International Financing Review June 13 20204 Top news Bottomless demand for sovereign issues Bonds Investors clamour for sovereign paper in banner week for syndications BY HELENE DURAN
Trang 1JUNE 13 2020 ISSUE 2337 www.ifre.com
06
LOANS
EQT’s €2.3bn fund lNANCINGûRAISESû the bar for private equity and ESG
07
LOANS
3ANTANDERûROCKETSû UPûRANKINGSûASû CRISISûSHAKESûUPû European lending
10
Too much, too soon for frenzied credit market: reality bites at end of rollercoaster week
In demand: six European sovereigns raise
€40bn from €303bn of orders in just two days Lift-off for €10bn buyout financing for
ThyssenKrupp’s elevators division
Trang 2IFR’s
ESG Financing Briefing
IFR’s ESG Financing Briefing is a subscription
service offering daily news, data and analysis
on green and ESG financing from across the Refinitiv Capital Markets Insight Team.
To subscribe or learn more, e-mail
ifr.clientsupport@refinitiv.com
Trang 3International Financing Review June 13 2020 1
The coming storm
F inancial markets got a dose of reality last week They
needed it At the begining of the week, equity and credit
markets were chugging along as if the March and April
sell-offs were an aberration Data showing the US unemployment
rate was “only” 13.3% in May was deemed good news It
wasn’t It was terrible and a stark illustration of the economic
devastation being wrought by Covid-19.
Yet the S&P 500 had turned positive for the year, the
Nasdaq hit a record high and credit market indices were
moving closer towards levels that prevailed in January and
February rather than the peak of the sell-off in March.
That changed on Wednesday after Federal Reserve Chair
Jerome Powell’s sober assessment of the US economy and
THENûCONlRMATIONûOFûANûUPTURNûINûREPORTEDûCORONAVIRUSû
cases in parts of the US Both were blunt reminders of what is
actually happening to those who had got heady on the easing
of lockdowns and the prospect of a quick recovery.
As a result, on Thursday, US and European equity markets
saw their biggest one-day falls since March – and credit
markets suffered in sympathy.
Whether this becomes another prolonged sell-off or a few
unsettling days before markets go on their merry way again
remains to be seen.
But the shock was coming In the bond market, issuers were
getting greedy and investors were back in “hunt for yield” mode.
“Madness”, “nuts”, “ridiculous” were just some of the
words bankers used to describe the action.
Corporate hybrids? Yes please Bank AT1s? Not a problem
Asian real estate? Here’s a US$20m order.
4HEûDISCONNECTûBETWEENûECONOMICûREALITYûANDûlNANCIALû
markets has never been greater.
We all know why, of course So far this year, announced
GLOBALûlSCALûANDûMONETARYûSTIMULUSûAMOUNTSûTOû53TRN û
according to Bank of America.
!NDûTHATûlREPOWERûHASNTûALLûBEENûUSEDûUPû"UTûWHILEûTHEû
support of governments and central banks is necessary and
right following the coronavirus outbreak, one day there will
have to be a reckoning.
One day, companies that are maintaining a zombie-like
existence will be unable to borrow any more money to cover
their ever-bigger debt piles.
One day, the economic realities of what’s happening will
make themselves felt.
Secondary education
I f the latest Hong Kong listings are any guide, Chinese companies have little to fear from US threats to kick them off American exchanges.
The rapturous response to the secondary listings of Netease and JD.com underlines the depth of the local following for big Chinese technology stocks JD.com’s 53BNûSHAREûSALEûISûTHEûCITYSûMOSTûPOPULARûPUBLICû OFFERINGûOFûTHEûYEAR ûWITHûTHEûRETAILûPORTIONûCLOSEûTOûû pop, and traded on Friday at a small premium to its US price.
These listings challenge the assumption that Chinese companies would somehow struggle to fund their expansion without access to the US equity market.
-OREûSIGNIlCANTLY ûTHEYûALSOûLESSENûTHEûTHREATûOFûAûFORCEDû delisting if Chinese companies fail to make their audit trail available to US regulators Once a secondary listing is in PLACE ûITûWOULDûNOTûBEûDIFlCULTûFORûAû#HINESEûCOMPANYûTOû make Hong Kong its primary trading venue, bringing international shareholders along with them.
In fact, that switch may be already under way.
Alibaba, which started the ball rolling with its US$13bn Hong Kong listing last November, has seen a much bigger shift in its shareholder base than expected, with about 46% of all trading over the past month now taking place in the city.
On Thursday, 33 million Alibaba shares changed hands in Hong Kong, versus 29.7 million (via 3.71 million ADRs) the same day in New York, giving Hong Kong a 53% share At 55%, the Hong Kong stock will be deemed to have become
Alibaba’s primary listing, in a test the exchange applies over THEûWHOLEûlNANCIALûYEAR
A Hong Kong primary listing would not exempt Alibaba from any US disclosure rules, but it would make it eligible for the Stock Connect trading link with mainland China, opening up a new investor base It would also simplify the cancellation of its New York listing, if such a move were to be enforced.
If trading in JD.com and Netease follows a similar path, any US attempts to use the capital markets as a trade or political bargaining chip will carry little weight The sooner politicians come to that conclusion, the better
Trang 4International Financing Review June 13 2020
2
Top news
Too much, too soon for frenzied
credit market?
Bonds Investors gravitate towards riskier structures but mini sell-off brings renewed doubts
BY SUDIP ROY
Questions about the intensity of
the credit binge were being
raised towards the end of last
week after US and European
equity markets suffered their
biggest one-day falls since March
on Thursday, bringing doubts
about whether the pace would
be sustained
A sober assessment of the US
economic outlook by Federal
Reserve Chair Jerome Powell on
Wednesday, and a jump in
reported coronavirus cases in
some US states in the south and
west on Thursday, led to
renewed selling
Whether this becomes a
prolonged sell-off or just a minor
correction of a market that had
risen too fast, too soon remains
to be seen, but both Powell’s
comments and the coronavirus
data delivered a reality check to
investors who had begun to get
excited about the prospect of a
quick economic recovery
“I think we needed it as the
market was too frothy and
issuers were getting greedy,”
said a senior banker on Friday
Bankers may now have to
reassess their pipelines and the
speed at which they planned to
bring deals into the market “We
had a few issuers early in the
week that said ‘no’ as we were a
few basis points wider Now I
guess they are 25bp wider So
that could mean they say ‘no
way, I need to get the 25bp back’
or they could say ‘OK, I messed
up and this could retrace more’
It’s too early to tell,” said the
banker
The good news for bond
markets is that the technical
support is still huge “Investors –
and the ECB – are still buying
We will just need to see higher
new-issue premiums Net-net, I
think we slow a bit, but don’t stop,” said the banker
Even on Thursday as the S&P
500 fell nearly 6%, some bond issuers still managed to print deals While a public holiday in parts of Europe meant the euro market took a breather, three US high-yield issuers priced deals and THAIOIL sold a US$1bn dual-tranche offering – inside fair value too – with some of the paper going to US accounts
The second half of the week WASûINûSTARKûCONTRASTûTOûTHEûlRSTûhalf as primary markets on both sides of the Atlantic were busy – despite the odd no-go call
While sovereigns led the way, WITHûlVEûEUROZONEûGOVERNMENTSûraising funds and three other European nations pricing publicly syndicated bonds, the credit markets across the world were also active as investors gravitated towards lower-rated issuers and riskier structures
“The huge bid for bank capital, corporate hybrids, Asian high-yield and so on is
incredible,” said another senior banker earlier in the week
The market backdrop was so good ahead of Wednesday’s FOMC meeting that some thought it was even better than
at the start of the year even if
credit spreads haven’t recovered
to the tights of that period
h4HEûMARKETûISûONûlREûANDûprobably better than January and February when it was thought we were in a utopian phase,” said a syndicate banker before Powell’s comments
REALITY CHECK?
At €269bn, publicly syndicated issuance by European sovereigns
in the euro and sterling markets
is already almost double the amount raised in the whole of
2019 No other year in recent times has seen €200bn of issuance
As for euro issuance overall, the total for the year has already
SURPASSEDûõBNû4HEûlRSTûthree days of last week saw about €60bn of issuance – from SSA through to high-yield – with the week shortened by the Corpus Christi holiday on Thursday
It is an even more incredible story in the US where investment-grade issuance volume of US$1.1trn is just US$27bn shy of the amount raised in the whole of 2019 The full-year record of US$1.33trn set
in 2017 looks set to be smashed
But while supply has boomed ever since central banks began pumping unprecedented amounts of liquidity into the lNANCIALûSYSTEMûINûRESPONSEûTOûthe coronavirus outbreak, the rally was causing a sense of disquiet in some quarters
“I personally don’t buy this STRENGTHû3HORTûTERMûlNEûTHEREû
is a huge amount of cash trying TOûlNDûAûHOMEûANDûCERTAINûSECTORS ûSUCHûASûTECH ûWILLûBENElTûand rightly should be strong But give it three to six months and I think it has to unravel as the reality and costs of Covid are seen,” said one fund manager
Others agreed that there will
be an eventual fallout “Maybe lNANCIALûMARKETSûHAVEûNOWûJUSTûBEENûCOMMODITISEDûBYûlSCALûANDûmonetary stimulus, the latter mostly It’s simply now too much money chasing too few lNANCIALûASSETS ûWHETHERûTHATûISûbonds or stocks,” wrote Tim Ash,
EM sovereign strategist at BlueBay
“And the instruments themselves now have no relationship to the underlying assets or investments, whether that is companies or sovereigns
There has to be a price for all this, surely Maybe later on in INmATION ûORûPERHAPSûBADûPOLICYûchoices.”
1.5 2.5 3.5 4.5 5.5 6.5 7.5
2/6/20 2/5/20
2/4/20 2/3/20
2/2/20 2/1/20
of Covid are seen”
Trang 5International Financing Review June 13 2020 3
For daily news stories visit www.ifre.com
@
In the meantime, though, the
fear of missing out pushed
investors into corners of the
market they would not have
looked at just a few weeks ago
“It looks like the yield hunt
has reached its illogically logical
height,” said Olga Budnovits, a
portfolio manager at Main
Partners
TAKING ADVANTAGE
Borrowers can hardly be
blamed for taking advantage
In emerging markets, for
example, supply from Africa
tentatively started again even
though several governments
from the region are seeking
countries, priced a US$750m
5.5-year non-call two issue at a
yield of 7.125% That compared
with initial talk of the 7.75%
area
Initially the company was
targeting a US$425m deal to
fund a tender offer on its
US$600mn 9.125% senior notes
due 2022
But such was the level of
interest following a day of
marketing, the tender was
cancelled and the deal was
UPSIZEDûWITHûTHEûPROCEEDSûNOWû
to be used to fully take out the
2022s at their call date next
month
Another regional issuer,
AFRICA FINANCE CORP (A3,
negative outlook) was also in
the market on the same
day The pan-African
multilateral institution,
based in Nigeria, sold a
yield of 3.25%, signifying a
minimal premium at most
“The screen was full on
Tuesday and order books
everywhere were stellar Fish
aren’t biting – they’re
swallowing the whole bloody
arm you hold out,” said the
syndicate banker
Another example of the
growing interest in esoteric
credits was evident in the euro corporate market as three unrated issuers – Portuguese utility GALP ENERGIA, French small appliance manufacturer
SEB, and ILIAD, a telecommunications operator across France and Italy – raised funds Galp and SEB had not issued since 2017
“It was not that long ago that you would have advised against unrated borrowers issuing, but the market is in good shape,” said another syndicate banker as these deals priced
MOMENTUM PLAY
DEUTSCHE BORSE and VW, meanwhile, maintained the momentum in the recently reopened corporate hybrid market
h)TûISûAMAZINGûHOWûSOMEûOFûthose credits that a few months ago you would have been wary
of have really rallied,” said a banker at one of the leads as VW priced its €3bn dual-tranche offering
“Hybrids are of great interest
to us at the moment I am getting something like a Double B yield on a bond from what is usually a very high quality issuer,” said an investor
h'IVENûTHEûYIELDû)ûCANûlNDûINûsenior, even if I go to the more riskier issuers which I don’t really want to do, there is a clear BENElTûTOûHYBRIDSûANDûWEûHAVEûactually increased their share in our portfolio.”
IN ON THE ACT
High-yield issuers were also getting in on the act Following only a trickle of deals in European primary over the past three months, supply began to pick up
Leading the way was VIRGIN MEDIA as it dipped into the euro, sterling and US dollar markets
to clean up its debt stack prior
to its merger with O2
“Finally the European issuers are coming out of hiding,” said a high-yield analyst
Average junk bond yields have recovered to 4.3%, down from a peak of 8.9% in March, ACCORDINGûTOû2ElNITIVûDATAûSome analysts are cautiously optimistic about the outlook, thanks to supportive technicals
“In high-yield, there’s been
no supply, because issuers haven’t needed to come But because of government support they’ve got liquidity anyway and
that’s reducing defaults,” said
!ZHARû(USSAIN ûHEADûOFûGLOBALûcredit at Royal London Asset Management
“That creates an environment
on the technical side that is very supportive Defaults aren’t going to be anything like what people thought they were going
to be two months or even a month ago.”
CAUTIONARY TALE
But while sectors such as high-yield and emerging markets play catch up, other areas were providing a cautionary tale
On Monday, Additional Tier 1 transactions from COMMERZBANK
and ABN AMRO demonstrated the strength of the primary market, with combined demand for the two trades peaking above
€19.5bn
But by mid-morning on Tuesday both deals were bid below par, at 99 and 98.60, respectively, setting a new tone, bankers said By Friday morning they had fallen to 97 and 97.62 respectively, according to 2ElNITIVûPRICES
Still, demand for less straightforward deals did not disappear as on Wednesday BPER BANCA BECAMEûTHEûlRSTû)TALIANûlender outside the country’s top tier to enter the market since the coronavirus outbreak
And NATIONWIDE BUILDING SOCIETY
took the AT1 revival to the sterling market, printing a
£750m deal on more than
£4.4bn of demand It was the since November
h)TSûAMAZINGûHOWûFARûWEVEûcome and we really are getting very close [to pre-crisis spreads],” said a DCM banker “The worry is whether
we have, in the last three or four days, moved too far too fast?”
“The market needs to consolidate because you can’t go 10bp tighter every day.”
Additional reporting by Eleanor Duncan, Tom Revell, Ed Clark, Robert Hogg
2,800 2,850 2,900 2,950 3,000 3,050 3,100 3,150 3,200 3,250 3,300
RUNNING OUT OF STEAM
Trang 6International Financing Review June 13 2020
4
Top news
Bottomless demand for sovereign issues
Bonds Investors clamour for sovereign paper in banner week for syndications
BY HELENE DURAND
Six sovereign issuers descended
on the European primary market
last week, raising
€40bn-equivalent over two days in an
extraordinary manifestation of
demand that saw books peak over
€303.5bn-equivalent, despite the
relentless pace that has
characterised the sector in 2020
IRELAND, SPAIN and GREECE, three
issuers that almost a decade ago
were caught up in one of the
worst sovereign crises to hit the
region, were greeted by a deluge
of investor demand
They emerged on the same
day as the UK brought a £9bn
October 2050 and ahead of
another €9bn that was priced
the following day by GERMANY
and FINLAND
“There are six hundred billion
reasons why, as an investor, you
should buy bonds,” said a DCM
banker referring to the ECB
Pandemic Emergency Purchase
Programme that was increased
by €600bn at its last meeting
He added: “You have to
remember, some of the big issuers
like ESM or KfW have been
missing from the market, while
we have an unprecedented level
of central bank support which GIVESûTHEûMARKETûCONlDENCEvSyndications have become a mainstay for sovereign issuers trying to chip away at their increased funding needs resulting from the coronavirus pandemic
Over €269bn-equivalent has been raised using the method in euros and sterling this year, versus over €139bn-equivalent for the whole of 2019, according
to IFR data, and bankers expect the tempo to remain rapid while conditions are strong
“All these sovereigns are accelerating their plans because
they need more [funding] and they all want to come before the summer,” another DCM banker said
Spain and Ireland, for example, had recently outlined UPSIZEDûFUNDINGûNEEDS
“The ECB has buoyed markets and the tone is phenomenal, so clearly the decision to come now
is the right one,” he said, adding that other sovereigns that had wanted to bring their deals last Tuesday, opted to step back when it became clear how much supply was expected
“You could have had a bit of a TRAFlCûJAM ûBUTûROSEûmore than tenfold to trade at US$5.53 on June 8
“The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity for the debtors to raise capital on terms that are far superior to any debtor-in-possession lNANCING vû(ERTZûSAID
!NDûUNLIKEûTYPICALûBANKRUPTCYûlNANCING ûselling stock would not impose new covenants, it said
Philip Scipio
Trang 27International Financing Review June 13 2020 25
People
& Markets
European banks say Q2 activity robust
European banking executives expressed
cautious optimism last week about
second-quarter trading – although they held back
from some of the bullish predictions made
by US peers in recent weeks
CREDIT SUISSE‘s new chief executive Thomas
'OTTSTEIN ûINûOFlCEûSINCEû&EBRUARY ûSAIDûACTIVITYû
so far had been “robust” in May and June
“Those early indications that we have seen
now in the last couple of weeks have been
actually quite promising and going in the
RIGHTûDIRECTION vûHEûSAIDûATûAûlNANCIALSû
conference organised by Goldman Sachs
“We clearly had a lot of stress in the system
in the second half of March, but things really
calmed down in April and they continue to be
quite robust in May and June.”
Gottstein warned that economic data for
the second quarter would be “very bad” for
Europe and the US But he said investment
banking colleagues were having a high level
of engagement with clients
Many corporate clients have made the
MOSTûOFûTHEûLOWERûRATESûAVAILABLEûTOûRElNANCEû
THEMSELVES ûSAIDûCHIEFûlNANCIALûOFlCERû$AVIDû
Mathers He said there had been a “very high
degree” of appetite
In a separate piece of research Credit Suisse
said it expected a solid rebound in European
economic activity during the third quarter, which could fuel an acceleration later in the YEARûINû-!ûhASûCORPORATESûANDûlNANCIALûsponsors vie to get ahead of the pack”
It said more corporate carve-outs could occur as clients “strive for optimum business models and structures in lower growth environment”
US bank chiefs have indicated trading revenues in the second quarter will continue Morgan last month said its Q2 markets revenues were on track to be up 50% from the same period last year
He said the CRE portfolio was “pretty ROBUSTvûSINCEûITûWASûWELLûDIVERSIlEDûANDûHADûreasonably low loan-to-value ratios of around 60% Similarly the aviation loans were AGAINSTûMODERNûmEETS
investment-grade oil and gas credits such as
US shale developers and its retail names
were mainly involved in groceries, he said at the Goldman conference
“We have done a bottom-up look across all those high and medium-risk sectors We HAVEûIDENTIlEDûTHEûSINGLEûASSETSûTHATûNEED ûsay, more attention Clearly some have moved to work out,” he said “[We] will be helping our clients as well as we can through THEIRûCASHmOWûDIFlCULTIESv
Credit Suisse’s Mathers said the outlook for its corporate loans had improved since THEûENDûOFûTHEûlRSTûQUARTER ûPARTICULARLYûFORûoil and gas names The bank had SFr2.9bn (US$3.06bn) of exposure to non investment grade oil and gas at the end of March
“There’s been a very substantial narrowing
of spreads over the course of the last two months, which I think one would expect to BEûBENElCIALûTOûTHEûRESERVEûBUILDûTHATûWEûTALKEDûABOUTûATûTHEûENDûOFûTHEûlRSTûQUARTER vû
he said, citing central bank support for investment grade credit
sub-“We’ve obviously seen a very sharp rise in oil and gas prices from the very distressed PERIODûATûTHEûENDûOFûTHEûlRSTûQUARTERû3Oû)ûthink in many ways, those types of risk exposures have probably improved since the ENDûOFûTHEûlRSTûQUARTERv
Christopher Spink
Travelodge uses new law for relief
TRAVELODGE last month fought off an
application by some of its landlords to
wind-up the UK hotel chain, after it failed to
pay its second-quarter rents The company
cited a planned new UK law aimed at
protecting tenants from eviction during the
coronavirus crisis – even though it is not yet
in force
The measures have since been put forward
to parliament, as part of the corporate
insolvency and governance bill, and are
being debated Travelodge, owned by
GOLDMAN SACHS, GoldenTree and Avenue
Capital, obtained the secret injunction
despite the laws not being passed
The High Court judgment was published
on Monday, days after Travelodge launched a
company voluntary arrangement It is
proposing to reduce the rents it pays on its
564 hotels by at least 50% until the end of
2021 Creditors, including landlords, will
vote on the proposals on June 19
There has been upset among its 300
landlords, since the CVA allows holders of
other unsecured debts to vote on the plans,
including those held by Travelodge’s equity
owners At the same time only a proportion
by value of landlords owed rent will be allowed to vote on the deal
Travelodge said the CVA was designed to temporarily reduce its obligations
“particularly those relating to its largest lXEDûCOSTûITEM ûLANDLORDûRENTSvû)TûSAIDûITûDIDûnot want to “compromise the claims of other creditors” such as its bank lenders and holders of its senior secured 2025 bonds
It said such other creditors will not be impacted by the CVA, except by waiving their rights to declare a cross-default on launch of the CVA These creditors had already agreed to that
At least 75% of unsecured creditors by value must approve the CVA and at least 50% of those unconnected with the company The CVA can also be challenged up to 28 days after the vote
Goldman and Travelodge’s shareholders have agreed to invest £40m more in the company, £10m of which is only available if the CVA goes through and any challenge is rejected The remaining £30m is contingent
on a £60m facility already provided by the SHAREHOLDERSûBEINGûRElNANCED
Before the CVA was launched, discussions had been held between the company and its landlords about how to cure the rental
default But Travelodge’s proposals were not considered adequate by all the landlords
“As this is a complex process involving around 300 individual landlords, each with differing interests, the company has decided to move to a formal CVA process to achieve the temporary rent reductions required,” it said
If the CVA is rejected, Travelodge has said it could make use of the new cram-down proposals
in the corporate insolvency and governance bill, which allow haircuts to be imposed on all creditors provided one class approves them
Travelodge said the business could lose
£350m of revenues this year due to closures, with much in its peak period between April and September The company’s annual rent bill is £215m Under the CVA, £230m in rent will be paid up to the end of 2021
Nick Leslau’s Prestbury is Travelodge’s biggest investor with 123 hotels It said it was scrutinising the proposals “in order to best protect its position”
Another landlord said the CVA was likely
to go through since it would be hard for most landlords to let their buildings to alternative tenants currently
Christopher Spink
Trang 28International Financing Review June 13 2020
26
MOELIS CO-PRESIDENT NAVID MAHMOODZADEGAN, P19
“It’s hard to build relationships if
you’re not sitting in front of people”
India bankruptcy freeze to hurt banks
India’s freeze on fresh bankruptcy
proceedings due to the coronavirus
pandemic is expected to hurt the country’s
already fragile banking system and delay
bad debt resolutions
The government amended the Insolvency
and Bankruptcy Code 2016 so that no new
BANKRUPTCYûCASESûCANûBEûlLEDûFORûDEFAULTSû
arising on or after March 25, when the
lockdown was declared, with the suspension
to last for six to 12 months
While the suspension of fresh bankruptcy
cases will help businesses facing a near-term
LIQUIDITYûCRUNCH ûhBANKSûANDûlNANCIALû
institutions are worried that the credit
discipline which was enforced by the
bankruptcy code may go for a toss”, said Aviral
Jain, co-head and managing director of global
RESTRUCTURINGûADVISORYûATû$UFFûû0HELPS
India introduced a new insolvency and
bankruptcy framework in 2016 to try to
speed up debt workouts and has tweaked it
over the years
The clean-up track record for India’s
banking system is weak, though, with few
SIGNIlCANTûRESTRUCTURINGSûINûTHEûPASTûUNTILû
THEûCENTRALûBANKûPUSHEDûlNANCIALû
institutions to appropriately recognise the
stress on their balance sheet The Reserve
Bank of India forced lenders in 2017 to begin
insolvency proceedings against some of the
biggest defaulters, rather than rolling over
bad debts or understating them
Some analysts believe there could be an incentive for banks to revert to their old ways for handling large non-performing accounts in the absence of bankruptcy proceedings and with weak progress on inter-creditor agreements
“Any such action would be negative as it would delay timely recognition of bad assets and affect recoverability,” said Saswata Guha, director at Fitch
Also, given the suspension of section 10 lLINGSûUNDERûTHEû)"# ûWHEREBYûCORPORATEûDEBTORSûCANNOTûVOLUNTARILYûlLEûFORûinsolvency, some businesses may not be able
to get the immediate support that was previously available under the bankruptcy code
“This will lead to unnecessary decay of their businesses for the next six to 12 MONTHS vûSAIDû*AINûATû$UFFûû0HELPSûh'IVENûthese circumstances, it would be prudent if the central bank announces a one-time restructuring scheme to resolve such stressed assets during the six-months moratorium period.”
On March 27, the RBI offered a month moratorium on loans, which was extended by another three months on May
three-22, to tide debtors over the economic crisis
Goldman Sachs expects India’s economy to shrink 45% year on year in the April to June QUARTERûANDûûINûlSCALûûAFTERû)NDIAûimposed a lockdown lasting more than two
months to limit the spread of the coronavirus
DISTRESSED OPPORTUNITIES
$EPENDINGûONûTHEûPACEûOFûECONOMICûrecovery, there is a risk that bad loans as a percentage of total loans will rise more than 500bp, or even double in the next two years from an estimated 9% at the end of March quarter, according to Fitch
Banks are also likely to face bigger principal losses Corporate insolvency resolution proceedings are likely to suffer from lower valuations and a possible decline in interest from bidders because of the uncertainty across many sectors of the economy
“This in turn may result in creditors having to agree on higher haircuts,” said recent note
However, the economic pain is expected
to throw up opportunities for distressed debt investors
“There is an opportunity to extend credit
to good quality borrowers due to an increase
in demand for capital following the slowdown in growth, and a constraint in are less able to provide liquidity,” said Haseeb Malik, partner and head of Asia corporate and traded credit at Varde Partners
Krishna Merchant
Please contact us if you have
information about job moves at
your firm or within the market
Call +44 (0)20 7542 4367
or email steve.slater@refinitiv.com
Trang 29 FRONT STORY FINANCIALS
Nationwide demonstrates sub recovery
AT1 revival goes up a notch after UK lender prints
Bankers eye more opportunities as calls come due
NATIONWIDE BUILDING SOCIETY laid bare the
remarkable recovery in subordinated debt
levels as it brought the Additional Tier 1
revival to the UK on Wednesday, printing a
£750m deal on more than £4.4bn of demand
denominated AT1 since November, followed
the reopening of the euro AT1 market on
Monday by Commerzbank and ABN AMRO,
with combined demand for the duo peaking
above €19.5bn
But the UK lender was entering a softer
market, after the credit rally stalled on
Tuesday
Leads Bank of America, Citigroup, JP Morgan
and Morgan Stanley opened books for the
transaction with initial guidance of the
ûAREA
4HEûCOUPONûWASûSUBSEQUENTLYûSETûATûû
for an expected £600m–£750m, before
BEINGûlXEDûATûaM
Notably, Nationwide was able to secure a
lower coupon than it achieved with a
coronavirus outbreak
In September it priced a £600m perpetual
Bankers said the deal demonstrated just
how far the market has rallied since the
“AT1s have moved a fair clip from the
wides and are pretty much back to where
syndicate banker “It’s remarkable we’ve
GONEûALLûWAYûOUTûANDûBACKûINûAGAINv
SûnûITSûONLYû!4ûOUTSTANDINGûnûWEREû
Wednesday’s open, according to Tradeweb
Bankers put fair value for the new issue at
n ûIMPLYINGûAûBPnBPû
concession
They said the deal should perform better
on the secondary market than Commerzbank and ABN AMRO’s euro trades, which have traded below par after having been priced without premiums
“Coming off the back of weaker performance yesterday, perhaps [Nationwide]
STARTEDûAûBITûMOREûTENTATIVELY ... class="text_page_counter">Trang 13< /span>
International Financing Review June 13 2020< /b> 11
For daily news stories visit www.ifre.com
@... class="page_container" data-page="15">
International Financing Review June 13 2020< /b> 13< /p>
For daily news stories visit www.ifre.com
@
Albertsons de-risks... class="page_container" data-page="7">
International Financing Review June 13 2020< /b> 5
For daily news stories visit www.ifre.com
@
Morgan Stanley to