The European high-grade corporate bond pipeline grew on Tuesday as borrowers aim to seize a funding window ahead of earnings blackouts in a resilient credit market.
With a public holiday in Germany, no issuance emerged in the euro market on Tuesday, following two deals on Monday – a new print from French real estate company Carmila and a dual-tranche tap by construction company Bouygues. There was no sterling issuance either.
However, there are four mandates in the pipeline, including a hybrid and a senior bond from a split-rated name.
"The market tone is quite nervous because of a fair amount of rates volatility, but that is mainly linked to US Treasuries and has been affecting broader risk appetite for equities," said a syndicate banker. "The credit market remains fairly resilient and primary deals are working quite well, as people still have a fair amount of cash."
French hotel operator Accor (NR/BBB–/BBB–) could come as early as Wednesday with a €500m no-grow perpetual non-call 5.5-year bond, according to the banker, who is also a lead on the deal. The company has hired Citigroup, HSBC and Societe Generale as global coordinators and structuring agents, together with Commerzbank, Mizuho, MUFG, Natixis and Santander as active bookrunners.
Accor held two days of investor calls, starting on Monday, for the proposed issuance that comes alongside a tender offer for its €500m 4.375% subordinated bond. CreditSights analysts said the new hybrid issue makes sense given the recent upgrade to Accor's senior unsecured notes to investment-grade and the upcoming coupon step-up on the 4.375% hybrid notes to around 8%, based on current rates.
S&P raised its long and short-term issuer credit ratings on Accor to BBB– from BB+ on September 12, citing the company's strong operating performance in the first half of 2023. Fitch had upgraded the company by a notch in April. The new hybrids have expected ratings of BB/BB.
Split-rated Valeo (Baa3, negative/BB+, stable) is also preparing to print, in its case a euro benchmark inaugural green bond with a 5.5-year tenor, via Credit Agricole as sole ESG structuring coordinator as well as joint global coordinator with BNP Paribas. They are also joint active bookrunners with Citigroup, MUFG, Natixis and Societe Generale. The French auto supplier finishes two days of calls on Wednesday.
There is a sense of caution among bankers even as the market gears up to bring higher-beta products. Still, they say the market should be able to take down the supply given blackouts are around the corner, as long as it is coming from the right name and with the right valuation.
"Liquidity is absolutely there and technicals are supportive as we're expecting a light supply week ahead. The strong secondary performance of some of the names that came a little cheap [in primary] is also encouraging," said a syndicate head.
Other issuers in the pipeline are Spanish airport operator AENA (A3/A–, Moody's/Fitch), which is preparing to print a seven-year euro benchmark bond, and auto breakdown services group RAC, which is looking to raise £250m with a five-year Class A3 offering through RAC Bond Co.