Investors took an immediate risk averse stance to the news, with euro investment grade spreads widening by 2bp-3bp. But as with the UK’s vote to leave the European Union in June, buyers soon emerged, restoring balance to the secondary market.
All eyes are now on the US and how traders and investors there react to the election result. As long as the US market does not fall and keep falling, European bankers will push out new issues.
There is a consensus on that point, and the main debate is over new issue premiums. Some see fatter concessions as inevitable, but others predict limited widening. They say NIPs have already widened during the last fortnight and companies are unlikely to have to pay much more this week or next.
Only one high yield deal is expected at the moment, for Perstorp, the Swedish speciality chemical company. It opened in Copenhagen on Monday a week-long roadshow for a €1bn-equivalent dollar and euro refinancing deal.
The Caa1/CCC+ rated firm has mandated Goldman Sachs as global co-ordinator and bookrunners HSBC and Nordea to sell €725m of notes in euros and dollars, including a euro-only floater, and a $420m second lien bond. All are five year non-call two, except the floater, which is non-call one. Pricing is set for Monday November 14.
The roadshow has been staged to cast the net as wide as possible among investors and the deal offers a range of formats, which may help it ride out the spike in volatility after the US election result.
Trump aside, the wind is in the high yield market’s sales. Issuance by western European firms this year has been €71bn, only 25% down from the €95bn tally by the same point in 2015. At one point this year issuance was 60% down.
And so far in the fourth quarter, there have been 17 issues this year, against 10 last.
For the past four weeks, euro corporate investment grade bonds have inflicted losses on investors, ranging from 0.6% on triple-B rated paper to more than 1% on triple-A bonds.
The euro high yield total return, however, is positive, from 0.5% on double-B paper to 1.4% for triple-C notes, JP Morgan said on Monday.
Conditions in the European leveraged loan market have remained fairly benign. The S&P European Leveraged Loan Index is broadly stable at around 98.6, having hit its highest level for the year so far on November 1 of 98.68. The Markit iTraxx Crossover is also firm at 326bp.
However, an investor in London said: “Bankers may decide to wait a few weeks with deals, so that they have more of an idea on pricing. It’ll be very hard to price anything at the moment.”
Genesys Telecommunications, the US contact centre software group, owned by Permira and Hellman & Friedman, held bank meetings in London on Tuesday for its $2.25bn-equivalent loan package backing its $1.4bn acquisition of cloud software firm Interactive Intelligence.
The debt includes a $550m-equivalent euro term loan ‘B’. Genesys’s leverage is set to rise to 12.7 times Ebitda after the deal, according to S&P Global, which downgraded it to B- on Monday. Price guidance on the loans is to be determined.
Meanwhile, PQ Corp, the US inorganic chemicals producer, has widened its amendment request on its $1.2bn-equivalent loan package signed in May, a move seldom seen in the market since the summer break.
The amendment increased the tranches from $900m to $930m and from €265m to €284m. Margins widened to 425bp and 400bp respectively, from guidance at 375bp, offered at par with a 1% floor.
“The repricing trend should pause for a while,” the investor added. “Investors will just look at them and say: are you kidding me?’”
Nordic fluting manufacturer Powerflute allocated its €240 term loan ‘B’ on Tuesday, backing its €400m leveraged buyout by Madison Dearborn Partners. The loan was allocated at the wide of 475bp-500bp guidance, offered at 98.5 with a 0% floor.
Dan Alderson, derivatives editor +44 207 779 7311
Max Bower, leveraged loans +44 207 779 8964
Silas Brown, niche currencies and private placements +44 207 779 8689
Jon Hay, corporate finance editor +44 207 779 7321
Victor Jimenez, high yield +44 207 779 7379
Ross Lancaster, corporate bonds editor +44 207 779 7322
Elly Whittaker, loans editor +44 207 779 8361
Corporate finanicng coverage highlights:
European HY to tough out US election even if Trump triumphs
Perstorp lone high yield borrower amid US vote suspense
With 2009 record in sight, corporate bond market gears up for post-election supply sprint