French telecoms operator Orange decided to bring forward a new issue and tap into the primary on Tuesday, rather than wait until January, when heavy supply means that borrowers are often jostling for the attention of investors.
Only a day before, the financing arm of Japan’s Nippon Telegraph and Telephone demonstrated that although it is late in the year, accounts are still there for new issues, even at relatively limited premiums, providing the credit and product are right.
Orange (Baa1/BBB+/BBB+) clearly fit the bill. Its €1bn 12-year senior unsecured amassed orders of over €5.5bn at the last update, with leads then able to fix the spread at 55bp, for a concession of just 5bp.
“Investors' cash positions continue to be robust and new issue supply in the final couple of weeks of the year is low,” said one banker involved, as an explanation for why the issue was so sought-after.
In addition, Orange is a well-known and liked credit that does not actually appear in the market that often. The issuer has raised €2bn in the primary this year, although €500m of that was subordinated debt.
“The [new issue] was actually more planned for early 2022,” said a second banker at one of the leads. “But they just wanted to ride the NTT momentum and do this now in a quieter market versus what is expected to be a busy January.”
Bankers have been debating since November whether to get clients to go into a market that has, until this week, demanded some steep premiums, at least at the start, or hold off until January. While premiums may be lower then, rates could well be higher and there would be considerable competing supply.
With concessions now falling, the balance of things may be changing. Although the end of this week would typically be the point at which the high-grade euro corporate supply finishes for the year, several bankers said that they would not be surprised if issuers decided to try their luck and squeeze in one last deal, either in the second half of this week or the start of next.
In a sign that syndicate officials still need to be careful about the way they approach the market, Orange's IPTs of 80bp-85bp, incorporated a starting concession of 30bp-35bp
That was broadly in line with what was seen at the end of November, when syndicate officials were emphasising how important it was to widen IPTs to offer an initial concession of 30bp or more, demonstrating to investors at the outset that the issuer was willing to pay up if required.
On Monday, NTT Finance’s €1.5bn dual-tranche green bond, which was executed after nearly three weeks of being sidelined by market volatility, exceeded bankers' expectations by generating orders in excess of €5.75bn and paying premiums of around 1bp and 10bp on the two notes.
Lead initially offered health premiums, announcing IPTs for the four and seven-year that implied premiums of around 30bp and 35bp.
Credit Agricole and Morgan Stanley acted as global coordinators for Orange’s new issue and were joined by bookrunners BBVA, BNP Paribas, CIC, Citigroup, Deutsche Bank and ING.