CORP WEEKLY: Headline DSV trade dominates busier week of sales

This week wasn’t short of talking points across global financial markets, with stocks and bonds getting whacked amid a cocktail of some disappointing earnings, strong US data which pared back rate cut bets and a UK budget which signalled higher taxes and borrowing.

Despite that, IG corporates (those that weren’t in earnings blackouts) were able to comfortably access the primary market and secure some economic funding.

The headline, of course, was the well flagged jumbo M&A-driven multi-tranche transaction from Danish transport and logistics company DSV A/S which in the end totalled EUR5bn and marked the joint-largest euro corporate trade of 2024.

DSV provided the backbone of a EUR10bn single currency IG corporate week, which not only meant we beat the average EUR8bn estimate but also equalled the highest guess.

In turn we also saw the sector’s largest weekly total since the final full week of Sep when EUR14bn (23 tranches) crossed the tape.

This week’s activity put the final single currency IG corporate total for October at EUR22.5bn, and significantly more than the paltry EUR7.25bn to have priced in the corresponding month last year as rising Middle East tensions hampered issuance plans.

Source: IGM

DSV blows the doors off

The highlight of the week, and arguably the year, came on Wednesday in the form of DSV’s six-part trade.

Participants were unsure just how much the borrower would take out the euro primary 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 (EUR2.1bn book), EUR650m 2yr (EUR2.45bn 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 as Vier Gas Transport GmbH (EUR500m no grow 7yr) and Avery Dennison Corporation (EUR500m no grow 10yr) provided 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.

Avery Dennison Corp was the second US issuer to print in the single currency this week and get in ahead of the upcoming election, after Carrier Global Corporation was the sole corporate issue out on Monday as it extended its curve with an opportunistic EUR Jan 2037 line.

Having initially touted a benchmark size, CARR took EUR750m out of the market via a long 12yr at m/s +125 (zero NIC) after tightening from m/s +160 area IPTs on bumper demand of EUR2.5bn (EUR3.1bn peak).

Coming after Carrier on Tuesday and ahead of DSV’s jumbo were two corporate borrowers with three tranches in the single currency.

Emerging from the pipeline we had Heimstaden Bostad with a EUR500m no grow 5yr, whilst L’Oreal brought an opportunistic EUR750m 3yr and EUR500m 7yr dual-tranche.

The latter’s low-beta issue saw solid enough combined demand of EUR2.9bn (EUR3.6bn peak) which allowed the borrower to shave 25bps off IPTs to print each tranche around 2.5bp above fair value having started with fairly aggressive starting NICs of 25-30bps.

Heimstaden started out with a juicer-looking NIC of 35bps at m/s +220 area IPTs and that, along with the no grow size, spurred more impressive peak demand of EUR3.6bn.

However, that dropped considerably to EUR2.3bn at the final count after the Swedish name printed some 45bps inside IPTs and with a negative 5bps NIC.

In the wake of DSV’s transaction on Wednesday we saw a French duo out on Thursday with a mixture of euro and sterling supply.

LVMH Moet Hennessy Louis Vuitton topped up the weekly single currency total with a EUR800m 3yr/EUR700m 8yr two-part, whilst Electricite de France (GBP500m 40yr) offered the only sterling corporate bond of the week.

Investor interest for LVMH’s second dual-tranche of the year was solid, peaking at EUR3.1bn and finishing up at EUR3bn after the French luxury goods company shaved 20-22bps off IPTs to print with 8-10bp NICs.

The tranches saw the lower cover ratios across the week at 2.13x on the 3yr and 1.86x on the 8yr despite offering the biggest NICs of any issuer this week, but that was perhaps not a surprise given the broader risk tone which was far from ideal.

Stocks got hammered on the back of some downbeat tech earnings and Fed easing bets trimmed in the wake of strong economic US data, whilst EGB yields were up across the board, again dragged higher by Gilts after the post-budget sell-off and fiscal jitters intensified to push the 10yr UK yield up to 17.9bps higher on Thursday.

Given the volatility in gilts it was therefore perhaps surprising to see EDF come out with a sterling trade, but the deal went smoothly.

The GBP500m (from benchmark) 40yr was issued at gilts +170 from a +185-190 starting point on demand which was last seen at GBP915m (GBP1.2bn peak).

Despite the deal being a 40yr line, it didn’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.

Summary of this week's EUR IG corporate trades:

In store for one of lowest volume weeks of 2024?

Given the distraction of key risk events next week, expectations for any meaningful corporate supply are extremely low.

The main attraction is of course Tuesday’s US Presidential election, whilst there is also an FOMC verdict due Thursday and another slew of corporate earnings to be watched as 101 Stoxx600 and 102 S&P500 members report across the week.

Given all that, Monday looks like the only window at this stage to launch a new deal, but we could see some issuance attempts on Thursday if there is a clear US Presidential winner by Wednesday, but whether that happens and/or the result is accepted by all looks quite unlikely.

Instead, most of the bankers we spoke to are targeting the following week for their near-term projects, meaning it could be a very busy w/c 11-Nov as issuers look to make the most of what is a shrinking 2024 issuance window.

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

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