Two high-grade corporate borrowers are preparing to return to the euro bond market after a long absence, and those returns will involve some price discovery in the face of selective investor appetite.
Urenco (Baa1/BBB+, Moody's/S&P) and Heraeus (Baa1/BBB+, Moody's/S&P) are holding calls until Tuesday and looking to print capped €500m senior trades, with 10-year and five-year tenors, respectively. For Urenco the issue will end a spell of almost seven years without issuing new debt in the international bond market, while the hiatus for Heraeus stretches to 12 years. They will be coming up against a difficult market backdrop that has seen investors become increasingly picky.
"Investors are finding excuses not to buy a deal these days, so every unfamiliar name - they have to overcome a certain hurdle to bring a deal," said a syndicate official. "Credit fundamentals are what matter, not whether an issuer came a week, month or a year ago."
Having a liquid curve is helpful in this market to get a deal done, but investors are more driven by the sector an issuer is operating in, said a second syndicate banker.
"It's not like an issuer with no liquidity has no chance. It has way more chance compared to some real estate names and maybe gas utilities related to the Russia-Ukraine conflict," he said.
If a borrower is an infrequent issuer but a market leader in its segment or operates on a decent scale, attractive pricing can bring investors into a new deal.
"When a company comes to the primary market for the first time or after a long break, we usually expect to receive some additional new issue premium and it potentially makes the name more interesting," said an investor.
Urenco is a uranium enrichment company owned by the governments of the UK, Germany and the Netherlands. The nature of the business means the deal "won't be for everyone," said the first syndicate official, with countries like Germany shutting down its nuclear industry over environmental concerns.
Urenco's link to a Russian enrichment company is another area where investors will demand extra information.
"The company cancelled its contract with the Russian company so they did all the right things. It's less about that and more about the place uranium holds as an alternative source of energy," said the first banker. Urenco is holding calls via Barclays, BNP Paribas, Credit Agricole and Deutsche Bank.
Another long absentee preparing to come back is Heraeus. Although small in size, the German family-owned company is one of the leading providers of diversified high-value technological solutions. The company's new bonds are set to become its first benchmark offering as it has only tapped the market once before, in 2010, with a €250m sub-benchmark deal.
Heraeus is holding calls via Commerzbank, Deutsche Bank, ING and UniCredit for the proposed note that will be used for the refinancing and early repayment of a €500m bridge loan that was raised in December last year to partially finance the acquisition of US-based Norwood Medical.
"For first-time issuers, issuers that haven't issued for a while and issuers that have internally changed their business profile and need a re-evaluation of its existing curve – they all need to do roadshows," said the second banker. "We can't open a book without a roadshow for unfamiliar names. Every investor will say - who is this?"
Tapping the market on Wednesday is an option for both Heraeus and Urenco, on the proviso that market conditions hold up, according to leads.