Gushing Over Water Deals

marketwatch DEALS Gushing over water deals Some in the capital markets are already It may have been overshadowed by the Ryanair’s offer, initially pitched at e2.80 a I calling it a drought bond and there are I subsequent controversial takeover share, was made by the budget carrier’s advisers suggestions it may be the first of a trickle, if not approach by its Irish arch-rival Ryanair, but Aer Davy Corporate Finance and Morgan Stanley. a flood, of similar deals in the water sector. Lingus’s e1.1bn flotation – one of the first Southern Water Services has raised outright British or Irish privatisations in years – In tapping the European high-yield market, £200m through a 45-year bond priced at close was judged successful by the Dublin government. I Japanese technology giant Softbank is to equivalent UK gilts. In a wobbling initial public offering (IPO) reckoned to be only the second Far Eastern Southern Water supplies water and deals with market, the formerly state-owned Irish national company to test the euro waters. wastewater across most of the counties in the airline raised e501m through the issue of new Earlier this year, Softbank snapped up the south of England – one of the worst affected ordinary shares priced at e2.20 a share. Japanese mobile phone operations of Vodafone regions last summer during the rainfall After exercising over-allotment options, the in a $16bn deal, which represented Asia’s shortages. The company said that it was using Irish government was left with a 28% stake, with largest-ever leveraged buy-out. the money to fast-track more than 50 investment employees and staff trusts speaking for another With Deutsche Bank acting as sole adviser on schemes. 12%. A further 12% initially ended up in the the deal, Softbank issued e500m of 7.75% Bond insurer-wrapped in order to ensure a hands of small investors, mainly the Irish share- senior notes, due 2013. triple A rating, the 2052 issue will pay a coupon buying public, while the rest was snapped up by The proceeds of the issue are being used to of 4.5%. international institutions. refinance short-term debt. “This fixed-rate bond will help us to continue “The level of interest was particularly positive “Japanese businesses have barely tapped to deliver major service and environmental both in Ireland and overseas,” said Dermot the high-yield market but this is changing,” improvements to our customers and at a rate Mannion, Chief Executive of Aer Lingus. “It said Rob Mathews of London law firm that makes it among the cheapest funding of its reflects the market confidence in this airline White & Case, which advised Deutsche Bank on kind raised this year,” said Southern Water’s and its continued future as a profitable and the issue. Finance Director, Howard Goodbourn. competitive company.” “Potential issuers are becoming more Southern Water is planning £1.6bn of The share offer and subsequent Ryanair comfortable with the high-yield product. investment in the current five-year regulated takeover interest tied up much of Dublin’s “With appetite from underwriters and period in which it, like many other water financial community. investors, we expect there to be more issues in companies, is charged with improving customer Allied Irish Banks and UBS acted as financial future by Japanese companies. A substantial service, upgrading water quality and wastewater advisers to the Irish government and joint driver of this will be the growing Japanese services and safeguarding resources. sponsors, global co-ordinators and bookrunners. leveraged buy-out market.” Lead manager on the issue was Royal Bank of Aer Lingus’s financial advisers, Merrion Scotland, whose parent company indirectly Stockbrokers and Goldman Sachs, acted as joint Robert Lea is City Correspondent of the London controls Southern Water. lead managers. Evening Standard ECM ISSUANCES TRANCHE SHARES TRANCHE ISSUER DATE TYPE DEAL VALUE EXCHANGE BOOKRUNNERS OFFERED OFFER PRICE Aer Lingus Group plc 27/9/2006 IPO $940m 277,764,346 $2.79 Dublin, London Allied Irish Banks, UBS BONDS TRANCHE TRANCHE TRANCHE TRANCHE DEAL TRANCHE BOOKRUNNER BORROWER DATE CURRENCY OFFER YEARS TO SPREAD TO VALUE VALUE COUPON PARENT PRICE MATURITY BENCHMARK Thames Water Utilities 15/9/06 sterling $456m $1.9bn 4.8% 97.7% 3.756 59bp Barclays Capital, Finance plc Deutsche Bank Thames Water Utilities Barclays Capital, 15/9/06 sterling $1.1bn $1.9bn 5.1% 99.8% 31.000 93bp Finance plc Deutsche Bank All data provided by Dealogic. www.dealogic.com 12 THE TREASURER NOVEMBER 2006.

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