French insurer Coface finally secured a long-delayed Tier 2 transaction on Thursday amid a mixed bag of results for rare FIG issuers, while elsewhere US banks hit the euro market for the first time in five months.
FIG issuers were back in the market in their droves on Thursday, as a slowdown in unsecured FIG supply on Wednesday - when Commerzbank was the only issuer to brave the senior market after US consumer price index data triggered an equity sell-off overnight - proved to be just a temporary blip.
"The market was stable post-CPI - we gave back a bit but we had rallied hard prior to that so I don't think that's unhelpful. And a few issuers watched over the course of Wednesday and then decided today was a good day, relative to the [UK bank] holiday, central banks and data points next week," said a banker.
The stable window allowed Coface to at last clear a Tier 2 transaction it first announced in February, on the eve of the war between Russia and Ukraine. The French insurer held investor calls ahead of the transaction in February and announced an associated tender offer for its €380m 4.125% March 2024 Tier 2s, but withdrew after the conflict broke out and market conditions rapidly deteriorated.
The emergence of more conducive conditions for such smaller, lesser-followed issuers in recent days encouraged Coface to return to the market, reopen the tender and hold another run of calls before taking its chance on Thursday.
"It's far from straightforward for a name like this in this market... but they've done the right thing," said the first banker, a lead on the transaction.
"They've done the roadshow, got the tender out there and taken time to allow investors to do the work and, fundamentally, they've listened to the buyside view on where they want to own it, which has generated a pretty good book and got some price tension out of it. For investors, these sorts of transactions, when done right, can have a meaningful portfolio uplift from a performance perspective."
Leads HSBC, JP Morgan and Natixis ultimately launched the €300m 10-year transaction at 355bp over mid-swaps, after opening books with initial price thoughts of 375bp area. Demand came in above €650m (pre-rec).
"It is good to see books two times subscribed on that kind of deal... for infrequent issuers and anything higher beta it is good to see that it still works," said a second banker, away from the deal.
Not every off-the-run trade worked, however.
German-based leasing company Grenke - seen as a crossover FIG/corporate issuer - postponed a long three-year euro sub-benchmark transaction on Thursday afternoon after setting the yield in line with IPTs at 6.25%. Books had been last reported above €150m, through Deutsche Bank, DZ Bank, SEB and UniCredit, even though the issuer had said in the mandate on Monday that it was open to selling a benchmark.
"That shows how tricky it still is out there, there are no guarantees and not everything works," said a third banker.
Elsewhere, infrequent issuers such as car leasing company Arval and Norwegian bank SpareBank 1 SMN had more joy, printing a €750m four-year senior unsecured and a €500m long three-year green senior preferred, respectively.
In the sterling market, the UK-listed and Bermuda-based insurer Hiscox sold its first senior unsecured benchmark since March 2018.
Leads ING, Lloyds, NatWest Markets and UBS launched the £250m five-year note at 290bp over Gilts, down from IPTs of 315bp area, with the final book standing above £770m.
But the lion's share of demand went to Citigroup and Goldman Sachs, which brought the first US bank supply in the single currency since May 5.
"It is about time because the absence of US banks since mid-August [when the euro market re-opened] was surprising," said the second banker.
"It is not that common to have levels in euros that, while still cheap to US dollars, are quite competitive... that is enough to push someone like Citi, which has not been active in euros for two years, to look at the market. The US banks have also been very active in the US dollar market so having euro or sterling as an option makes sense to alleviate some pressure on their home market."
In its first visit to the euro market since April 2020, Citigroup raised €2bn with a self-led two-part holdco senior offering.
The lender launched a €1bn green six-year non-call five tranche at 125bp, inside IPTs of 145bp area, with books topping €2.4bn.
It also landed a €11-year non-call 10 tranche at 160bp, inside IPTs of 175bp area, on demand of €2.1bn-plus.
A more regular issuer in the euro market, Goldman Sachs was making its second appearance in the currency this year, after selling a two-part €2.25bn holdco senior transaction in February.
The new self-led €1bn seven-year offering was marketed with IPTs of 175bp/180bp before landing at 160bp. Demand passed €2bn.
Bankers said that Goldman priced 20bp back at most, with Citi inside that, of the levels which could have been achieved in the US dollar market.
"Looking back historically that is at the tighter end of the range," said the second banker.