Bouncing back
BNP Paribas recovered its leadership in equity-linked as the European market bounced back in 2019. It was on the biggest deal, took a leadership role and was once again the most active bank in the region, making it IFR’s EMEA Structured Equity House of the Year.
No other bank in Europe gives structured equity the same high importance within its equity capital markets operations as BNP Paribas. It therefore suffered most from the 47% collapse in issuance in 2018.
The bank needed to step up its game in 2019. It had for many years been the volume house; when volume slumped so did its standing.
In the awards period to mid-November, BNPP had scored more deals than any other bank at 13 and leapt to number one in the league tables from sixth as market volumes recovered by more than 30%.
Although it was a consistent top five player, the number one slot had only been BNPP’s once in the previous decade, so this was a landmark moment for the bank.
A crucial component in the league table surge was getting on the largest deal of the year. Vodafone’s non-dilutive mandatory convertible bond was a reprise of a 2016 deal, but this time with added banks. BNPP secured a slot in the syndicate of five, as did HSBC (the other outperformer in 2019), on the £3.44bn deal (of which £1.9bn was distributed). BNPP was also a hedge counterparty on the equity derivative.
The deal once again failed to achieve full equity credit from ratings agencies (due to Vodafone’s actions) and includes no premium but is technically the largest in the EMEA market for 15 years.
Being the most active bank had always meant that BNPP had the freshest view of the market, aware of what investors were looking for and what they would shun. It was first out of the gates on January 8 with a €200m tap for Cellnex, which ended up being just an aperitif for the €850m nine-year CB that followed in June from the Spanish telecoms company, which is IFR’s Corporate Issuer of the Year.
And BNPP was consistently in the flow from then on, printing in eight months of the year and bookending the first deal of the year with the last pre-summer trade for Worldline and the final deal of the awards period from BW Offshore – all as a global coordinator.
Coming into the year the expectation was that interest rates would rise, helping to put CBs back on the agenda. It didn’t work out that way, yet more corporates were convinced to issue CBs.
“A few years ago convertible bonds were the only way to get a negative yield, then everyone could from straight debt,” said Thierry Petit, head of EMEA equity-linked at BNP Paribas. “This year we have pushed premiums to higher levels, yields lower and extended tenors. Issuers with access to both markets saw the opportunity.”
As equity markets rose it helped convince more issuers to consider the potentially dilutive product, often making decisions very quickly in reaction to moves in their stock price. This meant abandoning pre-sounding and relying on the bank’s judgment.
September saw US$5bn of issuance in reaction to share price moves and investors sitting on cash. In one week BNPP priced Edenred’s €500m debut that broke the negative-yield record for a CB at minus 1.53% (surpassing the record BNPP set with Worldline in July) and Veolia’s €700m CB, making the bank uniquely positioned to advise on the likely reception for its third deal of the week with GBL’s exchangeable into LafargeHolcim.
“To be opportunistic you need the market knowledge to offer the opportunity,” said Edwige Lacroix, deputy head of EMEA equity-linked. “Investors were begging for new paper as redemptions over summer were high.”
The bank was a bookrunner on GBL’s trade but was global coordinator on eight of its trades and passive on only two.
GBL is a regular issuer in equity-linked, and so were several others that employed BNPP. The most notable of those was French software company Ubisoft – another September trade – which had not previously employed BNPP, and care homes provider Orpea that had not used BNPP on its previous CB.
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