When is an Italian corporate not really an Italian corporate? It’s a question that many bankers have been struggling to work around over the last few years. When it has seemed that Italian (or Spanish, or Portuguese, or Irish) risk has just been too great for investors to take, they have emphasised just how un-domestic some borrowers are.
To provide a bit of comfort, for example, they will highlight that about 60% of Enel’s net capacity is from sources outside Italy. Similarly, around 40% of Telecom Italia’s revenues are from other countries.
Crisis or no crisis, these are international companies with international activity, bankers argue. Therefore it is only to be expected that they can fund at the pricing levels achieved by other international names.
All of which means that the market access seen by the big peripheral borrowers so far has not provided much of a gauge of sentiment to their troubled economies. But now there is a different name in the market — one that perhaps provides a better indication.
Snam, a gas transportation firm, is looking to reprice some €5bn of loans completed last year. It is a purely Italian company, focused on the transportation, storage and distribution of natural gas from Treviso near the border with Austria and Slovenia, and Mazara del Vallo in Sicily.
This is not to say that Snam is some little provincial borrower. Certainly, a Baa1/A- rated credit that can take €6bn out of the international bond markets within the space of four months — as Snam did in the second half of 2012 — cannot be dismissed as small fry.
But unlike with borrowers such as Iberdrola, Enel and Telefónica, bankers cannot point to Snam’s wealth of overseas activities and international revenue streams as a reason to justify tightening margins, especially when its domestic political environment is still so confused.
Encouragingly, this looks unlikely to make much of a difference. The consensus seems to be that Snam ought to have little trouble securing tighter pricing, even if it won’t be competing with the kinds of levels that the big German borrowers routinely get.
If it does successfully reprice its deal, it will have shown decisively that for some corporate borrowers, nationality doesn’t matter — even if their operations are entirely domestic. For well-rated, respected credits with a good financing strategy and plenty of ancillary business to dole out, bank lenders will be crawling over themselves to commit to deals.
In part, there is a virtuous circle at work here. It is precisely Snam’s exposure to international financing markets that has protected it from the worst of the contagion — and which now helps it maintain that same access. But whatever the specifics of Snam’s situation, the conclusion is a positive one: lenders are looking beyond a borrower’s country of origin.
