CORP SNAPSHOT: Mini summer flurry ahead of key risk events

The IG corporate bond market saw its first blank euro issuance week of the year last week and given the distraction of vacations and earnings, we wouldn’t have been surprised to see another one this week.

However, that is certainly not the case with three names live in euros Monday, getting in ahead of the FOMC & BoE meetings on Weds and Thurs respectively, and also US Payroll data Friday.

Vodafone (exp EUR500m 9yr), AstraZeneca (EUR 6/9yr two-part benchmark) and Edenred (exp EUR500m 8yr) are the names out in the single currency despite thinned out market participation due to holidays, whilst sterling is also on tap thanks to previously-pipelined South West Water (GBP 17yr green benchmark).

Vodafone out post-earnings with LME driven trade

First out of the blocks this morning was UK telecom Vodafone Group Plc (Baa2/BBB/BBB), which launched a new euro benchmark deal as part of a liability management exercise.

The borrower is touting a new EUR 9yr line via its financing arm Vodafone International Financing DAC, which comes after the company reported earnings last Thursday – announcing a slowdown in top-line growth after law changes related to selling TV services in Germany weighed.

Joint Bookrunners BNP Paribas, BofA, Deutsche Bank and Societe Generale have opened books and released IPTs for the Aug 2033s at m/s +115 area.

An amount equal to the net proceeds of the issuance will be applied for the general corporate purposes of the group, including, without limitation, to fund repurchases of existing EUR and USD debt securities, pursuant to the concurrent tender offers also launched this morning.

See full tender details here.

Vodafone raised USD3bn via a two-part 30/40yr just last month, but hasn’t issued senior single currency paper since bringing a EUR500m 4% Feb 2043 line in Feb last year, with that deal landing at m/s +135 (zero NIC) on a 5x covered book.

Shorter on the curve Vodafone has a number of trades, with a handful of those highlighted on the official comps list (below).

Adjusting the curve accordingly we saw fair value for the new 9yr EUR line at m/s +75, which bankers on and off the trade broadly agreed with.

Comps:

€650m 3.250% Mar-29 4.6yr ms+45 (Vodafone Intl Fin DAC) – Dec 2022

€1bn 1.625% Nov-30 6.3yr ms+62 (Vodafone plc) – May 2019

€1.15bn 1.600% Jul-31 7.0yr ms+66 (Vodafone plc) – Jul 2016

€650m 3.750% Dec-34 10.4yr ms+80 (Vodafone Intl Fin DAC) – Dec 2022

AstraZeneca sticks with two-pronged approach

Vodafone’s compatriot AstraZeneca PLC (A2/A+) is also out at the start of the week, with a dual-tranche euro benchmark made up of 6yr and 9yr tenors.

The British-Swedish pharma company has started touting the Aug 2030s and Aug 2033s at m/s +80-85 and m/s +100-105 IPTs respectively, through its subsidiary AstraZeneca Finance LLC.

Joint Bookrunners are BNP Paribas, Goldman Sachs International, Morgan Stanley and Societe Generale.

AstraZeneca last tapped the euro market in Mar last year, printing EUR750m 3.625% Mar 2027s and EUR750m 3.75% Mar 2032s.

Those were spotted at i +24 and +53 bid respectively on the official comps list circulated by leads this morning.

Referencing those bonds, we saw the starting NICs on each of the new tranches at 40-45bps.

Bond Ratings Tenor Amount (€m) Bid i-sprd (bps)

AZN:

AZN 3 5/8 03/03/27 A2 / A+ / A-u 2.6Y 750 i+24

AZN 1 1/4 05/12/28 A2 / A+ / A-u 3.8Y 800 i+29

AZN 0 3/8 06/03/29 A2 / A+ / A-u 4.8Y 800 i+33

AZN 3 3/4 03/03/32 A2 / A+ / A-u 7.6Y 750 i+53

Other Pharma:

LLY 0 5/8 11/01/31 A1 / A+ / NR 7.3Y 600 i+38

LLY 0 1/2 09/14/33 A1 / A+ / NR 9.1Y 600 i+31

MRK 3 1/4 05/30/32 A1 / A+ / NR 7.8Y 850 i+61

MRK 3 1/2 05/30/37 A1 / A+ / NR 12.8Y 850 i+80

NOVOB 3 1/8 01/21/29 A1 / AA- / NR 4.5Y 1000 i+30

NOVOB 3 1/4 01/21/31 A1 / AA- / NR 6.5Y 1000 i+47

NOVOB 3 3/8 05/21/34 A1 / AA- / NR 9.8Y 1350 i+62

ROSW 3.227 05/03/30 Aa2 / AA / AA 5.8Y 650 i+32

South West Water looking to follow Severn Trent lead

Sticking with the UK for now and sterling paper Monday is coming courtesy of South West Water Limited (Baa1/BBB), with the borrower emerging after calls at the back end of last week with a GBP 17yr green benchmark.

Marketing has begun for the Aug 2041 green at mid-gilts (UKT 1.25% Oct 2041s +200 area) IPTs.

Active Bookrunners on the trade are Barclays, BNP Paribas (ESG Structuring Advisor), HSBC and SMBC.

The notes are expected to be rated Baa1/A-, and are being issued through South West Water Finance Plc.

An amount equal to the net proceeds from the issue will be allocated by the issuer to finance or refinance, in whole or in part, new or existing eligible projects as set out in the group’s sustainable financing framework.

South West Water will be looking to emulate the success of peer Severn Trent Water Limited which emerged last week with a 14yr senior unsecured sustainable notes offering.

The GBP350m (from benchmark) issue was the first sterling IG corporate deal since the UK general election, and investors gave the sector a vote of confidence if this particular trade was anything to go by.

Demand for the trade peaked at GBP1.6bn (GBP1.5bn final), which allowed Severn Trent to ramp in pricing to a final gilts +155 (10bp NIC) from +170-175 IPTs.

As well as a vote of confidence to the sterling corporate market, it was also a positive for the UK water sector which has been under heavy pressure with regulator Ofwat demanding improvement in infrastructure and reduction of sewage leaks.

In fact, the Severn Trent deal came on the same day that the UK's biggest water company Thames Water was cut to junk rating by Moody's, with the ratings agency downgrading the company two notches to Ba2. Moody's cited the water company's weakening liquidity position and the potential for covenant breaches on its debt.

Edenred extends with 8s

Back to euros and French paper is on offer thanks to international payment service provider Edenred (A-), formerly Accor Services.

The borrower is extending its single currency benchmark curve with an expected EUR500m 8yr (Aug 2032) at m/s +145 area IPTs.

Global Coordinators are Credit Agricole CIB and Societe Generale, with Barclays, BNP Paribas, CIC, Citi, Commerzbank and ING as Active Bookrunners.

Fair value for this deal was being pitched by leads at m/s +105 when equating from the extra curve from Edenred’s EUR700m 3.625% Jun 2031s which were spotted at +98 bid pre-announcement having landed at m/s +75 last Jun on a EUR1.6bn book.

* Indicative i-spread (bid side) before announcement

Security Ratings BID I-Spd

EDENFP 1 3/8 06/18/29 -/A-/- 60

EDENFP 3 5/8 06/13/31 -/A-/- 98

PLXFP 3 1/2 09/04/28 -/BBB+/- 81

PLXFP 3 3/4 09/04/32 -/BBB+/- 119

ADENVX 0 1/2 09/21/31 Baa1/BBB+/- 81

CPGLN 3 1/4 02/06/31 A2/A/- 67

EXPNLN 1.56 05/16/31 A3/A-/- 66

RANDNA 3.61 03/12/29 Baa1/-/- 85

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

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