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CORP WEEKLY: Some signs of indigestion after busy run of issuance

It was a more orderly week for European bond issuance this week as uncertainty surrounding potential rate cuts and public holidays on both sides of the pond limited the potential issuance window.

Indeed, nearly all this week's EUR7.85bn ( 6 issuers / 12 tranches) of euro IG/split-rated euro corporate paper came in a two-day period between Monday's UK Bank Holiday/US Memorial Day and the Corpus Christi holiday in parts of Europe on Thursday. The only other deal to price came Monday when Chinese borrower Seawings Co issued a EUR350m Reg S only 3yr.

The final haul was above the average estimate of EUR6bn given in our weekly issuance poll but just short of the highest EUR8bn guess.

It was also well behind the previous week's total where, as a reminder, 22 IG corporate single currency lines were issued via 17 names worth a combined EUR13.75bn, making it the sector's second-largest week of 2024.

Source: IGM

Lowest average cover ratio of 2024 recorded

All this week's issuers were able to get their deals away safely enough but there were some signs of potential supply indigestion after the recent glut of issuance, with the monthly haul of EUR50.85bn marking the second busiest May on record for the asset class.

Combined demand for the EUR7.5bn of paper on offer this week (excluding Seawings where no book was communicated) had peaked at EUR24.25bn but at the final count was EUR18.8bn with the final cover ratio of 2.59x the lowest seen YTD.

The fall in orders came as issuers shaved an average 30.41bps off IPTs to print with an average NIC of 5.1bps.

That large compression, combined with potential indigestion and a volatile broader market tone amid an uncertain rate outlook, resulted in the investor resistance seen this week. Going forward, this may require issuers to take a more pragmatic approach to ensure smooth execution.

Linde and Medtronic go big

Seeing the most pricing resistance this week was Tuesday's sole transaction from Dublin-headquartered global chemicals company Linde plc.

Offering its second three-part euro of the year, the company took EUR2.2bn out of the market via EUR750m 6yr, EUR750m 10yr and EUR700m 20yr tranches. That after the issuer printed a slightly larger EUR2.25bn (EUR700m 4yr, EUR850m 7yr & EUR700m 12yr) three-part as recently as Feb.

Combined demand for the most recent transaction peaked at an impressive EUR6.25bn, but in a nod to a deteriorating risk tone on the day and after the borrower cut 30-37bps off IPTs to reoffer, final orders totalled just EUR3.4bn.

Linde's longest 20yr line priced slightly inside fair value estimates on a EUR1.2bn book whilst the 6yr and 10yr lines attracted demand of EUR1.1bn apiece and offered final NICs in the region of 3bps and 5bps respectively.

The bulk of issuance (EUR5.3bn) this week came Wednesday where leading the way was US borrower Medtronic with an even bigger EUR3bn no grow (EUR850m 5.5yr, EUR850m 12.5yr, EUR600m 19.5yr and EUR700m 29.5yr) four-part.

Medtronic already had a reputation for issuing large single currency trades, having printed a EUR3bn four-part in Sep 2022, a EUR6.25bn six-part in Sep 2020, a EUR5bn six-part in Jun 2019 and an even bigger EUR7bn six-part in Mar 2019 with the latest another successful exercise.

The new transaction saw combined demand last touted at EUR9.95bn from an earlier peak of EUR10.9bn after the borrower shaved between 25-30bps off IPTs and print with NICs ranging from 5-15bps.

Medtronic's deal pushed the 2024 reverse yankee issuance haul up to EUR38.23bn and just short of last year's final EUR43.3bn. Whilst the reverse yankee pace is set to remain busy with a number of US companies having euro debt to refinance this year, we will have to go some to beat the all-time record of EUR99.08bn set in 2019. The busy year for reverse yankee issuance so far comes with a number of issuers having euro bonds to refinance in the near future.

Out alongside Medtronic on Wednesday were European names LVMH (EUR850m short 6yr & EUR650m long 10yr two-part; 5bp NICs), ISS Global (EUR500m no grow 5yr; 5bp NIC) and HOWOGE (EUR300m 6yr social; 5bp NIC) which saw demand settle at EUR3bn, EUR1.35bn and EUR1.1bn from peaks of EUR4.2bn, EUR1.75bn and EUR1.15bn respectively.

Summary of this week's EUR IG/split-rated corp trades:

DateIssuerSize (EUR m)MaturityIPTs/Initial guidanceRe-offerIPT to Re-offer Pricing Differential (bp)NIC (bp)Books (EUR m)Final Cover Ratio (X)Peak Books (EUR m)
27-MaySeawings (HK) Co. Limited35030-May-20274.6%a4.2%-40N/AN/AN/AN/A
28-MayLinde plc75004-Jun-30m/s+85-90m/s+55-32.5311001.471850
28-MayLinde plc75004-Jun-34m/s+105am/s+75-30511001.472000
28-MayLinde plc70004-Jun-44m/s+145am/s+108-37-212001.712400
29-MayMedtronic plc85015-Oct-29m/s+95am/s+65-30524002.822800
29-MayMedtronic plc85015-Oct-36m/s+125am/s+95-30522502.652700
29-MayMedtronic plc60015-Oct-43m/s+155am/s+130-251521003.502200
29-MayMedtronic plc70015-Oct-53m/s+185am/s+155-30N/A32004.573200
29-MayISS Global A/S50005-Jun-29m/s+130am/s+100-30513502.701750
29-MayHOWOGE Wohnungsbaugesellschaft mbH (Social)30005-Jun-30m/s+125am/s+95-30511003.671150
29-MayLVMH Moet Hennessy Louis Vuitton S.E85005-Feb-30m/s+75am/s+45-30520002.352400
29-MayLVMH Moet Hennessy Louis Vuitton S.E65005-Oct-34m/s+95am/s+65-30510001.541800

Aptiv to add to reverse yankee haul

Looking ahead and next week looks set to be another compressed one for supply with the key ECB meeting on Thursday meaning the optimum issuance window looks to be Monday-Wednesday.

Feedback from bankers we spoke to on Friday suggests that the pace of issuance will be similar to that of this week.

One borrower known to be eyeing next week is Irish-American automotive technology supplier Aptiv PLC (Baa2/BBB/BBB) which will add the recent reverse yankee flurry.

Aptiv this morning hired Barclays, BNP Paribas and J.P. Morgan Securities plc to arrange a series of European fixed income investor calls on Friday and Monday ahead of a EUR 12yr SEC-registered benchmark trade.

That will mark the borrower's first single currency offering since it printed a EUR500m 1.6% Sep 2028 line in Sep 2016.

Also announcing a mandate this morning was Swedish medical device company Molnlycke Holding AB (BBB-) with the issuer to hold calls Monday via BNP Paribas, ING, J.P. Morgan, and SEB as Joint Bookrunners for a potential EUR500m 10yr transaction comps here.

The company has concurrently announced an any & all tender offer for its outstanding EUR500m 1.875% notes due Feb 2025 (ISIN: XS1564337993).

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

IssuerDealRe-offer spread (m/s)Current i-spread (bid)Issue Rating
MDT3.650% 10/29+65+63.5A3/A
MDT3.875% 10/36+95+91.5A3/A
MDT4.150% 10/43+130+125.5A3/A
MDT4.150% 10/53+155+151A3/A
ISSDC3.875% 06/29+100+100.5Baa3/BBB
LVMH3.375% 02/30+45+45.5Aa3/AA-
LVMH3.500% 10/34+65+66Aa3/AA-
LIN3.375% 6/30+55+57A1/A
LIN3.500% 06/34+75+78A1/A
LIN3.750% 06/44+108+110.5A1/A
HOTGR4.250% 05/30+142+143.5BBB-
EPEN5.875% 11/29+310+280BBB-/BBB-
PHIANA3.750% 05/32+115+111Baa1/BBB+
PNDORA3.875% 05/30+115+115Baa2/BBB
MNDILN3.750% 05/32+95+94.5Baa1/A-
ALOFP5.868% PNC5.25+292.8+266.5Ba2
AIFP3.375% 05/34+62+62A2/A
ENEXIS3.500% 05/36+75+77AA-
AMT3.900% 05/30+113+110.5Baa3/BBB-/BBB+
AMT4.100% 05/34+140+140.5Baa3/BBB-/BBB+
SCMNVX3.500% 05/26+25+9.5A1/A
SCMNVX3.500% 08/28+55+48.5A1/A
SCMNVX3.500% 11/31+75+72.5A1/A
SCMNVX3.625% 11/36+93+91.5A1/A
SCMNVX3.875% 05/44+124+123A1/A
AKERBP4.000% 05/32+125+128.5Baa2/BBB/BBB
TAP3.800% 06/32+103+100Baa2/BBB
SAGAX4.375% 05/30+155+151.5Baa2
AMCR3.950% 05/32+128+124Baa2/BBB
AVINOR3.500% 05/34+80+85.5A1

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