AA– funding channels and could also raise its option open to the bank, which was also (Moody’s/S&P). PROlLEûINû#HINAûTOûPROMOTEûTOURISM ûAû considering bonds as part of its normal Bankers familiar with the deal said source familiar with the deal said. funding pattern, one of the sources said. Sharjah could have achieved a lower “Tourism is one of the pillars of Qatari banks have been seeking to funding cost if it had issued US dollar Sharjah’s small economy. The issuer did diversify their funding sources since June bonds, but that gaining access to the the trade partly for publicity reasons to last year when Qatar became locked in a RENMINBIûMARKETûGAVEûITûMOREûlNANCIALû ATTRACTûMOREû#HINESEûTOURISTS vûSAIDûTHEû dispute with Saudi Arabia, the United Arab mEXIBILITY source. Emirates, Egypt and Bahrain. The rift h/VERALL û#HINESEûONSHOREûBONDûYIELDSû !CCORDINGûTOûOFlCIALûDATA ûMOREûTHANû involved the latter four cutting diplomatic are rising. As a new issuer in the market û#HINESEûVISITORSûSTAYEDûINû3HARJAHû and transport ties with Doha and led to and an unfamiliar name to onshore hotels in 2016, up 63% from the previous banks from those countries pulling funds investors, giving some premium was a year. out of Qatar. must,” a banker on the deal said, without 3HARJAHSûDEALûWASûTHEûlRSTûSOVEREIGNû #"1û'ROUPû#HIEFû%XECUTIVEû*OSEPHû putting a number on the size of the Panda bond offering this year and the Abraham told Reuters in September that premium. fourth sovereign Panda issue after those of the bank was considering borrowing on 4HEûBANKERûSAIDûlNALûPRICINGûWASûINûLINEû South Korea, Poland and Hungary. the Taiwanese bond market. One of the with fair value as previously estimated by Hungary printed the last sovereign Panda sources Reuters spoke to last Sunday said the underwriters. bonds in July. #"1ûWASûALSOûCONSIDERINGûOTHERûBONDû The deal was launched in the interbank Other Middle Eastern countries are markets such as Australia and Switzerland. bond market and was also available to reportedly looking at issuing renminbi /NEûOFûTHEûSOURCESûSAIDû#"1ûWOULDûPUSHû OFFSHOREûINVESTORSûUNDERûTHEû"ONDû#ONNECTû bonds. Reuters said last August that Saudi ahead with bonds or a loan or both, adding scheme. Arabia was considering partly funding that the loan could range between Orders for the deal were not particularly ITSELFûINû#HINESEûCURRENCY ûQUOTINGûAûSENIORû US$200m and US$500m. strong, the banker said, declining to OFlCIALûFROMûTHEûKINGDOM provide a number. Foreign investors, The banker on Sharjah’s deal expected including foreign central banks, more Middle Eastern issuers to visit the UAE commercial banks and asset management Panda market in the future. companies, bought into the deal. “Just like after Poland’s Panda bond FIRST PANDA BOND FROM THE About 27% of the bonds were allocated issue, Hungary followed suit and also MIDDLE EAST to foreign investors, with a sizable part printed one,” he said. HANDLEDûVIAû"ONDû#ONNECT 4HEûNEWLYûISSUEDûBONDSûWEREûTHEûlRSTû SHARJAH, the third largest constituent of the The Sharjah offering is part of a under Sharjah’s Rmb3bn Panda bond 5NITEDû!RABû%MIRATES ûHASûBECOMEûTHEûlRSTû rising tide of global bond issues from programme registered with the National Middle Eastern issuer to sell Panda bonds, Gulf sovereigns and companies over the Association of Financial Market paving the way for more cash-strapped past year, as low oil prices have pushed Institutional Investors. 'ULFûSOVEREIGNSûTOûRAISEûFUNDSûINû#HINA STATEûBUDGETSûINTOûDElCITûANDûTIGHTENEDû The notes were issued in the name of SHARJAH FINANCE DEPARTMENT. ALL INTL EMERGING MARKETS BONDS ALL INTL EMERGING MARKETS BONDS Proceeds will be remitted offshore, BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE converted into dirhams and consolidated Europe/Africa Middle East into Sharjah’s budget, according to the Managing No of Total Share Managing No of Total Share prospectus. bank or group issues US$(m) (%) bank or group issues US$(m) (%) Bank of China was lead underwriter and 1 Citigroup 8 2,109.38 23.9 1 Standard Chartered 5 2,842.97 18.5 lead bookrunner on the offering, while 2 HSBC 2 963.37 10.9 2 Citigroup 3 2,422.05 15.8 Industrial and Commercial Bank of China was 3 Deutsche Bank 2 860.13 9.7 3 HSBC 7 2,144.45 14.0 joint lead underwriter and joint 4 BNP Paribas 3 707.60 8.0 4 Sumitomo Mitsui Finl 2 1,760.75 11.5 bookrunner. 5 Commerzbank 3 598.24 6.8 5 Deutsche Bank 5 1,092.21 7.1 HSBC (China) and Standard Chartered 6 Goldman Sachs 3 574.28 6.5 6 Goldman Sachs 2 807.96 5.3 (China) were also joint lead underwriters on 7 SG 4 455.48 5.2 7 Credit Agricole 2 451.67 2.9 the issue. 8 Nova Ljubljanska Banka 1 300.63 3.4 8 BAML 2 426.39 2.8 =8 Jefferies 1 300.63 3.4 9 Morgan Stanley 2 329.43 2.1 DUBAI ISLAMIC BANK SECURES 10 PKO BP 1 247.84 2.8 10 RBC 2 296.67 1.9 FIVE-YEAR DEAL Total 11 8,825.02 Total 14 15,366.52 Excluding equity-related debt. Excluding equity-related debt. DUBAI ISLAMIC BANK, the largest Islamic bank Source: Thomson Reuters SDC code: L2 Source: Thomson Reuters SDC code: L5 in the UAE, hit the upper end of its size

68 International Financing Review February 3 2018 EMERGING MARKETS AMERICAS

TARGETûASûITûPRINTEDûAû53BNûlVE YEARû The bank was also active in the trading at 5.92%, but inside the Brazilian sukuk on Tuesday. Australian dollar market last week. It parent’s 2024s, which were being spotted The bank initially marketed a raised A$450m (US$360m) through a 10- at 7.20%, a banker said. benchmark trade at swaps plus 130bp year note at ASW+190bp. Initial price “They are being opportunistic as area. A banker away thought the bank thoughts were SQ ASW+200bp area. they don’t have to do this,” said a banker could be aiming for a print between plus That level equated to Swiss franc swaps away from the deal. “The 2020s are 110bp and 115bp. plus 230bp, putting it very wide of western callable at par so it is a positive NPV “If they go for size then plus 115bp currencies, but broadly in line with its transaction.” could make sense,” he said. “I expect them outstanding Aussie dollar curve. The leads The company is the world’s biggest meat to take US$750m, maybe even up to were ANZ, Nomura and Emirates NBD Capital. processor and owns big-name US brands US$1bn.” The bank’s not stopping there, however. such as Pilgrim’s Pride and Swift. Pricing was revised with guidance set at It also mandated But markets have been wary of the plus 115bp-120bp, to price in range. The DBS Bank, Emirates NBD Capital, HSBC and Brazilian parent where former chairman bank raised US$1bn at the tight end. Standard Chartered to arrange investor and chief executive, brothers Joesley and A lead reckoned it came with a meetings in Singapore on February 1 Wesley Batista, have been jailed on graft concession in the high single digits, based ahead of a Singapore dollar bond with a charges. on extending DIB’s existing 2022s. short to intermediate maturity. That deal “The problem is the headline risk,” said At guidance the books were around had yet to materialise by the end of the one investor. US$1.8bn, including lead interest, then week. 4HISûISûTHEûlRSTûTIMEûINûYEARSûTHATûAû53û DROPPEDûOFFûAûTOUCHûTOûlNISHûATûROUGHLYû The bank also issued a US$285m 30-year bank has not been involved in a JBS USA US$1.7bn. NON CALLûlVEû&ORMOSAûBONDûLASTûMONTHû issue. “The amount of Islamic account Emirates NBD is rated A3 by Moody’s and On this occasion, Barclays (left), RBC and participation was enough to allow the A+ by Fitch. BMO were the leads. JBS USA’s prior deals issuer to take this size at this level,” said a in 2015, 2014 and 2013 all included US banker close to the deal. LONDON COURT AGAIN FINDS FOR banks, according to IFR data. h7EVEûNOTûHADûMANYûlNANCIALû CREDITORS IN DANA GAS SUKUK DISPUTE With a fairly benign maturity schedule institution issuances out of the region the company can afford to be due to the fact that banks were not rushing !û,ONDONû(IGHû#OURTûJUDGEûAGAINûRULEDûINû opportunistic and bide its time, said the TOûlNANCEûEXPANSIONûPLANSûANDûGROWTHû favour of creditors on Thursday in a banker. But we have got a few maturities coming dispute over whether United Arab “They don’t have any impending up and banks will be looking to fund Emirates energy company DANA GAS must maturities hanging over them,” the banker them.” repay US$700m of Islamic bonds, a source said. The bank is rated A3 by Moody’s and A familiar with the court proceedings told “If they had bond maturities coming due by Fitch, both with stable outlooks. Reuters. ITûWOULDûHAVEûBEENûDIFlCULTû)NVESTORSû Bank ABC, Dubai Islamic Bank, First Abu Judge George Leggatt rejected an would have had a gun to their heads.” Dhabi Bank, HSBC, JP Morgan, KFH Capital, attempt by the company to overturn his JBS has seen leverage drop to 3.4x in the Sharjah Islamic Bank and Standard Chartered decision last November that the purchase third quarter last year, down from 4.2x in were joint lead managers and undertaking behind the sukuk was valid the second quarter 2017, according to a bookrunners. and enforceable. report from Itau BBA. There was no immediate comment from “If the deleveraging cycle [continues] at ENBD EXTENDS ITS NICHE Dana. the same speed, we believe that the risk CURRENCY FORAY perception could diminish despite the company’s governance-related EMIRATES NBD extended its foray into the uncertainties,” the bank’s analysts wrote niche markets over the course of the last year. week. AMERICAS On Monday, it brought a well subscribed CSN PLOTS MARKET RETURN AFTER lVEûYEARû3WISSûFRANCûSENIORûDEAL LONG HIATUS Joint leads BNP Paribas, Deutsche Bank and BRAZIL HSBC opened books on a minimum Steel producer CSN has kicked off SFr100m bond at mid-swaps plus 60bp JBS USA MAKES SURPRISE RETURN MARKETINGûFORûWHATûWILLûBEûITSûlRSTûDOLLARû AREA ûBEFOREûPRICINGûAûlNALû3&RMûINûLINEû bond in six years as it looks to retire short- with the guidance, equivalent to JBS’s US unit raised US$900m last week term debt. Eidgenossenschaft (Swiss government THROUGHûAû YEARûBOND ûMAKINGûITSûlRSTû The borrower will be in Los Angeles and bonds) plus 105bp. appearance in the international debt London on February 5, in Boston, London The level was bang in line with the markets since top executives were arrested and Switzerland on February 6 and in New bank’s euro curve when adjusted for the for insider trading. 9ORKûONû&EBRUARYû cross-currency swap. While JBS USA essentially stuck to 0ROCEEDSûWILLûHELPûlNANCEûAûTENDERûFORû Asset managers and private banks, pricing of 6.75%, it did increase the ITSûûûANDûûûBONDSû#3.û almost all Swiss, took the majority of the size from US$700m to US$900m as is offering a buyback price of par, paper. ITûLOOKEDûTOûRElNANCEûITSûEXISTINGû including a US$30 early tender premium. Reverse enquiry allowed the bond to be 8.25% 2020. Ratings are B3/B-. BB Securities, Bank of increased by SFr50m at the same terms on !TûAûlNALûYIELDûOFû ûTHEûNEWû YEARû America Merrill Lynch, Bradesco and Morgan Wednesday, taking the issue to an overall NON CALLûlVEûCAMEûWITHûAûPICK UPûTOûTHEû Stanley have been mandated as joint size of SFr285m. existing JBS USA’s 2024s, which were bookrunners.

International Financing Review February 3 2018 69 Bank of America Merrill Lynch, Citigroup, Unusually for a bond in the currency, a CHILE Goldman Sachs and JP Morgan were joint good proportion (17.6%) of non-Swiss bookrunners on the trade. accounts took part. A very granular 43 SOVEREIGN FOLLOWS EURO WITH accounts took part for an average ticket of DOLLAR ISSUE just under SFr4m. COLOMBIA #REDITOû2EALûBECAMEûTHEûlRSTû,ATINû CHILE issued a US$2bn 10-year bond on American private sector entity ever to Monday, returning to the market less than a GRAN TIERRA TAKES TO THE ROAD issue a sub-investment grade bond in the week after tapping euros as it looked to Swiss market. retire debt maturing between 2020 and GRAN TIERRA ENERGY International Holdings has 2026. started marketing a seven-year non-call four Rates volatility had the sovereign testing bond after mandating banks on the deal. PERU the waters with relatively generous initial The borrower will be in Switzerland, price thoughts of Treasuries plus 75bp - a 4ORONTOûANDû.EWû9ORKûONû&EBRUARYû ûINû CAMPOSOL EYES NEW BOND FORAY nice pick-up to the existing 2026s that ,ONDONûANDû.EWû9ORKûONû&EBRUARYûûANDûINû were trading at a G-spread of 37bp. Boston and Los Angeles on February 7. Agricultural company CAMPOSOL will return “Treasuries are whipping around so Proceeds are being used to repay a to market this week as it looks to raise much that it is not a bad thing to start with revolver. Gran Tierra is headquartered in funding for a new tender. a cushion,” said a banker away from the #ANADAûBUTûISûFOCUSEDûONûOILûANDûNATURALûGASû The company was in London, Boston, deal. %0ûINû#OLOMBIAû%XPECTEDûRATINGSûAREû" " .EWû9ORKûANDû,OSû!NGELESûLASTûWEEKûANDû Even so, with markets turning more Credit Suisse and RBS are acting as joint will wrap up roadshows with calls on BULLISHûONû#HILEûAMIDûAûRALLYûINûCOPPERûANDû global coordinators as well as joint Monday. following the electoral victory for bookrunners along with Scotiabank. At the same time, it has launched a conservative president-elect Sebastian tender for any and all of its US$147.5m Pinera, leads had little trouble tightening 10.50% 2021s. It is offering a buyback price from there. DOMINICAN REPUBLIC of 108.719, including a US$30 early tender In the end, the deal printed at 99.941 payment. with a 3.24% coupon to yield 3.247% or SOVEREIGN READIES NEW BOND Bank of America Merrill Lynch is acting as Treasuries plus 55bp, the tight end of lead. guidance of 60bp area, plus or minus 5bp. The DOMINICAN REPUBLIC is readying a bond as The sovereign raised €850m, or about it wraps up roadshows this week, US$1bn, the week before with an 11-year The sovereign, rated Ba3/BB–/BB–, will be URUGUAY bond that priced at mid-swaps plus 35bp, INû"OSTONûONû&EBRUARYû ûINû.EWû9ORKûONû putting it inside the 37bp that one banker &EBRUARYûûANDûINû.EWû9ORKûFORûCONFERENCEû LA JACINTA SOLAR STRETCHES TENOR thought was fair value. calls on February 7. WITH GREEN BOND -ONDAYSûDEALûISû#HILESûlRSTû YEARûINû53û 4HEû#ARIBBEANûNATIONûISûCONTEMPLATINGûANû dollars since January 2016, when it issued its intermediate or long-term US dollar deal or LA JACINTA SOLAR project has raised 3.125% 2026s at Treasuries plus 130bp. a US dollar bond combined with a local US$64.75m in the private placement That is one of the bonds that the country currency trade. market through a 24.5-year Green bond. targeted in the new tender. The others Citigroup and JP Morgan are acting as joint The deal, which has an average life of include the 3.875% 2020s, 3.25% 2021s, bookrunners. around 14.5 years, was priced with a 2.25% 2022s and 3.125% 2026s. coupon of around 5.5%, or about 300bp The new money component came to over the interpolated Treasury curve, said US$1.015bn with the remaining US$985m MEXICO a source. accounting for switches from old bonds Thanks to an A/B bond structure into the new security. CREDITO REAL MAKES ITS SWISS DEBUT including a loan from development bank the IDB, leads were able to place such a ALL INTL EMERGING MARKETS BONDS CREDITO REAL, the Mexican consumer and SME LONGûTENORûWITHûINSURANCEûlRMS ûTHEûMAINû BOOKRUNNERS: 1/1/2018 TO DATE lNANCEûGROUP ûDEBUTEDûINûTHEû3WISSûFRANCû buyers of the paper. Latin America market on Wednesday. “We were able to place it under a Managing No of Total Share The bonds were sounded at the 3% area multilateral umbrella,” the source said. bank or group issues US$(m) (%) level on Tuesday by sole lead Credit Suisse. “This was one of the most important 1 Citigroup 9 3,051.50 14.9 Books opened the next morning for a features to make investors lend with a 2 JP Morgan 9 2,508.79 12.3 minimum SFr150m size at 2.875% to 3%. longer tenor in a country like Uruguay.” 3 BAML 9 2,289.56 11.2 It eventually priced for a SFr170m size at The bond is rated Baa3 by Moody’s, 4 BNP Paribas 5 2,086.05 10.2 par to yield 2.875%. WHICHûPROVIDEDûAû'REENûBONDûCERTIlCATIONû 5 Credit Suisse 3 1,199.22 5.9 The level, equivalent to 299.5bp over mid- and assessment of GB2. Proceeds are going 6 Santander Global 5 1,120.02 5.5 SWAPS ûPUTûTHEûNEWûPAPERûmATûTOûAû TOûRElNANCEûANûEXISTINGûCONSTRUCTIONûLOAN 7 Deutsche Bank 1 1,000.00 4.9 hypothetical US dollar deal, according to a The Jacinta project began commercial =7 Sumitomo Mitsui Finl 1 1,000.00 4.9 LEADûOFlCIAL operations in September 2015. It is owned 9 Barclays 3 958.16 4.7 As to be expected given the high yield and BYû#HICAGO BASEDû)NVENERGY ûWHICHû 10 Itau Unibanco 5 888.64 4.4 low ratings of BB+/B+, the deal appealed develops, owns and operates renewable and Total 21 20,416.10 heavily to retail and private banking clients, other clean energy generation and storage Excluding equity-related debt. although an equally large number of asset facilities in the Americas and Europe. Source: Thomson Reuters SDC code: L3 managers took part. DNB Markets acted as lead.

70 International Financing Review February 3 2018 LOANS

Cambodia China India Japan France Israel Italy UK û United States û Brazil Leveraged Loans û Restructuring

FRONT STORY EUROPEAN MARKETS LMA addresses tardy settlement Trade body pushes to cut times for primary syndications New timeline provides for a standard 27 business days

The Loan Market Association is introducing 4HEûRECOMMENDEDûTIMELINEûSUGGESTSûAû DEALSûTHATûAREûONLYûARRANGEDûBYûONEûBANKûASû THEûPROSPECTûOFûlNANCIALûPENALTIESûFORûBANKSû @FASTûTRACKûPROCESSûOFûûDAYSûAFTERûALLOCATIONû ITûWASûDEEMEDûTOOûDIFlCULTûTOûDETERMINEûTHEû THATûDRAGûTHEIRûHEELSûSETTLINGûPRIMARYûLOANSû IFû+9#ûCOUNTERPARTYûCHECKSûHAVEûBEENû ROLEûANDûIMPACTûOFûEACHûBANKSûACTIONSûINûAû BYûINCLUDINGûDELAYEDûCOMPENSATIONûFORû COMPLETEDûANDûAûTARGETûOFûûDAYSûASûAû JOINTûARRANGINGûSCENARIO LENDERSûTHATûEXCEEDûRECOMMENDEDû STANDARDûTIMELINEûIFû+9#ûHASûYETûTOûBEû TIMELINES COMPLETED 4HEûTIMELINEûAPPLIESûEQUALLYûTOû h4HATûSHOWSûYOUûHOWûSIGNIlCANTûTHEû+9#û “There’s not that many deals INVESTMENT GRADEûANDûLEVERAGEDûLOANSûBUTûISû PROCESSûISûANDûWHATûAûDRAGûITûISûONûTHEû that it will truly catch, as EXPECTEDûTOûHAVEûMOREûIMPACTûINûTHEû SETTLEMENTûPROCESS vûAûSENIORûBANKERûSAID there’s not that many sole LEVERAGEDûLOANûMARKETûTHATûHASûBIGGERû 4HEûSTANDARDû DAYûTIMELINEûWILLûAPPLY û SYNDICATESûOFûûINVESTORSûORûMOREûnûANDû UNLESSûTHEûFACILITYûAGENTûHASûRECEIVEDûFORMSû underwritings, but it will focus MULTIPLEûSUBûINVESTORSûnûWHICHûCANûMAKEûFORû ANDûALLû+9#ûCHECKSûHAVEûBEENûCOMPLETEDûBYû banks. It’s a good thing, we PAINFULLYûSLOWûSETTLEMENT THEûINVESTOR ûTHEûAGENT ûANDûTHEûARRANGERS need to see improvement” BOOKRUNNERSûWITHINûFOURûBUSINESSûDAYSûOFû THEûALLOCATIONûDATE ûINûWHICHûCASEûTHEûFAST “This has been a challenging TRACKûTIMELINEûWILLûAPPLY h4HERESûNOTûTHATûMANYûDEALSûTHATûITûWILLû but necessary project. Not least TRULYûCATCH ûASûTHERESûNOTûTHATûMANYûSOLEû of the challenges was gaining COMPENSATION UNDERWRITINGS ûBUTûITûWILLûFOCUSûBANKSû)TSûAû recognition and understanding "ANKSûTHATûEXCEEDûTHEûTIMELINEûMAYûHAVEû GOODûTHING ûWEûNEEDûTOûSEEûIMPROVEMENT vû from both investors and TOûPAYûDELAYEDûCOMPENSATION ûCONSISTINGûOFû THEûLOANûSYNDICATEûHEADûSAID arrangers as to when they are AûMARGINûANDORûRECURRINGûFEES ûBUTûTHEû 4HEû,-!SûGUIDANCEûIS ûHOWEVER ûAû TIMELINEûTAKESûINTOûACCOUNTûTHATû RECOMMENDATIONûABOUTûBESTûPRACTICEûANDû on and off risk” UNDERWRITERSûREMAINû@ONûRISKûANDûAREûTHEû ISûNOTûLEGALLYûBINDING ûALTHOUGHûTHEûTRADEû LENDERûOFûRECORDûUNTILûTHEIRûCOMMITMENTSû BODYûISûHOPINGûTHATûTHEûMARKETûWILLûADOPTû 4HEû,-!ûHASûBEENûWORKINGûONûTHEû HAVEûBEENûTRANSFERREDûTOûANûINVESTOR THEûFRAMEWORKûANDûBECOMEûSELFûPOLICINGûINû GUIDANCEûFORûAROUNDûTWOûYEARSûWITHû )FûSETTLEMENTûDOESûNOTûHAPPENûWITHINû THISûRESPECT UNDERWRITINGûBANKS ûASûTHEûBUYSIDEûHASû THEûTIMEFRAME ûCOMPENSATIONûFORûTHEûDELAYû h)TûNEVERTHELESSûESTABLISHESûAûFRAMEWORKû CONTINUEDûTOûCALLûFORûFASTERûSETTLEMENTûTIMESû PERIODûWILLûBEûPAYABLEûTOûTHEûINVESTORûONû WITHINûWHICHûSETTLEMENTûOFûPRIMARYû ANDûENDûAûCONTROVERSIALûPRACTICEûTHATûALLOWSû THEûTRANSFERûDATEûBYûTHEûUNDERWRITER SYNDICATIONûCANûREASONABLYûBEûEXPECTEDûTOû ARRANGINGûBANKSûTOûCOLLECTûINCOMEûWHILEû $ELAYEDûCOMPENSATIONûISûALREADYûPAYABLEû OCCUR vû6OISEYûSAID INVESTORSûAREûONûRISK INûTHEû%-%!ûSECONDARYûLOANûMARKETû4HEû "ANKSûAREûCIRCULATINGûTHEû,-!Sû h4HISûHASûBEENûAûCHALLENGINGûBUTûNECESSARYû ,-!ûUPDATEDûITSûSECONDARYûTRADINGû GUIDANCEûTOûDEALûTEAMS ûWITHûTHEû PROJECTû.OTûLEASTûOFûTHEûCHALLENGESûWASû DOCUMENTSûINû ûWHICHûINCLUDEDûDELAYEDû UNDERSTANDINGûTHATûIFûTHEYûAREûINûAûSOLEû GAININGûRECOGNITIONûANDûUNDERSTANDINGûFROMû COMPENSATIONûONûTRADESûTHATûEXCEEDûITSû ARRANGINGûSITUATIONûTHEYûWILLûBEûUNDERû BOTHûINVESTORSûANDûARRANGERSûASûTOûWHENûTHEYû SETTLEMENTûTIMEFRAMEûOFû4 ûFORûDISTRESSEDû PRESSUREûTOûLIVEûBYûTHEûRECOMMENDATIONS û AREûONûANDûOFFûRISK vûSAIDû.ICHOLASû6OISEY û TRADESûANDû4 ûFORûPARûTRADES PARTICULARLYûIFûTHEYûAREû,-!ûMEMBERSûASû ,-!ûMANAGINGûDIRECTOR 4HEû53ûLOANûTRADEûBODYûTHEû,OANû MOSTûLARGEûINSTITUTIONSûARE "ANKSûATTRIBUTEûLONGûSETTLEMENTûTIMESûLESSû 3YNDICATIONûANDû4RADINGû!SSOCIATIONûHASû )TûREMAINSûTOûBEûSEENûWHETHERûBANKSûWILLû TOûECONOMICSûTHANûINEFlCIENTûBACKûOFlCESû BEENûWORKINGûTOûSHORTENûSETTLEMENTûTIMES û ACTUALLYûPARTûWITHûCOLD ûHARDûCASH ûBUTû OPERATIONSûANDûCREAKINGû)4ûSYSTEMS ûASûWELLû WHICHûITûVIEWEDûASûPOSINGûAûTHREATûTOû INVESTORS ûINCLUDINGûCOLLATERALISEDûLOANû ASûTHEûLABOUR INTENSIVEû+NOWû9OURû#USTOMERû MARKETûLIQUIDITYûAFTERûREGULATORSû OBLIGATIONûFUNDSûWHICHûOPERATEûONûTHINû PROCESSûFORûCOUNTERPARTIES ûWHICHûISû THREATENEDûTOûCATEGORISEûLOANSûASûNON MARGINS ûAREûTHOUGHTûTOûBEûMOREûLIKELYûTOû REQUIREDûBYûREGULATORS LIQUIDûASSETS WORKûWITHûBIGûARRANGINGûBANKSûTHATûMEETû h4HEûVIEWûFROMûTHEûBUYSIDEûISûTHATûBANKSû 4HEû,34!ûINTRODUCEDûADDITIONALûRULESûINû THEûGUIDELINES AREûNOTûINCLINEDûTOûSOLVEûTHISûPROBLEMû LATEûûTOûPENALISEûlRMSûFORûDELAYINGû &LEXIBILITYûFORûLEGITIMATEûDELAYSûINû BECAUSEûTHEYREûSITTINGûONûAûGREATûMARGINû SETTLINGûSECONDARYûLOANûTRADESûBEYONDûTHEû SYNDICATIONûHASûBEENûADDRESSEDûBYû INCOMEûSTREAMû)TSûNOTûDRIVENûBYûSEEINGûIFû RECOMMENDEDûSEVENûDAYS providing for a reset of the standard WEûCANûSQUEEZEûANûEXTRAûBITûOFûMARGIN û TIMELINEûIFûREQUIREDûOFûUPûTOûûBUSINESSû BANKSûNEEDûTOûIMPROVEûTHEIRû)4ûTOûSETTLEû LIMITED IMPACT? DAYSûWHENûEXTRAûTIMEûISûNEEDEDûTOûMAKEû FASTERûANDû+9#ûISûAûCHALLENGEûFORûEVERYONE vû 4HEûPROVISIONûMAYûHAVEûLIMITEDûINITIALû TRANSFERSûTOûINVESTORS AûLOANûSYNDICATEûHEADûSAID APPLICATIONûASûITûCURRENTLYûONLYûAPPLIESûTOû Tessa Walsh, Alasdair Reilly

International Financing Review February 3 2018 71 ASIA-PACIFIC Soft outlook for infra lending AUSTRALIA Slim pickings for lenders as privatisation pipeline slows CAMBODIA Dwindling privatisations in Australia are loans for airports, ports, hospitals, rail, roads ACLEDA BANK DOUBLES LOAN SIZE expected to hamper the 2018 infrastructure and schools were already decelerating in 2017, financing pipeline, limiting opportunities for with the US$6bn in deals representing a 53% ACLEDA BANKûHASûDOUBLEDûTHEûSIZEûOFûITSûlVE lenders in a market that is becoming more plunge from the US$12.8bn transacted in 2016, YEARûOFFSHOREûLOANûTOû53M ûWITHûShin competitive every year. according to Thomson Reuters LPC data. Kong Commercial Bank ASûMANDATEDûLEADû There are only a handful of deals in store ARRANGERûANDûBOOKRUNNER for this year. They include the privatisation of TOUGH COMPETITION 4HEûLOAN ûWHICHûPAYSûANûINTERESTûMARGINû New South Wales’ 51% stake in the A$17bn Even when the flow is robust, abundant liquidity OFûBPûOVERû,IBORûANDûHASûAûFOUR YEARû (US$13.78bn) WestConnex motorway project and and intense competition among lenders result AVERAGEûLIFE ûDREWûCOMMITMENTSûTOTALLINGû the multi-billion dollar Cross River Rail public- in most of the transactions being clubbed. For 53MûANDûALLOCATIONSûAREûBEINGû private partnership in Queensland. instance, despite its jumbo size, 18 lenders lNALISED However, the sheer size of these projects may clubbed a A$5.92bn loan for the privatisation of "ANKSûHAVEûBEENûOFFEREDûANûALL INûPRICINGû prop up this year’s infrastructure loan volumes to NSW power grid Endeavour Energy last June. OFûBP ûVIAûAûBPûUPFRONTûFEEû&UNDSûAREû 2017 levels, according to bankers. Infrastructure deals of less than A$1.5bn FORûWORKINGûCAPITAL A loan of A$5bn-plus could emerge for the in size can easily be clubbed among 10–12 )Nû&EBRUARYû û!CLEDAûOBTAINEDûAû bidder succeeding in buying the majority stake lenders, according to loan syndicators. 53MûTWO YEARûLOAN ûMADEûUPûOFû in NSW’s Sydney Motor Corporation, which owns The thinning pipeline will make it even more 53MûFROMû-,!"û)NTERNATIONALû&INANCEû the 3km network of roads and tunnel connecting difficult to get a piece of the action. #ORPûANDû53MûFROMû3-"# two toll roads called WestConnex. The total “It is difficult to get a chance to do these 3-"#ûHOLDSûANûûSTAKEûINû!CLEDA û financing required would be as much as A$10bn, public-private partnerships. They are not large WHILEû#OlBRED ûSUBSIDIARYûOFû0ARIS BASEDû including equity, to buy the 51% stake and fund deals and tend to be clubbed,” said a loans "REDû"ANQUEû0OPULAIRE ûANDû*APANSû/RIXû the construction of the third phase. Preliminary banker at an offshore Asian bank. CONTROLûûEACH bids are due in late February. Not surprisingly, given the lack of deals Queensland state’s A$5bn Cross River available to lenders, the A$3.5bn borrowing Rail project, which includes a tunnel and for Metro Tunnel, which is in syndication, is CHINA underground stations beneath the Brisbane drawing strong interest, although the minimum River and the central business district, has also ticket size of A$100m could be a hurdle for LINGLONG TYRE SEEKS DEBUT LOAN received expressions of interest. The winning smaller banks. bidder could raise several billion dollars of debt Increasingly, foreign banks, attracted SHANDONG LINGLONG TYREûISûMAKINGûITSûDEBUTû for the project. to the high-quality assets in infrastructure FORûAû53M EQUIVALENTûTHREE YEARûTERMû Beside these two mega deals, the pickings are financings are chipping away at the dominance LOAN ûWITHûANZ and Standard Chartered as slim, bankers say. Victoria and Western Australia of established players in this segment. ORIGINALûMANDATEDûLEADûARRANGERSûANDû are selling their land registries, while the former Domestic and international banks operating in BOOKRUNNERS is considering another package of road upgrades Australia are finding their grip on infrastructure 4HEûFACILITY ûWHICHûCANûBEûDRAWNûINû after closing the A$1.8bn Western Roads financings loosening. EITHERûEUROSûORû53ûDOLLARS ûPAYSûANûINTERESTû Upgrade Project in December. A tender of up to “Foreign banks are coming in with more MARGINûOFûBPûOVERû,IBORûANDûBPûOVERû A$1bn to replace rolling stock in the New South flexible terms and pricing than the Aussie %URIBOR ûANDûHASûANûAVERAGEûLIFEûOFûû Wales regional train network is also under way. banks and established players,” said a senior YEARS However, these opportunities pale in loans banker. comparison with past deals. Infrastructure Sharon Klyne

ASIA-PACIFIC LOANS BOOKRUNNERS – FULLY SYNDICATED VOLUME (INCLUDING JAPAN) -,!"SûJOININGûWITHû53MûORûMOREû FEH BACK FOR THREE-YEAR BULLET BOOKRUNNERS: 1/1/2018 TO DATE WILLûRECEIVEûANûALL INûPRICINGûOFûBPû Managing No of Total Share OVERû,IBORûORûBPûOVERû%URIBOR ûVIAûAû &INANCIALûSERVICESûlRMûFAR EAST HORIZON is bank or group issues US$(m) (%) BPûPARTICIPATIONûFEE ûWHILEû-,!Sû RETURNINGûFORûAû53M EQUIVALENTûTHREE 1 MUFG 29 1,336.72 19.4 COMMITTINGû53MnMûWILLûOBTAINûANû YEARûBULLETûLOAN ûONLYûTWOûMONTHSûAFTERûITû 2 Mizuho 4 1,324.86 19.3 ALL INûOFûBPûOVERû,IBORûORûBPû RAISEDûAûSAME SIZEDûFACILITY 3 Mega Financial 4 529.86 7.7 OVERû%URIBOR ûVIAûAûBPûFEEûANDûLEADû China Construction Bank (Asia) ûE Sun 4 Bank of Taiwan 5 496.84 7.2 ARRANGERSûWITHû53MnMûWILLûEARNûANû Commercial Bank û(ONGû+ONGûBRANCH ûFubon 5 Deutsche Bank 1 340.00 4.9 ALL INûOFûBPûOVERû,IBORûORûBPû Financial Holding ûICBC (Asia) ûMUFG ûTaishin 6 Sumitomo Mitsui Finl 5 298.35 4.3 OVERû%URIBOR ûVIAûAûBPûFEE International Bank ûWestpac and Wing Lung 7 Axis Bank 1 266.16 3.9 4HEûBORROWERûISû(ONGû+ONGû4IANCHENGû Bank AREûMANDATEDûLEADûARRANGERSûANDû 8 DBS Group 2 252.00 3.7 )NVESTMENTûû4RADING ûWHILEû3HANGHAI BOOKRUNNERSûONûTHEûLATESTûlNANCING ûWHICHû 9 Oversea-Chinese 1 223.77 3.3 LISTEDûPARENTû3HANDONGû,INGLONGû4YREûISû CANûBEûDRAWNûINûEITHERû(+ûORû53ûDOLLARSû =9 Bank of China 1 223.77 3.3 THEûGUARANTOR Bank of Communications û-ACAUûBRANCH ûJOINEDû Total 56 6,872.88 &UNDSûWILLûBEûUSEDûFORûGENERALû ASû-,! Proportional credit CORPORATEûPURPOSES ûRElNANCINGûANDû 4HEûFACILITYûCARRIESûANûINTERESTûMARGINûOFû Source: Thomson Reuters SDC code: S3a WORKINGûCAPITAL BPûOVERû,IBORûORû(IBOR

72 International Financing Review February 3 2018 LOANS ASIA-PACIFIC

,EADûARRANGERSûJOININGûFORû53MûORû ,ENDERSûGETûAûTOP LEVELûALL INûPRICINGûOFû 4HEûBORROWERûLASTûRAISEDûFOREIGN CURRENCYû MOREûWILLûGETûANûALL INûPRICINGûOFûBP ûVIAûAû BPûANDûTHEûLEADûARRANGERûTITLEûFORû DEBTûINû.OVEMBERûûWHENûITûSIGNEDûAû BPûFEE ûARRANGERSûFORû53MnMûWILLû 53MnM ûVIAûAûPARTICIPATIONûFEEûOFû 53M EQUIVALENTûYENûBILATERALûLOANûWITHû3") GETûANûALL INûOFûBP ûVIAûAûBPûFEEûANDû BP ûORûANûALL INûOFûBPûANDûTHEû MANAGERSûFORû53MnMûWILLûGETûANû ARRANGERûTITLEûFORû53MnM ûVIAûAû ALL INûOFûBPûVIAûAûBPûFEE BPûFEE ûORûANûALL INûOFûBPûANDûTHEû JAPAN 4HEûBORROWERSûSUBSIDIARYû)NTERNATIONALû MANAGERûTITLEûFORû53MnM ûVIAûAûBPû &ARû%ASTERNû,EASINGûISûPROVIDINGûAûLETTERûOFû FEE MIZUHO ARRANGES HYBRID FOR HULIC COMFORT &UNDSûWILLûBEûUSEDûTOûRElNANCEûAûLIKE &UNDSûAREûFORûWORKINGûCAPITALûANDû SIZEDûlVE YEARûMAIDENûLOANûCOMPLETEDûINû Mizuho BankûWASûTHEûMANDATEDûLEADûARRANGERû RElNANCINGûPURPOSES !UGUSTûû"ARCLAYSûWASûSOLEû-,!"ûONû OFûAûcBNû53M û YEARûHYBRIDûLOANû &%(ûISûALSOûINûTHEûONSHOREûMARKETûFORûAû THEûFACILITY ûWHICHûDREWûEIGHTûOTHERSûINû for HULICûDevelopment Bank of JapanûALSOûJOINEDû 2MBBNû53M ûTHREE YEARûTERMûLOANû GENERALûSYNDICATIONû4HATûLOANûPAIDûAûTOP INûSYNDICATION &IRSTû#OMMERCIALû"ANK û+OREANû$EVELOPMENTû LEVELûALL INûOFûBP ûBASEDûONûANûINTERESTû 4HEûINTERESTûMARGINûOFûTHEûFACILITY ûWHICHû "ANK û/#"#û7INGû(ANGû"ANKûANDû3-"#ûAREû MARGINûOFûBPûOVERû,IBOR WASûWASûTHEûlRSTûHYBRIDûLOANûINû*APANûTHISû -,!"SûONûTHISûLOAN ûPAYINGûAûMARGINûOFûû 4HEûBORROWERûPREVIOUSLYûRAISEDûAû YEAR ûWILLûSTEPûUPûBYûBPûAFTERûlVEûYEARSû OFûTHEû0"O#ûRATEûFORûAû YEARûAVERAGEûLIFEû 53MûDUAL TRANCHEûTERMûLOANûLASTû 4HEûINITIALûMARGINûWASûNOTûDISCLOSED -,!SûFORû2MBMûORûMOREûRECEIVEûANûALL INû -ARCHû4HEûLOANûCOMPRISESûAû53Mû *APANû#REDITû2ATINGû!GENCYûASSIGNEDûAû PRICINGûOFûûOFûTHEû0"O#ûRATEûTHROUGHûAû DOLLARûTRANCHEûANDûAû53M EQUIVALENTû RATINGûOFû!nûANDûûEQUITYûTREATMENTûTOûTHEû BPûPARTICIPATIONûFEE YENûPORTIONû4HEûDOLLARûPORTIONûOFFEREDûAû BORROWING ,ASTû.OVEMBER û&%(ûCOMPLETEDûAû TOP LEVELûALL INûOFûBP ûBASEDûONûANû !NûINITIALûDRAWDOWNûOFûcBNûWILLûTAKEû 53M EQUIVALENTûTHREE YEARûBULLETûTERMû INTERESTûMARGINûOFûBPûOVERû,IBOR ûWHILEû PLACEûONû-ARCHûûWITHûTHEûREMAINDERûONû LOANû4HEûLOANûPAIDûAûTOP LEVELûALL INûOFû THEûYENûPIECEûOFFEREDûAûTOP LEVELûALL INûOFû *UNEûû&UNDSûAREûTOûBOOSTû(ULICSûlNANCIALû BP ûBASEDûONûANûINTERESTûMARGINûOFû BP ûBASEDûONûAûMARGINûOFûBPûOVERû BASE BPûOVERû,IBORûORû(IBORûANDûAûBPûFEE 4IBORû4HEûLOANûHASûAûREMAININGûLIFEûOFûû /Nû*ANUARYû û(ULICûRAISEDûcBNûFROMû (ONGû+ONG LISTEDû&%(ûISûAûUNITûOFûSTATE YEARS YEARûNON CALLûlVEûSUBORDINATEDûBONDS û OWNEDû3INOCHEMû'ROUP 4HEûBORROWERûISû)NDIASûSECOND LARGESTû WHICHûCARRYûAûûCOUPONûFORûTHEûlRSTûlVEû PRIVATE SECTORûHOUSINGûlNANCEûlRM û YEARSûBEFOREûSTEPPINGûUPûTOûBPûOVERûSIX SCE SEEKS REFINANCING ACCORDINGûTOûITSûWEBSITE MONTHûYENû,IBORûTHEREAFTER 4HEû4OKYOû3TOCKû%XCHANGE LISTEDû CHINA SCE PROPERTY HOLDINGS is raising a REC SENDS RFP FOR US$400m BORROWERûPROVIDESûREAL ESTATEûLEASINGûANDû 53M EQUIVALENTû YEARûTERMûLOANûFORû PROPERTYûDEVELOPMENTûSERVICES RElNANCINGûPURPOSESûTHROUGHûMANDATEDû 3TATE OWNEDûRURAL ELECTRIFICATION CORPORATION LEADûARRANGERSûANDûBOOKRUNNERSûBank of HASûSENTûOUTûAûREQUESTûFORûPROPOSALSûFORûAû JOGMEC RETURNS FOR BULLET China (Hong Kong) ûHang Seng Bank and HSBC. 53MûTHREE YEARûlNANCINGûTOûMEETû 4HEûFACILITY ûWHICHûCANûBEûDRAWNûINûEITHERû GENERALûCORPORATEûNEEDS JAPAN OIL GAS & METALS NATIONALû*OGMEC ûISû (+ûORû53ûDOLLARS ûOFFERSûANûINTERESTûMARGINû 2%#ûLASTûSIGNEDûAû53MûlVE YEARû SEEKINGûAûcBNûONE YEARûBULLETûTERMû OFûBPûOVERû,IBORûORû(IBORûANDûHASûAû BILATERALûWITHû3TATEû"ANKûOFû)NDIAûINû*ULYû LOAN ûFOURûMONTHSûAFTERûITSûPREVIOUSûFACILITY YEARûAVERAGEûLIFE 4HEûINTERESTûRATEûOFûTHEûGOVERNMENT ,ENDERSûAREûOFFEREDûAûTOP LEVELûALL INû ,ASTû-ARCH û2%#ûRAISEDûAû53MûlVE GUARANTEEDûLOANûWILLûBEûDETERMINEDûINû PRICINGûOFûBPûANDûTHEûLEADûARRANGERûTITLEû YEARûSYNDICATEDûFACILITYû!.: û-5&'ûANDû CONVENTIONALûAUCTIONSûWITHûBIDSûFORûPRICINGû FORû53MûANDûABOVE ûVIAûANûUPFRONTûFEEûOFû -IZUHOû"ANKûWEREûMANDATEDûLEADûARRANGERS û DUEûONû&EBRUARYûûMizuho BankûISûTHEûAGENT BP ûORûANûALL INûOFûBPûANDûTHEûARRANGERû BOOKRUNNERSûANDûUNDERWRITERSûONûTHEû $RAWDOWNûISûSLATEDûFORû&EBRUARYûû TITLEûFORû53MnM ûVIAûAûBPûFEE FACILITY ûWHICHûDREWûûOTHERûLENDERSûINû 0ROCEEDSûAREûFORûOPERATINGûFUNDS )Nû$ECEMBERû ûTHEûBORROWERûRAISEDûAû GENERALûSYNDICATIONû4HEûBULLETûLOANûOFFEREDûAû )Nû3EPTEMBERû ûTHEûBORROWERû 53MûDUAL TRANCHEûINCREMENTALûFACILITY û TOP LEVELûALL INûPRICINGûOFûBP ûBASEDûONûANû OBTAINEDûAûcBNûONE YEARûTERMûLOANûATû WITHû"ANKûOFû#HINAû(ONGû+ONG û(ANGû3ENG û INTERESTûMARGINûOFûBPûOVERû,IBOR ZEROûINTERESTûFOLLOWINGûHEAVYû (3"#ûANDû0INGû!Nû"ANKûASû-,!"S OVERSUBSCRIPTIONûFROMûLENDERS ûSUCHûASû 4HEû(ONGû+ONG LISTEDûCOMPANY û PFC SEEKS FRESH FACILITY REGIONALûBANKS HEADQUARTEREDûINû3HANGHAI ûISûENGAGEDûINû PROPERTYûDEVELOPMENT ûINVESTMENTûANDû POWER FINANCE CORPORATION has put out a MCUBS MIDCITY RAISES BULLET MANAGEMENTûINû#HINA REQUESTûFORûPROPOSALSûFORûAû53MûlVE YEARûLOAN ûALTHOUGHûTHEûSTATE OWNEDû MCUBS MIDCITY INVESTMENTûSIGNEDûLASTû-ONDAYûAû COMPANYûISûSTILLûOUTûFORûAû53MûBULLETûOFû cBNûBULLETûTERMûLOANûFORûREALûESTATEû INDIA AûSIMILARûTENOR ACQUISITIONS ûTHEû4OKYOû3TOCKû%XCHANGE &UNDSûWILLûBEûUSEDûFORûGENERALûCORPORATEû LISTEDû2%)4ûSAID INDIABULLS BACK FOR US$200m REFI PURPOSES 4HEûLOANûCOMPRISESûAûcBNûEIGHT YEARû 0&#ûLAUNCHEDûITSû53MûlNANCINGûINTOû lXEDûINTERESTûRATEûTRANCHE ûAûcBNûSEVEN INDIABULLS HOUSING FINANCE has returned for a GENERALûSYNDICATIONûINûMID *ANUARYû-5&' û YEARûlXEDûINTERESTûRATEûTRANCHE ûAûcBNû lVE YEARûRElNANCINGûLOANûOFûUPûTOû53Mû -IZUHOû"ANKûANDû3TATEû"ANKûOFû)NDIAûAREûTHEû SEVEN YEARûlXEDûINTERESTûRATEûTRANCHE ûAû WITHûMUFG and State Bank of India as MANDATEDûLEADûARRANGERSûANDûBOOKRUNNERSû cBNûlVE YEARûTRANCHEûWITHûAûMARGINûOFû MANDATEDûLEADûARRANGERSûANDûBOOKRUNNERS ONûTHEûLOAN ûWHICHûPAYSûAûTOP LEVELûALL INû BPûOVERûTHREE MONTHû4IBORûANDûAûcBNû 4HEûlNANCINGûPAYSûANûINTERESTûMARGINûOFû PRICINGûOFûBP ûBASEDûONûANûINTERESTû ONE YEARûTRANCHEûWITHûAûMARGINûOFûBPûOVERû BPûOVERû,IBORûANDûHASûANûAVERAGEûLIFEûOFû MARGINûOFûBP ûANDûHASûAû YEARû ONE MONTHû4IBORû4HEûINTERESTûRATESûAREûYETû ûYEARS REMAININGûLIFE TOûBEûDETERMINED

International Financing Review February 3 2018 73 RESPECTIVELY ûWHILEûSENIORûMANAGERSûJOININGû WITHû53MnMûRECEIVEûAûBPûFEEûANDû Loan bankers pin hopes MANAGERSûCOMINGûINûWITHûUNDERû53Mû WILLûRECEIVEûAûBPûFEEû#OMMITMENTSûAREû DUEûONû&EBRUARYû on M&A 4HEûNEWûLOANûHASûALREADYûRECEIVEDûTOTALû COMMITMENTSûOFûOVERû53BNû4HEûTERMû 2018 OUTLOOK Cash-rich private-equity funds expected to boost deal activity LOANûCANûBEûFUNDEDûINû(ONGû+ONGûDOLLARS û -ACAUûPATACASûORû53ûDOLLARS Mergers and acquisition activity and synchronised totalling US$3.6trn, according to Thomson &UNDSûWILLûALSOûGOûTOWARDSûRENOVATINGûANDû global economic growth are expected to boost Reuters data, as M&A activity surpassed US$3trn REBRANDINGû3ANDSû#OTAIû#ENTRAL ûTHEûCASINOû loan market volumes in 2018, according to for the fourth year in a row. RESORTûTHATûOPENEDûINû!PRILû participants at the Asia Pacific Loan Market 4HEûBORROWERûONûTHEûNEWûTERMûLOANûISûVML Association’s annual summit in Hong Kong. REGULATORY HURDLES US FINANCE ûWHILEû3ANDSû#HINAûUNITSû6ENETIANû “With more M&A, leveraged finance remaining Delegates did warn that M&A could face -ACAU û6ENETIANû/RIENTûANDû6ENETIANû#OTAIû strong and some of the business from the bond some resistance from regulatory bodies. For AREûPROVIDINGûGUARANTEES market coming back, [loan] volumes should go instance, on January 2, a US government panel )Nû!UGUSTû û6ENETIANû-ACAUû53û up [in 2018],” said Jose-Antonio Olano, Societe rejected Ant Financial’s US$1.2bn acquisition &INANCEûRAISEDûAû53BNûDUAL TRANCHEû Generale’s global head of loan syndicate during of US money transfer company MoneyGram CLUB ûSPLITûINTOûAû53BNûSIX YEARûTERMû a roundtable at last week’s event. International over national security concerns. LOANûANDûAû53BNûFOUR YEARûREVOLVER The market received a shot in the arm with Chinese conglomerate HNA’s purchase of the announcement that private-equity giant US hedge fund Skybridge and the petroleum Blackstone Group is buying a 55% stake in the products, storage and logistics business of Financial and Risk business of Thomson Reuters Swiss trader and miner Glencore have been in a deal valuing the unit at about US$20bn. The left in limbo due to the company’s opaque EUROPE/MIDDLE US$14bn in debt backing the purchase will be shareholdings and ownership structure. EAST/AFRICA the largest leveraged buyout loan since 2013. Along with protectionism, rises in US interest “For the first time in 10 years, you have rates will be another source of concern this year. three of the global regions growing very nicely. Last Wednesday, the US Federal Reserve kept FRANCE Private-equity firms have got billions of unspent interest rates unchanged, but said inflation money that has been raised in the 2016/2017 would likely rise in 2018, bolstering expectations UNIBAIL-RODAMCO CLOSES BRIDGE fundraising cycle,” said Ray Doody, HSBC’s that borrowing costs will continue to climb. global head of leveraged and acquisition finance. That would vindicate the pre-emptive UNIBAIL-RODAMCOûHASûCLOSEDûSYNDICATIONûOFûTHEû “Notwithstanding some of the regulatory refinancings on which some borrowers, õBNûBRIDGEûLOANûBACKINGûITSû53BNû issues that the buyers are going to face, this will particularly those from the US, have embarked. ACQUISITIONûOFû!USTRALIANûSHOPPINGûMALLû be a good year for M&A as a result of economic Bankers pointed to signs of refinancing being OWNERû7ESTlELD ûAFTERûRAISINGûõBNûOFû and CEO confidence.” affected already, with volumes in the US for the COMMITMENTSûFROMûTHEûMARKET Blackstone’s purchase of the stake in the F&R month of January down 40% compared with the 4HEûBRIDGEûLOANûWASûARRANGEDûBYûDeutsche unit of Thomson Reuters, expected to close in the same period in 2017. As a result, panellists noted Bank and Goldman Sachs ANDûWASûSYNDICATEDû second half of the year, will go some way towards that the quality of deals would have to go up in TOûAROUNDûûBANKS bolstering the tally for 2018 after a blockbuster 2018 amid expectations of lacklustre deal flow. 4HEûCOMPANYûEXPECTSûTOûRElNANCEûTHEû 2017. The value of deals hit a record last year, Chien Mi Wong BRIDGEûLOANûTHROUGHûõBNûOFûDEEPLYû SUBORDINATEDûPERPETUALûHYBRIDûSECURITIESû ANDûAûCOMBINATIONûOFûSENIORûBONDûISSUANCEû Mizuho BankûWASûTHEûARRANGER ûWHILEûAozora 6ENETIANû-ACAUûWILLûUSEû53MûOFûTHEû ANDûASSETûDISPOSALûPROCEEDS Bank ûBank of Fukuoka ûDevelopment Bank of NEWûLOANûTOûREPAYûBEFOREûEND 3EPTEMBERûTHEû 5NIBAIL 2ODAMCOûEXPECTSûTOûMAKEûAROUNDû Japan ûMUFG ûNishi-Nippon City Bank ûSMBC and PRINCIPALûOFûAû53BNûTERMûLOANûTHATû õBNûOFûDISPOSALSûOVERûTHEûNEXTûFEWûYEARSûASû Sumitomo Mitsui Trust Bank joined in FORMSûPARTûOFûTHEûEXISTINGûDEBT PARTûOFûANûONGOINGûPORTFOLIOûREVIEW SYNDICATION 4HEûCOMPANYûISûLOOKINGûTOûEXTENDûTHEû 4HEûlNANCINGûWILLûCOVERûTHEû53BNû &UNDS ûTOûBEûDRAWNûONû&EBRUARYû ûAREûTOû TENORûOFûTHEû53BNûTERMûLOANûTOûMATCHû CASHûPORTIONûOFûTHEûOFFER ûANYûREQUIREDû BUYûFOURûOFlCEûBUILDINGS THEûNEWûFACILITYûTOû3EPTEMBERûûûFROMû RElNANCINGûATû7ESTlELDûANDû5NIBAIL )Nû!UGUST ûTHEûBORROWERûEXTENDEDûTHEûTENORû ûANDûAû53BNûREVOLVINGûCREDITûTOû 2ODAMCO ûANDûTRANSACTIONûCOSTS OFûITSûcBNûCOMMITMENTûLINE ûARRANGEDûBYû -ARCHûûûFROMûû,ENDERSûAGREEINGû 4HEûCOMPANYûEXPECTSûTOûRETAINûITSû3INGLEû!û -IZUHO ûTOûFOURûFROMûTHREEûYEARS TOûAMENDûANDûEXTENDûRECEIVEûAûBPûFEE CREDITûRATINGûFROMû30ûWITHûAROUNDûõBNûOFû 4HEûINTERESTûMARGINûONûTHEûNEWûTERMûLOANû POST ACQUISITIONûLIQUIDITY ûINCLUDINGûEXISTINGû RANGESûFROMûBPûTOûBPûOVERû,IBOR û CREDITûLINESûATû5NIBAIL 2ODAMCOûANDû7ESTlELD MACAU BASEDûONûTHEûBORROWERSûLEVERAGEûRATIOû4HEû 4HEûACQUISITIONûWILLûALSOûBEûBACKEDûWITHû CURRENTûMARGINûISûBP AROUNDûõBNûOFû5NIBAIL 2ODAMCOûSHARESû)Tû VENETIAN BETS ON NEW FUNDS ,ENDERSûCANûJOINûTHEû53BNûSIX YEARû ISûEXPECTEDûTOûBEûCOMPLETEDûINûTHEûlRSTûHALFû TERMûLOANûATûlVEûTICKETûLEVELSûINûGENERALû OFû 'AMINGûGIANTûVENETIAN MACAU is seeking a SYNDICATION NEWû53BNûSIX YEARûTERMûLOAN ûASûWELLû 'LOBALûCOORDINATORSûORûLEADûARRANGERSû SANOFI TAPS FOR ABLYNX BUY ASûANûAMENDMENTûANDûEXTENSIONûOFûEXISTINGû COMMITTINGû53MûORûMORE û53Mn LOANSûOFû53BN ûINûAûREPEATûOFûSIMILARû M ûORû53MnMûWILLûEARNû (EALTHCAREûGROUPûSANOFIûISûBACKINGûITSû EXERCISESûINûPREVIOUSûYEARS UPFRONTûFEESûOFûBP ûBPûORûBP û õBNûACQUISITIONûOFû"ELGIANû

74 International Financing Review February 3 2018 LOANS EMEA

BIOPHARMACEUTICALSûCOMPANYûABLYNX 4HEû53ûDOLLARûTERMûLOANûTOTALSû53BNû WITHûAûCREDITûFACILITYûFROMûBNP Paribas WHILEûTHEûYENûTERMûLOANSûTOTALû53BNû SPAIN Fortis 4HEûAMOUNTûOFûTHEûUNDRAWNû53ûDOLLARû 4HEûlNANCINGûWILLûPROVIDEûCERTAINTYûOFû REVOLVINGûCREDITûFACILITYûWILLûBEûREDUCEDûTOû IBERDROLA COMPLETES GREEN LOAN FUNDSûFORûTHEûACQUISITIONûANDûWILLûNOTûBEû 53BNûFROMû53BN FURTHERûSYNDICATED 5NDERûTHEûAMENDMENTSû4EVAûWILLûNOTû IBERDROLAûHASûSIGNEDûõBNûOFûSYNDICATEDû 4HEûACQUISITIONûISûEXPECTEDûTOûCLOSEûBYû DISTRIBUTEûCOMMONûSHAREûDIVIDENDSûWHILEû LOANS ûTHEûLARGESTû'REENûLOANûTRANSACTIONû THEûENDûOFûTHEûSECONDûQUARTERûANDûCOMESû ITSûNETûDEBTûTOû%BITDAûISûABOVEûûTIMESû GLOBALLY SHORTLYûAFTERû3ANOlSûAGREEMENTûTOûBUYû53û !LTHOUGHûNOûPRE PAYMENTûISûREQUIRED ûIFû 4HEûlNANCINGûISûANûAMENDMENT û HAEMOPHILIAûSPECIALISTû"IOVERATIVûFORû 4EVAûDECIDESûTOûMAKEûAûPRE PAYMENTûUSINGû EXTENSIONûANDûINCREASEûOFûTWOûEXISTINGûLOANSû 53BN PROCEEDSûFROMûDIVESTEDûASSETSûOFûFUTUREû COMPRISINGûAûõBNûREVOLVINGûCREDITûFACILITYû 4HATûACQUISITIONûHASûNOûlNANCINGû DEBTûISSUES ûTHEûPAYMENTûMUSTûBEûAPPLIEDû ORIGINALLYûAGREEDûINû.OVEMBERûûANDû CONDITIONûANDûWILLûBEûFUNDEDûTHROUGHûAû ONûAûPROûRATAûBASISûBETWEENûALLû53ûDOLLARû AMENDEDûINû&EBRUARYûûANDûAûõBNû2#&û COMBINATIONûOFûCASHûONûHANDûANDûTHROUGHû ANDûYENûTERMûLOANS ORIGINALLYûAGREEDûINû!PRILûûANDûALSOû NEWûDEBTûTOûBEûRAISEDû!!!ûRATEDû3ANOlû 4HEûAMENDMENTSûRECEIVEDûTHEûSUPPORTû AMENDEDûINû&EBRUARYû ISûCASH RICHûANDûHASûREADYûACCESSûTOûTHEû OFûLENDERSûHOLDINGûAROUNDûûOFûTHEû 4HEûAMOUNTûOFûTHEûCOMBINEDûlNANCINGû CAPITALûMARKETS FACILITIES HASûBEENûINCREASEDûTOûõBN ûWHILEû 3ANOlûALSOûHASûACCESSûTOûõBNûOFû 4EVAûWASûSADDLEDûWITHûHUGEûDEBTSûAFTERû MATURITIESûHAVEûBEENûEXTENDEDûTOû&EBRUARYû SYNDICATEDûREVOLVINGûCREDITûFACILITIESû4HOSEû ANûACQUISITIONûSPREEûINCLUDINGûTHEû ûWITHûOPTIONSûTOûEXTENDûBYûUPûTOûTWOû COMPRISEûAûõBNûFACILITYûMATURINGûINû 53BNûACQUISITIONûOFû!LLERGANû YEARS $ECEMBERûûANDûAûõBNûFACILITYû 'ENERICS ûWHICHûWASûCOMPLETEDûINû!UGUSTû -ARGINSûONûTHEûLOANûWEREûALSOûAMENDEDûTOû MATURINGûINû$ECEMBERû BEûLINKEDûTOûTHEûPROGRESSûOFû)BERDROLASû#/û 4HEûCOMPANYûAMENDEDû53BNûOFû EMISSIONS ûASûCERTIlEDûBYûTHEûENVIRONMENTALû LOANSûINû3EPTEMBERû ûTOûALLOWû AGENCYû6IGEO %IRIS ûINûADDITIONûTOûCREDITû GERMANY MAXIMUMûLEVERAGEûOFûûTIMESûTHROUGHûTOû RATINGSû)BERDROLAûISûRATEDû""" ûBYû30ûANDû THEûENDûOFû ûGRADUALLYûDECLININGûTOûû "AAûBYû-OODYS DEUTSCHE GLASFASER SIGNS TIMESûBYûTHEûENDûOFû 4HEûLOANûALSOûMARKSûTHEûRETURNûTOûPRE €650m LOAN CRISISûLEVELSûINûTERMSûOFûPRICINGû4HEûLOANû PAYSûUPûTOûBPûOVERû%URIBOR ûDOWNûFROMû &IBRE OPTICûNETWORKûCOMPANYûDEUTSCHE ITALY THEûBPûPAIDûONûAûõMûMULTICURRENCYû GLASFASERûHASûSIGNEDûAûõMûlVE YEARû SYNDICATEDûLOANûAGREEDûINû*UNEû LOANûVIAûAûSYNDICATEûOFûûBANKSûLEDûBYûHSH AC MILAN SEEKS REFI 4HEûDEALûISû)BERDROLASûSECONDû'REENûLOAN û Nordbank AFTERûAûõMûLOANûTHATûWASûAGREEDûWITHû 4HEûlNANCINGûREPLACESûTHEûCOMPANYSû 3OCCERûCLUBûAC MILAN has picked Bank of ""6!ûLASTû&EBRUARY ûWHICHûWASûMOSTLYûUSEDû EXISTINGûõMûLOANûONûIMPROVEDûTERMSû America Merrill Lynch TOûlNDûLENDERSû TOûlNANCEûPROJECTSûLINKEDûTOûENERGYû ANDûBACKSûTHEûCOMPANYSûõBNûNETWORKû INTERESTEDûINûRElNANCINGûTHEûCLUBûANDûDEBTû EFlCIENCYûANDûRENEWABLES ROLL OUTûANDûEXPANSIONûPLAN ATûITSûHOLDINGûHELDûBYû53ûHEDGEûFUNDû BBVA WASûALSOûTHEûFACILITYûAGENTûANDû 4HEûBANKûSYNDICATEûCOMPRISESûEXISTINGû %LLIOTT û2EUTERSûREPORTED SUSTAINABILITYûAGENTûONûTHEûõBNûLOAN û LENDERSûABN AMRO ûHSH Nordbank ûING ûKfW %LLIOTTûGAVEû#HINESEûBUSINESSMANû,Iû WHICHûWASûSYNDICATEDûTOûAROUNDûûBANKS IPEX ûNIBC and Societe Generale PLUSûNEWû 9ONGHONGûAûõMûLIFELINEûLASTûYEARûTOû LENDERSûBNP Paribas ûKommunalkredit û COMPLETEûTHEûPURCHASEûOFûTHEû3ERIEû!ûCLUBû Raiffeisen Bank International and SEB PLUSûõMûTOûINJECTûINTOûTHEûTEAM ûFUNDû UK (3(û.ORDBANKûSAIDûITûHADûCOMMITTEDû THEûACQUISITIONûOFûPLAYERSûANDûALLOWûTHEû õMûTOûTHEûlNANCING CLUBûTOûREPAYûITSûDEBTûWITHûBANKS INFORMA TAPS FOR UBM BUY 4HEûPREVIOUSûLOANûWASûPUTûINûPLACEûINû 4HEûLOANS ûWITHûANûAVERAGEûINTERESTûRATEû ûWHENûPRIVATEûEQUITYûlRMû++2ûBOUGHTû OFûJUSTûBELOWû ûWILLûHAVEûTOûBEûREPAIDûBYû INFORMAûISûBACKINGûITSûaBNûACQUISITIONûOFû AûMAJORITYûSTAKEûINûTHEûCOMPANYûFROMû /CTOBERû)NûCASEûOFûDEFAULT û%LLIOTTûCOULDû EVENTSûORGANISERû5"-ûWITHûaBN $UTCHûlBREûCOMPANYû2EGGEBORGH TAKEûOVERûTHEûCLUB EQUIVALENTûOFûLOANSûUNDERWRITTENûBYûBank of %ARLIERûTHISûMONTHû!#û-ILANSû#%/û America Merrill Lynch -ARCOû&ASSONEûSAIDûHEûHOPEDûTOûWRAPûUPûAû 4HEûlNANCING ûWHICHûHASûANûINITIALû ISRAEL RElNANCINGûDEALûBYû!PRIL MATURITYûOFûûMONTHSûWITHûTWOûSIX MONTHû EXTENSIONûOPTIONS ûCOMPRISESûAûaMû TEVA AMENDS LOANS SAFILO STARTS REFI TALKS ACQUISITIONûTERMûLOANûANDûAûaMûANDû 53MûFACILITYû"ûTHATûWILLûBEûUSEDûTOû 0HARMACEUTICALSûlRMûTEVAûHASûAMENDEDû %YEWEARûCOMPANYûSAFILOûHASûSTARTEDûTALKSû RElNANCEûEXISTINGû5"-ûDEBT ITSû53ûDOLLARûANDûYENûTERMûLOANSûANDû WITHûITSûLENDERSûOVERûTHEûRElNANCINGûOFûITSû 4HEREûISûALSOûAûaMûMULTICURRENCYû REVOLVINGûCREDITûFACILITIESûTOûGIVEûITûGREATERû õMûREVOLVINGûCREDITûFACILITY ûWHICHûISû REVOLVINGûCREDITûFACILITYûTOûBACKSTOPû mEXIBILITYûINûITSûlNANCIALûLEVERAGEûRATIOû DUEûTOûMATUREûINû*ULYû )NFORMASûEXISTINGûREVOLVINGûCREDITûFACILITY COVENANTS 4HEûlNANCINGûWASûORIGINALLYûPUTûINûPLACEû 4HEûACQUISITIONûLOANûWILLûFUNDûTHEûCASHû 4HEûAMENDEDûCOVENANTSûALLOWûAûGRADUALû ONû*ULYûûANDûWASûUNDERWRITTENûBYû PORTIONûOFûTHEûACQUISITION ûWHICHûWILLûALSOûBEû INCREASESûINûTHEûLEVERAGEûRATIOûFROMûû )NTESAû3ANPAOLO û5NI#REDITûANDû".0û lNANCEDûTHROUGHûaBNûOFûNEWû)NFORMAû TIMESûCURRENTLYûTOûûTIMESûDURINGûTHEû 0ARIBAS SHARES THIRDûANDûFOURTHûQUARTERûOFû ûWITHûAû 4HEûFOUR YEARûFACILITYûWASûPUTûINûPLACEûASû 4HEûlNANCINGûPAYSûANûINITIALûMARGINûOFû GRADUALûDECLINEûTOûûTIMESûBYû$ECEMBERû PARTûOFûAûõMûRElNANCINGûPLANûTHATûALSOû BPûOVERû,IBOR ûINCREASINGûTOûBPûAFTERûû û INCLUDEDûõMûOFûEQUITY LINKEDûBONDS MONTHS ûTHENûBPûAFTERûûMONTHS ûBPû

International Financing Review February 3 2018 75 AFTERûûMONTHS ûBPûAFTERûûMONTHS û 4HEûCOMPANYûALSOûHASûAûaMûTERMû WELLûASûAû53BNûEQUITYûINVESTMENTûFROMû BPûAFTERûûMONTHS ûANDûBPûAFTERûû LOANûDUEûTOûMATUREûINû-AYûûANDûANû GLOBALûINVESTMENTûlRMû*!"û(OLDING MONTHS UNDRAWNûaMûREVOLVINGûCREDITûFACILITY û +EURIGûWILLûPAYûAûSPECIALûDIVIDENDûOFû 4HEREûISûAûû,IBORûmOORû4HEûLOANûALSOû OFûWHICHûaMûMATURESûINû!UGUSTûû 53ûPERûSHAREûTOû$Rû0EPPERû3NAPPLEû PAYSûAûCOMMITMENTûFEEûOFûûOFûTHEû ANDûaMûINû!UGUSTû SHAREHOLDERS ûFORûAûTOTALûCASHûPAYMENTûOFû APPLICABLEûMARGIN 4HEûREVOLVERûWASûORIGINALLYûARRANGEDûINû 53BNû4HEûSHAREHOLDERSûWILLûRETAINûAû 4ICKINGûFEESûSTARTûATûBPûAFTERûONEû !UGUSTûûFORûlVEûYEARSûWITHûTWOûONE ûSHAREûINûTHEûCOMBINEDûCOMPANY ûWHICHû MONTH ûRISINGûTOûBPûAFTERûTWOûMONTHSûANDû YEARûEXTENSIONûOPTIONSû4HEûFACILITYûWASû WILLûBEûCALLEDû+EURIGû$Rû0EPPER BPûAFTERûTHREEûMONTHS COORDINATEDûBYûBOOKRUNNINGûMANDATEDû *!"ûWILLûBEûTHEûCONTROLLINGûSHAREHOLDERûOFû %XPECTEDûLEVERAGEûONûCOMPLETIONûISû LEADûARRANGERSû(3"#û"ANKûANDû,LOYDSû THEûCOMBINEDûGROUPûWHILEû-ONDELEZû AROUNDûûTIMESû,EVERAGEûISûEXPECTEDûTOû "ANK )NTERNATIONAL û*!"SûPARTNERûINû+EURIG ûWILLû DROPûBELOWûAûTARGETûCEILINGûOFûûTIMESûOVERû HOLDûAROUNDûAû ûSTAKE TIME ûAûLEVELûTHATûISûBROADLYûCONSISTENTûWITHû LOW & BONAR EYES REFINANCING $ESPITEûTOTALûNETûDEBTûATûCLOSINGûOFûAROUNDû ANûINVESTMENT GRADEûPROlLE û)NFORMAûSAID 53BN ûTHEûCOMBINEDûCOMPANYûISû 0ERFORMANCEûMATERIALSûGROUPûLOW & BONAR is EXPECTEDûTOûMAINTAINûANûINVESTMENT GRADEû CAPITA EYES DEBT REDUCTION LOOKINGûTOûRElNANCEûITSûEXISTINGûõMû RATING REVOLVINGûCREDITûFACILITY 3TRONGûCASHmOWûGENERATIONûWILLûHELPûTHEû /UTSOURCINGûCOMPANYûCAPITAûISûLOOKINGûTOû 4HEûEXISTINGûFACILITYûWASûPUTûINûPLACEûINû COMPANYûACCELERATEûDELEVERAGINGûANDûITûISû REDUCEûITSûDEBTûASûPARTûOFûAûCOMPLETEû *ULYûûVIAû"ARCLAYS û#OMERICAû"ANK û TARGETINGûNETûDEBTûTOû%BITDAûOFûBELOWûû OVERHAULûOFûTHEûCOMPANYûAFTERûITûISSUEDûAû (3"# û).' û+"# û3ANTANDERûANDû2OYALû TIMESûWITHINûTWOûTOûTHREEûYEARSûAFTERûCLOSING PROlTûWARNINGûONû7EDNESDAYûCAUSINGûITûTOû "ANKûOFû3COTLAND ûANDûISûDUEûTOûMATUREûINû +EURIGû$Rû0EPPERûWILLûHAVEûPROûFORMAû LOSEûNEARLYûûOFûITSûMARKETûVALUE *ULYû COMBINEDûûANNUALûREVENUESûOFûAROUNDû 4HEûCOMPANYûWILLûSEEKûTOûRAISEûCASHû 4HATûlNANCINGûPAIDûANûINITIALûMARGINûOFû 53BN ûWITHûBRANDSûINCLUDINGû$Rû0EPPER û THROUGHûAûRIGHTSûISSUEûANDûASSETûDISPOSALSûASû BPûOVERû,IBOR%URIBOR ûSUBSEQUENTLYû 50 û3NAPPLE û!7 û-OTTSûANDû3UNKIST ûANDû ITûFACESûTHEûMATURITYûOFûUPûTOûaMûOFûTERMû RANGINGûBETWEENûBPûANDûBPû COFFEEûBRANDû'REENû-OUNTAINû#OFFEEû LOANSûINû3EPTEMBER DEPENDINGûONûTHEûLEVELûOFûNETûDEBTûTOû 2OASTERS #APITAûISûPLANNINGûAûRIGHTSûISSUE ûWHICHû %BITDA HASûBEENûBACKEDûBYûAûSTANDBYûUNDERWRITINGû 4HEûCOMPANYûEXPECTSûTOûCOMPLETEûTHEû HUBBELL DETAILS ACLARA FINANCING FORûUPûTOûaMûFROMû#ITIGROUPûANDû RElNANCINGûINûTHEûlRSTûHALFûOFû 'OLDMANû3ACHS HUBBELL ûWHICHûMANUFACTURESûELECTRONICû 4HEûCOMPANYûWILLûALSOûUSEûPROCEEDSûFROMû HICL RENEWS £400m LOAN PRODUCTS ûHASûAGREEDûAûTERMûLOANûANDû THEûSALEûOFûNON COREûBUSINESSESûTOûREDUCEû REVOLVINGûCREDITûTHATûSUPPORTûTHEûALL CASHû DEBTûINûTHEûSHORTûTERMûANDûINVESTûINûTHEû Infrastructure investor HICL INFRASTRUCTURE CO ACQUISITIONûOFû!CLARAû4ECHNOLOGIES ûANû REMAININGûCOREûGROUPûBUSINESSESûOVERûTIME HASûRENEWEDûITSûEXISTINGûaMûREVOLVINGû AFlLIATEûOFû3UNû#APITALû0ARTNERS ûFORûABOUTû )NûADDITION û#APITAûWILLûSUSPENDû CREDITûFACILITYûFORûTHREEûYEARSûONûIMPROVEDû 53BN DIVIDENDSûUNTILûITûGENERATESûSUSTAINABLEû TERMS 4HEûCOMPANYûSAIDûJP Morgan is FREEûCASHûmOW ûANDûITûISûALSOûTARGETINGûCOSTû 4HEûlNANCINGûPAYSûAûMARGINûOFûBPû ADMINISTRATIVEûAGENTûFORûAûlVE YEARûTERMû SAVINGS OVERû,IBOR ûDOWNûFROMûTHEûBPûPAIDû LOANûOFûUPûTOû53MûANDûAû53MûlVE 4HEûCOMPANYûEXPECTSûNETûDEBTûINûTHEû PREVIOUSLY ûANDûMATURESûONû-AYûû YEARûREVOLVINGûCREDITûAGREEMENT REGIONûOFûaBNûATûYEAR ENDûûWITHû %XISTINGûLENDERSûNational Australia Bank û 4HEûNEWûREVOLVERûWILLûREPLACEûANûEXISTINGû LEVERAGEûOFûAROUNDûûTIMES SMBC ûLloyds Bank ûRoyal Bank of Scotland ûING û 53MûlVE YEARûAGREEMENTûDATEDû #APITAûWILLûTARGETûMEDIUM TERMûLEVERAGEû Santander and HSBC WEREûJOINEDûBYûCredit $ECEMBERû OFûBETWEENûûANDûûTIMESûNETûDEBTûTOû Agricole ONûTHEûRENEWEDûFACILITY 4HEûREVOLVERûCANûBEûINCREASEDûTOûUPûTOû %BITDAûANDûANûINVESTMENT GRADEûCREDITû ()#,ûINCREASEDûTHEûFACILITYûTOûaMûFROMû 53BN ûANDûINCLUDESûAû53MûSUB LIMITû RATING aMûINû-AYûûTOûBACKûAûPIPELINEûOFû FORûISSUINGûLETTERSûOFûCREDIT NEWûOPPORTUNITIESûITûWASûEVALUATING 4HEûREVOLVERûISûFORûGENERALûCORPORATEû EMEA LOANS BOOKRUNNERS – FULLY PURPOSES ûINCLUDINGûISSUINGûCOMMERCIALû SYNDICATED VOLUME PAPERû4HEûCOMPANYûSAIDûITûCANûBORROWûUPûTOû BOOKRUNNERS: 1/1/2018 TO DATE 53MûOFûREVOLVINGûLOANSûONûTHEûMERGERû Managing No of Total Share CLOSINGûDATEûTOûPARTIALLYûlNANCEûTHEû!CLARAû bank or group issues US$(m) (%) NORTH AMERICA ACQUISITION 1 Goldman Sachs 1 3,787.80 14.2 2EVOLVERûBORROWINGSûCANûBEûMADEûINû =1 Deutsche Bank 1 3,787.80 14.2 CURRENCIESûINCLUDINGû53ûDOLLARS ûEUROS û 3 BNP Paribas 7 1,857.90 7.0 UNITED STATES POUNDSûSTERLING û#ANADIANûANDû3WISSûFRANCS 4 ING 6 1,721.55 6.5 JP Morgan ûBank of America Merrill Lynch and 5 HSBC 5 1,524.91 5.7 DR PEPPER BACKED BY LOANS HSBC AREûJOINTûLEADûARRANGERSûANDûJOINTû =5 Credit Agricole 5 1,524.91 5.7 BOOKRUNNERS 7 MUFG 4 1,388.56 5.2 4HEûMERGERûOFû53ûDRINKSûCOMPANIESûDR 0RICINGûONûTHEûTERMûLOANûISûLINKEDûTOû 8 Santander Global 5 1,132.16 4.3 PEPPER SNAPPLE GROUP and KEURIG GREEN RATINGSû&ORû!! !! !AûTHEûMARGINûISûBPû 9 BBVA 4 1,097.55 4.1 MOUNTAINûISûBEINGûBACKEDûWITHûAû DAYû OVERû,IBORûFORû! ! !ûITûISûBPûFORû!! 10 NatWest Markets 3 1,012.59 3.8 UNSECUREDûBRIDGEûLOANûOFûUPûTOû53BNû !ûITûISûBPûFORû! ! !ûITûISûBPûFORû =10 Banca IMI 3 1,012.59 3.8 FROMûJP Morgan ûBank of America Merrill Lynch """ """ "AAûITûISûBPûANDûFORû""" Total 15 26,624.20 and Goldman Sachs """"AAûORûLOWERûITûISûBP Proportional credit 4HEûREVERSEûTAKEOVER ûWORTHûMOREûTHANû 4HEûCOMPANYûISûRATEDû!ûBYû30ûANDû&ITCH û Source: Thomson Reuters SDC code: R17 53BN ûWILLûBEûFUNDEDûTHROUGHûTHEûLOANûASû ANDû"AAûBYû-OODYS

76 International Financing Review February 3 2018 LOANS LEVERAGED LOANS

*OININGûTHEûTERMûLOANûWEREûBank of NY KELLOGG AGREES US$2.5bn LOANS BNP Paribas ûCitigroup ûCredit Agricole and Mellon ûCitigroup ûTD Bank ûWells Fargo ûUS Mizuho AREûJOINTûBOOKRUNNERSûONûTHEûDEAL Bank ûCitizens and Northern Trust #EREALûMAKERûKELLOGG COûANNOUNCEDûAûNEWû MUFG HASûALSOûJOINEDûASûSENIORûMANDATEDû 0RICINGûONûTHEûREVOLVERûISûALSOûLINKEDûTOû lVE YEARûCREDITûAGREEMENTûALLOWINGûITûTOû LEADûARRANGER ûWHILEûBank of America ûHSBC ûJP RATINGSû&ORû!! !! !AûTHEREûISûAûMARGINû BORROWûUPûTOû53BNûINûADDITIONûTOûAû Morgan ûMorgan Stanley ûSantander and OFûBPûANDûWITHûAûFACILITYûFEEûOFûBPûFORû DAYûFACILITYûFORûUPûTOû53BN Scotiabank AREû-,!S ! ! !ûTHEûMARGINûISûBPûANDûTHEû JP Morgan ûBarclays ûBank of America Merrill 0ROCEEDSûWILLûBEûUSEDûFORûGENERALû FACILITYûFEEûISûBPûFORû!!!ûITûISûBPûANDû Lynch ûCitigroup ûRabobank ûMorgan Stanley, CORPORATEûPURPOSES BPûFORû! ! !ûITûISûBPûANDûBPûFORû MUFG and Wells Fargo AREûJOINTûLEADû """ """ "AAûITûISûBPûANDûBPû ARRANGERSûANDûJOINTûBOOKRUNNERS ANDûFORû"""""""AAûITûISûBPûANDû 0ROCEEDSûAREûFORûGENERALûCORPORATEû BP PURPOSES *OININGûTHEûREVOLVERûWEREû"ANKûOFû.9û 4HEREûAREûûLENDERSûONûTHEûlVE YEARû LEVERAGED LOANS -ELLON û#ITIGROUP û4$û"ANK û7ELLSû&ARGO û LOAN ûWHICHûREPLACESûTHEûEXISTINGû 53û"ANK û#ITIZENS û.ORTHERNû4RUSTûANDû AGREEMENTûDATEDû&EBRUARYûûANDûSETûTOû -ORGANû3TANLEY MATUREûINû&EBRUARYû UNITED STATES !CLARAûPROVIDESûMETERS ûSOFTWAREûANDû 4HEûlVE YEARûFACILITYûINCLUDESûUPûTOû INSTALLATIONûSERVICESûTOûMOREûTHANûû 53MûFORûLETTERSûOFûCREDIT ûANDûUPûTOû EAGLEPICHER DEAL TAKES SHAPE ELECTRIC ûWATERûANDûGASûUTILITIESûWORLDWIDE 53MûFORû%UROPEANûSWINGLINEûLOANS 4HEûNEWû DAYûLOANûREPLACESûTHEû "ATTERYûCOMPANYûEAGLEPICHER TECHNOLOGIESû DUO BACK XEROX, FUJIFILM JV EXISTINGûLOANûDATEDû*ANUARYû ûû4HEû LEVERAGEDûBUYOUTûBYûPRIVATEûEQUITYûlRMû NEWûLOANûCANûBEûEXTENDEDûBYûAûYEARûTOû '4#2ûWILLûBEûBACKEDûBYû53MûOFû Citigroup and Morgan Stanley have provided *ANUARYûû INSTITUTIONALûTERMûLOANS 53BNûOFûCOMMITTEDûlNANCINGûTOû 0RICINGûONûTHEûlVE YEARûISûLINKEDûTOû Jefferies WILLûLEADûAûBANKûSYNDICATEûTHATû SUPPORTûAûJOINTûVENTUREûBETWEENûXEROX CORP RATINGSû&ORû!! ! ûORûHIGHERûTHEûMARGINû INCLUDESûBarclays and RBC Capital Markets ANDû*APANSûFUJIFILM HOLDINGS ISûBPûOVERû,IBORûWITHûAûûFACILITYûFEEû 4HEûlNANCINGûISûSTRUCTUREDûASûAû53Mû 4HEûCOMPANIESûSAIDûINûAûPRESSûRELEASEû FORû"AA""" """ ûITûISûBPûANDûBPû SECUREDûTERMûLOANûWITHûAûlRSTûPRIORITYûCLAIMû THATû8EROXûSHAREHOLDERSûWILLûRECEIVEûAû FORû"AA""""""ûITûISûBPûANDûBPû ANDûAû53MûSECUREDûTERMûLOANûWITHûAû 53BNûSPECIALûCASHûDIVIDENDûANDûOWNû FORû"AA""" """ ûITûISûBPûANDûBPû SECONDûPRIORITYûCLAIM ûOFûTHEûCOMBINEDûCOMPANY ANDûFORûLOWERûTHANû"AA""" """ ûITûISû 4HEûDEBTûPACKAGEûWILLûINCLUDEûAûREVOLVINGû 4HEûCOMBINEDûCOMPANYûWILLûBEûCALLEDû BPûANDûBP CREDITûFACILITYû)TSûSIZEûHASûNOTûYETûBEENû &UJIû8EROX ûWITHûDUALûHEADQUARTERSûINû 0RICINGûONûTHEû DAYûDEALûISûBPûOVERû lNALISED #ONNECTICUTûANDûINû*APAN ,IBORûWITHûAûBPûFEEûFORû!! ! ûORûHIGHERû %AGLE0ICHERûISûCURRENTLYûPARTûOFû6ECTRAû &UJIlLMû(OLDINGSûISûSETûTOûTAKEû BPûANDûBPûFORû"AA""" """ û #ORP ûTHEûMATERIALSûANDûCHEMICALSûlRMû OVERû8EROX ûCOMBININGûTHEû53ûCOMPANYû BPûANDûBPûFORû"AA""""""ûBPû PREVIOUSLYûKNOWNûASû/-û'ROUP INTOûTHEIRûEXISTINGûJOINTûVENTUREûTOû ANDûBPûFORû"AA""" """ ûANDû 6ECTRAûISûOWNEDûBYûPRIVATEûEQUITYû GAINûSCALEûANDûCUTûCOSTSûAMIDûDECLININGû BPûANDûBPûFORûLOWERûTHANû"AA HEAVYWEIGHTû!POLLOû'LOBALû-ANAGEMENT û DEMANDûFORûOFlCEûPRINTING û2EUTERSû """ """ WHICHûTOOKûTHEûCOMPANYûPRIVATEûINûûINûAû REPORTEDû&UJIlLMûNOWûOWNSûûOFû&UJIû 4HEûCOMPANYûISûRATEDû"AAûBYû-OODYSû ROUGHLYû53BNûDEAL 8EROX ûTHEûJOINTûVENTUREûDATINGûBACKû ANDû"""ûBYû30ûANDû&ITCH !POLLOûISûPLANNINGûTOûCARVEûOUTû6ECTRASûOTHERû MOREûTHANûûYEARSûTHATûSELLSûPHOTOCOPYINGû BUSINESS ûMAGNETICûMATERIALûMAKERû PRODUCTSûANDûSERVICESûINûTHEû!SIA 0ACIlCû 6ACUUMSCHMELZE ûWHICHûITûWILLûCONTINUEûTOûOWN REGION ,"/SûHAVEûACCOUNTEDûFORûûOFûYEAR TO 4HEûTWOûCOMPANIESûSAIDûTHATû&UJIû8EROXû DATEû53ûLEVERAGEDûLOANûVOLUME ûWHICHûATû WILLûBUYûBACKûTHATûSTAKEûFROMû&UJIlLMûFORû LATIN AMERICA 53BNûASûOFû*ANUARYûûISûDOWNûûYEAR AROUNDû53BN ûUSINGûBANKûDEBT OVER YEAR

PHILIP MORRIS EXTENDS RCF BRAZIL AMERICAS LOANS BOOKRUNNERS – FULLY SYNDICATED VOLUME PHILIP MORRIS INTERNATIONALûHASûEXTENDEDûTHEû PETROBRAS LAUNCHES US$3bn DEAL BOOKRUNNERS: 1/1/2018 TO DATE TERMûOFûITSû53BNûREVOLVINGûCREDITûFACILITYû Managing No of Total Share BYûAûYEARûTOû&EBRUARYûû /ILûCOMPANYûPETROBRASûHASûLAUNCHEDûAû bank or group issues US$(m) (%) 4HEûLOANûWASûSETûTOûEXPIREûONû&EBRUARYûû 53BNûREVOLVINGûCREDITûFACILITYûINTOûGENERALû 1 BAML 38 10,292.34 17.6 SYNDICATION 2 Wells Fargo 26 6,143.08 10.5 Citibank EuropeûISûADMINISTRATIVEûAGENTûOFû 4HEûAPPLICABLEûMARGINûONûTHEûlVE YEARû 3 JP Morgan 22 5,292.44 9.0 THEûFACILITY ûWHICHûISûDATEDû&EBRUARYû SENIORûUNSECUREDûFACILITYûISûTIEDûTOûAûRATINGSû 4 Citigroup 8 3,502.03 6.0 !LLûOTHERûTERMSûANDûCONDITIONSûREMAINû GRIDûANDûOFFERSûBANKSûAûSPREADûOFûBPûOVERû 5 MUFG 7 2,710.42 4.6 INûFULLûFORCEûANDûEFFECT ,IBORûATûTHEûCURRENTûRATINGSûOFû"A"" "" 6 Goldman Sachs 9 2,225.39 3.8 4HEûFACILITYûPAYSûAûMARGINûOFûBPûOVERû 4HEûCOMMITMENTûFEEûONûTHEûUNUSEDû 7 SunTrust Banks 11 2,221.29 3.8 ,IBORûWITHûAûBPûUTILISATIONûFEEûFORû PORTIONûOFûTHEûFACILITYûWILLûBEûûOFûTHEû 8 US Bancorp 13 2,125.65 3.6 DRAWINGSûOFûOVERûAûTHIRD ûANDûBPûFORû APPLICABLEûMARGIN 9 Mizuho 4 1,641.67 2.8 DRAWINGSûOFûOVERûTWO THIRDSû4HEREûISûAû 5TILISATIONûFEESûAREûZEROûIFûûORûLESSûOFû 10 PNC Financial 13 1,489.49 2.5 COMMITMENTûFEEûOFûBPûONûUNDRAWNûFUNDS THEûFACILITYûISûDRAWN ûRISINGûTOûBPûIFû Total 96 58,498.49 0HILIPû-ORRISûISûRATEDû!ûBYû30ûANDû!ûBYû ûISûDRAWN ûANDûBPûIFûûORûMOREûISû Proportional credit -OODYS DRAWN Source: Thomson Reuters SDC code: R7

International Financing Review February 3 2018 77 3YNDICATIONûOFûTHEû%AGLE0ICHERûDEBTûISû HASûûSOFTûCALLûPROTECTIONûFORûSIXûMONTHS 3HUTTERmYûSAIDûITûWOULDûSUSPENDûITSûSHAREû EXPECTEDûTOûLAUNCHûINûLATEû&EBRUARY ûWITHû 'OPHERûPROVIDESûENVIRONMENTALLYûSAFEû REPURCHASEûPROGRAMMEûINûORDERûTOûFOCUSûONû FUNDINGûANDûCLOSINGûSLATEDûFORûEARLYû-ARCH RECYCLINGûOFûLEAD BASEDûBATTERIES NEAR TERMûDELEVERAGING 4HEûLOANSûWILLûBRINGûLEVERAGEûTOûûTIMESû )4ûSTAFlNGûCOMPANYûON ASSIGNMENT has 4HEûCOMPANYûISûRATEDû"" ûBYû30ûANDû"Aû THROUGHûTHEûSENIORûTRANCHEûANDûûTIMESû OBTAINEDû53BNûINûCOMMITTEDûlNANCINGû BYû-OODYS TOTAL ûBASEDûONû53MûONûLASTûûMONTHSû FROMûWells FargoûTOûBACKûITSûACQUISITIONûOFû 3HUTTERmY ûWHICHûALLOWSûCUSTOMERSûTOû %BITDA GOVERNMENTûSERVICESûCONTRACTORû%#3û&EDERAL CREATEûPERSONALISEDûMEDIAûANDûPHOTO BASEDû '4#2ûWILLûWRITEûANûEQUITYûCHECKûFORûOVERû 5NDERûTHEûTERMSûOFûTHEûDEAL û/Nû PRODUCTSûONLINE ûINû!UGUSTûûPRICEDûAû ûOFûCAPITALISATION ûIMPLYINGûTOTALû !SSIGMENTûWILLûACQUIREû%#3ûFORû53MûINû 53MûLOANûCOMPRISINGûAû53Mû CAPITALISATIONûOFûAROUNDû53M CASHûFROMûMAJORITYûOWNERûANDûFOUNDERû2OYû SEVEN YEARûDELAYED DRAWûTERMûLOANûANDûAû INVICTUS ûTHEûlREûSAFETYûANDûOILûADDITIVESû +APANIûANDûPRIVATEûEQUITYûlRMû,INDSAYû 53MûlVE YEARûREVOLVINGûCREDIT DIVISIONSûOFû)SRAELû#HEMICALS ûHASûLAUNCHEDû 'OLDBERG 4HEûCOVENANT LITEûTERMûLOANûPRICEDûATû ANû53MûCREDITûFACILITYûBACKINGûITSû 4HEûlNANCINGûCOMPRISESûAû53Mû BPûOVERû,IBORûWITHûAûûmOORûANDûû ACQUISITIONûBYûlNANCIALûSPONSORû3+û#APITAL REVOLVINGûCREDITûFACILITY ûWHICHûWILLûBEû DISCOUNTû4HEûREVOLVERûPRICEDûATûBPûWITHû 4HEûFUNDINGûCOMPRISESûAû53MûlVE UNDRAWNûATûCLOSE ûANDûAû53BNûTERMûLOANû AûûmOOR YEARûREVOLVER ûAû53MûSEVEN YEARû "û4HEûCOMPANYûEXPECTSûTOûEXECUTEûAûPORTIONû ROBERTSHAW HOLDINGS ûAûPROVIDERûOFûHEATINGû lRST LIENûTERMûLOANûANDûAû53MûEIGHT OFûTHEûlNANCINGûVIAûANûAMENDMENTûTOûITSû ANDûAIRCONDITIONINGûSYSTEMSûANDûSERVICESûTOû YEARûSECOND LIENûTERMûLOAN EXISTINGûFACILITIES RESIDENTIALûANDûCOMMERCIALûMARKETS ûWILLûONû Barclays ISûADMINISTRATIVEûAGENTûONûTHEû #LOSINGûLEVERAGEûISûEXPECTEDûTOûBEûROUGHLYû 4UESDAYûLAUNCHûAû53MûBUYOUTûLOANû lRST LIENûPORTIONûANDûGoldman Sachs is ûTIMES BACKINGûTHEûCOMPANYSûSALEûTOû/NEû2OCKû ADMINISTRATIVEûAGENTûONûTHEûSECOND LIENû %#3ûPROVIDESûCYBERûSECURITY ûCLOUD û)4û #APITALû0ARTNERS TRANCHEûHSBC ISûALSOûANûARRANGERûONûTHEû MODERNISATIONûANDûADVANCEDûSCIENCEûANDû Deutsche Bank ûCredit Suisse and Jefferies LEADû DEAL ENGINEERINGûSERVICESûTOûGOVERNMENTû THEûDEAL ûWHICHûISûEXPECTEDûTOûBEûCOVENANT &IRST LIENûGUIDANCEûISûSETûATûBP BPû AGENCIES LITE OVERû,IBORûWITHûAûûmOORûANDûû/)$û4HEû 4HEûTRANSACTIONûISûSLATEDûTOûCLOSEûONû!PRILû 4HEûlNANCINGûCOMPRISESûAû53Mû TERMûLOANûHASûûSOFTûCALLûPROTECTIONûFORûSIXû ûATûWHICHûTIMEû/Nû!SSIGNMENTûPLANSûTOû SEVEN YEARûlRST LIENûTERMûLOANûANDûAû MONTHS CHANGEûITSûNAMEûTOû!3'.û)NCORPORATED 53MûEIGHT YEARûSECOND LIENûTERMûLOAN 3ECOND LIENûGUIDANCEûISûSETûATûBP )NVESTMENTûlRMûVICTORY CAPITAL "OTHûLOANSûWILLûHAVEûû,IBORûmOORSû4HEû BPûOVERû,IBORûWITHûAûûmOORûANDûAû MANAGEMENTûHASûREDUCEDûPRICEûTALKûONûITSû lRST LIENûTRANCHEûWILLûHAVEûûSOFTûCALLû DISCOUNTûOFûû4HEûTERMûLOANûISûCALLABLEûATû 53MûTERMûLOANû" PROTECTIONûFORûSIXûMONTHS ûWHILEûTHEûSECOND ûINûYEARûONE ûTHENûATûûINûYEARûTWO RBC Capital Markets LEADSûTHEûLOAN ûWHICHûISû LIENûPORTIONûWILLûBEûCALLABLEûATû û #ORPORATEûFAMILYûRATINGSûAREû""" û NOWûGUIDEDûATûBPûOVERû,IBORûWITHûAûû AMERICAN GAMING SYSTEMSûISûLOOKINGûTOû &ACILITYûRATINGSûAREû"" "" ûFORûTHEûlRST mOORûANDûû/)$ ûCOMPAREDûWITHûOPENINGû REPRICEû53MûOFûlRST LIENûTERMûDEBTûTOûAû LIENûANDû#AA### "ûFORûTHEûSECOND LIEN GUIDANCEûINûTHEûBP BPûOVERû,IBORû SPREADûOFûBPûOVERû,IBORûWITHûAûûmOOR û ACCESS CIG ûANûINFORMATIONûMANAGEMENTû RANGEûWITHûAûûmOORûANDûAûDISCOUNTûOFûû OFFEREDûATûPAR SERVICESûPROVIDER ûWILLûLAUNCHûONû4UESDAYûAû /)$ 4HEûDEAL ûLEDûBYûJefferies ûWOULDûRESETûû 53BNûCREDITûFACILITY 4HEûTRANSACTIONûINCLUDESûAû53Mû SOFTûCALLûPROTECTIONûFORûSIXûMONTHS Jefferies ûMacquarie and Nomura LEADûTHEû REVOLVINGûCREDITûFACILITY 4HEûCOMPANYûLASTûCAMEûTOûMARKETûINû DEAL 0ROCEEDSûFROMûTHEûDEAL ûALONGûWITHûCASHû $ECEMBERûûTOûRAISEû53MûINûlRST LIENû 4HEûCREDITûFACILITYûCOMPRISESûAû53Mû FROMûANûINITIALûPUBLICûOFFERING ûWILLûBEûUSEDû INCREMENTALûTERMûDEBTû4HEûADD ONûLOANûWASû REVOLVER ûAû53MûlRST LIENûTERMûLOAN ûAû TOûRElNANCEûDEBT ûINCLUDINGûAû53Mû ISSUEDûATûPARûAFTERûTHEûû/)$ûOFFEREDûATû 53MûDELAYEDûDRAWûlRST LIENûTERMûLOAN û TERMûLOANû"ûDUEûINû/CTOBERûûTHATûWASû LAUNCHûWASûELIMINATED Aû53MûSECOND LIENûTERMûLOANûANDûAû REPRICEDûINû*ULYûûTOûBPûOVERû,IBORû 4HEûSPREADûONûTHEûLOANûCLEAREDûATûBPû 53MûDELAYEDûDRAWûSECOND LIENûTERMû FROMûBP OVERû,IBORûWITHûAûûmOOR ûINûLINEûWITHû LOAN 6ICTORYûlLEDûFORûANû)0/ûONû*ANUARYû GUIDANCEû4HEREûWASûNOûCALLûPROTECTIONûPUTû )NITIALûPROCEEDSûWILLûBEûUSEDûTOûRElNANCEû %XISTINGûRATINGSûAREû""" ûCORPORATEûANDû INûPLACEû0ROCEEDSûFROMûTHEûNEWûMONEYû EXISTINGûDEBT ûWHILEûPROCEEDSûFROMûTHEû FACILITYûANDûEXPECTEDûTOûBEûUPGRADEDûTOû"A WEREûSLATEDûTOûFUNDûANûACQUISITIONûANDûFORû DELAYEDûDRAWûTERMûLOANSûAREûSLATEDûTOûFUNDû BBûPOST )0/ GENERALûCORPORATEûPURPOSES ACQUISITIONS *EFFERIESûANDû-ACQUARIEûARRANGEDûTHEûLOAN û 4HEûlRST LIENûTERMûLOANûWILLûHAVEûûSOFTû SHUTTERFLY DETAILS ACQUISITION LOAN WHICHûISûGOVERNEDûBYûAûlRST LIENûNETûLEVERAGEû CALLûPROTECTIONûFORûSIXûMONTHS ûWHILEûTHEû COVENANTûANDûCOMESûDUEûONû&EBRUARYûû SECOND LIENûWILLûBEûCALLABLEûATûûINûYEARû SHUTTERFLY ûTHEûDIGITALûIMAGEûCOMPANY ûHASû ONE ûTHENûATûûINûYEARûTWO DETAILEDûANû53MûINCREMENTALûLOANû #ORPORATEûFAMILYûRATINGSûAREû""û&IRST BEINGûISSUEDûTOûBACKûITSûPURCHASEûOFû LIENûFACILITYûRATINGSûAREû"" GOPHER RESOURCE SEEKS US$490m PRIVATELY HELDû,IFETOUCHûFORûTHEûSAMEû ,ASû6EGAS BASEDû!MERICANû'AMINGû AMOUNT PRODUCESûGAMINGûPRODUCTSûFORûCASINOûmOORS GOPHER RESOURCEûISûMARKETINGûAû53Mû 4HEûACQUISITIONûOFû,IFETOUCH ûAûSCHOOLû LOANûTOûFUNDûTHEûCOMPANYSûACQUISITIONûBYû PHOTOGRAPHYûCOMPANY ûISûEXPECTEDûTOûCLOSEû SYNIVERSE SETS PRICE TALK ON REFI %NERGYû#APITALû0ARTNERS INûTHEûSECONDûQUARTER The Credit Suisse LEDûDEALûISûSPLITûBETWEENûAû 4HEûADD ONûLOANûISûEXPECTEDûTOûPRICEûATû -OBILEûPHONEûTECHNOLOGYûPROVIDERûSYNIVERSE 53MûREVOLVERûANDûAû53MûCOVENANT BPûOVERû,IBORûANDûTOûHAVEûSOFTûCALLû TECHNOLOGIESûHASûCIRCULATEDûGUIDANCEûONûITSû LITEûlRST LIENûTERMûLOAN PROTECTIONûOFûûFORûSIXûMONTHSûMorgan 53BNûlRST LIENûTERMûLOANûBACKINGûAû 4HEûTERMûLOANûISûGUIDEDûATûAûRANGEûOFû Stanley LEADS RElNANCING BP BPûOVERû,IBORûWITHûAûûmOORû4HEû 4HEREûWILLûBEûQUARTERLYûAMORTISATIONûOFû Goldman Sachs LEADSûWITHûBarclaysû0RICEû SEVEN YEARûLOANûISûOFFEREDûATûAûû/)$ûANDû PRINCIPALûEQUALûTOûûPERûYEAR TALKûONûTHEûlVE YEARûLOANûISûBP BPû

78 International Financing Review February 3 2018 LOANS LEVERAGED LOANS

OVERû,IBORûWITHûAûûmOORûANDûAûû ,ENDERSûAREûOFFEREDûSIXûMONTHSûOFûSOFTûCALLû Suisse ûCitizens ûMacquarie ûPNC and Goldman DISCOUNT PROTECTIONûATû Sachs ,ENDERSûAREûOFFEREDûSIXûMONTHSûOFûSOFTûCALLû 4HEûlNANCINGûINCLUDESûAû53Mû 4HEûISSUERûISûRATEDû""ûANDûTHEûLOANûISû PROTECTIONûATûû4HEûLOANûWILLûAMORTISEûATû REVOLVINGûCREDITûFACILITYûANDûWILLûBEûGOVERNEDû RATEDû"" ûPERûYEAR BYûAûTOTALûNETûLEVERAGEûCOVENANT FEECO ûTHEûFEEûBUSINESSûOFûINSURANCEû 4HEûlNANCINGûWILLûINCLUDEûAûREVOLVINGû 2ATINGSûAREû"" ûCORPORATEûANDûFACILITY COMPANYû!M4RUST ûHASûSHIFTEDû53MûTOû CREDITûFACILITYûUPûTOû53M Morgan Stanley and Goldman Sachs are THEûlRST LIENûPORTIONûOFûAû53MûCREDIT û 0ROCEEDSûWILLûBEûUSEDûTOûRElNANCEûTHEû PROVIDINGûDEBTûlNANCINGûFORû,EONARDû'REENû ANDûDOWNSIZEDûTHEûSECONDûLIENûBYûTHEûSAMEû COMPANYSûEXISTINGûTERMûLOANûDUEûINû!PRILû û0ARTNERSûLEVERAGEDûBUYOUTûOFûPACKAGINGû AMOUNT ûANDûPAYûTRANSACTIONûFEESûANDûEXPENSES COMPANYûPROMACH 0ROCEEDSûFROMûTHEûLOANûBACKûPRIVATEû 2ATINGSûAREû""ûCORPORATEûANDû""û 4HEûDEALûVALUESû0RO-ACHûATûANûENTERPRISEû EQUITYûlRMû-ADISONû$EARBORNû0ARTNERSû FACILITYû4HEûDEALûPROMPTEDûAûONEûNOTCHû VALUEûOFûMOREûTHANû53BN ûORûûTIMESû PURCHASEûOFûAûûSTAKEûINûTHEûUNIT CORPORATEûRATINGûUPGRADEûFROMû-OODYS 0RO-ACHSûLASTûûMONTHSû%BITDA 4HEûCOVENANT LITEûTRANSACTIONûISûNOWûSPLITû 0UBLICLYûTRADEDûKITCHENWAREûANDû ,EONARDû'REENûISûACQUIRINGû0RO-ACHûFROMû BETWEENûAû53MûSEVEN YEARûlRST LIENû TABLEWAREûPRODUCTSûPROVIDERûLIFETIME BRANDS !%!û)NVESTORS ûWHICHûBOUGHTûTHEû#OVINGTON û TERMûLOANûANDûAû53MûEIGHT YEARûSECOND HASûLAUNCHEDûAû53MûlRST LIENûTERMûLOANû +ENTUCKY BASEDûCOMPANYûFROMûPRIVATEû LIENûTERMûLOAN BACKINGûITSûACQUISITIONûOFûHOUSEWAREû EQUITYûlRMû4HEû*ORDANû#OMPANYûINûûFORû BAML LEDûALONGSIDEûDeutsche Bank ûBarclays û COMPANYû&ILAMENTû"RANDSûFROMû#ENTREû ANûENTERPRISEûVALUEûOFûABOUTû53BN Jefferies and CIBC 0ARTNERS 0RO-ACHSûPACKAGINGûPRODUCTSûINCLUDEû 0RICINGûONûTHEûlRST LIENûANDûSECOND LIENûTERMû JP Morgan LEADSûTHEûSEVEN YEARûLOAN û BOTTLE CAPPINGûMACHINERYûANDûLABELLINGû LOANSûlNISHEDûUNCHANGEDûFROMûINITIALû GUIDEDûATûBPûOVERû,IBORûWITHûAûûmOORû EQUIPMENT GUIDANCEû4HEûlRST LIENûLOANûPRICEDûATûBPû ANDû ûDISCOUNT 0HARMACEUTICALûCOMPANYûMALLINCKRODT OVERû,IBORûWITHûAûûmOORûANDûAûDISCOUNTûOFû ,ENDERSûAREûOFFEREDûSIXûMONTHSûOFûSOFTûCALLû HASûCIRCULATEDûPRICEûTALKûONûTHEû53Mû û4HEûSECOND LIENûLOANûCLEAREDûATûBPûOVERû PROTECTIONûATû TERMûLOANûBACKINGûITSûPURCHASEûOFû3UCAMPOû ,IBORûWITHûAûûmOORûANDûAûDISCOUNTûOFû 0ROCEEDSûFROMûTHEûTERMûLOANûANDûROUGHLYû 0HARMACEUTICALS 4HEûlRST LIENûLOANûHASûSIXûMONTHSûOFûû 53MûOFûDRAWINGSûUNDERûAûNEWû53Mû Deutsche Bank LEADSûWITHûBarclays and SOFTûCALLûPROTECTION ûWHILEûTHEûSECOND LIENû lVE YEARûASSET BASEDûREVOLVINGûCREDITûFACILITYû Citigroupû#O MANAGERSûINCLUDEûCredit Suisse û LOANûINCLUDESûHARDûCALLûPROTECTIONûOFû WILLûBEûUSEDûTOûFUNDûTHEû53Mû Goldman Sachs ûMorgan Stanley ûWells Fargo û ACQUISITION Mizuho and PNC 4HEûISSUERûISûRATEDû"" û4HEûlRST LIENûLOANû 2ATINGSûAREû"A" ûCORPORATEûANDû"" û 4HEûTERMûLOAN ûWHICHûWILLûMATUREûONû ISûRATEDû"" ûWHILEûTHEûSECOND LIENûLOANûISû FACILITY &EBRUARYûû ûISûGUIDEDûATûBPûOVERû RATEDû#AA### #ENTREû0ARTNERSûWILLûOWNûûOFûTHEû ,IBORûWITHûAûûmOORûANDûAûû -ADISONû$EARBORNûISûPAYINGû COMBINEDûCOMPANY DISCOUNT APPROXIMATELYû53MûFORûITSûSTAKEûINûTHEû (OSPITALûANDûMEDICALûGROUPûOPERATORû ,ENDERSûAREûOFFEREDûSIXûMONTHSûOFûSOFTûCALLû FEEûBUSINESS PROSPECT MEDICALûISûINûTHEûMARKETûWITHûAû PROTECTIONûATû 'LOBALûENTERPRISEûSOFTWAREûPROVIDERûEPICOR 53BNûlRST ûANDûSECOND LIENûLOANû 4HEûDEBTûWILLûAMORTISEûATû SOFTWARE CORPûHASûWRAPPEDûAû53BNû PACKAGEûBACKINGûAûDIVIDENDûRECAPITALISATION 2ATINGSûAREû"" "AûCORPORATEûANDû"" "Aû REPRICINGûOFûITSûTERMûLOANû" ûWHICHûINCLUDESû JP MorganûLEADSûTHEûDEAL ûWHICHûISûSPLITû FACILITY Aû53MûINCREMENTALûTERMûLOAN BETWEENûAû53BNûSIX YEARûlRST LIENû 4HEûSPREADûONûTHEûLOANûDECREASEDûTOû TRANCHEûANDûAû53MûSEVEN YEARûSECOND SCIENTIFIC GAMES SEALS REPRICING BPûOVERû,IBORûWITHûAûûmOOR ûTHEûTIGHTû LIENûTRANCHE ENDûOFûGUIDANCEûOFûBP BP 'UIDANCEûISûCIRCULATINGûATûBP BPû 3LOTûMACHINEûCOMPANYûSCIENTIFIC GAMES 4HEûLOAN ûDUEû*UNEûû ûSOLDûATûPARûANDû OVERû,IBORûWITHûAûûmOORûANDûû/)$ûONûTHEû INTERNATIONALûHASûREPRICEDûANDûUPSIZEDûITSû HASûûSOFTûCALLûPROTECTIONûFORûSIXûMONTHS lRST LIENûANDûATûBP BPûWITHûAûûmOORû TERMûLOANû"ûBYûAûTOTALûOFû53MûTOû 0ROCEEDSûFROMûTHEûLOANûREPRICEûTHEû ANDûû/)$ûONûTHEûSECOND LIEN 53BN COMPANYSûlRST LIENûTERMûLOANûANDûREPAYû 4HEûlRST LIENûINCLUDESûSIXûMONTHSûOFûSOFTû 4HEûCOMPANYûHADûINITIALLYûLAUNCHEDûAû EXISTINGûSECOND LIENûNOTES ûINCLUDINGûAûû CALLûPROTECTIONûATû ûWHILEûTHEûSECOND LIENû REPRICINGûOFûTHEûLOANûDUEû!UGUSTûûANDû PREPAYMENTûPENALTY FEATURESûAûûHARDûCALLûSCHEDULE PROPOSEDûTOûADDû53MûTOûTAKEûTHEûSIZEûTOû 0ROCEEDSûWILLûBEûUSEDûTOûRElNANCEûTHEû 53BN US LEVERAGED LOANS COMPANYSû53Mû4,"ûDUEûINû û 4HEûADDITIONALûPROCEEDSûWILLûBEûUSEDûTOû BOOKRUNNERS: 1/1/2018 TO DATE PREPAYûAûPORTIONûOFûITSûUNDERFUNDEDû RElNANCEûTHEûREMAININGûûSENIORûSECUREDû Managing No of Total Share PENSION ûPAYûAûDIVIDENDûTOûSHAREHOLDERSû NOTESûDUEû ûPAYûBREAKAGEûCOSTSûANDû bank or group issues US$(m) (%) INCLUDINGû,EONARDû'REENûû0ARTNERSûANDû REPAYûREVOLVERûBORROWINGS 1 BAML 18 4,498.74 17.2 COVERûFEESûANDûEXPENSES 4HEûTRANSACTIONûALSOûCUTSûTHEûSPREADûONû 2 Wells Fargo 12 2,730.23 10.5 THEûLOANûTOûBPûOVERû,IBORûWITHûAûûmOOR û 3 Goldman Sachs 9 2,225.39 8.5 ZOTEC LAUNCHES US$305m TL THEûTIGHTûENDûOFûGUIDANCEûOFûBP BPû 4 JP Morgan 8 1,922.17 7.4 4HEûLOANûWASûPREVIOUSLYûPRICEDûATûBPû 5 Citigroup 4 1,595.43 6.1 ZOTEC PARTNERS ûWHICHûPROVIDESûBILLINGûANDû OVERû,IBOR 6 SunTrust Banks 7 1,376.35 5.3 PRACTICEûMANAGEMENTûSERVICESûTOûPHYSICIANS û 4HEûNEW MONEYûPORTIONûWASûOFFEREDûATûAû 7 Morgan Stanley 6 1,076.01 4.1 HASûLAUNCHEDûAû53MûlRST LIENûTERMû ûDISCOUNT ûWHILEûTHEûEXISTINGûDEBTûWILLû 8 Antares Capital 10 992.81 3.8 LOAN ROLLûATûPAR 9 Citizens Financial 5 962.49 3.7 Goldman Sachs LEADSûWITHûWells Fargoû4HEû 4HEûLOANûHASûûSOFTûCALLûPROTECTIONûFORû 10 KeyBanc CM 4 861.67 3.3 SEVEN YEARûRElNANCINGûISûGUIDEDûATûBP SIXûMONTHS Total 53 26,090.60 BPûOVERû,IBORûWITHûAûûmOORûANDûû Bank of America Merrill Lynch LEDûALONGSIDEû Excluding Project Finance. DISCOUNT Deutsche Bank ûJP Morgan ûFifth Third ûCredit Source: Thomson Reuters SDC code: P2

International Financing Review February 3 2018 79 Jefferies and KKR Capital Markets arranged 4HEûlNANCINGûISûNOWûSPLITûBETWEENûAû ENDûOFûGUIDANCEûOFûBP BPûWITHûAûû THEûTRANSACTION 53MûREVOLVINGûCREDITûFACILITY ûAû53Mû mOORûANDûPARûOFFERINGûPRICE #ORPORATEûFAMILYûRATINGSûAREû"" û&IRST lRST LIENûTERMûLOAN ûANDûAû53MûSECOND 4HEûTRANSACTIONûRESETSûSOFTûCALLûPROTECTIONû LIENûFACILITYûRATINGSûAREû"" LIENûTERMûLOAN ATûûFORûSIXûMONTHS %PICORûPROVIDESûINDUSTRY SPECIlCû 4HEûSTRUCTUREûATûLAUNCHûINCLUDEDûAû 4HEûLOANûWASûPREVIOUSLYûPRICEDûATûBPû ENTERPRISEûSOFTWAREûTOûPROMOTEûBUSINESSû 53MûREVOLVINGûCREDITûFACILITY ûAû53Mû OVERû,IBORûWITHûAûûmOORû)TûWASûPLACEDûINû GROWTHû++2ûACQUIREDûTHEûCOMPANYûFROMû lRST LIENûTERMûLOAN ûANDûAû53MûSECOND -AYûûTOûBACKûTHEûCOMPANYSûBUYOUTûBYû FUNDSûADVISEDûBYû!PAXû0ARTNERSûINû LIENûTERMûLOAN PRIVATEûEQUITYûlRMû!POLLOû'LOBALû 4HEûSEVEN YEARûlRST LIENûPRICEDûATûBPû -ANAGEMENT LIBERTY MEDIA ALLOCATES REFI OVERû,IBOR ûWITHûAûSTEPDOWNûTOûBPûOVERû 4HEûISSUERûANDûTHEûDEBTûAREûRATEDû"A" ,IBORûWHENûGROSSûlRST LIENûLEVERAGEûISûû 4ALENTûlRMûCREATIVE ARTISTS AGENCY has 4ELECOMSûCONGLOMERATEûLIBERTY MEDIA has TIMESûANDûANûADDITIONALûBPûSTEPDOWNû DETAILEDûlNALûPRICINGûONûITSû53MûTERMû ALLOCATEDûAû53BNûTERMûLOANûRElNANCINGû FOLLOWINGûAûQUALIFYINGû)0/ ûAûûmOORûANDû LOANûREPRICING ATû&ORMULAû/NE ûTHEûGLOBALûMOTORûSPORTûITû û/)$ Bank of America Merrill Lynch LEDûTHEû BOUGHTûINû 4HEûLOANûWASûPREVIOUSLYûGUIDEDûATûBPû COVENANT LITEûDEALûWITHûTPG 4HEû53BNûlRST LIENûTERMûLOANû"û OVERû,IBORûWITHûAûûmOORûANDûû/)$ 4HEûCOMPANYûSUCCESSFULLYûDECREASEDû MATURINGûINû&EBRUARYûûREPRICEDûTOû 4HEûSIX MONTH ûûSOFTûCALLûPROTECTIONû PRICINGûTOûBPûOVERû,IBORûWITHûAûûmOORû BPûFROMûBPûTHROUGHûTHEûDEALû)TûWASû WASûUNCHANGED ASûPROPOSEDû!ûSTEPDOWNûTOûBPûOVERû,IBORû PREVIOUSLYûBNûINûSIZEûTHEûRElNANCINGû 4HEûEIGHT YEARûSECOND LIENûPRICEDûATûBPû WHENûlRST LIENûNETûLEVERAGEûISûLESSûTHANûORû USEDûMûOFûEXCESSûCASHûONûBALANCEûSHEETû OVERû,IBORûWITHûAûûmOORûANDûû/)$û EQUALûTOûûTIMESûWASûADDED ANDûMûDRAWNûFROMûAûREVOLVINGûCREDITû 0RICEûTALKûWASûPREVIOUSLYûBPûOVERû,IBORû 4HEûLOANûWASûORIGINALLYûPRICEDûATûBPû FACILITYûTOûPAYûDOWNûSOMEûOFûTHEûDEBT WITHûAûûmOORûANDûû/)$ OVERû,IBORûWITHûAûûmOORûINû&EBRUARYû 4HEûLOANûHASûSOFTûCALLûPROTECTIONûATûûFORû 4HEûûHARDûCALLûSCHEDULEûWASû 4HEûLOAN ûDUEûINû&EBRUARYû ûWASû SIXûMONTHSû4HEûEXISTINGûLOANûISûRATEDû"" UNCHANGED OFFEREDûTOûINVESTORSûATûPARûANDûALSOûBENElTSû JP Morgan ARRANGEDûTHEûDEAL ûWHICHûISû -Y%YE$RûPARENTû#APITALû6ISIONû3ERVICESûISû FROMûAûRESETûOFûûSOFTûCALLûPROTECTIONûFORû LEVERAGE NEUTRALûWITHûTHEûRElNANCEDûTERMû BACKEDûBYû!LTASû0ARTNERSûANDû#AISSEûDEûDEPOTû SIXûMONTHS LOANûNON RECOURSEûTOû,IBERTY ETûPLACEMENTûDUû1UEBEC 4HEûISSUERûISûRATEDû"" û4HEûLOANûISûRATEDû $ELTAû4OPCOûISûTHEûSUBSIDIARYûTHATûOWNSû """ &ORMULAû TRICO ALLOCATES US$425m REFI )NûADDITIONûTOû&ORMULAû û,IBERTYû-EDIAû PHOENIX CUTS PRICING ON LBO LOAN HASûSTAKESûINûTHEû!TLANTAû"RAVESû-AJORû 7INDSHIELDûWIPERûMANUFACTURERûTRICO ,EAGUEû"ASEBALLûCLUB ûANDû53ûBROADCASTERû PRODUCTS CORPûHASûSETûlNALûTERMSûFORûITSû 3TEELûMILLûSERVICESûCOMPANYûPHOENIX SERVICES 3IRIUS8- 53MûlRST LIENûTERMûLOANûRElNANCING û INTERNATIONALûTIGHTENEDûPRICINGûONûTHEûTERMû 4HEû&ORMULAûûCHAMPIONSHIPûRUNSûFROMû LEDûBYûGoldman Sachs LOANûPORTIONûOFûAû53MûLOANûSUPPORTINGû -ARCHûTOû.OVEMBERûEVERYûYEARû)NûûITû 4HEûTENORûOFûTHEûLOANûHASûBEENûSHORTENEDû ITSûBUYOUTûBYûPRIVATEûEQUITYûlRMû!POLLOû WASûWATCHEDûBYûOVERûMûTELEVISIONû TOûSIXûYEARS ûFROMûSEVENûINITIALLY 'LOBALû-ANAGEMENT VIEWERSûACROSSûûTERRITORIES 0RICINGûWIDENEDûTOûBPûOVERû,IBORûWITHû 4HEûFUNDINGûCOMPRISESûAû53MûSEVEN ,IBERTYû-EDIAûBOUGHTû&ORMULAûûFROMû AûûmOORûANDûû/)$ ûCOMPAREDûWITHûBPû YEARûTERMûLOANûANDûAû53MûREVOLVINGû #6#ûINûûFORûANûENTERPRISEûVALUEûOFû OVERû,IBORûWITHûAûûmOORûANDûAûû/)$ûATû CREDITûFACILITY 53BN LAUNCH 4HEûlNALûSPREADûONûTHEûTERMûLOANû LUCID ENERGY GROUP IIûHASûINCREASEDûITSûTERMû 4HEûLOANûNOWûFEATURESûAûûHARDûCALLû DECREASEDûTOûBPûOVERû,IBORûWITHûAûû LOANûBYû53MûANDûCUTûTHEûSPREADûBYûBP SCHEDULE ûVERSUSûûMONTHSûOFûSOFTûCALLû mOORûFROMûGUIDANCEûOFûBPû4HEûDISCOUNTû 0ROCEEDSûFROMûTHEûNOWû53BNûCREDITû PROTECTIONûATûûPREVIOUSLY NARROWEDûTOûûFROMû ûINITIALLY FACILITYûBACKûTHEûCOMPANYSû53BNû 4HEûAMORTISATIONûSCHEDULEûWASû 4HEûTERMûLOANûSTILLûHASûSIXûMONTHSûOFûSOFTû BUYOUTûBYû2IVERSTONEû(OLDINGSûANDû ACCELERATEDûTOûûINûTHEûlRSTûYEARûANDûû CALLûPROTECTIONûATû 'OLDMANû3ACHSû-ERCHANTû"ANKINGû$IVISION THEREAFTER ûCOMPAREDûWITHûûPERûYEARû Barclays LEDûWITHûCredit Suisse ûDeutsche Bank Jefferies ARRANGEDûTHEûDEAL ûWHICHûINCLUDESû ORIGINALLY and Royal Bank of Canada Aû53MûSUPERûPRIORITYûREVOLVINGûCREDITû 4HEûDEBTûWILLûINCLUDEûAûûTIMESûTOTALû %NERGYûANDûINFRASTRUCTUREûASSETû ANDûTHEûUPSIZEDû53MûlRST LIENûTERMû NETûLEVERAGEûCOVENANT MANAGEMENTûlRMûEIG MANAGEMENT COMPANY LOAN 4HEûCOMPANYûWILLûALSOûRElNANCEûITSû REVISEDûPRICINGûONûAû53MûTERMûLOANû" 4HEûSPREADûONûTHEûSEVEN YEARûTERMûLOANû EXISTINGû53MûASSET BASEDûREVOLVINGû JP Morgan LEDûTHEûSEVEN YEARûTERMûLOAN û DECREASEDûTOûBPûOVERû,IBORûFROMû CREDITûFACILITYûWITHûAûNEWû53MûlVE YEARû WHICHûPRICEDûATûBPûOVERû,IBORûWITHûAûû GUIDANCEûOFûBPû4HEûûmOORûANDûû !",ûFACILITY mOORûANDûûDISCOUNT ûCOMPAREDûWITHû /)$ûWEREûUNCHANGED 0ROCEEDSûWILLûBEûUSEDûTOûTAKEûOUTûAû BP BPûWITHûAûûmOORûANDûû 4HEûLOANûALSOûHASûûSOFTûCALLûPROTECTIONû PRIVATELYûPLACEDûTERMûLOANûANDûREPAYû DISCOUNTûATûLAUNCH FORûSIXûMONTHS BORROWINGSûUNDERûTHEûEXISTINGû!",ûFACILITY ,ENDERSûAREûOFFEREDûSIXûMONTHSûOFûSOFTûCALLû ,UCIDûISûAûNATURALûGASûGATHERINGûANDû 0ROûFORMAûLEVERAGEûISûûTIMES ûBASEDûONû PROTECTION PROCESSINGûCOMPANYûOPERATINGûINûTHEûCOREûOFû 53MûOFûLASTûûMONTHSû%BITDAûATû 4HEûlNANCINGûWILLûINCLUDEûAû53Mû THEû.ORTHERNû$ELAWAREû"ASIN 3EPTEMBERû û REVOLVINGûCREDITûFACILITY /PTOMETRYûPRACTICEûMANAGEMENTû ,IGHTINGûMANUFACTURERûLUMILEDSûWRAPPEDû 0ROCEEDSûWILLûBEûUSEDûTOûRElNANCEûEXISTINGû COMPANYûMYEYEDRûCLOSEDûAû53MûlRST UPûTHEûREPRICINGûOFûITSû53BNûTERMûLOANû DEBTûANDûFUNDûTHEûACQUISITIONûOFûAûSTAKEûINûAû LIENûANDûSECOND LIENûLOANûPACKAGEûBACKINGûAû DUEûINû*UNEûûDeutsche Bank LEDûTHEû NEWûJOINTûADVISORûTOû&3û%NERGYûANDû0OWERû&UND RElNANCINGûOFûITSûCAPITALûSTRUCTURE COVENANT LITEûDEALûWITHûCredit Suisse %)'ûANNOUNCEDûITûWOULDûCREATEûAûJOINTû Goldman Sachs LEDûWITHûRBC ûCredit Suisse û 4HEûLOANûCLEAREDûATûBPûOVERû,IBORûWITHû VENTUREûWITHûALTERNATIVEûINVESTMENTû Barclays ûJefferies and Golub Capital AûûmOORûANDûAûPARûISSUEûPRICE ûATûTHEûTIGHTû MANAGERû&3û)NVESTMENTSûTOûRUNû&3%0

80 International Financing Review February 3 2018 LOANS LEVERAGED LOANS

2ATINGSûAREû"A"" ûCORPORATEûANDûFACILITY DUEûINû&EBRUARYûûANDûANûUPSIZEDû 0OWERûCOMPANYûLIGHTSTONE GENERATIONûWASû #LOUD BASEDûMARKETINGûCOMPANYûMARKETO 53MûADD ONûTHATûWILLûPAYûDOWNûAûPORTIONû ALSOûEXPECTEDûTOûWRAPûAûREPRICINGûLASTûWEEKû INCREASEDûITSûTERMûLOANûBYû53MûANDû OFûITSûSECOND LIENûTERMûLOAN )TûWASûASKINGûLENDERSûTOûREPRICEûITSû LOWEREDûTHEûSPREAD 0ROCEEDSûOFûTHEûADD ONûLOAN ûDOUBLEDûFROMû 53BNûTERMûLOANû"ûANDû53MûTERMû 4HEûSPREADûONûTHEûNOWû53MûSEVEN THEûGUIDEDûSIZE ûWILLûALSOûBEûUSEDûTOûFUNDûAû LOANû# YEARûlRST LIENûTERMûLOANûISûBPûOVERû,IBOR û SHAREHOLDERûDISTRIBUTION Credit Suisse WASûLEADINGûTHEûDEAL ûWHICHû DECREASEDûFROMûGUIDANCEûOFûBP BP 0RICINGûISûBPûOVERû,IBORûWITHûAûû,IBORû CIRCULATEDûATûBP BPûOVERû,IBORûWITHûAû 4HEûû,IBORûmOORûANDûû/)$ûWEREû mOORûATûPAR ûAFTERûBEINGûGUIDEDûATûBP ûmOOR UNCHANGEDûFROMûLAUNCHûTERMS BP 4HEûCOMPANYûPREVIOUSLYûLOWEREDûPRICINGû 0ROCEEDSûFROMûTHEûTERMûLOAN ûTOGETHERû 4HEûADD ONûALSOûPRICEDûATûBPûOVERû,IBORû TOûBPûOVERû,IBORûFROMûBPûOVERû,IBORû WITHûAû53MûlVE YEARûREVOLVERûWILLûBEû WITHûAûûmOOR ûBUTûWITHûAûûDISCOUNTûnû INû-ARCHû USEDûTOûRElNANCEûDEBTûANDûADDûCASHûTOû INûLINEûWITHûEXPECTATIONS 4HEûDEALûINCLUDESûSIXûMONTHSûOFûSOFTûCALLû -ARKETOSûBALANCEûSHEET The Credit Suisse LEDûDEALûINCLUDESûSIXû PROTECTIONûATû 4HEûTERMûLOANûWILLûAMORTISEûATûûANDû MONTHSûOFûSOFTûCALLûPROTECTIONûATû ,IGHTSTONEû'ENERATIONûISûBACKEDûBYû INCLUDESûSIXûMONTHSûOFûSOFTûCALLûPROTECTIONûATû !RCLINûARRANGEDûAû53MûlRST LIENûTERMû PRIVATEûEQUITYûlRMSû"LACKSTONEûANDû!RC,IGHTû û4HEûREVOLVERûISûGOVERNEDûBYûAûSPRINGINGû LOANûANDûAû53MûSECOND LIENûTERMûLOANû #APITALû0ARTNERS LEVERAGEûCOVENANTûWHILEûTHEûTERMûLOANûISû INû&EBRUARYûûTOûBACKûITSûLEVERAGEDû BEINGûPROPOSEDûONûAûCOVENANT LITEûBASIS BUYOUTûBYûPRIVATEûEQUITYûlRMû,ONEû3TAR Morgan Stanley LEDûALONGSIDEûCitigroup û 4HEûlRST LIENûLOANûPRICEDûATûBPûOVERû EUROPE/MIDDLE EAST/ Golub ûJefferies ûMacquarie ûBank of America ,IBORûWITHûAûûmOORûWHILEûTHEûSECOND LIENû AFRICA Merrill Lynch and Nomura LOANûPRICEDûATûBPûOVERû,IBORûWITHûAûûmOOR 4HEûISSUERûANDûFACILITYûAREûRATEDû"" ITIVITI SEEKS US$725m-EQUIV LOAN NATIONAL VET TIGHTENS PRICING CONSOLIDATED CONTAINER 4RADINGûTECHNOLOGYûPROVIDERûITIVITI GROUP has NATIONAL VETERINARY ASSOCIATES tightened TWEAKS REPRICING LAUNCHEDûAû53M EQUIVALENTûLOANû PRICINGûONûAû53MûSEVEN YEARûTERMûLOANû BACKINGûTHEûCOMPANYSûACQUISITIONûOFûULLINK THATûWILLûBEûUSEDûTOûRElNANCEûTHEûCOMPANYSû 0LASTICûPACKAGINGûMAKERûCONSOLIDATED 0ROCEEDSûFROMûTHEûLOANûWILLûALSOûBEûUSEDû TERMûLOANû" CONTAINER CO updated pricing for its TOûREPAYû)TIVITISûOUTSTANDINGûDEBT Bank of America Merrill Lynch LEADSûWITHû 53MûTERMûLOANûREPRICINGûTRANSACTION Credit Suisse ûUniCredit ûUBS and DNB are Royal Bank of Canada and Jefferies 4HEûLOANûREMAINSûGUIDEDûATûBPûOVERû BOOKRUNNERS 4HEûCOMPANYûCUTûPRICINGûONûTHEûCOVENANT ,IBORûWITHûAûûmOOR ûBUTûTHEûCOMPANYûHASû 4HEûFUNDINGûISûSPLITûBETWEENûAû53Mû LITEûLOANûTOûBPûOVERû,IBORûWITHûAûûmOORû ADDEDûAûBPûRATINGS BASEDûSTEPDOWNûIFû MULTI CURRENCYûSIX YEARûREVOLVER ûAû AFTERûOPENINGûATûBP BPû4HEûDISCOUNTû CORPORATEûRATINGSûAREû""ûORûBETTER 53M EQUIVALENTûEURO DENOMINATEDû WASûSETûATû ûONûTHEûTIGHTûENDûOFû 4HEûLOAN ûDUEû-AYû ûISûSTILLûOFFEREDûATû SEVEN YEARûlRST LIENûTERMûLOAN ûANDûAû GUIDANCEûOFû PARûANDûTHEûDEALûRESETSûSOFTûCALLûPROTECTIONûATû 53MûEIGHT YEARûSECOND LIENûTERMûLOAN 4HEûDEALûINCLUDESûSIXûMONTHSûOFûSOFTûCALLû ûFORûSIXûMONTHS 4HEûlRSTûLIENûISûGUIDEDûATûBP BPû PROTECTIONûATû Barclays ISûLEADINGûWITHûCitigroup ûCredit OVERû%URIBORûWITHûAûûmOORûANDûAûû/)$ û 4HEûISSUERûISûRATEDû""ûANDûTHEûLOANûISû Suisse ûMorgan Stanley and Macquarie WHILEûTHEûSECONDûLIENûISûGUIDEDûATûBPû RATEDû"" #ONSOLIDATEDû#ONTAINERûARRANGEDûTHEûLOANû OVERû,IBORûWITHûAûûmOORû4HEû2#&ûISûGUIDEDû 4HEûCOMPANYûOPERATESûABOUTûû ORIGINALLYûINû-AYûûATûAûSIZEûOFû53Mû TOûPAYûBPûOVERû%URIBORûWITHûAûûmOORûATû VETERINARYûFACILITIESûINû.ORTHû!MERICA û TOûBACKûITSûACQUISITIONûBYûDIVERSIlEDû PAR !USTRALIAûANDû.EWû:EALAND COMPANYû,OEWSû#ORPû!TûTHATûTIME ûTHEûLOANû 4HEûlRSTûLIENûINCLUDESûûSOFTûCALLû %LECTRICû2ACEWAYûPRODUCTSûMAKERûATKORE PRICEDûATûBPûOVERû,IBORûWITHûAûûmOOR PROTECTIONûFORûSIXûMONTHS ûWHILEûTHEûSECONDû INTERNATIONALûCUTûPRICINGûONûAû53Mû 4HEûISSUERûANDûTHEûLOANûAREûRATEDû"" LIENûHASûHARDûCALLûPROTECTIONûATû û ûPAR ADD ONûTOûITSûTERMûLOANûDUEûINû$ECEMBERû #LOUD BASEDûPUBLICûRELATIONSûlRMûCISION 4HEûCORPORATEûRATINGûISû"" ûWHILEûTHEû ûANDûPRICEDûTHEûEXISTINGûDEBTûATûTHEû WASûSCHEDULEDûTOûCLOSEûAû53BN ISSUERûRATINGûISû""ûONûTHEûlRSTûLIENûANDû SAMEûLEVEL EQUIVALENTûDOLLARûANDûEUROûTERMûLOANû #AA### ûONûTHEûSECONDûLIEN 0RICINGûISûNOWûBPûOVERû,IBORûWITHûAûû REPRICINGûONû&RIDAY ûSTRAIGHTûAFTERûCOMINGû mOORûFORûTHEûADD ONûANDûTHEûORIGINALûLOANû OUTûOFûITSûLATESTûSOFTûCALLûPERIOD EUROPEAN LEVERAGED LOANS 4HEûCOMPANYûORIGINALLYûmOATEDûPRICINGûOFû !û53BNûANDûAûõMûTERMûLOANû BOOKRUNNERS: 1/1/2018 TO DATE BPûOVERû,IBOR ûWHICHûISûWHEREûTHEû WEREûSETûTOûREPRICEûFROMûBPûTOûBPûANDû Managing No of Total Share EXISTINGûLOANûWASûPRICED BPûOVERû,IBORûANDû%URIBOR ûRESPECTIVELY bank or group issues US$(m) (%) The Deutsche Bank LEDûDEALûWASûISSUEDûATû 4HEûCOVENANT LITEûLOANSûWEREûOFFEREDûATû 1 NatWest Markets 1 437.82 7.1 PARû4HEûADD ONûCIRCULATEDûWITHûAûDISCOUNTûOFû PARûWITHûAûûmOORûWHILEûTHEûSOFTûCALLûATûû =1 UniCredit 1 437.82 7.1 ûWHENûITûWENTûTOûMARKET ISûBEINGûRESETûFORûSIXûMONTHSû4HEYûBOTHû =1 HSBC 1 437.82 7.1 0ROCEEDSûWILLûHELPûlNANCEûAûSTOCKû MATUREûINû*UNEû ûHAVINGûORIGINALLYû =1 SG 1 437.82 7.1 BUYBACKûANDûPAYûDOWNûITSûASSET BASEDû PRICEDûATûBPûOVERû,IBORûWITHûAûûmOORûINû =1 BNP Paribas 1 437.82 7.1 LENDINGûFACILITY *UNEûûFORû#ISIONSûACQUISITIONûOFû02û =1 BBVA 1 437.82 7.1 !TKOREûLINEDûUPûTHEûEXISTINGûTERMûLOANûINû .EWSWIREûFORû53BN =1 ING 1 437.82 7.1 $ECEMBERûûATûAûSIZEûOFû53MûTOû Deutsche Bank WASûARRANGINGûTHEûDEAL =1 MUFG 1 437.82 7.1 RElNANCEûDEBT #ISIONûMERGEDûLASTûYEARûWITHûACQUISITIONû =1 Banca IMI 1 437.82 7.1 4HEûISSUERûISûRATEDû""" ûANDûTHEûLOANûISû VEHICLEû#APITOLû!CQUISITIONû#ORPû)))ûINûAû =1 Citigroup 1 437.82 7.1 RATEDû""" TRANSACTIONûVALUEDûATû53BNû3PONSORû Total 1 6,129.50 2ESINSûMAKERûARCLINûlNALISEDûTERMSûONûAû '4#2ûMAINTAINEDûAûûSTAKEûINû#ISIONû Excluding project finance. Western Europe only included. REPRICINGûOFûITSû53MûlRST LIENûTERMûLOANû FOLLOWINGûTHEûDEAL Source: Thomson Reuters SDC code: P10

International Financing Review February 3 2018 81 SWISSPORT SECURES €325m

Shareholders accrue €2bn !IRûCARGOûHANDLERûSWISSPORTûHASûLINEDûUPûAû õMûTERMûLOANû"ûFROMûBarclays for its ACQUISITIONûOFû!USTRALIANûmIGHTûSUPPORTû of dividends from 3i’s Action SERVICESûOPERATORû!EROCARE 4HEûLOANûWILLûBEûDRAWNûONûORûSHORTLYû EUROPE Latest €760m payment is part of a wider €2.4bn leveraged loan BEFOREûTHEûACQUISITIONSûCLOSE ûSCHEDULEDûTOû OCCURûBYû-ARCHû ûANDûBRINGSûLEVERAGEûATû Dutch discount retailer ACTION is set to pay ABN AMRO, BNP Paribas, Deutsche Bank, 3WISSPORTûTOûBETWEENûûANDûûTIMESû €760m to shareholders, the fifth dividend to ING, Natixis and Rabobank are leading the latest %BITDAûASûOFûûYEAR END be dished out under private equity firm 3i’s leveraged loan financing and investors have been 3WISSPORTûHASûALSOûRECEIVEDûAûõMûPARTIALû ownership. asked to commit to the deal by February 13. REPAYMENTûOFûANûAFlLIATEûLOANûTOûPARENTû 3i acquired Action in 2011 and since then The €2.285bn TLB is guided to pay 325bp- COMPANYû(.! ûTHEû#HINESEûCONGLOMERATE û approximately €2bn has been paid out in 350bp over Euribor, with a 0% floor at 99.75 WHICHûISûDUEûTOûMATUREûONû&EBRUARYû dividends to shareholders, around 9.0 times their OID. The existing TLB pays 350bp over Euribor. (.!ûISûSTILLûPLANNINGûTOûLISTû3WISSPORTûINû original investment. The new TLB is covenant-lite, removing a net THEûSECONDûHALFûOFûTHISûYEAR ûHELPINGûTOû The latest €760m dividend payment is part leverage covenant in the existing covenant-loose SIGNIlCANTLYûREDUCEûLEVERAGEûATûTHEûBUSINESS of a wider €2.4bn leveraged loan financing that term loan. 3WISSPORTûEMPLOYSûOVERû ûPEOPLEû comprises a €2.285bn seven-year term loan B Pricing of the new €125m RCF is 325bp over ANDûGENERATESûOPERATINGûREVENUEûOFûõBN and a €125m six-year revolving credit facility. Euribor and it is offered with a springing leverage The €2.285bn TLB will refinance an existing covenant. The RCF has increased from an BERLYS ALLOCATES BUYOUT LOAN €1.6bn TLB, with the additional debt used for the existing €75m. dividend, alongside cash on balance sheet. The dividend recapitalisation will re-lever !ûõMûLEVERAGEDûLOANûlNANCINGûBACKINGû 3i acquired Action in 2011 and took its first Action to 4.8 times Ebitda, from 3.0 times. &RENCHûPRIVATEûEQUITYûlRMû!RDIANSû dividend in 2013 when Action raised a €275m Despite a tricky sector where many retailers ACQUISITIONûOFû3PANISHûBAKERIESûBERLYS and add-on loan to refinance a vendor loan and pay a have suffered, Action has experienced rapid BELLSOLAûHASûALLOCATEDûONû%UROPESûSECONDARYû distribution. Action then paid a €285m dividend deleveraging, from 4.5 times at the time of its LOANûMARKET to shareholders in 2014 as part of a wider last recapitalisation in December 2016, driven 4HEûCOVENANT LOOSEûLOANûPAYSûBPûOVERû €840m recapitalisation, according to Thomson by continued strong Ebitda growth and cash %URIBORûWITHûAûûmOOR ûINûLINEûWITHûORIGINALû Reuters LPC. generation. GUIDANCE ûBUTûALLOCATEDûATûPAR ûTIGHTERûTHANû There were two further dividends paid out in Action is Europe’s largest and best performing INITIALûû/)$ûGUIDANCE December and February of 2016. non-food discount retailer with net sales in FY16 BNP Paribas ûCredit Agricole ûING and Natixis “Action is one of those investments that just of €2.7bn. Almost two-thirds of net sales are now UNDERWROTEûTHEûDEBTûlNANCING ûWHICHûINCLUDESû keeps on giving. There is still implied equity left generated outside of The Netherlands. AûõM ûSIX YEARûREVOLVINGûCREDITûFACILITY so if 3i sell or IPO Action they would still have a It operates nearly 1,100 stores across seven !RDIANûANNOUNCEDûTHEûACQUISITIONSûOFû return to realise, and if they don’t sell then they countries in Europe, employing over 40,000 "ERLYS ûFROMûFUNDSû!LANTRAûANDû!RTAû#APITAL û will just take another dividend,” a syndicate head people. ANDû"ELLSOLAûINû.OVEMBERû4HEûSPONSORûPLANSû said. Claire Ruckin TOûMERGEûTHEûTWOûlRMS ûCREATINGûAûBUSINESSû WITHûAROUNDûõMûINûCOMBINEDûREVENUES "ERLYSûANDû"ELLSOLAûAREûLEADINGû ALTRAN SETS FINAL TERMS WASûAGREEDûATûANûEXTRAORDINARYûGENERALû MANUFACTURERSûOFûBREADûANDûBAKERY ûSERVINGû MEETINGûONû*ANUARYû ARTISANûBAKERIES ûBAKERYûCOFFEEûCHAINS û &RENCHûTECHNOLOGYûCONSULTANCYûALTRAN has 4HEûLOANSûAREûRATEDû"""A RETAILERS ûHOTELS ûRESTAURANTSûANDûCOFFEEû SETûlNALûTERMSûONûTHEûõBN EQUIVALENTû !ûPORTFOLIOûMANAGERûLOOKINGûATûTHEûDEALû SHOPSûTHROUGHOUTû3PAIN TERMûLOANûPACKAGEûBACKINGûITSûACQUISITIONûOFû SAIDûTHATûWHILEû!LTRANûWASûAûGOODûBUSINESS û 53ûDIGITALûDESIGNûANDûENGINEERINGûSERVICESû THEûSECTORûITûOPERATEDûINûWASûNATURALLYû TRACTEL REVERSE FLEXES lRMû!RICENT CYCLICAL 4HEûDEALûCOMPRISESûõBNûANDû53Mû h$URINGûANûECONOMICûDOWNTURNûONEûOFû 3AFETYûPRODUCTSûMANUFACTURERûTRACTEL has SEVEN YEARûTERMûLOANû"S ûWHICHûCARRYûINITIALû THEûlRSTûTHINGSûCOMPANIESûWILLûCUTûISûOUTSIDEû REVERSEûmEXEDûTHEûõMûTERMûLOANû"û MARGINSûOFûBPûOVERû%URIBORûANDûBPû CONSULTANTS vûHEûSAID BACKINGûITSûACQUISITIONûOFû&INNISHûMASTû OVERû,IBOR ûRESPECTIVELY (OWEVER ûANOTHERûINVESTORûNOTEDûTHEû CLIMBINGûPRODUCTSûBUSINESSû3CANCLIMBER 4HOSEûMARGINSûAREûDUEûTOûFALLûFOLLOWINGûAû COMPANYSûSTABLEûEQUITYûGROWTHûOVERûTHEû 0RICINGûONûTHEûSEVEN YEARûLOANûHASûBEENû PLANNEDûõMûEQUITYûISSUEûTOûBPûOVERû PASTûTENûYEARS ûSAYINGûITûWASûAûRESILIENTû REVISEDûTOûBPûOVERû%URIBORûWITHûAûû %URIBORûANDûBPûOVERû,IBOR ûRESPECTIVELY BUSINESSûh)ûTHINKûITSûDECENTûANDûTHEûTIE UPûISû mOORûATûPAR ûHAVINGûLAUNCHEDûATûBPûWITHûAû 4HEûLOANSûHAVEûMARGINûRATCHETSûRELATEDûTOû AûGOODûONEv û/)$ûANDûAûûmOOR NETûLEVERAGE ûDROPPINGûTOûBPûOVERû Credit Agricole CIB ûGoldman Sachs and !ûõM EQUIVALENTûDOLLARûTRANCHEûISû %URIBORûANDûBPûOVERû,IBORûFORûBETWEENû Morgan Stanley UNDERWROTEûTHEûLOANûANDûWILLû UNCHANGEDûATûBPûOVERû,IBORûWITHûAûû ûANDûûTIMESû%BITDA ûBPûANDûBPû ALSOûUNDERWRITEûTHEûõMûRIGHTSûISSUEûTOû mOORûANDûAûû/)$ FORûBELOWûûTIMESûTOûûTIMES ûANDûBPû RElNANCEûPARTûOFûTHEûCOMMITTEDûlNANCING BNP Paribas ûCredit Agricole and HSBC ANDûBPûFORûUNDERûTHREEûTIMES !LTRANSûACQUISITIONûOFû#ALIFORNIA BASEDû ARRANGEDûTHEûDEAL "OTHûLOANSûWEREûOFFEREDûATûûWITHûAûûmOORû !RICENTûFROMûAûGROUPûOFûINVESTORSûLEDûBYû++2û !FTERûTHEûCOMPLETIONûOFûTHEûBUYOUTûOFû ANDûSIXûMONTHSûOFûSOFTûCALLûPROTECTIONûATû ISûTHEûLARGESTûOFûAûSERIESûOFûDEALSûDONEûBYûTHEû 3CANCLIMBERûFORûANûUNDISCLOSEDûSUM ûTHEû 4HEûEUROûTRANCHEûISûALSOûSETûTOûDECREASEûTOû &RENCHûBUSINESS ûANDûWILLûCREATEûAûGROUPû COMPANYSû%BITDAûISûEXPECTEDûTOûBEûAROUNDû õBNûFOLLOWINGûTHEûEQUITYûRAISING ûWHICHû WITHûREVENUEûOFûALMOSTûõBN õM

82 International Financing Review February 3 2018 LOANS LEVERAGED LOANS

4RACTELûWASûACQUIREDûBYûPRIVATEûEQUITYû Bank of America Merrill Lynch ûBarclays and INû*ANUARYû ûBACKEDûBYûAûaMû lRMû#INVENûINû Goldman SachsûLEDûTHEûJUMBOûlNANCINGû lNANCINGûSPLITûBETWEENûAûaMûSEVEN YEARû ALONGSIDEûCredit Suisse ûDeutsche Bank ûING û 4,"ûANDûAûaM EQUIVALENTûEURO IVC LAUNCHES £100m ADD-ON Lloyds ûRabobank ûRBC and UBS DENOMINATEDû4," #ORPORATEûFAMILYûANDû4,"ûRATINGSûAREû 5+ûVETERINARYûCAREûBUSINESSûIVCûHASûLAUNCHEDû EXPECTEDûTOûBEû""" ûWITHûAûRECOVERYûRATINGû AûaMûTERMûLOANûADD ON ûWHILEûALSOû OFû ASIA-PACIFIC PLANNINGûTOûINCREASEûITSûaMûACQUISITIONû 4HEûLOANûWILLûBACKûTHEûACQUISITIONûOFû û ANDûCAPEXûFACILITY %SSOûSITESûINû)TALYûANDû û%SSOûSITESûINû PERMIRA READIES I-MED TAKEOVER 4HEûTERMûLOANûADD ONûWILLûRESETûTHEû 'ERMANYûASûWELLûASûRElNANCEû%'û'ROUPSû ACQUISITIONûANDûCAPEXûFACILITY ûWHICHûISûALSOû OUTSTANDINGûDEBTûFACILITIESûTHATûINCLUDEû 0ERMIRAû!DVISERSûHASûLINEDûUPûAûlVE YEARû SETûTOûINCREASEûINûSIZEûTOûaM aMûANDûõMûOFûTERMûLOANS LEVERAGEDûBUYOUTûLOANûOFûABOUTû!Mû 4HEûTERMûLOANûISûTOûPRICEûINûLINEûWITHûTHEû 4$2ûACQUIREDûAûaBNûMINORITYûSTAKEûINû 53M ûFROMûSIXûLENDERSûTOûTAKEûOVERû EXISTINGûFACILITYûATûBPûOVERû,IBORûWITHûAû %'û'ROUP ûFORMERLYûKNOWNûASû%UROû'ARAGES û 8 RAYûSERVICESûPROVIDERûI-MED ûmOOR SEB and SMBC AREûBOOKRUNNERS )6#ûLASTûTAPPEDûTHEûLOANûINû!UGUSTûFORû aM Banks sacrifice fees !FTERûTHEûADD ON û)6#SûTOTALûTERMûLOANûDEBTû WILLûSTANDûATûaM EQUIVALENT ûDENOMINATEDû on Flamingo INûSTERLING ûEUROSûANDû3WEDISHûKRONORû)TûALSOû HASûAûaMûREVOLVINGûCREDITûFACILITYûALONGSIDEû EUROPE Changes made to attract investors THEûaMûACQUISITIONûFACILITY 3WEDISHûPRIVATEûEQUITYûlRMû%14ûACQUIREDû Banks have given up some fees on a €310m However, whether the deal will sell in its )6#ûINû*ANUARYûûBACKEDûWITHûAûaMû leveraged loan financing backing UK flower and entirety remains unclear and the banks could LEVERAGEDûLOANûlNANCING ûSPLITûBETWEENûAû vegetable supplier FLAMINGO’s merger with rose be left holding some of the paper, the sources aMûTERMûLOANû" ûAûaMûACQUISITIONûANDû producer Afriflora. said. CAPITALûEXPENDITUREûFACILITYûANDûAûaMû Credit Suisse, Investec and Jefferies led the REVOLVINGûCREDITûFACILITY financing, which comprises a €280m seven-year LOCAL SUPPORT? )Nû-AY û%14ûMERGEDû)6#ûWITHûITSû term loan B and a €30m six-year revolving credit Sun European Partners agreed to buy Afriflora, .ORTHERNû%UROPEANûPORTFOLIOûCOMPANYû facility. alongside founders the Barnhoorn family, from %VIDENSIA The deal was altered significantly in a bid to KKR late last year. Afriflora produces over 1.1bn 4HEûMERGERûWASûBACKEDûWITHûAû make it more attractive to investors after the loan roses a year, cultivated from its farmland in aM EQUIVALENTûADD ONûTERMûLOANûINû!PRILû faced some difficulties during syndication. Ethiopia. VIAû"ANKûOFû)RELAND û(3"# û.AT7EST û3%"ûANDû Investors are cherry-picking larger or better- An investor queried whether the business 3-"# perceived credits in the market amid a flurry of would have been better supported by local 4HEûaMûEURO DENOMINATEDûTERMûLOANû new issuance in January. banks in light of this. #ûALLOCATEDûATûBPûOVERû%URIBORûWITHûAûû Banks have had to pay up to offer soft-call “It’s a nice coupon but farms in Africa are mOORûATûPAR protection of 102 for 12 months, from an original difficult to get comfortable with - you have level of 101 soft-call for six months. really no idea on the situation there,” he said. EG PRICES JUMBO FACILITY Soft-call protection gives investors comfort “Local banks with local knowledge should that a borrower cannot refinance or reprice a really be doing these sorts of deals.” !ûJUMBOûLEVERAGEDûLOANûBACKINGû loan within the protection period, without paying Another investor said he bought into the ACQUISITIONSûMADEûBYû5+ûPETROLûSTATIONû a premium to do so. deal but it was far easier to justify foregoing operator EG GROUPûANDûTHEûRElNANCINGûOFû However, the banks are not paying for other deals when the market was as busy as it is. EXISTINGûDEBTûHASûPRICED document changes, or the hefty 96 OID and “The key is to focus on companies !NûõMûTERMûLOANû" ûAûõMû4,"û 575bp over Euribor interest margin, as they generating free cash flow,” he said. “There’s ANDûAûõMû4,"ûALLûPRICEDûATûBPûOVERû are just within the flex terms agreed with the been some deals that haven’t been great so far %URIBORûWITHûAûûmOORûANDûAûû/)$ û sponsor. this month - it’s been about dodging them.” HAVINGûBEENûGUIDEDûATûBP BPûOVERû The flex terms were more generous on this Moody’s assigned Flamingo a B2 corporate %URIBOR financing than conventional deals in Europe’s rating earlier this month, citing positive free !ûaMû4,"ûPRICEDûATûBPûOVERû,IBORû leveraged loan market, to take account of a cash flow at the business due to reduced WITHûAûûmOORûANDûAûû/)$ûAFTERû number of issues - including sector and the fact capex requirements following years of notable LAUNCHINGûATûBP BPûOVERû,IBORûANDûAû that Afriflora sources its products from its 500 investment. 53Mû4,"ûPRICEDûATûBPûOVERû,IBORû hectares of farmland in Ethiopia. The ratings agency forecast Flamingo’s WITHûAûûmOORûANDûAûû/)$ûAFTERûBEINGû The term loan, which now also includes a adjusted net leverage at 4.5 times for 2017 GUIDEDûATûBP BPûOVERû,IBOR leverage covenant, was launched as a covenant- year-end, also noting around €10m of cash on !LLûTHREEûTERMûLOANSûHAVEûAûSEVEN YEARû lite term loan guided to pay 500bp over Euribor, balance sheet. MATURITYûANDûINCLUDEûûSOFT CALLûFORûSIXû at 99 OID. Sun previously bought Finlays Fresh produce MONTHS Finding yield in Europe’s leveraged loan market has in 2015, subsequently rebranding it Flamingo. 4HEûlNANCINGûALSOûCOMPRISESûAûaMû proven tricky amid an overall pricing compression as Flamingo is the second largest supplier of YEARûMULTI CURRENCYûREVOLVINGûCREDITû demand continues to outweigh supply. flowers and vegetables in the UK. It is issuing FACILITYûPAYINGûBPûOVERû%URIBOR,IBORûANDû “At these yields there will be more investors at the debt through Zara UK Midco Limited. AûõMû YEARûLETTERûOFûCREDITûGUIDEDûTOû play,” a syndicate head said. Claire Ruckin PAYûBPûOVERû%URIBOR

International Financing Review February 3 2018 83 5NDERWRITERSûCredit Agricole ûGoldman Sachs û 0ARTNERSû'ROUPûPURCHASEDûTHEûSTAKEûINû h7EûHAVEûCONCLUDEDûALLûCOMMERCIALûTERMSû HSBC ûING Bank ûNatixis and SMBCûPLANûTOû 4RIMCOûINûûFROMûANOTHERûPRIVATE OFûTHEûNEWûDEALûANDûAREûABOUTûTOûSIGNûWITHûALLû LAUNCHûTHEûFACILITYûINTOûSYNDICATIONûSHORTLYû EQUITYûlRM û.AVISû#APITALû0ARTNERSû!TûTHEû THEûBANKSûTOûRECEIVEûûAGREEMENTû 'OLDMANûISûTHEûlNANCIALûADVISER TIME ûITûHADûTAKENûAû53MûSENIORûLOANû IMMINENTLY vûTHEûCOMPANYûSOURCEûSAID ûADDINGû )NûADDITIONûTOûTHEûACQUISITION ûTHEûFACILITYû FROMûFOURû4AIWANESEûBANKS THATûûOFûCREDITORSûHADûAGREEDûSOûFAR ISûALSOûFORûWORKINGûCAPITALûANDûCAPITALû #4"#ûWASûTHEûSOLEûFACILITYûANDûSECURITYû !Lû*ABERSûDEBTûISûMOSTLYûHELDûBYûLOCALûANDû EXPENDITUREû4HEûLEVERAGEûMULTIPLEûISûJUSTû AGENT ûMANDATEDûLEADûARRANGERûANDû INTERNATIONALûBANKS ûALTHOUGHûSOMEûHEDGEû UNDERûûTIMESû%BITDAûANDûTHEûOPENINGû BOOKRUNNERû4Aû#HONGû"ANK û4AIPEIû&UBONû FUNDSûANDûOTHERûNON BANKûlNANCIALû MARGINûISûINûTHEûLOWûSûOVERû""39 #OMMERCIALû"ANKûANDû4AISHINû INSTITUTIONSûALSOûFEATUREûAMONGûTHEûCREDITORû ) -EDûOWNERû%14û(OLDINGS ûAû3WEDISHû )NTERNATIONALû"ANKûJOINEDûINû*ULYûTOûSHAREû GROUP PRIVATE EQUITYûlRM ûHADûPULLEDûTHEûSALEûLATEû THEû-,!ûTITLE 3INCEûCOMPLETINGûAû53BNûDEBTû LASTûYEARûAFTERûLOWERûTHANûEXPECTEDûOFFERSû 4HEûlVE YEARûAMORTISINGûTERMûLOAN ûWITHû RESTRUCTURINGûINû*UNEû û!Lû*ABER ûBESTû 0ERMIRAûUNVEILEDûTHEûSALEûONû*ANUARYû ûBUTû ANûAVERAGEûLIFEûOFûABOUTûTHREEûTOûûYEARS û KNOWNûASûAûCONTRACTORûBUTûWITHûINTERESTSûINû DIDûNOTûDISCLOSEûTHEûPRICE ûWHICHûLOCALûMEDIAû PAIDûAûMARGINûOFûBPûOVERû,IBOR OTHERûSECTORS ûHASûTAKENûSTEPSûTOûSELLûNON PEGGEDûATûAROUNDû!BN 4RIMCOûWASûFOUNDEDûINû(ONGû+ONGûANDû COREûASSETS ûINCLUDINGûITSûûSTAKEûINû ) -ED ûWITHûOVERûûCLINICSûCONDUCTINGû SERVESûGARMENTûMANUFACTURERSûINû#HINA û CONSTRUCTIONûJOINTûVENTUREû!,%#ûTOû MûPATIENTûPROCEDURESûAûYEAR ûISûTHEû )NDIAûANDû3OUTH %ASTû!SIA )NVESTMENTû#ORPORATIONûOFû$UBAIûLASTûYEAR DOMINANTûPLAYERûINû!USTRALIASûDIAGNOSTIC 3UCHûSALESûHAVEûHELPEDûTOûCUTûDEBT ûWITHû IMAGINGûSERVICES ûWHICHûBENElTSûFROMû THEûREDUCTIONûALSOûBOOSTEDûBYûINCREASESûINû GOVERNMENTûSUBSIDIESû&ORûTHEûû REVENUE lNANCIALûYEAR ûTHEûCOMPANYûPOSTEDûSALESûOFû 5NDERûTHEûNEWûPLAN ûTHEûMATURITYûOFûTHEû !MûANDû%BITAûOFû!Mû2EVENUEûISû RESTRUCTURING DEBTûWILLûBEûEXTENDEDûBYûSEVENûYEARSûTOû FORECASTûTOûGROWûINûTANDEMûWITHû!USTRALIASû 3EPTEMBERûû ûWITHûTHEûCOMPANYûALSOû AGEINGûPOPULATION REQUIREDûTOûCONTINUEûTOûREDUCEûITûVIAû Morgan Stanley and RothschildûADVISEDû%14û EUROPE/MIDDLE EAST/ QUARTERLYûREPAYMENTSûANDûFURTHERûASSETû ONûTHEûSALE AFRICA SALES )TûALSOûINCLUDESûAûREDUCTIONûINûTHEûINTERESTû TWO BACK AFFINITY’S TRIMCO BUYOUT AL JABER NEARS RESTRUCTURING RATEûONûTHEûDEBTûANDûTHEûREMOVALûOFû hPAYMENTûINûKINDvûACCRUEDûINTEREST ûWHILEû 4WOûBANKSûAREûPROVIDINGûDEBTûlNANCINGûFORû !BUû$HABI BASEDûAL JABER GROUPûEXPECTSûTOû QUARTERLYûAMORTISATIONûPAYMENTSûWILLûALSOû !FlNITYû%QUITYû0ARTNERSûTOûBUYûAûMAJORITYû SEALûAûDEALûTOûRESTRUCTUREûAROUNDû$HBNû BEûCUTûFROMû-ARCHû ûTHEûCOMPANYû STAKEûINûGARMENTûLABEL MAKERûTRIMCO 53BN ûINûDEBTûTHISûMONTH û2EUTERSû SOURCEûSAID INTERNATIONAL HOLDINGS REPORTED !Lû*ABERSûPROBLEMSûSTARTEDûINûTHEûMID Cathay United Bank and CTBC Bank are !LTHOUGHûTHEûCONGLOMERATE ûWHICHûWASû SûWHENûITûBORROWEDûTOûFUNDûITSûDRIVEûTOû PROVIDINGûAûlVE YEARûAMORTISINGûLOANûOFû FOUNDEDûBYûTHEû!L *ABERûFAMILYûINû ûHASû EXPANDûOUTSIDEûOFûITSûCOREûBUSINESSûOFû AROUNDû53MnM STRUGGLEDûSINCEûAûDOWNTURNûINûCONSTRUCTIONû CONSTRUCTION 4HEûSENIORûDEBTûREPRESENTSûLEVERAGEûOFû HITûTHEû5!%ûAFTERûTHEûGLOBALûlNANCIALûCRISIS û 4HEûWEIGHTûOFûTHEûDEBTûANDûAûSLOWDOWNûINû AROUNDûTWOûTOûTHREEûTIMES ITSûOUTLOOKûFORûûONWARDSûISûPOSITIVE û THEûLOCALûMARKETûPUSHEDûITûTOûBEGINûTALKSû !FlNITYûAGREEDûTOûACQUIREûTHEûMAJORITYû THEûCOMPANYûSOURCEûTOLDû2EUTERS WITHûCREDITORSûINûû"UTûTHEûû STAKEûINû(ONGû+ONG HEADQUARTEREDû4RIMCOû !Lû*ABERSûOUTLOOKûHASûBEENûBOOSTEDûBYû RESTRUCTURINGûFAILEDûTOûEASEû!Lû*ABERSû FORû53MûFROMû0ARTNERSû'ROUPûEARLIERû EXPECTEDûWINSûOFûNEWûCONSTRUCTIONûPROJECTSû TROUBLESûANDûINû-ARCHûûITûMISSEDûAû THISûMONTH INûBOTHû!BUû$HABIûANDû$UBAI REPAYMENT Is your company breaking the law?

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84 International Financing Review February 3 2018 EQUITIES

Australia China India Malaysia South Korea Germany Ireland Israel Sweden 90 UK 91 United States 91 Argentina 95 Structured Equity 96

FRONT STORY US Hudson loses altitude on debut Lack of a discount mars travel retailer’s US$749m IPO

Travel retailer HUDSON found willing takers Some accounts complained that Hudson Passengers that typically arrive at the airport FORûITSû53Mû.93%û)0/ûBUTûSTUMBLEDû did not come at a valuation discount to Dufry, ATûLEASTûONEûORûTWOûHOURSûBEFOREûTHEIRûmIGHTûANDû on debut Thursday in what is proving a even though Dufry shares fell more than 5% often buy products they forget to pack or that DIFlCULTûMARKETûFORûUNDERWRITERSûTOûJUGGLEû INûTHEûlVEûSESSIONSûGOINGûINTOûPRICING AREûNOTûPROVIDEDûIN mIGHT ûMANAGEMENTûSAIDûINû demand and pricing. Hudson is a familiar name to travelers. It the company’s online roadshow presentation. Hudson’s Swiss parent DUFRY was the seller OPERATESûûTRAVELûESSENTIALSûANDû At the airport, “buying online is 23 hours of all of the 39.4m Class A shares offered in convenience stores, book stores, duty-free too late,” Hudson CEO Joseph DiDomizio the IPO of its US and Canada unit, cutting its STORESûANDûOTHERûOUTLETSûINûûTRANSPORTATIONû told investors in the company’s online STAKEûTOû terminals, including 24 of the 25 largest roadshow presentation. !û lRMûUNDERWRITINGûSYNDICATEûLEDûBYû airports in the continental United States and !MAZONSûSUCCESSûHASûMADEûLIFEûDIFlCULTûFORû Credit Suisse, Morgan Stanley, UBS, Bank of Canada. traditional retailers and limited the number of America Merrill Lynch and Goldman Sachs priced Hudson marketed the IPO on consistent consumer discretionary IPOs to those that can the shares at US$19.00, the bottom of the organic revenue growth (9.5% a year since show they are “Amazon-proof”. US$19-$21. ûANDûBENElTSûFROMûTHEûLIMITEDûPRICEû “Hudson’s high single-digit organic growth Though the deal was said to be six times sensitivity of its customers. is viewed as protected from Amazon, and it is covered going into pricing, Hudson made a “Business people who travel really not just the newsstands but also food and SLOPPYûDEBUT ûFALLINGûûINûITSûlRSTûSESSIONû understand Hudson,” another banker close beverage and duty free,” a third banker said. TOûCLOSEûATû53 to the deal said. “They know how hard it is Though the IPO represented a sizable UBS handled stabilization duties, though to go into a Hudson store at the airport or 42.5% economic stake, Dufry plans to it appeared on the S-1 behind Credit Suisse train station and spend less than $10.” maintain a controlling ownership. Dufry and Morgan Stanley. One of Hudson’s most attractive attributes retains 53.1m, super-voting Class B shares One banker close to the deal said that is its insulation from e-commerce that give it a 93.1% stake in matters of while early feedback was good, valuation competition because of the captive nature of corporate governance. was always going to be sticking point. its airport passenger base. Anthony Hughes Vici Properties hits jackpot on IPO

Caesars Palace landlord raises US$1.2bn in upsized IPO

Casino REIT VICI PROPERTIES conquered dicey overture was awkwardly timed just days another three properties from Caesars – markets by upsizing its NYSE IPO and pricing before the IPO’s launch, but Vici’s board Harrah’s Atlantic City, Harrah’s New Orleans the deal at the midpoint of the range for swiftly (and perhaps predictably) rejected the and Harrah’s Laughlin - that expires in proceeds of US$1.2bn. bid. October 2022. This amount was a hefty 20% more than The MGM offer did provide a valuation )TûALSOûHASûRIGHTSûOFûlRSTûREFUSALûOVERû the original target. mOORûFORû6ICISû)0/ properties that Caesar acquired in its Morgan Stanley, Goldman Sachs, Bank of Vici, spun out as Caesars Entertainment 53BNûCASHûPURCHASEûOFû#ENTAURû(OLDINGSû America Merrill Lynch, Barclays, Citigroup and emerged from bankruptcy in October, owns last November. Deutsche Bank found takers for 60.5m shares a portfolio anchored by the iconic Caesars Vici wants to buy assets from third at US$20, setting an initial dividend yield at Palace Las Vegas. parties, but as MGM Growth’s experience 5.25%. They had marketed 50m shares at The REIT quickly acquired Harrah’s Las has shown those deals are much tougher US$19-$21. Vegas in December for US$1.14bn giving it to get done because casino operators 6ICIûlNISHEDûITSûDEBUTûSESSIONûATû53 û 20 properties operated by Caesars under don’t want to risk getting kicked out/ 4.5% above offer. triple-net-lease agreements. AROUNDûBYûAûLANDLORDûAFlLIATEDûWITHûAû “Investors have been waiting for another It funded the purchase with US$963.9m competitor. publicly-traded casino REIT to go public for raised via a private placement and debt sale The key difference between MGM Growth some time,” one banker involved in the as part of a broader recapitalisation. The and Vici is that the former is controlled by underwriting told IFR. “Vici wanted to go company is using some of its IPO proceeds to MGM Resorts International, making it a public and start doing deals.” repay that debt and to fund future hCAPTIVEûlNANCINGûVEHICLEvû#AESARS ûBYû Vici received an unsolicited offer from acquisitions. contrast, has no shareholding or board rival MGM GROWTH PROPERTIES last month to Vici should have ample opportunities to representation at Vici. acquire it for US$19.50 a share. MGM’s grow its portfolio. It has an option to acquire Robert Sherwood

International Financing Review February 3 2018 85 WEEK IN NUMBERS PERFECT CHINA MULLS IPO IN HK

ASIA-PACIFIC Cosmetic company PERFECT CHINA is mulling a One out of three Hong Kong listing which could raise about ENERJISA ENERJI WAS THE ONLY ONE US$1.5bn, according to people familiar with OUT OF THE FIRST THREE EUROPEAN AUSTRALIA the situation. IPOS OF THE YEAR TO COMPLETE The company, which Malaysian WITHIN THE ORIGINAL MARKETED TRANSURBAN COMPLETES RIGHTS OFFER entrepreneur Koo Yuen Kim founded and TERMS. METROVACESA AND MLP SGLIK employs a direct sales method, has had HIZMETLER BOTH HAD TO RESTRUCTURE Toll-road operator TRANSURBAN has raised initial discussions with potential arrangers THEIR IPOS AFTER FAILING TO SECURE A$162m (US$130m) from the sale of 13.6m over the listing, targeted for as early as this ENOUGH DEMAND NEWûSHARESûATû!ûEACH ûOFFûAûmOORûPRICEû year, said the people. of A$11.40. Perfect China could not be reached for The shares that retail investors did not buy comment. as part of their rights entitlement were sold Perfect China is renowned for the overseas 47% to others through a bookbuilding process. trips it organises for its top sales CAPITA SHARES FELL MORE THAN Macquarie, Morgan Stanley and UBS worked representatives. Last year, the company held an 47% ON WEDNESDAY AFTER THE UK on the deal. incentive event for 3,500 delegates in Malaysia. GOVERNMENT CONTRACTOR ISSUED A With the sale, Transurban completed the PROFIT WARNING FOR 2018 JUST WEEKS !BNû FOR ûENTITLEMENTûOFFERûITû GDS COMPLETES FOLLOW-ON OFFERING INTO THE YEAR, SUSPENDED ITS DIVIDEND announced last December. AND ANNOUNCED A £700m RIGHTS ISSUE The primary and secondary follow-on in Nasdaq-listed GDS HOLDINGS has raised CHINA 53M The developer and operator of data US$9.6bn HUAMI SHAPES UP FOR NYSE IPO CENTRESûINû#HINAûSOLDûMû!MERICANû JANUARY SAW 20 US-LISTED IPOS RAISE depositary shares at US$26 to raise US$9.6bn, THE BUSIEST START TO A YEAR ON HUAMI ûAûMAKERûOFûlTNESSûTRACKERSûFORû 53Mû%XISTINGûSHAREHOLDERSûSOLDûAû RECORD, TOPPING THE 17 DEALS OF JANUARY Chinese smartphone company Xiaomi, has FURTHERûMû!$3û0RICINGûWASûANûû 2014. IT IS THE HIGHEST MONTHLY PROCEEDS started bookbuilding for a NYSE IPO of up to discount to the pre-deal spot. SINCE SEPTEMBER 2014, WHEN ALIBABA US$120m. The deal was upsized from 9.5m shares. WENT PUBLIC IN THE BIGGEST EVER IPO The company is selling 10m American The book was multiple times covered depositary shares at an indicative price with about 100 investors participating. The range of US$10–$12. deal drew diverse demand from long-only 0RICINGûISûSLATEDûFORû&EBRUARYû investors, existing shareholders, as well as 20% Huami was founded in 2014 and is technology specialists. CASINO REIT VICI PROPERTIES WAS headquartered in Beijing. It manufactures RBC, JP Morgan and Citigroup were the joint ABLE TO UPSIZE ITS NYSE IPO BY 20% under the Mi brand for Xiaomi and under its bookrunners. AND PRICE AT US$20, ABOVE THE OWNû!MAZlTûBRAND US$19.50 PER SHARE OFFER FROM RIVAL Xiaomi has invested in Huami, as has PING AN FILES TO LIST SPIN-OFF MGM GROWTH PROPERTIES THAT WAS Shunwei Capital. Shunwei is a venture REJECTED JUST AHEAD OF LAUNCH CAPITALûlRMûFOUNDEDûBYû8IAOMIûCHIEFû PING AN INSURANCE (GROUP) has applied to spin EXECUTIVEûOFlCERû,EIû*UN off and list PING AN HEALTHCARE AND TECHNOLOGY Xiaomi owns a 19.3% stake in Huami and on Hong Kong’s main board, according to an 3HUNWEIû ûACCORDINGûTOûTHEûlLING EXCHANGEûlLING Three years Credit Suisse, Citigroup and China Renaissance Ping An Healthcare, formerly known as CHINA EVERGRANDE’S AMBITIOUS PLAN are joint bookrunners. Ping An Good Doctor, is the largest online FOR A HK$23bn (US$2.9bn) PERPETUAL CONVERTIBLE BOND PAYING AN UP TO ASIA-PACIFIC EQUITIES ASIA-PACIFIC EQUITIES (EX-JAPAN) 4% COUPON AND WITH A CONVERSION BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE PREMIUM OF 50%-60% WAS COMPLETELY Managing No of Total Share Managing No of Total Share ABANDONED AFTER LAUNCH. THE HK$18bn bank or group issues US$(m) (%) bank or group issues US$(m) (%) FIVE-YEAR RESTRUCTURED DEAL PAID 1 Goldman Sachs 5 2,254.17 14.9 1 Goldman Sachs 5 2,254.17 15.9 MORE, HAD A LOWER PREMIUM AND EVEN 2 UBS 7 1,730.40 11.4 2 UBS 6 1,550.87 10.9 INCLUDED A PUT AFTER THREE YEARS 3 Morgan Stanley 9 1,337.12 8.8 3 Morgan Stanley 8 1,287.83 9.1 4 Huatai Securities 4 1,214.75 8.0 4 Huatai Securities 4 1,214.75 8.5 5 Citigroup 5 1,027.21 6.8 5 Citigroup 5 1,027.21 7.2 6 Citic 2 850.16 5.6 6 Citic 2 850.16 6.0 Rmb20bn 7 China Merchants Secs 5 645.42 4.3 7 China Merchants Secs 5 645.42 4.5 CNPC SET A 1.4% COUPON ON ITS 8 Sumitomo Mitsui Finl 6 496.27 3.3 8 Guotai Junan Securities 3 300.19 2.1 EXCHANGEABLE BOND INTO PETROCHINA. 9 Guotai Junan Securities 3 300.19 2.0 9 Haitong Securities 3 272.86 1.9 THE EB IS THE LARGEST EVER IN THE 10 Haitong Securities 3 272.86 1.8 10 Guoyuan Securities 1 235.12 1.7 DOMESTIC MARKET AT US$3.2bn-EQUIVALENT Total 162 15,132.32 Total 155 14,207.86

AND COMES WITH A HIGHER COUPON THAN Including all domestic and international deals and rights issues Including all domestic and international deals and rights issues LAST YEAR’S DEBUT EB BY CNPC Source: Thomson Reuters SDC code: C4a1 Source: Thomson Reuters SDC code: C4a2

86 International Financing Review February 3 2018 EQUITIES ASIA-PACIFIC

healthcare and medical destination in China It will set the price on February 5 and start The government made the merger and in terms of user numbers. bookbuilding two days later. listing announcement at its annual budget The company intended to raise about Proceeds will be used for working capital. today, but did not indicate the timeframe US$1bn from a Hong Kong IPO as early as for the IPO. THEûlRSTûHALFûOFûTHISûYEAR ûPEOPLEûCLOSEûTOûTHEû APPROVAL FOR RIGHTS ISSUE The Indian government has set a deal told IFR earlier. Citigroup and JP Morgan PRIVATISATIONûTARGETûFORûTHEûlSCALûYEARûn AREûWORKINGûONûTHEûmOAT GUANGHUI ENERGY has received written ûATû2SBNûVERSUSûTHEûREVISEDû2STRNû Following the transaction, Ping An approval from the China Securities TARGETûFORûnû4HEûORIGINALûPRIVATISATIONû Insurance will remain the controlling Regulatory Commission for a proposed TARGETûFORûnûWASû2SBN shareholder of Ping An Healthcare. rights issue of up to Rmb4bn (US$635m). So far, it has sold shares to raise Rs925bn The natural gas and coal company plans to and has until March 31 to reach the RED STAR BLOCK BRINGS IN HK$1.27bn ISSUEûNOTûMOREûTHANûBNûSHARESûONûAû FOR increased target. 10 basis at a price of Rmb2.55, a discount of The government is targeting record 0RIVATEûEQUITYûlRMû7ARBURGû0INCUSûRAISEDû ûTOûTHEû&EBRUARYûûCLOSEûOFû2MB PRIVATISATIONûPROCEEDSûFORûnû (+BNû53M ûFROMûAûSELL DOWNûOFû 0ROCEEDSûWILLûBEûUSEDûFORûAûLIQUElEDû through capital market share sales and MûSHARESûINû#HINESEûFURNITUREûANDû natural gas project and debt repayment. strategic sales. One such strategic sale was building materials retailer RED STAR China Securities is the sponsor. that of its 51.11% stake in Hindustan MACALLINE. SHAANXI INTERNATIONAL TRUST will seek CSRC Petroleum to ONGC for Rs369bn. The block, representing 11% of Red Star’s approval on Monday for a proposed rights issue Typically, the Indian government has ( SHAREûCAPITAL ûWASûSOLDûATû(+ûPERû of up to Rmb3bn. The trust company plans to fallen short of its privatisation targets. share, the lower half of the indicative price OFFERûUPûTOûMûRIGHTûSHARESûONûAû FOR û RANGEûOFû(+nûORûAûDISCOUNTûOFû basis. Largest shareholder Shaanxi Coal and BANK OF BARODA HIRES FOR QIP 6% to the pre-deal spot. #HEMICALû)NDUSTRYû'ROUP ûWHICHûOWNSûû The book was around 30 times of SIT, will take up its entitlement in full. State-owned BANK OF BARODA has hired Axis, oversubscribed, with a good mix of long- China Securities is the sole bookrunner. BoB Capital Markets, Citigroup, Credit Suisse, JM only investors and hedge funds. Proceeds will be used for working capital. Financial and KotakûTOûMANAGEûAûQUALIlEDû There is a 90-day lock-up period. institutional placement of shares to raise CICC was the sole placing agent. TIMES SELL-OFF BRINGS HK$833m 2SBNn2SBNû53MnM û according to people familiar with the plan. SHANGRI-LA BLOCK RAISES HK$1.05bn 3CHIAVONAû)NVESTMENTûHASûRAISEDû(+Mû The QIP is likely to happen before the end 53M ûFROMûTHEûSELL OFFûOFûITSûSTAKEûINû of March. An undisclosed institutional vendor has TIMES PROPERTY HOLDINGS. BoB and its state-owned peers, under raised HK$1.05bn (US$134m) through a The clean-up trade, involving 90m shares, pressure from rising bad-loan provisions, are block trade in Hong Kong-listed SHANGRI-LA was marketed at an indicative price range of selling shares to shore up capital. ASIA. HK$9.25–$9.65. Bank of Maharashtra, Punjab National 4HEûBLOCKûOFûMûSHARES ûREPRESENTINGû The shares were sold at the bottom of the Bank, Syndicate Bank and Union Bank of 1.6% of existing capital, was sold at the RANGE ûREPRESENTINGûAûDISCOUNTûOFûûTOûTHEû )NDIAûSOLDûSHARESûTOûRAISEûAûCOMBINEDû2SBNû bottom of the indicative price range of pre-deal spot. last year, while Andhra Bank, Canara Bank, (+nû0RICINGûWASûAûDISCOUNTûOFû The book was multiple times covered Corporation Bank and Indian Bank have also ûTOûTHEûPRE DEALûSPOT with a mix of long-only investors and hedge unveiled plans to sell equity for a total of The book was multiple times covered. The funds. Rs110bn. top 10 investors got about two-thirds of the UBS was the sole bookrunner. allocation. TRIO SELLS 5m QUESS SHARES There is a 60-day lock-up on the vendor. Morgan Stanley was the sole bookrunner. INDIA Three shareholders have sold 5m QUESS SHARESûTOûRAISEû2SBNû53M ûATû2Sû JIANGSU LEASING PRE-MARKETS IPO PLAN FOR MEGA INSURANCE IPO each, below an indicative range of Rs1,000– Rs1,025, according to people with JIANGSU FINANCIAL LEASING has started pre- The Indian government sees a possible mega knowledge of the disposal. marketing a Shanghai IPO of up to Rmb4bn IPO of a state-owned insurance giant after 4HEûlNALûPRICEûREPRESENTSûAûDISCOUNTûOFû (US$632m) with Huatai United Securities as announcing plans to merge three general ûTOûTHEûPRE DEALûCLOSEûOFû2S ûONû sponsor. insurers under its control. the National Stock Exchange. The company will become only the The plan is to merge ORIENTAL INSURANCE, The 5m shares represent 3.45% of the SECONDûLISTEDûlNANCIAL LEASINGûCOMPANYûINû NATIONAL INSURANCE and UNITED INDIA INSURANCE company’s capital. THEû! SHAREûMARKETûANDûTHEûlRSTûTOûCOMPLETEû into one before seeking a listing. There is a 30-day lock-up on sellers an IPO, opening a potential new source of Last year, state-owned GENERAL INSURANCE Manipal Integrated Services, Ramdas funding for the fast-growing, capital- CORP OF INDIAûRAISEDû2SBNû53BN û Madhava Pai and Vasanthi Ramdas Pai. intensive sector. through its IPO and THE NEW INDIA ASSURANCE Deutsche Bank was sole bookrunner. Bohai Capital, a unit of Chinese RAISEDû2SBNûFROMûITSûmOATû"OTHûTRADEûWELLû conglomerate HNA Group, went public in below their respective IPO prices. JM FIN PLACEMENT RAISES Rs6.5bn Shenzhen through a backdoor listing in “After the performances of the NIA and 2011. GIC, it will be hard to sell yet another state- JM FINANCIAL has raised Rs6.5bn (US$102m) Jiangsu Leasing plans to sell up to 640m owned insurer,” said an ECM banker. “A THROUGHûAûQUALIlEDûINSTITUTIONALûPLACEMENTû shares, or about 21.4% of its enlarged larger company with better economies of of shares priced at Rs162 each, according to company capital. scale has a better chance.” a person with knowledge of the deal.

International Financing Review February 3 2018 87 The indicative price was at a 0.03% The sale comprised a base size of 260m shares The covered message came on Monday discount to the pre-deal close of Rs162.05. with an option for 65m increase, which was after one day of bookbuilding, with Around 40.1m shares, or 5.03% of the fully exercised. The total number represents additional details relating to the price range current company capital, were sold in the ûOFû3ETIASûENLARGEDûSHAREûCAPITAL issued on day two. QIP, which saw 25 investors participate. BNP Paribas and Maybank were the /NûOFFERûAREûMûBEARERûSHARESûATûõn Credit Suisse and IDFC Bank were the bookrunners. õûPERûSHARE ûOFûWHICHûUPûTOûMûWILLûBEû bookrunners. NEWLYûISSUEDûANDûMûPROVIDEDûBYûTHEû The funds will be used to support the company’s only shareholder, Wilhelm Beier company’s capital needs. SOUTH KOREA and family. There is a 60-day lock-up on the issuer and The selling shareholder is also providing the controlling shareholders. SK LUBRICANTS PLANS 2018 IPO UPûTOûMûSHARESûFORûAûGREENSHOE Bookbuilding is expected to run until FLEMINGO TARGETS JUNE IPO SK LUBRICANTS, a unit of SK Innovation, plans to &EBRUARYû ûWITHûAûTRADINGûDEBUTûTHEû LISTûINû3OUTHû+OREAûASûEARLYûASû ûACCORDINGû following day. Retailer FLEMINGO DUTY FREE aims to launch a to people familiar with the situation. The price range values the manufacturer Rs20bn–Rs25bn (US$314m–$393m) The lubricant oil subsidiary revealed the OFûPATENT FREEûPHARMACEUTICALSûATûõBN domestic IPO in June, people with plan on January 31 without mentioning the õBN knowledge of the transaction have said. timing and size of the IPO. Berenberg is sole bookrunner, with ODDO 4HEûCOMPANYûPLANSûTOûlLEûTHEûPROSPECTUSû It is SK Lubricants’ third attempt for a BHF as co-lead. with the Securities and Exchange Board of listing, after the 2013 and 2015 bids for IPOs India next month. of up to US$1.5bn failed to materialise. ALSTRIA PICKS UP €193m FOR Flemingo runs duty free shops at airports The company is expected to raise about PROPERTY BUYS in India, Sri Lanka and Africa. US$1bn this time. Samena Capital Group, Cartesian Group, Samsung Securities, Korea Investment & !ûõMûSELLDOWNûINûOFlCEûREALûESTATEû Samara Capital, Albright Capital Securities, Citigroup, Credit Suisse and Mirae business ALSTRIA was substantially Management and CDIB Capital International Daewoo, mandated for the previous IPOs, are oversubscribed on indications of interest are among the investors in the company, expected to continue to work on the new before launch on Monday night after around FOUNDEDûINû mOAT ûACCORDINGûTOûTHEûPEOPLE a dozen accounts were wall-crossed, largely Axis, Credit Suisse, HSBC, ICICI Securities and European existing shareholders. Yes Securities are leads on the IPO. Books opened after the close with TAIWAN REFERENCEûTOûTHEûMARKETûCLOSEûOFûõûANDû LODHA TO FILE FOR IPO THIS MONTH were covered within 25 minutes. Guidance of HON HAI GETS SPIN-OFF APPROVAL õ õûCOVEREDûTHROUGHOUTûFOLLOWEDû LODHA DEVELOPERSûPLANSûTOûlLEûTHEûDRAFTû an hour later and books closed at 6:45pm in PROSPECTUSûFORûAû53MnBNû)0/ûLATERû Taiwan-listed electronics contract ,ONDONûWITHûPRICINGûATûõ ûAûûDISCOUNT this month and is targeting a launch in the manufacturer HON HAI PRECISION INDUSTRY has 4HEûTOPûûACCOUNTSûTOOKûAROUNDûûOFû second quarter, people with knowledge of obtained shareholder approval to list the trade. the transaction have said. subsidiary Foxconn Industrial Internet on 0ROCEEDSûWILLûBEûUSEDûTOûlNANCEûFURTHERû Citic CLSA, JM Financial, Kotak and Morgan the Shanghai Stock Exchange. GROWTH ûINCLUDINGûõMûFORûTHEû Stanley are the bookrunners. FII will offer about 10% of its total issued acquisition of two properties in Hamburg The Indian property company planned an share capital, according to a statement. and Stuttgart, with the balance to be used )0/ûOFû2SBNû53M ûINû ûBUTûDIDû The pricing and timetable for FII’s IPO for further acquisitions or repayment of not launch because of weak market have yet to be decided. debt, including potential cash settlement of conditions. Proceeds will be used for investments in a convertible bond. Citigroup, Enam, CLSA, Credit Suisse, JP cloud computing and the production of 4HEûSTOCKûOPENEDûATûõûONû4UESDAYû Morgan, Kotak, Nomura, SBI Capital and Global internet equipment, research and development and stayed largely above pricing, closing the TrustCapital were the bookrunners then. of 5G industrial internet systems and DAYûmATûTOûTHEûOPEN According to the company’s website, it is computing data centres, among other things. currently developing an estimated 43m sq ft The plan still needs regulatory approval. EMEA EQUITIES OFûREALûESTATEûANDûHASûûONGOINGûPROJECTSû BOOKRUNNERS: 1/1/2018 TO DATE across London, Mumbai, Pune, Hyderabad Managing No of Total Share and Bangalore. bank or group issues US$(m) (%) 1 Goldman Sachs 7 1,852.94 18.6 EUROPE/MIDDLE 2 Credit Suisse 4 1,355.79 13.6 MALAYSIA EAST/AFRICA 3 UBS 4 1,133.17 11.4 4 Morgan Stanley 3 456.01 4.6 SETIA PLACEMENT BRINGS M$1.01bn 5 BAML 4 442.06 4.4 GERMANY 6 Standard Bank Group 2 347.46 3.5 Real-estate company SP SETIA has raised 7 Deutsche Bank 3 304.40 3.1 M$1.01bn (US$259m) from the sale of 325m BOOKS COVERED FOR DERMAPHARM 8 Chapel Hill Advisory Pt 2 270.00 2.7 SHARESûATûTHEûTOPûOFûAû-nûPRICEû 9 Citigroup 3 266.45 2.7 range, according to a person with Books are covered throughout the price 10 JP Morgan 3 262.33 2.6 knowledge of the transaction. range and on the full deal size for the Total 60 9,960.97 4HEûlNALûPRICEûIMPLIEDûAûûDISCOUNTûTOû Frankfurt IPO of DERMAPHARM, including Including all domestic and international deals and rights issues the pre-deal close of M$3.25. greenshoe. Source: Thomson Reuters SDC code: C4cr

88 International Financing Review February 3 2018 EQUITIES EMEA

Morgan Stanley and UBS were joint The EBRD honoured its 40% commitment, a multiple of nine times Ebitda, based on the bookrunners, with Kempen as co-lead with the rest of allocations skewed to both company’s Ebitda for the year ending in manager. new and existing long-only shareholders. /CTOBERûûOFû53Mû4HEûPRICINGû ProCredit said proceeds would fund its implies an enterprise value of FIRST POST-IPO SELLDOWN IN JOST growth strategy. The stock responded well approximately US$2bn. ONû&RIDAY ûOPENINGûUPûûATûõûANDû Davy and Goldman Sachs were joint A group of sellers comprising Avedon hanging around that level all morning. bookrunners. Rabobank was co-lead manager Partners, Bain Capital Credit, Black Berenberg was sole global coordinator and Diamond and Cinven have picked up joint bookrunner with equinet. Econnext õMûFROMûTHEûSALEûOFûAûûSTAKEûINû advised. ISRAEL trucks and trailer parts maker JOST. The trade launched on Tuesday evening INSTONE TARGETS UP TO €943m SOL-GEL PRICES NASDAQ FLOAT WITHûGUIDANCEûOFûõ õûFORûANûOFFERINGûOFû VALUATION AT MID-POINT 3m shares, later upsized to 3.65m shares, representing well over 200 days’ trading. Homebuilder INSTONE REAL ESTATE shrugged BMO Capital Markets and Jefferies priced an 0RICINGûCAMEûATûõ ûAûûDISCOUNTûTOûTHEû off concerns elsewhere in EMEA IPOs and UPSIZEDû53Mû.ASDAQû)0/ûLASTû7EDNESDAYû õûCLOSE PUTûOUTûGUIDANCEûFORûAûõM õMû for Israeli acne/rosacea specialist SOL-GEL 4HEûSALEûISûTHEûlRSTûSINCEûLASTû*ULYSû &RANKFURTû)0/ûONû&RIDAYûMORNINGû4HEûmOATû TECHNOLOGIES. The banks, including co- õMû)0/ûOFû*OSTû0RICEDûATûõûINûTHEû had been expected to total more than managers JMP Securities and Raymond James, )0/ ûTHEûSHARESûCLOSEDû7EDNESDAYûATûõ õMûATûLAUNCH priced 6.25m shares at US$12 each, the Commerzbank, Deutsche Bank and JP Morgan Instone is targeting primary proceeds of midpoint of the US$11-$13 range and up were joint bookrunners. AROUNDûõM ûWITHûAPPROXIMATELYûõMûTOû from 5m shares at launch. fully repay an existing shareholder loan and The offering gives Sol-Gel a market SCHALTBAU CAPITAL INCREASE TO PAY the balance for the acquisition and CAPITALISATIONûOFû53MûVERSUSûTHEû53Mû DOWN DEBT development of new residential projects, as sum its controlling shareholder Moshe Arkin well as for other corporate expenses. paid to acquire the company four years ago. %LECTRICALûANDûMECHANICALûENGINEERINGûlRMû There are 20.35m shares on offer, with Sol-Gel is working with Irish generics giant SCHALTBAU HOLDINGûISûRAISINGûõMûTOûREPAYû the bulk coming from seller Activum, which Perrigo to develop generic, topical foam existing liabilities. is subject to a six-month lock-up post versions of approved dermatology drugs. The Munich-based business is offering admission. The market capitalisation is Proceeds will be used to fund an ongoing MûNEWûSHARESûONûAû FOR ûBASISûATûõ ûAû õM õMûANDûTHEûFREE mOATûISû û phase III study of a generic version of an ûDISCOUNTûTOû4%20ûOFûõ ûACCORDINGû rising to 63.3% on full exercise of a 15% FDA-approved treatment for rosacea called to IFR estimates. secondary greenshoe. Soolantra that is marketed in the US by There are declarations of intent to Roadshows run from February 2 through Galderma Laboratories. subscribe in the rights issue and backstop to February 13, with pricing and allocations commitments for at least 1.44m shares and on February 14. EMEA COMMON STOCK ISSUER LEGAL ADVISERS UPûTOûMûSHARES ûCORRESPONDINGûTOû Credit Suisse and Deutsche Bank are joint 1/1/2018 TO DATE PROCEEDSûOFûATûLEASTûõM global coordinators and joint bookrunners No of Total Share The shares are fully entitled to dividends with BNP Paribas, Morgan Stanley and Legal adviser issues US$(m) (%) FORûTHEûYEARûSTARTINGû*ANUARYûû UniCredit. 1 Linklaters 1 586.3 6.9 Subscription runs from February 1-14. =1 Werksmans Attorneys 1 586.3 6.9 There is no rights trading. 3 Goodwin Procter 2 200.8 2.4 Commerzbank is sole global coordinator IRELAND 4 Vischer 1 130.8 1.5 and has underwritten the capital increase. 5 Latham & Watkins 1 75.0 0.9 TOTAL PRODUCE ISSUES SHARES TO PAY =5 Gross Kleinhendler 1 75.0 0.9 EBRD BACKS PROCREDIT GROWTH FOR RIVAL Hodak Halevy Greenberg & Co FUNDRAISING 7 K&L Gates 1 70.0 0.8 Fruit and vegetable supplier TOTAL PRODUCE 8 Cooley 1 69.0 0.8 Commercial banking group PROCREDIT HOLDING RAISEDûõMûONû4HURSDAYûFROMûAûPLACINGû 9 CMS 1 1.0 0.0 RAISEDûõMûLASTû4HURSDAYûNIGHTûINûANû OFûNEWûSHARESûASûPARTûOFûAûlNANCINGûPACKAGEû Total 55 8,515.3 accelerated capital increase that was related to the company’s US$300m Source: Thomson Reuters SDC code: AX3 SIGNIlCANTLYûUPSIZEDûANDûBACKEDûBYûTHEû acquisition of 45% of US rival Dole Food. European Bank for Reconstruction and The amount raised exceeded an initial Development. target set at launch of US$150m. EMEA COMMON STOCK MANAGER LEGAL ADVISERS There was no need to wall-cross in advance The placing was launched before the 1/1/2018 TO DATE as ProCredit had signalled a potential 10% opening, and at around 11.30am, investors No of Total Share increase in mid-January. At launch, ProCredit WEREûTOLDûTHATûPRICINGûWASûSETûATûõûPERû Legal adviser issues US$(m) (%) offered 3% of share capital, backed by an share, which represents a 2.13% discount to 1 Allen & Overy 1 586.3 6.9 intention by the EBRD to put in an order for 7EDNESDAYSû$UBLINûCLOSINGûPRICEûOFûõû 2 Covington & Burling 2 144.0 1.7 UPûTOûûOFûTHEûSALE ûORûUPûTOûõM The shares are also traded on the London 3 Homburger 1 130.8 1.5 The deal was covered quickly and the Stock Exchange. =3 Ropes & Gray 1 130.8 1.5 decision was taken to upsize to the full 10% In total, 63m new shares will be issued, 5 Gornitzky & Co 1 75.0 0.9 offering previously authorised by shareholders, which corresponds to around 19.6% of the 6 Cahill Gordon & Reindel 1 70.0 0.8 comprising 5.53m shares. Pricing came at existing share capital. Total 55 8,515.3 õ ûAûûDISCOUNTûTOûTHEûõûCLOSE The price paid for 45% of Dole represents Source: Thomson Reuters SDC code: AX4

International Financing Review February 3 2018 89 Trading began with an open of US$15.33, handful of SPACs that completed last UPûMOREûTHANûû4HEûSTOCKûROSEûINûEARLYû year. TURKEY trading but came off and closed at US$13.64, Landscape Acquisitions, fronted by up 13.66%. Noam Gottesman and Mike Fascitelli, ENERJISA TIGHTENS RANGE IN FINAL raised US$500m last November and was HOURS trading within a week of launch, while NORWAY Martin Franklin’s US$1.25bn J2 involved Bookrunners on the Istanbul IPO of closer to a typical IPO bookbuild period of electricity distribution business ENERJISA SALMONES CAMANCHACA LEAPS ON two weeks. Franklin was also involved ENERJI signalled once again that the deal is on DEBUT with Ocelot Partners, which raised track to complete successfully on Friday. US$425m in March last year after a week Following messaging on Wednesday that 3HARESûINûlSHERIESûANDûAQUACULTUREûBUSINESSû of bookbuilding. books were covered on the full deal size SALMONES CAMANCHACA were listed in Norway A longer schedule seemed sensible from including greenshoe, guidance was on Friday after a placing of new and existing the start given the focus on Russia and tightened on Friday with reassurance that shares that values the company at COMPARATIVELYûLOWERûPROlLEûOFû4AVRIN the deal is oversubscribed. .+RBNû53M Morgan Stanley is lead-left and joint global The range was tightened to TL6.25-TL6.50, 4HEû)0/ûCOMPRISEDûMûSHARESûATû.+Rû coordinator with Sberbank on Kismet. around the bottom of the initial PERûSHARE ûOFûWHICHûMûAREûNEWLYûISSUEDû 4, 4,ûGUIDANCE ûWITHûBOOKSûCOVEREDû shares and 10.62m are existing shares within that revised range. Management was provided by the company’s Chilean parent, SWEDEN in London on Friday ahead of books closing in COMPANIA PESQUERA CAMANCHACA. the early afternoon. A domestic bookbuild 4HEûFREE mOATûONûADMITTANCEûISû û HEAVY CONCENTRATION ON SSAB run by AK Investment began on Thursday and with all the remaining shares held by the SELLDOWN wrapped up end of day on Friday. selling shareholder. The company said The new guidance suggests a deal size of demand exceeded the offer more than There was a heavily concentrated book for 4,BN 4,BNû53M M û eight times. 7EDNESDAYûNIGHTSû3+RBNû53M û Pricing and allocations are due on Monday, 0RICEûGUIDANCEûWASû.+Rn.+RûPERû selldown in steelmaker SSAB. On allocations, &EBRUARYû ûWITHûTRADINGûONû&EBRUARYû SHARE ûANDûTHEûDEALûSIZEûISû.+Rû the top 10 accounts took more than 60% of Citigroup is senior global coordinator with 53M û'UIDANCEûWASûNARROWEDûTOû the book, with the top 20 orders accounting HSBC as global coordinator and Bank of NKr40–NKr45 on Wednesday. FORûCLOSEûTOûûOFûTHEûTRADE America Merrill Lynch and Deutsche Bank as The shares opened on Friday at State-owned Solidium was the seller, joint bookrunners. AK Investment is .+R ûANDûCLIMBEDûSTEADILYûOVERûTHEû OFFERINGûUPûMû" SHARES ûREPRESENTINGûû domestic lead manager. course of the day to close at NKr44.5, which of existing share capital and approximately REPRESENTEDûAûlRST DAYûGAINûOFûALMOSTû 10 days’ trading. The trade followed a wall- FAST FOODS GROUP TFI TARGETS DNB Markets was sole global coordinator, cross, with allocations skewed to both those US$242m with Nordea and Pareto as joint bookrunners. wall-crossed and long-only investors. Larrain Vial was placing agent for the Chilean Coverage took just 20 minutes and TFI TAB FOOD INVESTMENTS, which operates bookbuilding. pricing came at SKr40, a 2.4% discount to the Burger King and other fast food restaurants 3+RûCLOSEû!ûMULTIPLEûTIMESûCOVEREDû in Turkey and China, has opened books for a book comprised 60 lines. Nasdaq IPO of up to US$242m. RUSSIA Solidium is left with 26.4m A-shares and The company is offering 4.5m American Mû" SHARES ûINûTOTALûûOFûOUTSTANDINGû depository shares to raise up to US$49.5m RUSSIAN SPAC KISMET CONTINUES TO shares, subject to a 90-day lock-up. based on the US$9-$11 price range. The BUILD SSAB shares opened at SKr40.60 on decision to list in the US is an expensive one so Thursday and dropped just below pricing in the company expects to receive net proceeds of Russia-focused SPAC KISMET is taking time the early afternoon, closing the day down ONLYû53MûATûTHEûMID POINTûOFûGUIDANCEû to come together. A vehicle for former ûATû3+R Proceeds will be used to reduce a loan. MegaFon CEO Ivan Tavrin is targeting Deutsche Bank and SEB were joint Existing shareholders provide the bulk of the US$200m for a company preferably in, bookrunners. SELLINGûWITHûMû!$3ûTOûRAISEû53M but not limited to, the telecoms, $192.5m, plus a 3.3m secondary greenshoe. technology, internet or customer services IBT COMPLETES RIGHTS ISSUE Yurdanur Kurdoglu, the founder’s spouse; space operating in or with exposure to ATA Holding; ELQ Investors VIII; European Russia. INFANT BACTERIAL THERAPEUTICS reported 99.3% Bank for Reconstruction and Development; The IPO launched on January 9 and was take-up for its SKr440m (US$55.5m) rights and Clouse are selling shareholders. The expected at that time to close around the end issue. founding Kurdoglu family will remain of January, having kicked off with indications There were acceptances for 4.59m of the heavily invested with an aggregate holding of interest for around two-thirds of the target MûSHARESûOFFEREDûONûAû FOR ûBASISûATû of just under 66%. haul. Converting those into orders and SKr95. Pricing is slated for February 6. making up the balance is still ongoing and !LLûTHEû ûCLASSû!ûSHARESûWEREû 4&)û4!"ûOPERATESû ûOUTLETS ûOFûWHICHû the deal is not likely to close this week. subscribed for, with 4.435m of the 4.46m 1,035 are in Turkey. Burger King accounts Bankers involved were relatively class B shares. The balance was dealt with for more than three-quarters of the sanguine at the end of last week, through oversubscription. company’s outlets with its other main UNDERSTANDABLYûGIVENûTIMINGûWASûmEXIBLE û The shares were trading around brands being Popeyes, Usta Donerci, Sbarro and it is notable that Kismet has taken a SKr115.50 on Friday afternoon. and Arby’s, where Usta Donerci is the only different approach on timing than the SEB, Zonda and Rothschild advised. non-US import. Just over three-quarters of

90 International Financing Review February 3 2018 EQUITIES AMERICAS

sites are company operated with 24% by sub- MûSHARESûREPRESENTEDûûOFûEXISTINGû At least nine companies seeking a total of franchisees. share capital and approximately 21 days’ nearly US$2bn are hoping to price US IPOs. The company has expanded rapidly with a TRADINGû!NûOFlCIALûCOVEREDûMESSAGEû Unfortunately they have timed their run CAGR in stores of 26% since 2006 and in followed after 20 minutes. with a sudden bout of market bearishness China a CAGR of 59% since 2012. TFI TAB is The only guidance was pricing of 305p and increased volatility, in part spurred by looking to open 350-400 restaurants in its SHORTLYûBEFOREûBOOKSûCLOSEDûATûPMûINû rising bond yields. HOMEûMARKETûINûTHEûNEXTûlVEûYEARSûCOMPAREDû London. Pricing was a 2.3% discount. Heading into Friday’s close, the S&P 500 with 1,000-1,250 in China in the same period. The top 10 accounts took more than 60% was on track to record its worst week since 4HEûCOMPANYûPOINTSûOUTûINûITSû3%#ûlLINGûTHATû of the trade, but care was taken to ensure early February 2016 around the same time it has managed to achieve same-store sales everyone got an allocation, with the book the market last spiraled into correction growth (12.5% in 2014-16) at the same time as skewed towards UK and US accounts. territory. rapidly expanding its footprint. 0ROCEEDSûWILLûPARTLYûlNANCEûTHEûPURCHASEû The biggest IPOs on the calendar are Morgan Stanley, Credit Suisse and Goldman of the 49% Entertainment One does not Russian-backed steel pipe maker IPSCO Sachs are active bookrunners. already own in The Mark Gordon Company, 4UBULARSûUPûTOû53M ûANDûOILlELDû with the remainder of the consideration to SERVICESûCOMPANYû#ACTUSûUPûTOû53M BEûlNANCEDûWITHûDEBT US ECM bankers appear to have come into UK JP Morgan, Investec and RBC were joint ûFULLYûCOGNISANTûTHATûTHEûBULLISHû bookrunners. conditions that prevailed through last year AILING CAPITA TURNS TO CITI AND 4HEûSTOCKûOPENEDûATûPûONû4UESDAY û MIGHTûPROVEûmEETING GOLDMAN BUTûSHIFTEDûUPûANDûCLOSEDûATûP ûUPûû Companies have already raised more than on the day. US$10bn through US stock listings, making Shares in CAPITAûPLUMMETEDûMOREûTHANûûONû it the busiest start to the year on record by Wednesday after the UK government THE PRS REIT FUNDS FOR SITE proceeds as issuers rushed to access capital CONTRACTORûISSUEDûAûPROlTûWARNINGûANDûSAIDûTHATû ACQUISITIONS while markets remain open for business. Citigroup and Goldman Sachs had provided a Though there have been some high- aMûSTANDBYûUNDERWRITEûFORûANûUPCOMINGû THE PRS REIT, which invests in new-build PROlLEûDISAPPOINTMENTS ûMOSTûNOTABLYû!$4 û rights issue. homes in the private rented sector, is ONLYûFOURûOUTûOFûû)0/SûTHATûHAVEûPRICEDûTHISû Following the Carillion debacle, Capita’s carrying out a £256.25m placing with year are trading below offer. new chief executive Jonathan Lewis said proceeds to be used to acquire development The looming “staleness” deadline on that Capita needed a complete overhaul and sites and newly completed sites. February 14, after which companies can no THEûCOMPANYûLOWEREDûITSûûPROlTû The REIT said in early January that it had long rely on third-quarter earnings to forecast by 30%. IDENTIlEDûDEVELOPMENTûOPPORTUNITIESûWITHûAû market IPOs, could slow the pace of Alongside the rights issue, Capita will also gross development cost of more than £540m. launches. carry out a non-core disposal programme The placing comprises 250m shares priced Earnings distractions and market over the next two years and cut the dividend at 102.5p, a 1% discount to the 105p close on conditions could continue to crimp until the company generates sustainable January 30 net of the maiden dividend of 1.5p secondary issuance, though there are FREEûCASHmOW declared on Wednesday, and a 4.4% premium several sponsor selldown or M&A Capita will target a leverage ratio of one to the unaudited NAV per ordinary share of lNANCING RELATEDûDEALSûTHATûCOULDûLAUNCHû to two times net debt to Ebitda. PûASûATû$ECEMBERûû4HEûDIVIDENDûDOESû near-term. Capita shares opened at 250p on not apply to the new shares. That said, a little more than half of S&P Wednesday morning, having closed on Books are due to close by 1pm on March 1. 500 companies have now reported their 4UESDAYûATûP ûANDûTHEûSTOCKûFELLûFURTHERû Steve Smith, chairman of The PRS REIT, fourth-quarter numbers, clearing the way DURINGûTHEûDAYûTOûCLOSEûDOWNûûATû said in a statement that the £250m raised in for some companies to come back to P May’s IPO has been fully deployed. As part of investors. The shares continued to fall, dropping to the IPO, the company established a 250m PûBYû4HURSDAYSûCLOSE ûBUTûAPPEAREDû share placing programme, to be completed IPSCO LOOKS TO RIDE OUT SANCTIONS TOûlNDûAûLEVELûATûTHEûPOINT ûTRADINGûEARLYûONû within 12 months of admission. CONTROVERSY Friday afternoon above 159p. The placing is not underwritten. Nplus1 Singer and Stifel are joint bookrunners, Undaunted by the lingering threat of US ENTERTAINMENT ONE FUNDS MGC replicating the syndicate for the IPO. sanctions on his homeland and its powerful ACQUISITION oligarchs, Russian billionaire Dmitry Pumpyanskiy is pushing ahead with a NYSE Books opened on last Monday night’s IPO of his US-based steel pipe and tube- £53.3m primary placing in media group and making company IPSCO TUBULARS. owner of the Peppa Pig brand ENTERTAINMENT AMERICAS IPSCO early Monday launched the sale of ONE with full coverage from a wall-crossing. MûPRIMARYûSHARESûANDûMû A banker involved said interest from secondary shares at US$20-$23 each, raising North America dictated a post-close launch UNITED STATES up to US$535m. rather than an intra-day placing launched Bank of America Merrill Lynch and Morgan lRSTûTHING ûANDûTHATûINTERESTûWASûREmECTEDûINû BIG IPO WEEK RUNS INTO CHOPPY Stanley AREûLEADINGûANûEIGHT lRMû those attending what was said to be a larger MARKET underwriting syndicate that expects to price than usual wall-crossing process. THEûDEALûTHISû4HURSDAY û&EBRUARYû As is typical with primary placings, After a record January for US IPO proceeds, The launch came amid reports the Trump guidance at launch was simply reference to the new issue renaissance faces its sternest Administration was poised to impose new the market close of 312.2p. The offering of test in the coming week. SANCTIONSûONû2USSIANûGOVERNMENTûOFlCIALSû

International Financing Review February 3 2018 91 and leading businessmen considered close argues it is much more focused by weighted indexes in partnership with to President Vladimir Putin. geography (US and Canada) and industry Nasdaq, having launched three new ETFs in But as later revealed, the US government exposure (energy) than these rivals. THEûlRSTûNINEûMONTHSûOFû did not impose fresh sanctions as expected, Victory generated adjusted Ebitda of up to though the US Treasury Department CARDLYTICS TOUTS PURCHASING POWER 53MûLASTûYEARûlNALûNUMBERSûAREûSTILLûTOû released a report that named Pumpyanskiy be announced) versus a target market among a list of 96 Russian billionaires and January saw plenty of IPO pricings, but CAPITALISATIONûOFûUPûTOû53BNûANDûNETû continues to threaten to do so. conspicuously missing from the deal mix debt post-IPO of a little more than US$300m. With Pumpyanskiy’s London-listed TMK has been a US-domiciled tech company. The IPO proceeds will be used to repay expected to maintain control of IPSCO post- That could be about to change with last debt, including US$125m incurred to fund a IPO (TMK will hold a stake of about 60% even -ONDAYSûLAUNCHûOFûTHEûUPûTOû53Mû)0/ûOFû pre-IPO dividend to existing shareholders. after selling shares in the deal), he may still “purchase intelligence” platform CARDLYTICS. Crestview will emerge from the IPO with have a tough task in winning over investors. #ARDLYTICSûISûSEEKINGûUPûTOû53MûBYû AûûECONOMICûINTERESTûBUTûWILLûCONTROLû “The early feedback we are getting is that selling 5.4m primary shares at US$13-$15 the company as the biggest holder of super- investors need to get comfortable with EACHûFORûPRICINGûNEXTû4HURSDAY û&EBRUARYû voting Class B shares. Reverence Capital being a minority shareholder of a company Bank of America Merrill Lynch and JP Morgan Partners will own a 14.5% economic interest with a Russian parent,” one banker close to head the underwriting syndicate. and its employee shareholders committee the deal said. The company, formed by former Capital 24.3%. IPSCO has 11 factories in the US and One Financial executives, has a technology Canada with 1.5m tonnes of annual steel platform that uses consumer data purchased SEATTLE GENETICS SECURES M&A pipe production capacity situated close to FROMûlNANCIALûINSTITUTIONSûTOûHELPû FUNDING key energy customers. It touts its strong marketers sell their products. market position, technology leadership, cost The S-1 outlines some regulatory risks, Cancer drug developer SEATTLE GENETICS fully competitiveness and leverage to the US but the company already purchases data funded its planned US$614m acquisition of fracking revolution. Adjusted Ebitda from more than 2,000 banks, managed to breast cancer drug developer Cascadian margins are estimated at 12.2%-13.9% in the generate US$129m-$130m of revenue last Therapeutics in the equity capital markets. quarter just ended. year and could be breakeven (at the adjusted Barclays and JP Morgan priced an upsized The terms give the company a market %BITDAûLINE ûINûTHEûlNALûQUARTER US$600m offering of 11.54m shares at CAPITALISATIONûOFûABOUTû53BNûVERSUSûû Cardlytics’ revenue growth is at the lighter US$52 each on Wednesday night. Seattle ADJUSTEDû%BITDAûOFû53M Mû end of the tech IPO spectrum at just 14.4%- 'ENETICSûSHARESûWEREûUPûûONû4HURSDAYû REVERSINGûAû53MûADJUSTEDû%BITDAûLOSSû 15.3% last year, though this was depressed by to US$56.15. in 2016). declining “other platform services” revenue as Though the acquisition was backed with a IPSCO increased revenues 125% to the company shifted to focus solely on its core US$400m bridge from the underwriting 53MûINûTHEûNINEûMONTHSûENDEDû Cardlytics Direct business. banks, funds from the fully exercised 3EPTEMBERû ûDUEûTOûINCREASEDûSALESûANDû The company also departs from the greenshoe provide Seattle Genetics with prices for its OCTG (oil country tubular standard software IPO model because it goes enough cash to fund the acquisition after goods) and line pipe, in turn driven by E&Ps into the deal with US$55m of borrowings, the underwriting fees are paid. increasing their drilling capex as oil prices though it plans to emerge from the IPO with Though funding an M&A deal entirely have recovered. net cash. with equity might seem aggressive, Seattle The roadshow also highlights the company’s Top-end pricing would imply a market Genetics’ top shareholder Baker Brothers dramatic swing from adjusted Ebitda losses to capitalisation of less than US$300m, so it is Investments was on board and indicated for gains in recent years, and the balance sheet not going stretch too many valuation models. its 32% pro-rata share of the deal. improvement that resulted from TMK (which Seattle Genetics has agreed to pay US$10 a BOUGHTû)03#/ûINû ûINJECTINGû53MûINTOû VICTORY CAPITAL IPO RIDES BULL MARKET share in cash for Cascadian and its late stage the company last March. breast cancer asset. The drug is currently Comps include US Steel, Italy’s Tenaris Multi-boutique asset manager VICTORY CAPITAL undergoing Phase II trials with data and France’s Vallourec, though IPSCO ISûPOISEDûTOûBECOMEûSûlRSTûDEBUTANTEû expected in 2019. FROMûTHEûlNANCIALûSERVICESûSECTORûWHENûITû Seattle Genetics’ drug Adecetris is US EQUITIES looks to price a Nasdaq IPO seeking up to approved in the US and Europe to treat four BOOKRUNNERS: 1/1/2018 TO DATE US$222.3m this coming Wednesday, types of cancer with expected sales of Managing No of Total Share &EBRUARYû 53M MûTHISûYEAR bank or group issues US$(m) (%) The timing looks less than ideal given The breast cancer drug that is being 1 Morgan Stanley 15 3,231.38 15.4 markets went into sell-off mode last week. acquired potentially adds another US$250m 2 Barclays 12 2,154.00 10.3 JP Morgan, Bank of America Merrill Lynch, to Seattle Genetics’ top line, according to an 3 Goldman Sachs 15 2,025.25 9.7 Morgan Stanley, Barclays, Goldman Sachs and RBC Capital Markets research note. 4 JP Morgan 17 1,992.47 9.5 RBC Capital Markets are leading the sale of The acquisition is expected to close by the 5 BAML 15 1,947.45 9.3 MûPRIMARYûSHARESûATû53nûEACH end of this quarter. Seattle Genetics may 6 RBC 8 1,585.46 7.6 "ACKEDûBYûPRIVATEûEQUITYûlRMû#RESTVIEWû BECOMEûENTITLEDûTOûAû53MûFEEûIFûTHEûDEALû 7 Citigroup 11 1,411.70 6.7 Partners, which bought the business from is terminated. 8 Credit Suisse 7 1,054.23 5.0 +EY#ORPûINû û6ICTORYûHASû53BNûINû 9 Deutsche Bank 5 719.65 3.4 assets under management across a range of BANKS ACCELERATE BIOTECH FUNDING 10 Cowen & Co 10 573.54 2.7 investment strategies, including nine Total 77 20,938.06 independently managed “franchises”. Cantor Fitzgerald is off to a fast start to ECM in Including all domestic and international deals and rights issues Last month Victory unveiled plans to ûTHANKSûINûPARTûTOûITSûWILLINGNESSûTOû Source: Thomson Reuters SDC code: C3r launch new ETFs that will track volatility- PRICEûBIOTECHûBLOCKSû4HEûBANKSû53Mû

92 International Financing Review February 3 2018 EQUITIES UNITED STATES

commitment to Irish cardiovascular drug developer AMARIN was its second biotech block this year. FTS International sizes up to The trade was successful for Cantor. !MERINûOPENEDûATû53ûONû4UESDAYûAFTERû Cantor priced 19.3m ADSs at US$3.65, a US$350m IPO wide 9% discount to Monday’s US$4.01 last sale. US Oilfield services companies capture rising valuations “Cantor has found a way that it can compete with smaller banks while it builds Oilfield services companies are aggressively FTS is reactivating five hydraulic drilling rigs its research and M&A advisory platforms,” a pumping the IPO market for new funding amid over the next nine months to meet the growing life science ECM banker told IFR. “But even a recovering oil prices. demand. When the expansion is complete, at small block can blow your foot off if it goes On Thursday, FTS INTERNATIONAL, a provider of a cost of US$34m, it will have 32 fleets with the wrong way.” hydraulic fracturing services, landed an upsized combined capacity of 1.6m horsepower active #ANTORSûPREVIOUSûBLOCKûWASûAû53Mû US$350m from the sale of 19.5m shares at across five US production basins. offering of gene therapy specialist Arie US$18.00, the top of the US$15-$18 marketing A larger fleet and improved pricing of Pharmaceuticals in late January. range. fleet deployments should lead to a dramatic Cantor is not the only small bank that is FTS opened on the NYSE on Friday at improvement in operating results. FTS is doing biotech blocks. BTIG committed US$19.00 and traded above US$20.00 later in projected to top US$650m in adjusted Ebitda US$50m to CERUS as the latter looks to the session. this year, nearly double the US$370m it expects commercialise its Intercept blood system for “It was not just energy specialists,” a banker to generate in 2017, based on estimates of the reducing blood pathogens during involved in the underwriting said of demand for underwriting banks and preliminary fourth- transfusions. the offering. “We saw brand-name mutual fund quarter results. The bank reoffered 11.6m shares at a complexes come in for size.” At the final IPO price, FTS was valued at a 53ûlXEDûPRICEûAFTERûPURCHASINGû A syndicate of banks led by Credit Suisse and multiple of roughly four times 2018 EV/Ebitda, days’ trading at US$4.10 for a US$1.5m Morgan Stanley responded to strong investor cheap by traditional metrics but also recognising PROlTû#ERUSûOPENEDûATû53ûONû demand ahead of pricing by revising terms from the sector’s extreme cyclicality and reliance on a Wednesday and continues to trade above 15.15m all-primary shares to 19.5m shares. All high oil price. BTIG’s reoffer price. the extra shares were sold by CHESAPEAKE ENERGY, Keane Group, ProPetro and RPC trade at 4.7, William Blair left little to chance in pricing FTS’s second-largest shareholder. 5.1 and 7.1 times 2018 numbers. a US$55m follow-on offering for VIKING Chesapeake, which invested in the business Liberty Oilfield Services, another fracker, THERAPEUTICS. The bank was fully covered by in 2011 as part of a broader consortium, reduced accepted an even steeper discount when it priced CONlDENTIALûMARKETINGûEFFORTSûBEFOREû its stake to 20.7% with the sale of 4.3 shares. its US$248.9m IPO last month. The decision by FTS launching the deal publicly on Thursday Temasek and RRJ Capital did not sell but to follow Liberty was intentional and designed to night. saw their stakes diluted to 39.1% and 11.2%, avoid the need to avoid a “fire sale”, said the banker. The result was an upsized offering of 11m respectively. Next up is CACTUS, a manufacturer of wellhead SHARESûATû53ûEACH ûVERSUSûTHEûMûSHARESû and pressure control systems used in hydraulic that were marketed overnight. The stock RISING TIDE LIFTS VALUATIONS fracturing. WASûBACKûUPûTOû53ûEARLYûONû&RIDAY The rise in WTI oil from about US$40 a barrel in Cactus is seeking up to US$407m from an IPO Viking shares have doubled since it priced the middle of last year to the mid-60s has led US due to price next Wednesday. a US$15m stock offering in early-December oil & gas companies to spend aggressively again The company is being valued at eight times at US$2.50. Proceeds will be used to fund to grow production. EV-to-2018 Ebitda at the mid-point of a US$16– ongoing trials of its treatments for In the week ended January 26, the number $19 range being targeted on 21.4m shares. metabolic and endocrine disorders. of drilling rigs operating in the US grew by 12 to Citigroup and Credit Suisse lead a syndicate of Its lead drug helps accelerate bone growth 947, the highest weekly gain since March 2017 10 banks underwriting the IPO. in patients that are recovering from hip and compared with just 712 rigs a year ago, QUINTANA ENERGY SERVICES, a diversified oilfield fracture surgery. Viking has another drug according to Baker Hughes. Analysts at Simmons services company, is seeking up to US$142.9m on that is undergoing Phase II trials in patients & Company recently forecast that number would its IPO, also scheduled to price on Wednesday. with non-alcoholic steatohepatitis (NASH). average 1,004 this year and 1,128 in 2019. Bank of America Merrill Lynch and Simmons & The US government projects that average Company are leading the sale of 9.5m shares at LIVER DRUG DEVELOPER GETS US$125m daily US oil production will rise this year to a US$12–$15. record 10.3m barrels. Stephen Lacey CYMABAY THERAPEUTICS, which is developing a drug to treat a rare and devastating liver disease, raised US$125m from an upsized broader market negativity and traded Leerink Partners and Evercore ISI were joint overnight stock sale. robustly in Tuesday’s aftermarket session, bookrunners, the latter new to the name but Stoked by reverse inquiry and aided by a gaining as much as 11.6% to US$12.60 before bringing its respected/differentiated wall-crossing, CymaBay sold 11.6m shares at closing at US$12.00 (up 6.3%). research to the table. 53ûEACH ûTHEûMIDPOINTûOFûAû53 The Nasdaq Biotechnology Index is up Both Roth Capital Partners and HC ûMARKETINGûRANGEûANDûAûûDISCOUNTû NEARLYûûSOûFARûTHISûYEARûANDûUPûûINûTHEû Wainwright & Co (co-managers for the to last sale. past 12 months. offering) released bullish reports on The deal, which was covered at launch “What you are getting is some of these CymaBay last week, posting price targets of and well oversubscribed, was increased macro funds putting money in biotech right 53ûANDû53ûRESPECTIVELY from the original US$100m proceeds target. now because it has been such a big mover,” #YMA"AYûALSOûRAISEDû53MûATû53û Impressively, CymaBay brushed aside one ECM banker said. a share in July last year, a deal led by

International Financing Review February 3 2018 93 Leerink, Piper Jaffray and Cantor Fitzgerald Needham & Company and Cowen were joint Also shaping up for a follow-on in the on that occasion. bookrunners on the offering, which was not coming week is fellow Texas bank CymbaBay earlier this month enrolled WALL CROSSEDûANDûWASûTHEûlRSTû%#-ûOUTINGû CADENCE BANCORPORATION ûWHICHûlLEDû patients for a Phase II study of seladelpar, for the company in recent memory. publicly late Thursday for an all- the orphan drug it is developing to treat so- 5LTRAû#LEANûDIDûNOTûSTATEûAûSPECIlCûUSEûOFû SECONDARYûMûSHAREûOFFERINGû#ADENCEû called primary biliary cholangitis. PBC is a proceeds, but could use the money to fund HADûPREVIOUSLYûlLEDûCONlDENTIALLYûONû rare autoimmune liver disease that results acquisitions. January 25. INûIMPAIREDûBILEûmOWûANDûCANûTURNûINTOû Earlier this month, the company guided This will be Cadence’s second follow-on lBROSIS ûCIRRHOSISûANDûLIVERûFAILURE ûANDû investors towards fourth quarter revenues at since it went public last April and follows a whose symptoms include fatigue and the high end of its US$240m–$250m rally in its stock price from US$21 in pruritus (severe itching). forecast. 3EPTEMBERûTOûABOUTû53 As with rival (and late 2016 IPO) Ichor, Goldman Sachs and JP Morgan will lead the SUN, ULTRA TAP ECM AFTER STOCK Ultra Clean is to a large extent riding on the offering. RALLIES coattails of its major customer, Lam Research, which is responsible for more SHELL MIDSTREAM FUNDS PIPE SUN HYDRAULICS, a provider of industrial than 50% of Ultra Clean’s sales. ACQUISITIONS technology to hydraulics and electronic Lam earlier this month said its shipments MARKETS ûTOOKûAûHEFTYûûALL INûDISCOUNTû were running well above already high %QUITYûlNANCINGSûBYûMASTERûLIMITEDû in order to price a US$253m three-day expectations, fuelling hopes that the wafer partnerships have been few and far between marketed stock offering. fabrication equipment (WFE) outlook will in recent years, and predominately via In a rare trip to ECM for the company, REMAINûROBUSTûTHROUGHû private placements. But public stock sales Sun was able to upsize the deal to 4.4m Ultra Clean presented at Needham’s OUTûOFûTHEûONCE PROLIlCûSECTORûMAYûBEûONûTHEû shares from 4m at launch and priced the growth conference last month, while Cowen way back. SHARESûATû53ûLATEûONû4HURSDAYû"UTû recently raised estimates for both Ultra SHELL MIDSTREAM PARTNERS, the ROYAL DUTCH this was only after the thinly-traded stock Clean and Ichor. SHELLû-,0ûAFlLIATE ûLANDEDûROUGHLYû tumbled from US$69.19 at launch post-close 53MûINûAûPRIMARYûBLOCKûSALEû on Monday. GREEN BANCORP BACKERS PARE STAKES OVERNIGHTû4HURSDAY ûITSûlRSTûPUBLICLYû Morgan Stanley was sole bookrunner. marketed sale of stock in nearly two Bankers said the deal was well The private equity/venture capital backers years. oversubscribed, but the shares had run up of Texas-based GREEN BANCORP took advantage Shell Midstream went ex a US$0.333 ûINûTHEûPASTûYEARûANDûSOMEûINVESTORSû of the bank’s rebounding share price to sell distribution Friday. Investors buying shares were concerned about them being ABOUTûûOFûTHEIRûHOLDINGSûVIAûAû53Mû in the offering will not collect this payout. overvalued. block trade on Wednesday. Morgan Stanley marketed its purchase of Early in Friday’s aftermarket session, Sun Barclays reoffered 3m secondary shares at MûUNITSûATû53nûAFTERû shares were trading at around US$56.00, AûlXEDûPRICEûOFû53ûEACH ûAûû adjusting for the fourth-quarter dividend, below the offering price. discount to last sale. versus Thursday’s closing price of US$29.03. The company was “over-equitising” for Major shareholders Harvest Partners, 4HEûlNALûPRICEûWASû53 future acquisitions, one banker said. Friedman Fleischer & Lowe and Pine Brook Shell Midstream will pay the distribution !LONGSIDEûTHEûOFFERING û3UNûRELEASEDûmASHû Road Partners each sold 1m shares, leaving February 14 to shareholders of record NUMBERSûFORû ûINCLUDINGûNON '!!0û them with roughly another 4m shares each February 5. The stock sale closes the ADJUSTEDûNETûINCOMEûOFû53nûAû VERSUSûTHEûMûOUTSTANDING following day. share on revenues of US$341.5m–$343.5m. The offering represented about 15 days’ “It was good to see dedicated MLP funds 4HISûISûUPûMOREûTHANûûVERSUSûû trading and was therefore a rare liquidity show up (for the offering),” one banker told levels, in large part thanks to the late 2016 event for the bank. IFR. “We weren’t sure they would.” acquisition of Enovation Controls. The deal took some digesting. Green’s Still, Shell Midstream broke offer in early The company is on the hunt for more SHARESûFELLûûTOû53ûINû4HURSDAYSû TRADINGû&RIDAY ûFALLINGûTOû53 acquisitions in both the hydraulics and aftermarket, below the reoffer price. The purchase price of the block was electronics segments, part of its plan to get )TûWASû'REENSûlRSTûFOLLOW ONûSINCEûITûWENTû negotiated and not competitively bid, to US$1bn of annual revenues by 2025. public in August 2015 at US$15 per share. though Shell Midstream likely discussed its Sun has an acquisition “pipeline” of more 'REENûSPENTûMOSTûOFûITSûlRSTûTWO AND A HALFû lNANCINGûPLANSûWITHûOTHERûBANKS ûTHEû than 50 companies, the most attractive ones years as a public company in the red, trading banker told IFR. with revenues of US$50m–$150m and BELOWû53ûATûTHEûMARKETSûLOWSûINûEARLYû Shell Midstream last sold stock publicly in operating margins of more than 20%. 4HEûRUN UPûSINCEûANDûRECENTûlLINGûACTIVITYû May 2016 via a block sale led by Barclays at ULTRA CLEAN, a maker of critical systems prompted questions about the intentions of the higher price of US$33.25 per unit. It also and subsystems for the semiconductor Green’s backers on the bank’s quarterly raised US$300m from the concurrent sale of CAPITALûEQUIPMENTûMARKET ûTOOKûAûûlLE TO earnings call last month. units to Royal Dutch Shell. offer discount on a US$100m marketed Chief executive Manuel Mehos declined The MLP said it does not plan to sell stock stock sale. to comment on the backers’ intentions but again this year, including through its at-the- 4AKINGûADVANTAGEûOFûANûûSTOCKûSURGEûINû said they remained supportive and liked the market programme. It sold 5.4m units the past year and a golden run for the bank’s strategy. THROUGHûOPENûMARKETûSALESûINûTHEûlRSTûNINEû chipmaking sector, Ultra Clean took out a During the quarter, the bank delivered MONTHSûOFû DAYûOFûMARKETINGûBEFOREûSELLINGûMû 14% annualised loan growth and increased Shell Midstream is using combined primary shares or 13% of the outstanding at non-interest-bearing deposits by US$119m. proceeds to repay revolver borrowings US$21.00, down from a pre-launch close of But it also took US$5.5m of credit costs following the acquisition late last year of US$23.04. related to its “last two E&P relationships”. MIDSTREAMûASSETSûFROMû3HELLûFORû53Mû

94 International Financing Review February 3 2018 EQUITIES AMERICAS

ECM DEALS: WEEK ENDING 2/2/2018 Stock Country Date Amount Price Deal type Bookrunner(s) Central Puerto Argentina 01/02/2018 US$330.0m US$16.50 IPO (secondary) BAML, JP Morgan, Morgan Stanley Hudson Bermuda 31/01/2018 US$748.6m US$19.00 IPO (secondary) Credit Suisse, Morgan Stanley, UBS, BAML, Goldman Sachs GDS Holdings China 26/01/2018 US$286m US$26 Follow-on (primary) RBC, JP Morgan, Citigroup Red Star Macalline China 26/01/2018 HK$1.27bn HK$10.75 Follow-on (secondary) CICC Shangri-La Asia China 31/01/2018 HK$1.05bn HK$18.50 Follow-on (secondary) Morgan Stanley Times Property Holdings China 01/02/2018 HK$833m HK$9.25 Follow-on (secondary) UBS Alstria Ofﬁce REIT Germany 29/01/2018 €193m €11.4 Accelerated follow-on (primary) Morgan Stanley, UBS Jost Germany 30/01/2018 €142.33m €11.4 Accelerated follow-on (secondary) Commerzbank, Deutsche Bank, JP Morgan ProCredit Germany 01/02/2018 €61.04m €11.4 Accelerated follow-on (primary) Berenberg Galaxy Surfactants India 31/01/2018 Rs9.37bn Rs1,480 IPO (secondary) Edelweiss, ICICI Securities, JM Financial JM Financial India 30/01/2018 Rs6.5bn Rs162 Follow-on (primary) Credit Suisse, IDFC Quess India 30/01/2018 Rs5.7bn Rs950 Follow-on (secondary) Deutsche Bank Total Produce Ireland 01/02/2018 €144.9m €2.3 Accelerated follow-on (primary) Davy, Goldman Sachs Sol-Gel Technologies Israel 31/01/2018 US$75m US$12 IPO (primary) Jefferies, BMO, JMP Securities, Raymond James Corporacion America Airports Luxembourg/ 31/01/2018 US$486.2m US$17.00 IPO (primary, secondary) Oppenheimer, BAML, Citigroup, Goldman Sachs Argentina S P Setia Malaysia 30/01/2018 M$1.01bn M$3.11 Follow-on (primary) BNP Paribas, Maybank Salmones Camanchaca Norway 01/02/2018 NKr831.6m NKr42 IPO (primary and secondary) DNB Markets, Larrain Vial, Nordea Bank, Pareto Securities Metrovacesa Spain 02/02/2018 €645.15m €16.5 IPO (secondary) BBVA, Deutsche Bank, Morgan Stanley, Santander, Goldman Sachs, Societe Generale Infant Bacterial Therapeutics Sweden 30/01/2018 SKr440m SKr95 Rights issue SEB, Zonda SSAB Sweden 31/01/2018 SKr1.48bn SKr40 Accelerated follow-on (secondary) Deutsche Bank, SEB Entertainment One UK 29/01/2018 £53.3m 305p Accelerated follow-on (primary) JP Morgan, Investec, RBC Amerin US 29/01/2018 US$70.0m US$3.65 Accelerated follow-on (primary) Cantor Fitzgerald Cerus US 30/01/2018 US$50.0m US$4.23 Accelerated follow-on (primary) BTIG CymaBay Therapeutics US 29/01/2018 US$125.3m US$10.80 Accelerated follow-on (primary) Leerink Partners, Evercore FTS International US 01/02/2018 US$351.0m US$18.00 IPO (primary, secondary) Credit Suisse, Morgan Stanley Green Bancorp US 31/01/2018 US$69.8m US$23.25 Accelerated follow-on (secondary) Barclays Seattle Genetics US 31/01/2018 US$600.0m US$52.00 Follow-on (primary) Barclays, JP Morgan Shell Midstream Partners US 01/02/2018 US$680.0m US$27.20 Accelerated follow-on (primary) Morgan Stanley Sol-Gel Technologies US 31/01/2018 US$75.0m US$12.00 IPO (primary) Jefferies, BMO Capital Markets Sun Hydraulics US 01/02/2018 US$253.0m US$57.50 Follow-on (primary) Morgan Stanley Ultra Clean Holdings US 30/01/2018 US$100.0m US$21.00 Follow-on (primary) Needham, Cowen Vici Properties US 31/01/2018 US$1.21bn US$20.00 IPO (primary) Morgan Stanley, Goldman Sachs, BAML, Barclays, Citigroup, Deutsche Bank Viking Therapeutics US 01/02/2018 US$55.0m US$5.00 Accelerated follow-on (primary) Wm Blair

4HEûPURCHASEûPRICEûISûAû TIMESûMULTIPLEûOFû billionaire and majority shareholder EXPECTEDûûADJUSTEDû%BITDA ARGENTINA %DUARDOû%URNEKIANûANOTHERûM MLPs, tax-advantaged investment vehicles The air was quickly taken out of a deal OBLIGATEDûTOûPAYûOUTûTHEûBULKûOFûCASHmOWSûTOû ARGENTINE AIRPORT OPERATOR MAKES THATûHADûBEENûSEENûASûAûBENElCIARYûOFû investors, have become capital market CONCESSION ON IPO Argentina’s turnaround story and the pariahs. The benchmark Alerian MLP Index country’s possible promotion on the MSCI ISûDOWNûûSINCEûTHEûBEGINNINGûOFûû An initial public offering from Argentina’s index to emerging market status later this ANDûDESPITEûAûRECENTûREBOUNDûREMAINSûû CORPORACION AMERICA AIRPORTS took the shine year. below peak levels in 2014. off the country’s buoyant ECM market last A sell-off early last week reversed gains on Antero Midstream Partners was the last week after it dramatically cut pricing to get the country’s Merval index – which has MLP to sell stock publicly, raising investors on board in a volatile week for RALLIEDûSOMEûûSINCEûMIDû$ECEMBERûnû US$314.5m via an overnight block sale in equities. creating substantial headwinds for the IPO. September. 0RICEDûATû53ûAûSHARE ûTHEûDEALûFROMûTHEû “(There was) some sensitivity from non- A big reason for investor dissatisfaction is airport operator came at the bottom end of dedicated LatAm accounts, which (was) so-called incentive distribution rights that THEûlNALû53 53ûRANGE ûAFTERûLEADSûHADû REmECTEDûINûORDERûSIZES vûSAIDûAûBANKERû entitle the parent/sponsor to a growing already revised from the US$19-$23 original “Investors use this backdrop to push share of distributions paid, making it more talk on investor push back. evaluations.” expensive for the MLP subsidiary to fund Corporacion America shares sank on Nor did it help that accounts had little growth with equity. debut in closing at US$16.40, 3.5% below time to get comfortable with what is the Shell Midstream has previously offer. world’s largest airport operator having only committed to increase its distribution by The company sold 11.9m shares and an just absorbed PagSeguro’s stellar US$2.3bn 20% this year. INVESTMENTûVEHICLEûAFlLIATEDûWITHû!RGENTINEû IPO the week before.

International Financing Review February 3 2018 95 “Investors had limited time to work on (a listed shares ahead of pricing - each ADS PAIR RAISE EQUITY-LINKED FUNDS deal) with a lot of moving parts,” said one represents 10 common shares. portfolio manager. Central Puerto NYSE-listed ADSs traded ZHEJIANG ENERGY GROUPûRAISEDû2MBBNû Corporacion America operates 51 airports ONû&RIDAYûAFTERNOONûATû53 ûUPûû (US$1.25bn) from a private placement of in total in Argentina, Brazil, Ecuador, from offer. Its Merval-listed shares plunged three-year exchangeable bonds into ZHEJIANG Armenia, Peru, Italy and Uruguay. ûTOû0Sû53 ZHENENG ELECTRIC POWER. 4HEûCOMPANYûHOPESûTOûBENElTûFROMûTHEû Despite the disappointment, Central The placement was launched at a base entrance of low cost airlines in Argentina, Puerto still achieved a valuation of nearly size of Rmb5bn, with an option for a size which will start to use some of the smaller seven times forward EV/Ebitda, a premium increase of Rmb2.9bn, which was fully airports to operate and compete with bus TOûTHEûlVEûTIMESûOFûRIVALû!RGENTINEûPOWERû exercised. The coupon was set at 1%. The operators. producer PAMPA ENERGIA. initial conversion price was set at It brought in total consolidated revenues Central Puerto generated adjusted Ebitda Rmb5.90, a premium of 0.2% to the pre- of US$1.2bn for the nine month period of US$160m on revenue of US$330m in the deal spot. ENDINGû3EPTEMBERûû ûACCORDINGûTOûTHEû lRSTûNINEûMONTHSûOFû Zhejiang Energy holds 9.51bn Zhejiang prospectus. Argentina’s power companies are Zheneng shares, or 69.94% of the company’s Adjusted Ebitda for the same period was BENElTINGûFROMûHIGHERûELECTRICITYû total issued capital. 53M ûWHICHûTHEûCOMPANYûAIMSûTOû prices after the government removed CICC and Citic Securities were joint double by 2023, according the investor. tariffs last year on the rates they could bookrunners. h4HEREûWILLûBEûMOREûmIGHTûREPLACEMENTSû charge. WUXI RURAL COMMERCIAL BANK raised Rmb3bn of buses and more fees, taxes and airport Central Puerto’s shares have more than from an offering of six-year convertible duties,” he said. doubled in the past six months. bonds, with the public tranche covered 532 !Tû53 ûTHEûQUALITYûOFûORDERSûIMPROVEDû The US stock listing allowed TIMESû%XISTINGûSHAREHOLDERSûTOOKûûOFû as investors grew more comfortable buying shareholders to cash out a portion of their the CBs, while the rest were sold to retail into the deal, especially at a price that came investment. It also broadens the investors. at a nice discount to Latin American and company’s access to capital as it looks to The coupon for the CB is 0.3% in year one, international peers. build four new power plants over the next STEPPINGûUPûTOûûINûYEARûSIXû4HEûINITIALû “You are buying a high quality asset and a two years. CONVERSIONûPRICEûISû2MB ûmATûTOûTHEûPRE good operator at a lower valuation due to a Central Puerto currently operates seven deal spot. weak week (in the equity markets),” said the FACILITIESûWITHû ûMEGAWATTSûOFûCAPACITYû The unsecured CB received a AA+ rating investor. and holds interests in another three plants. from United Ratings. In the end, Corporacion America came at The company expects to begin The Jiangsu-based lender plans to use the AROUNDû TIMESû%6%BITDAûVERSUSû commercial operations on two wind proceeds to strengthen Core Tier 1 capital. times for Mexican airport operators and PROJECTSûINû!PRILûTHATûWILLûADDûû China Securities was the sponsor. roughly 13.5-times for Spanish airport MEGAWATTSû)TûHASûANOTHERûûMEGAWATTSûOFû operator Aena, said an investor. projects that are scheduled to come online DEVELOPERS ISSUE SHORT-DATED CBS “Aena is one of the most loved stocks by in 2019 and 2020. hedge funds and has tripled (in price) in two FUTURE LAND DEVELOPMENT HOLDINGS and years,” he added. POWERLONG REAL ESTATE have raised HK$4.34bn Oppenheimer & Co, Bank of America Merrill (US$555m) through the issue of short-dated Lynch, Citigroup, Goldman Sachs led the convertible bonds. The fundraisings follow offering. Supposedly a long standing STRUCTURED EQUITY THEûûRISEûINûTHEû(ANGû3ENGûMAINLANDû relationship with the company on the properties index in January. private banking side is behind Future Land came to market on Monday Oppenheimer’s top billing. CHINA with a base deal of HK$1.96bn for its 363-day bonds and an upsize option of HK$390m CENTRAL PUERTO REVALUED ON NYSE IPO HAN’S LASER READIES CB ISSUE that was duly exercised. On the same day, Powerlong offered bonds of the same tenor Argentina’s economic reforms under HAN’S LASER TECHNOLOGY INDUSTRY GROUP will to raise HK$1.6bn, which was later increased President Mauricio Macri have been hold an internet roadshow on Monday and by HK$390m. effective, but international investors are start bookbuilding the next day for a The two companies are part of a rapidly reluctant to pay up for valuations being Rmb2.3bn (US$365m) six-year convertible developing trend of issuing very short-dated targeted by companies after a rally in LatAm bond. bonds – which have tenors too short to be equities. The coupon for the proposed CB is 0.20% eligible for Thomson Reuters convertible Power generator CENTRAL PUERTO proved a in year one, stepping up to 2.00% in year six. league tables – as bonds with maturities case in point. It had to reset expectations The initial conversion price has been set at under one year do not need to be registered downward after seeking full value for its 2MB ûORûATûAûPREMIUMûOFûûTOûTHEû with China’s National Development and NYSE-listed IPO. &EBRUARYûûCLOSEûOFû2MBû4HEû Reform Commission. Considering the Bank of America Merrill Lynch, JP Morgan unsecured CB received a AA+ rating from run-up in share prices, the speed to market and Morgan Stanley priced 20m ADSs at Dagong Global. is important. 53 ûAûDOLLARûBELOWûTHEû53 The Chinese manufacturer of laser and “Some property developers still need time $21.50 marketing range and downsize automatic auxiliary equipment plans to use to get regulatory approval for new quotas to from 35.5m ADS shareholders had hoped the proceeds for production projects. issue bonds. So, the short-dated CB allows to sell. Industrial Securities is the sponsor and joint them to raise funds quickly and to have a The US$16.50 offer price marked a 30% to bookrunner with Goldman Sachs Gao Hua lRST MOVERûADVANTAGE vûSAIDûAûSENIORûEQUITY the US-dollar equivalent price of its Merval- Securities. linked banker.

96 International Financing Review February 3 2018 STRUCTURED EQUITY

“The stock rally has boosted investor level of 2016 when the company originally lVE YEARû#"ûEXCHANGEABLEûINTOûSHARESûOFûTHEû enthusiasm for CBs from the property sector, issued the 10.5% notes to help fund its life insurer. because it offers a chance for investors to get acquisition of SanDisk. JP Morgan, acting as sole books, placed the stock-like returns at lower risks.” CB with investors after one day of marketing Both bond issues ended up multiple times JP MORGAN LOCKS IN GAINS ON VOYA on Tuesday at a 0.25% coupon and 35% COVERED ûWITHûMOREûTHANûûACCOUNTSûINûTHEû FINANCIAL conversion premium, the mid-point of talk. Future Land book. According to the banker, The CB can be settled only in cash, Chinese brokerages and fund companies are JP MORGAN CHASE hedged its exposure to VOYA allowing the bank to retain upside exposure very active in these short-dated property CBs. FINANCIAL through the sale of a US$350m, TOûSHAREûPRICESûOFû53 Powerlong’s zero-coupon CB issue was PRICEDûATûAûYIELDûTOûMATURITYûOFû ûTHEûTOPû OFûAûMARKETEDûRANGEûOFûnû4HEû conversion premium was set at 23.50%, the CNPC sweetens terms for lower half of the 22.50%–30.00% range over the reference price of HK$4.41. The initial conversion price is HK$5.4463. jumbo EB Bank of America Merrill Lynch, Credit Suisse, HSBC and UBS were the joint bookrunners. CHINA Oil giant launches record Rmb20bn issue offering six months after debut sale On Future Land, Citigroup and Deutsche Bank were joint bookrunners. The coupon CHINA NATIONAL PETROLEUM CORP has launched Rmb170bn from Rmb56bn, according to Guosen ONûTHEû#"ûWASûlXEDûATûûPAYABLEûSEMI a record Rmb20bn (US$3.18bn) sale of Securities. annually, off a 1.50%–2.50% range, and the exchangeable bonds just six months after The broker’s analysts estimate volume will conversion premium came at the top of the making a Rmb10bn debut. grow further this year, when there will be new nûRANGEûOVERûTHEûREFERENCEûPRICEûOFû For the first public EB issue of the year, the oil equity-linked supply of at least Rmb180bn. (+ giant set more investor-friendly terms than for Apart from the huge supply, rising bond rates its first outing last year, in a sign that Chinese are also a major reason behind CNPC’s decision issuers have to work harder to woo investors after to raise the coupon of the new EB, according to UNITED STATES a flood of equity-linked offerings and an increase the bankers. in onshore bond yields. Since CNPC’s EB debut last July, China’s WESTERN DIGITAL REFIS ON RATINGS The five-year bonds exchangeable for the five-year Top Tier Triple A bonds benchmark has UPGRADE A-shares of PETROCHINA will be the largest risen about 90bp as of January 31, according to EB in the domestic market, surpassing China Thomson Reuters’ data. Rising volatility combined with a back-up in Communications Construction Group’s Rmb16bn Treasury rates has tempted large, established private issue last November with the A-shares DROP IN PRICING companies to dip into the convertible bond of China Communications Construction as the CNPC’s outstanding EB has fallen about 6.6% to market to supplement funding needs. underlying. be quoted at 106.51 on January 31 from a peak of WESTERN DIGITAL secured US$1bn through Despite the overwhelming investor response 114.02 on January 25. Bankers, however, believe the sale of a six-year CB on Tuesday as part to its debut EB, CNPC sweetened terms for the the recent fall will not have much of an impact of a broader liability management exercise, new issue as a reflection of changed market on investor demand. including US$2.3bn of new eight-year conditions, according to bankers on the deal. “The investor appetite is still positive for the straight bonds and an extension of bank “The equity-linked market expanded new issue because many investors focus more facilities. Combined proceeds fund the significantly last year due to a surge in supply of on the long-term value of the new EBs,” said tender for US$3.35bn principal of 10.5% both convertible bonds and exchangeable bonds. another banker on the deal. notes maturing in 2024. So the terms have to be more attractive to attract Everbright Securities analysts estimate The CB, by comparison, priced at a investors,” said one banker on the issue. the issue will attract orders from 200 to 300 coupon of just 1.5% with dilution offset to a CNPC set the coupon at 1.4%, the bottom of investors, with an allocation rate of 0.3% to 40% premium. While at the wide end of 1%– the indicative range of 1.4%–2.0%. The initial 0.5%. 1.5% and 40%–45% talk, it represented far conversion price has been set at Rmb9.38, a Bookbuilding runs from February 1 to more attractive funding than what was premium of 0.9% to PetroChina’s pre-deal spot. February 6. being taken out. The initial conversion premium is the lowest of Both the issuer and the EBs have AAA ratings -OODYSûRESPONDEDûTOûTHEûRElNANCINGûBYû any public EB issue since at least the start of from China Chengxin. upgrading the storage device maker to 2017. The securities can be exchanged for investment-grade and rating the CB Baa3 For comparison, CNPC priced its debut EB PetroChina A-shares 12 months after issue. ahead of pricing. last July at a coupon of 1%. The initial conversion CNPC holds 155bn PetroChina A-shares, Bank of America Merrill Lynch and JP Morgan price was set at Rmb9, a premium of 15.5% to representing about 84.6% of the total issued marketed the CB for one day on Tuesday. PetroChina’s pre-deal spot. capital. Western Digital plans to supplement the China Securities, Goldman Sachs Gao Hua RElNANCINGûBYûDRAWINGûDOWNû53BNûOFû SURGE IN SUPPLY Securities and CICC are joint leads on the offering. its US$6.3bn cash holdings at December 29 China’s equity-linked market experienced The three banks are also joint bookrunners with while reducing overall debt by US$1bn. The explosive growth last year, with supply China Galaxy Securities, China Merchants Securities, company also purchased US$153.5m worth surging after a series of supportive rule Citic Securities and BOC International (China). of stock concurrent with the CB placement. changes. Proceeds will be used to replenish working Western Digital shares fell 0.4% to The combined outstanding principal of capital. 53ûWHILEûTHEûDEALûWASûONûTHEûROAD û the equity-linked market tripled last year to Ken Wang, Fiona Lau but they are still well above the mid-40s

International Financing Review February 3 2018 97 JP Morgan acquired the shares underlying CONVERSIONûPRICEûOFû#û The company will use proceeds to repay the the exchangeable from former Voya (US$23.90), a 32.5% premium to the US$300m drawn portion of a revolving credit Financial parent ING. reference price. facility.Societe Generale was sole bookrunner. As part of the spin-off its former US insurance arm in 2014, ING retained 26.05m warrants EXERCISABLEûATû53û4HEûWARRANTS ûWHICHû GLOBAL CONVERTIBLE OFFERINGS GLOBAL CONVERTIBLE OFFERINGS – EMEA are net-share settle, expire in 2024. BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE *0û-ORGANû#HASEûOFmOADEDûEXPOSUREûINû Managing No of Total Share Managing No of Total Share Swiss travel retailer Dufry last month bank or group issues US$(m) (%) bank or group issues US$(m) (%) through a similarly structured, US$350m 1 Goldman Sachs 8 3,218.56 19.1 1 SG 2 293.58 15.6 exchangeable. 2 Morgan Stanley 7 1,293.58 7.7 =1 BNP Paribas 2 293.58 15.6 3 BAML 6 1,191.53 7.1 3 JP Morgan 2 233.33 12.4 4 JP Morgan 8 1,102.07 6.5 4 HSBC 1 150.00 7.9 CANADA 5 CSC Financial 2 933.85 5.5 5 Goldman Sachs 1 143.58 7.6 6 RBC 4 830.37 4.9 =5 Morgan Stanley 1 143.58 7.6 ENDEAVOUR CB TO PAY DOWN DEBT 7 China Merchants Secs 2 785.42 4.7 =5 Citigroup 1 143.58 7.6 =7 Citic 2 785.42 4.7 8 Bank J Vontobel 1 101.71 5.4 Canada-listed, Africa-focused and 9 BNP Paribas 3 626.91 3.7 =8 UBS 1 101.71 5.4 London-headquartered gold miner 10 Barclays 1 500.00 3.0 =8 Credit Suisse 1 101.71 5.4 ENDEAVOUR MINING last week raised Total 40 16,848.72 Total 5 1,887.32 US$300m in convertible bonds Including exchangeables. Including exchangeables. maturing in February 2023. The bonds Source: Thomson Reuters SDC code: C9 Source: Thomson Reuters SDC code: C09d came with a coupon of 3% and a

ALL INTERNATIONAL ASIAN CONVERTIBLES ALL INTERNATIONAL ASIAN CONVERTIBLES ALL INTERNATIONAL US CONVERTIBLES (EXCLUDING JAPAN) BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE BOOKRUNNERS: 1/1/2018 TO DATE Managing No of Total Share Managing No of Total Share Managing No of Total Share bank or group issues US$(m) (%) bank or group issues US$(m) (%) bank or group issues US$(m) (%) 1 Goldman Sachs 2 2,147.90 60.4 1 BAML 5 1,127.92 17.7 1 Goldman Sachs 1 1,994.15 69.5 2 Daiwa Securities 2 380.31 10.7 2 Morgan Stanley 5 950.00 14.9 2 Morgan Stanley 1 200.00 7.0 3 Morgan Stanley 1 200.00 5.6 3 RBC 3 750.00 11.8 3 JP Morgan 1 160.40 5.6 4 JP Morgan 1 160.40 4.5 4 JP Morgan 5 708.33 11.1 =3 CIMB Group Holdings Bhd 1 160.40 5.6 =4 CIMB Group Holdings Bhd 1 160.40 4.5 5 Barclays 1 500.00 7.8 5 Yuanta Financial Hldg 1 100.00 3.5 6 Nomura 1 153.75 4.3 6 Goldman Sachs 4 475.00 7.5 6 HSBC 1 63.61 2.2 7 Yuanta Financial Hldg 1 100.00 2.8 7 Wells Fargo 4 402.92 6.3 =6 UBS 1 63.61 2.2 8 HSBC 1 63.61 1.8 8 China Merchants Secs 1 333.33 5.2 =6 Credit Suisse 1 63.61 2.2 =8 UBS 1 63.61 1.8 =8 BNP Paribas 1 333.33 5.2 =6 BAML 1 63.61 2.2 =8 Credit Suisse 1 63.61 1.8 =8 Citic 1 333.33 5.2 Total 5 2,869.40 Total 8 3,557.21 Total 12 6,372.50

Including exchangeables. Including exchangeables. Source: Thomson Reuters SDC code: M11 Source: Thomson Reuters SDC code: M10 Source: Thomson Reuters SDC code: C9a

EQUITY-LINKED DEALS WEEK ENDING: 2/2/2018 Issuer Country Date Amount Greenshoe Tenor Coupon (%) Premium (%) Bookrunner(s) Powerlong Real Estate China 29/01/2018 HK$1.99bn HK$390m 2019 0 23.50 BAML, Credit Suisse, HSBC, UBS Future Land Development China 29/01/2018 HK$2.35bn HK$390m 2019 2.25 28 Citigroup, Deutsche China Evergrande Group China 30/01/2018 HK$18bn - 2023 4.25 40 BAML, Credit Suisse, Citigroup, Deutsche, Haitong, UBS Voya Financial US 30/01/2018 US$350.0m NA 5y 0.3 32.5 JP Morgan Western Digital US 30/01/2018 US$1.0bn US$100.0m 6y 1.5 40.0 BAML, JP Morgan

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98 International Financing Review February 3 2018 INTERNATIONAL FINANCING REVIEW CONTACTS

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International Financing Review February 3 2018 99 INTERNATIONAL FINANCING REVIEW INDEX

AB InBev 35 Deutsche Glasfaser 75 Kellogg Co 77 Sanofi 74 Ablynx 75 Deutsche Hypothekenbank 41 Keurig Green Mountain 76 Santander 24 Access CIG 78 Dominican Republic 70 KfW 10 Schaltbau Holding 89 Acea 35 Driver Espana Five 45 Kismet 90 Scientific Games 44 Acleda Bank 72 Driver Turkey Master S.A. 46 KME 42, 43 Scientific Games International 79 AC Milan 75 Dr Pepper Snapple Group 76 Kommunalbanken 29, 33 Scotiabank 16 Action 82 Dubai Islamic Bank 68 La Banque Postale 41 Seadrill 24 African Development Bank 33 Dufry 85 La Jacinta Solar 70 Sears 46 AFW 19 EaglePicher Technologies 77 Lazard 22 Seattle Genetics 92 Air Berlin 67 EG Group 83 LeasePlan Corp 45 Selecta 43 Albea 43 EIG Management Company 80 Liberty Media 80 SFIL 31 Algeco Scotsman 42 Elis 43 Lifetime Brands 79 Shaanxi International Trust 87 Alitalia 67 Emirates NBD 69 Lightstone Generation 81 Shandong Linglong Tyre 72 Al Jaber Group 84 Endeavour Mining 98 Local Government Funding Vehicle 33 Shangrao Investment Holding Group 64 Alliander 36 Enerjisa Enerji 9, 90 Lodha Developers 88 Shangri-La Asia 87 Al Rayan Bank 28 Entertainment One 91 Low & Bonar 76 Sharjah 8, 68 Alstria 88 Epicor Software Corp 79 Lowell 43 Sharjah Finance Department 68 Altran 82 Etihad Airways 67 Lucid Energy Group II 80 Shell Midstream Partners 94 AMAG Leasing 37 Eurex 21 Lumileds 80 Shutterfly 78 Amarin 93 European Financial Stability Facility 29 Macy’s 46 SIAS 35 American Gaming Systems 78 European Investment Bank 32 Mallinckrodt 79 Silverstone 44 American Homes 4 Rent 34 European Union 31 Marketo 81 S Immo 37 Arclin 81 Evercore 22 MCUBS MidCity Investment 73 SK Lubricants 88 Aroundtown 37 Export Development Canada 30, 33 Metrix Portfolio Distribution Plc 46 Social Finance 47 Asian Development Bank 33 Far East Horizon 72 Metrovacesa 9 SoFi 48 Atkore International 81 FedEx 4, 34 MGM Growth Properties 85 Sol-Gel Technologies 89 AusNet Services Holdings 38 FeeCo 79 Mizuho Financial Group 21 Solus 6 Australian Office of Financial Management 49 Flamingo 83 MLP Saglik Hizmetleri 9 Sparkasse Pforzheim Calw 41 Banco Popular 24 Flemingo Duty Free 88 Mongolyn Alt 66 SP Setia 88 Banco Sabadell 25 Fondo de Amortizacion del Deficit Electrico 31 Morgan Stanley 23 SSAB 90 Banco Santander 38 Ford Motor Credit Company 36 Moscow Domodedovo Airport 59 Standard Chartered 24 Bankinter 40, 41 Freddie Mac 47 MUFG 21 Sulfindo Adiusaha 65 Bank of America Merrill Lynch 16, 23 FREMF SPC Series K-I01 47 Municipality Finance 32 Sumitomo Mitsui Financial Group 21 Bank of Baroda 87 FTS International 93 MyEyeDr 80 Summit 43 Bank of Montreal Capital Markets 16 Fujian Zhanglong Group 64 National Australia Bank 49 Suncorp-Metway 40 Barclays 23 Fujifilm Holdings 77 National Insurance 87 Sun Hydraulics 94 Bellsola 82 Future Land Development Holdings 5, 96 National Rural Utilities Cooperative 34 Swissport 82 Berendsen 43 GDS Holdings 86 National Veterinary Associates 81 Syniverse Technologies 78 Berlys 82 General Insurance Corp of India 87 Nationwide Building Society 44 Taizhou Huaxin Pharmaceutical 64 Bevco Lux 35 Global Lending Services 48 Nederlandse Gemeenten 33 TD Securities 16 Binhai New Area 60 GLS Auto Receivables Trust (GCAR) 2018-1 48 Nederlandse Waterschapsbank 29 Tesla 47, 48 Blackstone 6, 45 Goldman Sachs 23, 25 Newcastle Permanent Building Society 40 Teva 75 Brevan Howard 19 Gopher Resource 78 Noble Group 6 TFI TAB Food Investments 90 Bumper 10 46 Gran Tierra Energy 70 Nomura Holdings 21 The New India Assurance 87 Cactus 93 Greece 8 Nordea 39 The PRS REIT 91 Cadence Bancorporation 94 Green Bancorp 94 Northern Territory Treasury Corp 33 Thomson Reuters 7 Caixabank 25 Greenland Holding Group 61, 65 Nostrum Oil 66 Times Property Holdings 87 Camposol 70 GSO 6 On Assignment 78 Tolkien Funding Sukuk No.1 Plc 28 Capita 76, 91 Guanghui Energy 87 Oriental Insurance 87 Total Produce 89 Cardlytics 92 Guorui Properties 64 Pampa Energia 96 Tractel 82 Cassa Depositi e Prestiti 35 Han’s Laser Technology Industry Group 96 Paratus AMC 45 Transurban 86 Central Puerto 96 HC International 64 Pemex 59 Trico Products Corp 80 Cerus 93 Helaba 41, 40 Perfect China 86 Trimco International Holdings 84 Chesapeake Energy 93 HICL Infrastructure Co 76 Petrobras 77 Ullink 81 Chile 70 Hon Hai Precision Industry 88 PetroChina 97 Ultra Clean 94 China Cinda Asset Management 60 Hovnanian 6 Philip Morris International 77 Unibail-Rodamco 74 China Development Bank 24 Huami 86 Phoenix Services International 80 United Auto 47, 49 China Eastern Airlines 65 Hubbell 34, 76 Pietra Nera Uno 45 United Auto Credit Securitization 49 China Evergrande Group 5 Hubei Science & Technology Investment 61 Ping An Healthcare and Technology 86 United India Insurance 87 China Logistics Property Holdings 65 Hudson 85 Ping An Insurance (Group) 86 Vantage Data Centers 47 China National Petroleum Corp 97 Hulic 73 Poland 66 Venetian Macau 74 China SCE Property Holdings 73 Iberdrola 75 Poly Real Estate Group 64 Vici Properties 85 China Shanshui Cement 65 I-Med 83 Portugal 32 Victory Capital 92 Chinese whispers 20 Indiabulls Housing Finance 65, 73 Power Finance Corporation 73 Victory Capital Management 78 CIBC World Markets 16 Infant Bacterial Therapeutics 90 Powerlong Real Estate Holdings 5, 96 Viking Therapeutics 93 Cinda Asset Management 64 Informa 75 ProCredit Holding 89 Viridian 42 Cision 81 Inner Mongolia High-Grade Highway 60 ProMach 79 VML US Finance 74 Citigroup 23 Instone Real Estate 89 Prosegur Compania de Seguridad 36 Volkswagen Dogus Finansman 46 Clifden 45 International Finance Corp 33 Prospect Medical 79 Volkswagen Financial Services 37, 45 Close quarters 20 Invictus 78 Pure Gym 43 Voya Financial 97 Commercial Bank of Qatar 68 IPSCO Tubulars 91 Queensland Treasury Corporation 32 Wellcome Trust 37 Commonwealth Bank of Australia 22 Israel Electric 67 Quess 87 Western Digital 41, 97 Compania Pesquera Camanchaca 90 Itiviti Group 81 Quintana Energy Services 93 Westpac 39 Consolidated Container Co 81 IVC 83 Rabobank 40 World Omni 47, 49 Constellation Brands 34 Japan Oil Gas & Metals National 73 RBC Capital Markets 16 World Omni Financial (WOART 2018-A) 49 Corporacion America Airports 95 JBS USA 69 Red Star Macalline 87 Wuxi Rural Commercial Bank 96 Creative Artists Agency 80 JC Penney 46 Rhodium Resources 66 Xerox Corp 77 Credit Bank of Moscow 59 Jiangsu Financial Leasing 87 RMAC 45 Yango Group 64 Credito Real 70 JM Financial 87 Robertshaw Holdings 78 Yes Bank 64 Credit Suisse 17, 23 Jost 89 Romania 67 Zhejiang Energy Group 96 CSN 69 JP Morgan 17, 23 Royal Dutch Shell 94 Zhejiang Zheneng Electric Power 96 CymaBay Therapeutics 93 JP Morgan Chase 97 Rural Electrification Corporation 73 Zhongtai Financial International 64 Dana Gas 69 Just Group 39 RusHydro 59 Zotec Partners 79 Dermapharm 88 Just the medicine 20 Safilo 75 Deutsche Bank 15, 23, 24 KazMunaiGas 66 Salmones Camanchaca 90

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