The deal was first announced on May 10, with JP Morgan as gloco and sole physical bookrunner, with BNP Paribas joining the deal as a bookrunner — a role which carries formal risk and diligence responsibilities for the issue, but does not give it practical ability to drive the terms of the offering.
At announcement, the €75m offering was described as being for general corporate purposes, with the company clarifying that this included “ongoing working capital needs”, but also a portion of the purchase price for the acoustics and soft trims business of Faurecia and STS Group.
At the time of announcement, the company’s existing €350m April 2024 was seen at roughly 97-98, according to MarketAxess’s BondTicker service.
JP Morgan initially marketed the bonds at a level below that, around 94-95, which offered a new issue and illiquidity premium to the outstanding levels, but wasn’t successful in finding demand at that level — indeed, the efforts seem to have pushed down trading levels for the outstanding issue.
BNP Paribas then took over the marketing last week as sole gloco, placing the bonds on Friday at 92.5, against an outstanding level seen by one banker in the low-mid 95 area.
The new note was a mirror – meaning identical terms to the outstanding, but not fungible. Tapping an outstanding bond at a significant discount attracts a different tax treatment, which may require US withholding tax to be paid on the extra amount.
This does, however, potentially hurt liquidity in the new offering. Rather than investing in a fungible issue which adds on to an existing benchmark-sized bond, investors are trapped in a small issue which may not be readily marketable if they want to exit.
The 92.5 cash price gives a 7.079% yield to maturity, though the bonds are callable at par from April next year.