The European high-grade corporate bond market snapped out of a stubborn supply lull on Thursday, with two issuers seizing a market window to print deals in euros and sterling.
Boston Scientific (Baa1/BBB/BBB) raised its maximum size of €3bn from a four-tranche bond offering, while the financing entity for Thames Tideway Tunnel, Bazalgette Finance, launched a £300m 12-year green bond. The new deals were covered more than four times at peak orders but had to leave some premium on the table.
“The market is still tricky and difficult to navigate but there was more stability this morning with the US bond market seeing two relatively active days. It was a reasonable go-day,” said a syndicate banker on Bazalgette’s deal.
“Maybe we could have pushed further but a 10bp premium is not unusual for sterling deals and the NIP on the Boston trade also looks reasonable as they had to leave a bit to keep investors interested.”
Boston Scientific’s multi-trancher comprised three, six, nine and 12-year tenors which launched at mid-swaps plus 55bp, 93bp, 105bp and 120bp, respectively, via Barclays, Bank of America and Citigroup. The sizes were set at €1bn, €750m, €750m and €500m.
Bankers on and away from the deal saw fair value as 30bp—35bp inside the initial price thoughts in the areas of 80bp area, 115bp area, 130bp area and 145bp are. That meant the new bonds paid concessions of around 5bp for the three-year note and in the low 10s for the longer tranches.
“US issuers are more relaxed with price, while European issuers are slightly more opportunistic when it comes to raising debt in the capital market – they are so over-reliant on bank loans because it’s cheap and easy,” said a lead on the Boston Scientific trade.
The senior unsecured notes are eligible for the ECB’s CSPP programme as they are issued by a European entity American Medical Systems Europe. The US-based medical device manufacturer is the guarantor.
The new bonds also came on the heels of positive credit rating changes as Moody’s upgraded Boston Scientific’s senior unsecured rating by a notch from Baa2 on February 23 and S&P revised the company’s outlook to positive from stable on Wednesday. Both rating agencies cited their projection of continued solid performance over the near term, reflecting strong growth of key products.
Proceeds of the new notes will be used to fund a concurrent capped US$2.5bn tender offer on the company's dollar bonds.
Defensive trade
Water utility Bazalgette Finance landed its green bond at mid-Gilts plus 130bp, inside IPTs of 145bp–150bp. Final books were around £1.4bn.
“It’s a genuinely green offering, not just a green label, where the proceeds are going to be used to build a super sewer – it's different from an oil company doing ESG bonds,” said the syndicate banker.
“It’s a niche trade from a rare issuer, but a well-known project that was always going to appeal to the UK investor base.”
While the lead put fair value at 120bp, one DCM banker said the notes paid a concession of around 20bp. The senior secured notes with expected ratings of Baa1/BBB+ (Moody’s/Fitch) launched via Lloyds, RBC and SMBC Nikko.
Bazalgette Tunnel and Bazalgette Holdings are the underlying obligors. Bazalgette Tunnel is the sister company of Bazalgette Finance and is set up to construct, own and operate the Thames Tideway Tunnel, which runs underneath the River Thames through London to collect excess storm water and sewer discharge.