Clinical precision
In a year in which reverse Yankee issuance was much less prominent, Medtronic’s €3.5bn four-part offering in September was the standout trade.
Although the tone over the summer had improved, with credit markets rallying, there was still a sense of fragility. Issuers had to be nimble and carefully choose the best execution windows. Medtronic did so and reaped the rewards, landing its deal at tighter concessions than the market average, despite the size.
The US medical devices company is well-known to euro investors and had sold big multi-tranche deals before in the single currency. Still, it hadn’t been in the euro market for two years so took the sensible decision to hold a day of calls, which helped draw in soft orders. It then opened books the following day.
Medtronic (A3/A) was selling three, six, nine and 12-year notes, taking centre stage in a crowded market on the day. The tenors fitted the corporate’s existing maturity profile and also aligned with the market’s dynamics at the time.
Given uncertainty about the trajectory of rates, investors were sensitive about exposure to duration risk. At the same time, they had high cash balances, which they were keen to deploy.
Books peaked at €14.7bn, which allowed pricing to be tightened significantly, leaving a final premium in the 5bp–10bp range. That was tighter than other deals at the time. Pricing was also competitive versus its US dollar curve, with the nine-year tranche, for example, landing about 5bp inside.
A €500m 2025 note landed at 25bp over swaps, a €1bn 2028 bond at plus 55bp, a €1bn 2031 tranche at plus 70bp and a €1bn 2034 note at plus 85bp. The final book was €13.55bn. That was the biggest order book for a euro investment-grade corporate up to that point in the year. The deal could have swamped the day’s other transactions but instead guided decision-making across syndicate desks.
The bonds were distributed broadly, with accounts in Germany, the UK and France the biggest buyers. Fund managers, meanwhile, got more than half the allocation, an illustration of the quality of orders in the book.
The purpose of the deal was to refinance debt, with the amount raised capped to match upcoming maturities through to March 2023.
Barclays, Bank of America, Citigroup and HSBC were the joint bookrunners.
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