SELP and Compagnie de Saint-Gobain are looking to make the most of the afterglow from July's rally to beat the euro investment-grade market rush in September and print ESG-themed deals.
European real estate investor SELP is holding calls via Bank of China, BNP Paribas, NatWest Markets and Santander ahead of a five-year euro green bond, expected to be rated Baa2 by Moody's and BBB+ by Fitch.
Construction materials company Saint-Gobain (Baa1/BBB, Moody's/S&P) has appointed Credit Agricole, Goldman Sachs and Societe Generale as global coordinators for three €500m no-grow bonds. There will be a three-year tranche and a short six-year leg, as well as an inaugural sustainability-linked tranche with a 10-year tenor.
The companies are entering a market which saw the OAS on the iBoxx euro liquid corporate index drop from 190bp at the start of July to 158bp. The average yield over the same period fell from 2.91% to 2.21%.
"Some guys were looking a bit earlier but the market wasn't for them, but this July rally seems like it still has legs," said a lead on SELP.
"The earnings season has proven quite positive – perhaps surprisingly. Then SSE and Annington went well, people took comfort from that, so why wait?"
SELP will be hoping to gain extra momentum from a tender offer for its €500m 1.25% 2023s attached to the deal, as well as the general lack of supply in the corporate market.
"A lot of accounts have cash which they were holding in case of redemptions, but that fear seems to have faded," said the lead. "They are putting some of that money into secondary but can't find much there. And, for the issuer, it decided the secondaries are back on track, the market looked open and people have cash available."
SELP has four euro bonds outstanding, with the new note set to sit between a conventional December 2026 bond and a green May 2029 bond, seen by leads before the announcement at I-spreads of 200bp and 201bp respectively. In a demonstration of how the tides have shifted in SELP's favour, the two bonds were bid at 238bp and 228bp at the start of July.
Pricing feedback will also roll in during the course of Monday through the global investor call and separate one-on-ones. The size of the trade is yet to be determined, other than to be flagged as a benchmark.
One point of focus in logistics is Amazon, which doubled its fulfillment network in just two years to meet rocketing demand during the pandemic but has started slowing warehouse openings to rein in costs. It has paused a major office space expansion in Bellevue, Washington, and it has not filled roles that became vacant in some facilities, lowering its full and part-time headcount from the March quarter, Reuters reported.
"Amazon caused a bit of a scare, but that was in America, and the feeling from the other logistics companies is that Europe is undersupplied with warehouses and they remain keen on growing their businesses," said the lead.
SELP is a 50:50 joint venture between UK logistics REIT Segro and Canada's Public Sector Pension Investment Board, and invests in logistics properties across France, Germany, Poland, the Czech Republic, Belgium and the Netherlands.
Room for everyone
Although SELP could well run up against Saint Gobain's three-parter on Tuesday, the lead was confident the trades could co-exist.
"The one concern historically was whether at this time of year people are around, but I don't think fund manager desks are completely empty," he said. "The two companies are not in the same industry, and in the corporate market to have two deals on the same day doesn't feel like a big deal."
A second banker said that the market has continued to function despite huge moves, including in Double A bonds.
"Issuance volumes are down, no question; new issue premiums are up, no question," he said.
"But European corporate issuance is down 20%, 30% on last year. FIG is up 15%, SSAs are similar to last year. There was always a view that if the market sold off that the market would stop functioning. What we’ve seen this year is that the market has sold off gigantically, more than any of our wildest dreams, but the markets have generally kept functioning, just at different pricings, which is quite a positive.”
Saint-Gobain's curve, running from 2025 to 2031, was seen by leads as ranging from swaps plus 42bp out to 104bp.
The sustainability-linked bond will have 37.5bp step-up coupons linked to reducing absolute Scope 1 and 2 GHG emissions by 33% and achieving an 80% reduction of non-recovered production waste, all by 2030.
The global coordinators will be joined by Barclays, Commerzbank and Mizuho as active bookrunners on the three-year tranche. BBVA, Standard Chartered and UniCredit will join as active bookrunners on the short six-year tranche. Deutsche Bank, ING and SMBC will join as active bookrunners on the 10-year tranche.