CORP SNAPSHOT: French pair out after DSV's impressive outing

Corporate investors are seeing a singular bond in each of the euro and sterling markets on the final session of October.

That with LVMH Moet Hennessy Louis Vuitton is topping up the weekly single currency curve with a EUR 3yr/8yr two-part benchmark, whilst Electricite de France is offering the first sterling corporate bond since last Thursday in the form of a long-dated 40yr benchmark.

The timing of the latter is interesting when bearing in mind the huge rise in gilts seen yesterday and today in the wake of Chancellor Reeves’ budget release which showed UK taxes to rise by GBP40bn, with notable rises in taxes on capital gains and carried interest for private equity.

Thursday’s pair are out after the highlight of the week, and arguably the year, came on Wednesday in the form of DSV’s well-flagged six-part trade.

Participants were unsure just how much the borrower would take out the market to fund the EUR13.4bn acquisition of Deutsche Bahn’s logistic business, and with IoIs already at EUR10bn ahead of books opening there was some chatter that it could challenge the top 10 biggest trades on record which are all EUR7bn+.

In the end the borrower printed EUR5bn, meaning it "only" equalled Siemens’ five-part sale in Feb as the joint-biggest trade for the asset class this year.

Largest EUR IG corp trades of 2024:

Source: IGM

Investor demand for DSV appeared insatiable, with final orders at EUR29.05bn at the final count having only eased back slightly from an earlier peak of EUR31.1bn despite the borrower shaving 32.5-45bps off IPTs across the six tranches.

That was much more than the EUR15.8bn Siemens attracted in Feb, whilst looking at IGM data it was the third biggest final combined demand ever seen for a single currency corporate trade having only been topped by AB InBev's EUR13.25bn six-part record trade in 2016 (EUR31.3bn) and Medtronic’s EUR7bn six-part in 2019 (EUR30.25bn).

In terms of the DSV tranches, investors favoured the mid-to-long tenors amongst the EUR600m 2yr FRN (2.1bn book), EUR650m 2yr (2.45bn book, 0-5bp NIC), EUR1bn 4yr (EUR3.95bn book; 0 NIC), EUR1.25bn 6yr (EUR7.6bn book; -5 NIC), EUR750m 8yr (EUR6.7bn book; -5 NIC) and EUR750m 10yr (EUR6.25bn book; -5 NIC) fixed lines.

DSV wasn’t the only show in town on Wednesday where we had Vier Gas Transport GmbH (EUR500m no grow 7yr) and Avery Dennison Corporation (EUR500m no grow 10yr) providing supporting acts after recent roadshows.

The former priced its latest trade 30bps inside initial talk (~5bp final NIC) on a 3.1x covered book, whilst rarer name Avery Dennison Corp saw more measured demand of EUR1.2bn and shaved 27.5bps off the mid-point of IPTs.

Wednesday’s trades put the overall weekly euro IG corporate supply at EUR8.5bn and beyond the average estimate of EUR8bn given by participants in our weekly issuance poll. But given LVMH’s trade today, we could challenge even the highest EUR10bn guess.

More broadly and ahead of today’s final session of the month, the single currency IG corporate total for October was already at EUR21bn following Wednesday, and significantly more than the paltry EUR7.25bn to have priced in the corresponding month last year as rising Middle East tensions hampered the issuance window.

Before we look at Thursday’s deals on offer in Europe, it is also worth having a quick look across the Atlantic where we also saw some big M&A-driven activity on Wednesday.

Marsh & McLennan started things off with an early morning announcement of a USD7.25bn seven-part offering to help fund its acquisition of McGriff Insurance Services, LLC. That was followed by Waste Management, who began marketing a USD5.2bn 5-pt offering to partially fund its purchase of Stericycle, a global leader in medical waste management. See THE ENDGAME from our US credit team for more background on those.

LVMH returns for another two-part EUR

** French luxury goods company LVMH Moet Hennessy Louis Vuitton S.E (Aa3/AA-) this morning mandated Global Coordinators BofA Securities, Credit Agricole CIB and Morgan Stanley, as well as Active Bookrunners Citi, HSBC, MUFG, Natixis, RBC Capital Markets and UniCredit for a dual-tranche EUR 3yr and 8yr benchmark trade

IPTs:

EUR Nov 2027s at m/s +65 area

EUR Nov 2032s at m/s +85 area

• Expected issue ratings are Aa3 / AA- (Moody’s / S&P)
• Proceeds are to be used for general corporate purposes
• LVMH has already printed a two-part euro this year, bringing EUR850m 3.375% Feb 2030 and EUR650m 3.5% Oct 2034s at m/s +45 and +65 respectively on combined demand that finished at EUR3bn (EUR4.2bn peak)
• The aforementioned lines were highlighted on the official comps list (below) alongside the issuer’s other most recently issued bonds and also the securities of peer L’Oreal from earlier this week
• Referencing the comps as a whole, bankers on and off the trade were seeing the starting NICs at 30bps on each tranche

Issuer Rating Tenor (yrs) MS+

MCFP 0.125 2/28 Aa3/AA-/Nr 3.3 38

MCFP 3.25 9/29 Aa3/AA-/Nr 4.9 48

MCFP 3.375 2/30 Aa3/AA-/Nr 5.3 50

MCFP 0.375 2/31 Aa3/AA-/Nr 6.3 39

MCFP 3.5 9/33 Aa3/AA-/Nr 8.9 72

MCFP 3.5 10/34 Aa3/AA-/Nr 9.9 71

ORFP 2.5 11/27 Aa1/AA/Nr 3.0 34

ORFP 2.875 11/31 Aa1/AA/Nr 7.0 55

Electricite De France goes long in sterling

** French electric utility company Electricite De France SA (Baa1/BBB/BBB+) on Thursday hired Barclays, HSBC, NatWest Markets, Societe Generale CIB, Santander and Wells Fargo Securities as Joint Bookrunners for a GBP 40yr benchmark

IPTs: Books open for GBP Nov 2064s at mid-gilts (UKT 4% Oct 2063) +185-190

• Expected issue ratings are Baa1 (Moody’s) / BBB (S&P) / BBB+ (Fitch)
• An amount equal to the net proceeds from the issuance will be allocated to the financing and/or refinancing of investments made in the construction of the two EPR-type reactors at the Hinkley Point C site in Somerset, United Kingdom, with a total capacity of 3.26 GW
• Despite this being a 40yr line, it doesn’t actually extend EDF’s existing senior sterling curve after the borrower printed a pioneering GBP1.35bn 100yr (6% Jan 20114) line in Jan 2014
• More recently and EDF printed a GBP500m 7.375% non-call Sep 2035 green hybrid in Sep this year, and a GBP450m 5.5% Jan 2035/GBP500m 5.625% Jan 2053 senior two-part in Jan 2023. The latter two bonds were highlighted on official comps below, but with the existing curve so flat fair value for the new 40yr is tricky to pinpoint

£££ Electricite de France (EDF) GBP 40yr - Comparables £££

(Baa1 / BBB / BBB+)

Indicative pre-announcement secondaries vs Gilts (bid)

Ticker Coupon Issue Date Maturity Remaining Yrs Size (GBP mn) Spread (G+)

EDF 5.500% Jan-23 Jan-2035 10.2 £450 154

EDF 5.500% Mar-12 Mar-2037 12.4 £500 148

EDF 5.500% Oct-11 Oct-2041 17.0 £1,500 151

EDF 5.125% Sep-10 Sep-2050 25.9 £985 153

EDF 5.625% Jan-23 Jan-2053 28.2 £599 154

EDF 6.000% Jan-14 Jan-2114 89.2 £1,350 234

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

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