New reality
It was not easy to be an underwriter in 2022’s high-grade corporate bond market. Rising rates, volatile spreads and a war in Europe turned the day-to-day business of deal-making on its head. For navigating tough markets and delivering results to the world’s biggest borrowers, Barclays is IFR’s North America Investment-Grade Corporate Bond House of the Year.
The North American investment-grade corporate bond market featured a number of franchise-defining deals in 2022, including inaugural offerings from Facebook owner Meta Platforms and chipmaker Advanced Micro Devices. But overall volumes in the region plummeted, and to get many otherwise mundane transactions done to executives’ high standards, bankers were forced to sweat the details like never before.
One bank managed these tough circumstances with particular aplomb. While North American high-grade corporate bond volumes fell 25% to US$483bn in 2022, according to Refinitiv data, Barclays climbed the league tables two slots to seven. This did not happen by accident.
According to Meghan Graper, global co-head of investment-grade syndicate at the bank, Barclays’ success in 2022 required “challenging the status quo” to bring investors and issuers together on new issues.
“On any given day, we know in this volatility things change quickly,” Graper said. “And so part of challenging the status quo is being able to know in a real-time way how investors are positioned, where on the curve they [want to be], and also trying to assess where price breaks are within any given order book.”
The fruits of Barclays’ labours can be seen throughout the year. The bank had leading roles on the biggest high-grade transactions. Executives from the world’s biggest companies called on its bankers when they needed important trades done.
When AT&T and Discovery needed to hit the bond market in March to help finance a much-hyped creation of content powerhouse Warner Bros Discovery, they selected only three banks as active bookrunners for what became, at US$30bn via 11 tranches, the year’s biggest high-grade bond offering.
Barclays, one of the three, was the only bank that wasn’t also a financial adviser on the crucial merger and spinoff – implying it was hired for its debt capital markets prowess alone.
“When it's the largest, most important trades where basis points matter a lot and they're living with that debt for a very long time, they want people who are going to be thoughtful throughout the whole process and stick with it,” said Barbara Mariniello, head of DCM.
Elsewhere, when AMD decided to come to market for the first time as in investment-grade issuer (its last deal, in 2014, was high-yield), it tapped Barclays as lead-left bookrunner. The US$1bn offering split evenly between 10s and 30s priced at Treasuries plus 95bp and 125bp in June for the A3/A– rated issuer.
As the summer of 2022 set in, Barclays still had more challenging work ahead. It was one of four bookrunners on the long-awaited deal from Meta, which priced a US$10bn offering of fives, 10s, 30s and 40s on August 4.
The parent of Facebook, WhatsApp and Instagram naturally enjoyed clear name recognition among investors. However, the deal was not without its difficulties. Pricing on a Thursday, the financing came on the heels of offerings that week from more established tech issuers Apple and Intel, both of which also pushed tenors out to a rare 40 years.
It was unclear before Meta launched whether investors' appetitive for Big Tech had already been sated.
“In early August; it’s still volatile,” said Matt Gannon, managing director in the DCM operation at Barclays. “It came after some heavy tech issuance. Apple came that Monday. Intel came out Tuesday. So we had to navigate that.”
What is more, the company and its underwriters had to convince cashflow-conscious debt investors that Meta’s plans to plough billions of dollars into its loss-making metaverse division was not such a credit negative.
In the end, the company attracted an impressive order book that peaked at US$32bn.
Barclays put its ingenuity to work again in November for Philip Morris International, which like many of its peers is expanding its business into smoke-free nicotine products. Barclays was one of six bookrunners on a US$6bn bond that took out part of a bridge loan supporting Philip Morris’s US$16bn acquisition of Swedish Match.
The Marlboro cigarette maker priced its offering of twos, threes, fives, sevens and 10s, tightening 40bp–45bp from price thoughts. Once again, Barclays delivered for corporate executives as they set out to raise critical funds in one of the toughest markets since the credit crisis.
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