CORP SNAPSHOT: Focus on sterling as Severn Trent Water reopens market

The IG corporate market remains on course for its first zero euro issuance week of the year, with borrowers again staying away amid summer vacations and the distraction of earnings.

Away from the single currency there is some activity though, thanks to UK water company Severn Trent Water Limited which has emerged after calls on Tuesday with a GBP 14yr senior unsecured sustainable notes offering via Severn Trent Utilities Finance PLC.

Active Bookrunners BofA Securities, CIBC Capital Markets, Lloyds and RBC Capital Markets are working the Jul 2038s at mid gilts (UKT 3.75% Jan 2038) +170-175 IPTs.

The notes are expected to be rated Baa1 by Moody's, BBB+ by S&P, and A- by Fitch.

Proceeds from the bond are to be used to finance and/or refinance assets and expenditures with a positive sustainability impact in accordance with Severn Trent's Sustainable Finance Framework.

This marks the first sterling IG corporate deal since 18-Jun (Unite Group GBP400m Jun 2032s) and the first since the opposition Labour party won the UK general election on 4-Jul.

Severn Trent itself has already issued euros this year (EUR500m 4% Mar 2032 sustainability in Feb) but hasn't tapped the sterling market since Mar last year when it brought a GBP400m 5.25% Apr 2036 sustainability bond.

The latter was highlighted on the official comps list shared by leads on Monday along with the initial mandate announcement as follows:

Ticker Ratings Issue Dt Amt. Cpn Mat. UKT bid ESG

SVTLN Baa1/BBB+/A- Nov-16 400 2.750 Dec-31 +124

SVTLN Baa1/BBB+/A- Feb-22 400 2.625 Feb-33 +127 Y

SVTLN Baa1/BBB+/A- Nov-22 400 4.625 Nov-34 +130 Y

SVTLN Baa1/BBB+/A- Mar-23 450 5.250 Apr-36 +127 Y

SVTLN Baa1/BBB+/A- May-20 300 2.000 Jun-40 +113 Y

SVTLN Baa1/BBB+/A- Jan-12 530 4.875 Jan-42 +125

More sterling supply is on the way in the not too distant future thanks to Severn Trent's peer South West Water Finance Plc (Baa1/A-).

The UK water company on Tuesday hired Barclays, BNP Paribas, HSBC and SMBC as Active Bookrunners to arrange a series of fixed income investor calls commencing on Thursday and Friday (25-26 Jul).

A GBP 17yr senior unsecured benchmark green bond is expected to follow, subject to market conditions.

The issuance will be in line with the Group's Sustainable Financing Framework which is aligned to the ICMA Green and Social Bond Principles, the Blue Bond Guidance and Sustainability Bond Guidelines and has a Second Party Opinion from DNV.

Performance tracker of recent EUR IG/split-rated benchmark deals

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