Nestle made a quick return to the European bond market to raise £900m from a two-tranche offering as it looks to diversify its funding channels, while investors continue to dismiss uncertainties around the food company's Russian business.
The notes came as Nestle (Aa3/AA–, Moody’s/S&P) looks for alternative markets in which to raise funds after pricing a €2bn three-tranche deal on March 21 via a European entity Nestle Finance International. This time, Nestle was tapping the sterling market through a US entity, Nestle Holdings, that has US dollars as its main funding currency with its businesses deriving revenue across the US. Nestle S.A. is the guarantor.
It was "more efficient" to fund in sterling than in euros after adjusting for the cross-currency swap, said a lead.
A £300m five-year note and a £600m 10-year bond landed at mid-Gilts plus 80bp and 90bp, respectively, via Credit Suisse, Deutsche Bank, HSBC and RBC Capital Markets, indicating new issue premiums of around 10bp and 10bp–15bp.
Syndicate bankers said the shorter tenor started 25bp back of fair value at initial price thoughts, while the longer note started 25bp–30bp back. IPTs were 95bp area and 105bp–110bp.
Books were skewed towards the 10-year note that offered slightly higher concessions and generally gains solid demand from UK insurers, although the Double A rated issuer received a "good broad participation" across different investors, according to the lead.
Orders for the April 2027s and April 2032s came in at over £725m and more than £1.175bn.
Nestle's euro tranches last week paid minimal to negative new issue concessions even as it came under pressure to halt operations in Russia. Although it is still selling essential foods, the food company has halted sales of most brands in Russia, including KitKat and Nesquik.