Un articolo sulle recenti emissioni di perpetual industriali (focalizza su quelle delle utilities Scottish & Southern Energy, Suez Environnement, RWE)
Record hybrid-bond issuance set to slow Credit Markets - MarketWatch
Hybrid-bond sales hit record in September
But the market’s appetite seems to be sated, strategists say
LONDON (MarketWatch) — European hybrid-bond issuance has hit an all-time monthly high in September, but there are signs the market may be reaching a saturation point.
German utility RWE AG raised $2.22 billion in its hybrid-bond sale on Monday, taking the total amount raised this month by European companies from hybrid-bond sales to nearly $5 billion, according to Dealogic.
That figure is the highest on record, and it marks only the fourth month with more than $1 billion in deal activity since September 2006. Hybrid bonds combine elements of both debt and equity, allowing them to be treated partly as equity by credit-rating agencies.
But there is market talk of a pause in new issues, with widening spreads suggesting investors have had enough for now.
“The hybrid market was just undergoing a rebirth, but it seems that it’s come to a stop again,” said Herve Boiral, head of credit at Amundi in Paris. “Half a dozen corporations were planning hybrid issues, but now we won’t have another launch for two or three weeks,” he added.
The trades around RWE’s hybrid bonds tell the tale. At launch the bonds, with a yield of just under 5%, were trading at 2.65% over swaps, but that has since widened to 2.95%, an increase of 30 basis points, as demand has dropped and the price of the bonds has fallen.
Boiral said that in a healthy market a hybrid bond’s spreads contract by 10 or 20 basis points in the days following an issue.
“It seems that the appetite in Europe has, at the moment, reached some sort of limit,” said an official at BlackRock Inc. in London who wasn’t authorized to speak publicly on the matter. “It needs some time to digest these recent deals.”
The official said he knew of several companies that had been holding road shows for hybrid-bond issues, but which had decided to postpone launches following the RWE sale. He declined to name the companies.
Record month
Despite the looming slowdown, the volume and pace of European corporate hybrid-bond issuance is noteworthy because of the scale of the market’s rebound.
There were only four deals between December 2007 and February 2010, with a total value of $1.67 billion, according to Dealogic. This month so far has seen three deals with a total value of just under $5 billion.
September’s deals suggest that Europe's credit markets have recovered considerably from the crisis. Hybrid bonds are the most subordinated debt in a corporate structure, and the fact that investors were willing to buy the bonds shows some measure of risk tolerance has returned.
“A year ago, you couldn’t even think of issuing hybrid bonds,” said Boiral.
Before the RWE deal, two other European companies had issued hybrid bonds this month: on Sept. 8, Scottish and Southern Energy PLC raised roughly $1.79 billion, and French water and waste utility Suez Environnement SA raised about $946 million on Sept. 14, according to Dealogic.
David Stanley, London-based co-manager of the T. Rowe Price Strategic Income Fund, said the recent hybrid-bond issues have perpetual maturities but carry two call dates, at five-year intervals.
If the securities are not called after five years, then the coupons get reset at the prevailing five-year swap plus the issue spread. At the second call date five years later, if not called, they then revert to a floating-rate instrument at the 3-month Euribor rate, plus the initial issue spread and an additional 100 basis points.
The general market expectation is that all these hybrid securities will be called at their first call date, though this is not a commitment by the issuer.
The attraction of hybrid bonds for corporations is simple. Because of the possibility to defer coupon payments, they can obtain part equity treatment from the ratings agencies. Issuance of hybrid bonds can strengthen companies’ balance sheets and support their senior debt ratings.
“You can think of them as relatively cheap equity funding for a company,” Stanley said.
For some investors, the bonds are enticing because they offer better yields than other investment-grade bonds in today’s markets, but are typically rated only two notches below normal bonds issued by a company.
“Investors are searching for yield, so the companies felt it was the right time for some new launches,” Boiral said.
Not every bond buyer is impressed with the securities.
“They seem to me to carry a lot of equity risk without the upside of equities,” Stanley said. “They are bull-market-type instruments and one wonders what their secondary market will be like in a spread-widening environment -- they’re unusual, idiosyncratic and [as the saturation post-RWE shows], I think there may be a limitation to the amount of natural buyers for this type of bonds.”
Sam Mamudi is a reporter for MarketWatch, based in New York
): l'ottimo Terzano mi ha detto che è completamente illiquida.
