Going big and long
Robert Bosch demonstrated the depth of the European investor base in a challenged market environment when, in May, it priced the biggest euro investment-grade corporate bond transaction in more than 19 months.
In a year marred by interest rate volatility, and with investors becoming increasingly selective, bringing big deals was a tough task.
The biggest buyer of corporate bonds over the past few years, the European Central Bank, was no longer present, while a lack of conviction meant other liquidity providers could also, at times, be absent from books.
Against that backdrop, the German engineering company's €4.5bn four-tranche offering on May 25 was a monumental achievement, being the biggest euro corporate deal since the fourth quarter of 2021.
The solid nature of the credit, with Single A ratings from S&P and Fitch, was helpful as the deal gained triple-digit anchor orders from high-quality asset managers, insurance companies and pension funds from Germany and the UK. Yet the book was also highly granular with more than 1,100 single orders.
But it wasn’t a straightforward deal to execute. The company was issuing its first public bond since 2014, which meant investors had to familiarise themselves with the story. It also wasn’t the easiest credit to position, with the business comprising autoparts and consumer and industrial units. As a result, Bosch spent two days on investor calls, giving accounts enough time to reopen credit lines and indicate their levels of interest.
The marketing effort paid off. Books opened on four, seven, 12 and 20-year tranches, with combined final orders hitting €21.7bn.
The smooth progression of the 20-year portion was particularly noteworthy. Bonds at that tenor have become a rare feature in the euro investment-grade corporate market in the face of global central banks' rate hiking cycle.
Bosch’s 20-year note was the first since February, meaning it was also the first since the banking crisis in March roiled global markets. Moreover, at €1.5bn, the June 2043 bond was the biggest 20-year note since March 2020.
It was also the biggest of the four tranches in the Bosch offering, supported by demand of more than €8bn. That enabled the lead managers to bring in pricing from 175bp area over swaps to plus 140bp.
The deal included €750m June 2027s, €1bn June 2030s and €1.25bn June 2035s. Those notes landed at spreads of plus 30bp, 55bp and 85bp, respectively.
BNP Paribas, Citigroup, Deutsche Bank, Mizuho and UniCredit were the bookrunners.
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