The issuer mandated BNP Paribas and Citi to arrange investor meetings in the US from next week, with meetings available in New York and New Jersey on Monday, in Boston on Tuesday, in Philadelphia on Wednesday, and potentially elsewhere in the US on Thursday and Friday.
European investors will get the chance for calls and meetings in the week following — though Tesco said that it was looking at a dollar-denominated deal with 144A documentation.
The deal follows last week’s offer from NewDay Funding, a UK credit card master trust which securitizes store-branded cards.
Arrangers Bank of America Merrill Lynch and Lloyds and joint leads HSBC and Santander anchored the deal with a $150m dollar clip at 75bp over one month Libor. This tranche had a 2.1 year average life, compared with the 3.1 year average life for the £33m sterling seniors, which came at 100bp over Libor.
At this level, US investors buying the seniors were getting more than twice the spread of competing US or Canadian cards — enough to ease any concerns about the overleveraged UK consumer or the coming economic impact of Brexit.
“What you lose in swap costs [from dollars] you make up in an all-in spread basis,” said one syndicate banker. “There’s a decent amount of execution risk for some of these non-bank issuers, and so it is worthwhile derisking the trade by placing some of the dollars ahead of time.”
Tesco issued a sterling-denominated credit card ABS last autumn, placing a £300m ‘A1’ class at 53bp over Libor through sole arranger Citi.