January 15, 2014 / 12:45 AM / 4 years ago

Yankee affair with French continues

NEW YORK, Jan 14 (IFR) - The investment-grade market started to feel some fatigue from the USD10.2bn deluge of French deals in the past two days, with some lesser-known credits struggling to grab attention today.

Of the USD7.75bn of deal volume on Tuesday, USD4bn came from French names, including a USD1.5bn hybrid from EDF, a USD1.5bn senor unsecured multi-tranche deal from bank BFCM and a USD1bn Tier 2 capital deal from Societe Generale.

The announcement of Credit Agricole’s dual-trigger perpetual non-call 10-year Additional Tier 1 trade also drew investors’ attention. BFCM received just enough orders to get a USD1bn of three and five-year fixed and three-year floating rate notes priced. “There’s been a lot of French supply and BFCM is just a much lesser known name to the US market compared with SocGen and Credit Ag,” explained one syndicate manager away from leads Barclays, Goldman Sachs and HSBC.

“And as well as a bit of struggle on name recognition, the market is seeing some French fatigue,” the syndicate manager added.

One investor said that BFCM started out with slightly tighter new issue concessions at the initial price thoughts level of about 10-15bp, compared with some deals that have offered premiums of 15-20bp at the whispered stage.

The result was a small order book for each tranche. According to sources, the USD500m three-year fixed-rate notes priced at T+95bp, the same as guidance and at the wide end of its 90-95bp initial price thoughts. That tranche attracted only USD650m of demand, while the USD600m floater garnered a flat USD600m of interest. Similarly, the USD400m five-year saw books reach just USD500m before it priced at the tight end of whispers at 115bp.

Yet to BFCM’s credit, it achieved good pricing without giving much away. New issue concessions worked out to be around 5bp for the three and the five-year tranches.

EDF once again stole the limelight today with a USD1.5bn 5.625% perpetual non-call 10-year hybrid, issued on the heels of its USD4.7bn multi-tranche senior unsecured Yankee deal on Monday.

The hybrid priced to yield 5.75%, after attracting in excess of USD6bn of orders from about 350 accounts, of which about 50-60% were US-based.

EDF decided not to pull in pricing from guidance of 5.75%, despite the size of the book. It’s understood that EDF wanted to ensure a well performing deal as it heads into the euro and sterling markets with a EUR perp non-call eight-year hybrid, a EUR perp non-call 12-year and a GBP perp non-call 15-year.

Market sources also heard that some of the top-line investors in the EDF hybrid - including a few global asset managers who might participate in the euro and sterling trades - had price sensitivity under 5.75%.

EDF issues hybrids to bump up the equity treatment they receive from rating agencies. Its 100-year tranche priced on Monday, however, does not receive any equity treatment.

At its issue yield of 5.75%, the deal offers about a 35bp pickup to the 5.4% trading yield on its outstanding 5.25% perpNC10s, which has a call date at 2023, a 25bp step-up if not called as well as a floating rate back-end of MS+345.9bp.

Although 35bp sounds generous, the issuer locked in a much smaller floating rate back-end of MS+279.1bp.

Societe Generale followed BPCE’s Tier 2 deal on Monday with a USD1bn 5.00% 10-year subordinated Tier 2 issue of its own. Although SocGen didn’t get the USD6bn order book that the 5.15%USD1.5bn BPCE trade achieved, it locked in pricing that was arguably flat to 5bp wide of fair value.

Led by itself, BAML, BNP Paribas and Standard Chartered, SocGen ratcheted in pricing by 12.5bp to just T+225bp from whispers of 237.5bp after getting a book of around USD2.8-2.9bn. That compared with a 240bp trading level on the BPCE Tier 2 priced at 235bp the day before.

Senior unsecured SocGen bonds trade about 10-15bp tighter than BPCE, which would put fair value on a new 10-year subordinated issue at around 220-225bp.

Investors said they liked the deal because it offered a good pickup over SocGen’s senior unsecured paper. SocGen has 2021 off-the-runs trading around T+115bp and 2.625% October 2018s at G+78bp bid.

JPMorgan followed its earnings release with a USD2bn 6.75% perpNC10 preferred Tier 1 trade with a floating rate back-end of L+378bp.

The deal priced at about a 30bp new issue concession to its outstanding 6.00% perpNC10s yielding about 6.40-6.50%. The deal attracted about USD3bn of demand and shot up in the after market to around 100.75-101.25 in dollar price.

And Credit Ag finally announced it had settled on a perpNC 10-year rather than a five-year call for its dual-trigger AT1. Credit Ag has not placed initial price thoughts on the deal, but investors are hearing that it’s probably going to start out with whispers of 8.00-8.125%.

Despite the unique dual-trigger structure and thin common equity buffers relative to those in low-rigger SocGen AT1s, US investors seem to be rallying behind the Credit Ag trade.

“Credit Ag is viewed as a strong credit so the deal should do fine,” said one investor.

Comparables include SocGen’s 7.875% perpNC10 AT1 dollar deal that trade at a dollar price of 101-101.25 with a yield to call of 7.7%. SocGen, however, has bigger buffers of common equity ahead of the trigger than the Credit Ag 5.125% buffer at the bank level.

BANQUE FEDERATIVE DU CREDIT MUTUEL Banque Federative du Credit Mutuel, Aa3/A/A+ (n/s/s), announced a USD benchmark 144a/Reg S (no reg rights) multi-part offering that consists of a 3-year (1/20/2017) fixed & FRN and 5-year (1/22/2019) fixed. The active bookrunners are Barclays, Goldman Sachs and HSBC. UOP: GCP. IPTs: 3yr FXD T+90-95bp, 3yr FRN L+equivalent, 5yr T+115-120bp PRICE GUIDANCE: 3yr fixed T+95bp area, 3yr FRN Libor equiv, 5yr fixed T+115bp area LAUNCH: USD1.5bn total. USD500m 3yr fixed at T+95bp, USD600m 3yr FRN at 3mL+85bp, USD400m 5yr at T+115bp. PRICED: USD1.5bn total. Settlement date 1/2022. USD500m. Cpn 1.70%. Due 1/20/2017. Ip USD99.893. Yld 1.737%. T+95bp. First pay 7/20/2014. USD600m. Cpn 3mL+85bp. Due 1/20/2017. Ip USD100.00. Yld 3mL+85bp. First pay 4/20/2014. USD400m. Cpn 2.75%. Due 1/22/2019. Ip USD99.791. Yld 2.794%. T+115bp. First pay 7/22/2014. BOOK: USD650m on 3yr fxd, USD600m on 3yr FRN, USD500m on 5yr Fxd. NIC: 5bp COMPS: BFCM 2.500% October 29, 2018 at G+105bp (add 5bp for credit curve=FV of 110bp for new 5yr) ACAFP (A2/A) 1.625% April 15, 2016 at G+84bp (add 2-3bp for credit rating difference, + 3bp for credit curve = FV at 89-90bp for 3yr) ACAFP (A2/A) 3.000% October 1, 2017 at G+90bp ACAFP (A2/A) 2.625% October 3, 2018 at G+81bp BNP (A2/A+) 1.250% December 12, 2016 at G+45bp BNP (A2/A+) 2.375% September 14, 2017 at G+61bp BNP (A2/A+) 2.400% December 12, 2018 at G+72bp SOCGEN (A2/A) 3.500% January 15, 2016 at G+68bp SOCGEN (A2/A) 2.750% October 12, 2017 at G+84bp SOCGEN (A2/A) 2.625% October 1, 2018 at G+80bp TOYOTAL MOTOR CREDIT CORP (TMCC) Toyota Motor Credit Corp (TOYOTA), Aa3/AA- (s/s), announced a USD benchmark SEC registered multi-part senior unsecured MTN offering that consists of a 5-year (1/17/2019) fixed and/or FRN. The active bookrunners are Bank of America, Barclays and Deutsche Bank. Settle: T+3 (1/17/2014). IPT: 5yr FRN Libor equiv, 5yr FXD low-mid 50’s PRICE GUIDANCE: 5-year FXD T+50bp area (+/- 2bp), 5yr FRN Libor equiv LAUNCH: USD1.25bn total. USD1bn 5yr fixed at T+48bp, USD250m 5yr FRN at 3mL+39bp PRICED: USD1.25bn 2-part total. USD250m 5yr (1/17/2019) FRN. At 100, floats 3mL+39bp. 1st pay: 4/17/2014. USD1bn 2.10% 5-year (1/17/2019) fixed note. At 99.915, yld 2.118%. T+48bp. MWC+10bp. 1st pay: 7/17/2014. BOOK: USD2.4bn NIC: 5-6bp COMPS: TOYOTA 2.00% October 24, 2018 at G+32bp HNDA (A1/A+) 2.125% October 10, 2018 at G+43bp SOCGEN Societe Generale, Nr/BBB+/BBB+ (-/n/s), announced a USD benchmark 10-year (1/17/2024) bullet subordinated Tier 2 transaction via SocG CIB as Global Coordinator & Structuring Advisor, along with Bank of America Merrill Lynch, BNP Paribas and Standard Chartered as joint lead managers & bookrunners and Santander and VTB Capital as joint lead managers. The 144A/RegS. Relevant stabilization regulation including FCA/ICMA. UOP: GCP. Settlement date 01/17/2014. IPT: T+237.5bp area PRICE GUIDANCE: T+230bp area (+/- 5bp) LAUNCH: USD1bn 10yr at T+225bp PRICED: USD1bn 5.0%10-year (1/22/2024). At 99.093, yld 5.117%. T+225bp. 1st pay: 7/22/2014. BOOK: USD2.8bn NIC: 3-5bp COMPS: Senior SOCGEN 2.625% October 1, 2018 at G+78bp BPCEGP (A2/A) 2.500% December 10, 2018 at G+94bp LT2 BPCEGP (Baa3/BBB+) 5.70% October 22, 2023 at G+233bp BPCEGP (Nr/Nr/A-) 5.15% July 21, 2024 at G+235bp ABBEY 5.00% October 7, 2023 at G+188bp INTNED 5.80% September 25, 2023 at G+232bp STANLN (A3/A-) 5.20% January 26, 2024 at G+217bp JOHN DEERE CAPITAL CORP John Deere Capital Corp (DE), A2/A (s/s), announced a USD benchmark SEC registered 3-year (12/14/2016) fixed senior unsecured MTN. The active bookrunners are Deutsche Bank, HSBC and JP Morgan. UOP: GCP. Settle: T+3 (1/17/2014). IPTS: low 40s PRICE GUIDANCE: T+35bp area (+/- 2bp) LAUNCH: USD500m at T+33bp PRICED: USD500m 1.05% 3-year (12/15/2016). At 99.80, yld 1.12%. T+33bp. 1st pay: 6/15/2014. BOOK: USD2bn NIC: 8bp COMPS: DE 1.05% October 11, 2016 at G+25bp DE 1.95% December 13, 2018 at G+39bp EDF Electricite de France SA, expected ratings A3/BBB+/A-, announced a USD benchmark perpetual NC10yr deal via global coordinators Citigroup, Credit Suisse and SocGen. Active bookrunners are Bank of America, Barclays, Bank of Toyko Mitsubishi, HSBC and Nomura. 144a/RegS. First call 1/22/2024. Reset rate: 10y USD m/s + [initial spread to m/s] + step. Step ups: 25 bps in 2024 + further 75bps in 2044 Special event call: Tax Deductibility / Accounting / Rating Agency /Minimal amount outstanding (all at 101% of par), Withholding tax (at par) Substitution / Variation: Yes, but subject to the terms of the exchange or variation not being prejudicial to the interests of the note holders. Settlement date 1/22/2014. IPT: High 5.00% PRICE GUIDANCE: 5.75% number LAUNCH: USD1.5bn at 5.75% PRICED: USD1.5bn 5.625% NC10YR. At 99.059, yld 5.75%. T+288.1bp. Spread to MS: T+279.1bp (MS: 2.959%). 1st call date: 1/22/2024. 1st pay: 7/22/2014. BOOK: USD6.1bn COMP: 5.25% PerpNC10s with 2023 call date, trading at 5.40% and with 25bp step up if not called as well as reset to MS+345.9bp JPM JP Morgan Chase & Co (JPM), Ba1/BBB/BBB- (s/n/s), announced a USD benchmark SEC registered $1,000 par fixed to floating rate non-cumulative perpetual NC10 preferred, Series S. JP Morgan is sole books. UOP: GCP. Settle: T+5. LAUNCH: USD2bn at 6.75% PRICED: USD2bn. Cpn 6.75%. Due Perpetual NC10yr. Ip par. Yld 6.75%. Settlement date 1/2022. First pay 8/1/2014. Cusip # 46625HJQ4. If not called, coupon will float at L+378bp. BOOKS: USD3bn COMPS: 6.00% perpNC10s, trading at YTC of 6.4-6.5%. back-end floats at L+330bp.

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