Italian borrowers build out curves in pre-blackout window

Credit: REUTERS/ALESSANDRO BIANCHI

Three Italian corporates were seizing the opportunity to issue long-dated paper as they take advantage of enticing spreads and rates.

By Edward Clark

LONDON, Oct 7 (IFR) - Three Italian corporates were seizing the opportunity to issue long-dated paper as they take advantage of enticing spreads and rates.

Energy firms Eni and Iren, and holding company Exor, were out with 10 or 15-year trades, though bankers said their decision to come on the same day was coincidental.

"For the Italian names things are especially good. Italian spreads have narrowed and rates more broadly are very attractive," said a banker on the Iren trade.

"There are a lot of blackouts in November, so now marks a good window to issue."

Eni opened books on a 15-year deal at mid-swaps plus 120bp-125bp area via Banca IMI, Barclays, BBVA, MUFG, Societe Generale and UniCredit.

"The trade is largely to extend the curve," said a lead banker. Eni's longest bond before was a January 2029, which was bid at plus 75bp.

Pinpointing fair value was not necessarily straightforward. Eni's January 2027s were bid at 57bp, while its May 2028s and September 2028s were at 63bp and 62bp, respectively.

Leads also looked at other issuers' curves, such as Snam and OMV, but neither was a perfect comparable. Snam has 2027s and 2034s with the curve worth 28bp, while OMV's curve between its 2028 and 2034 points was 22bp.

With books on Eni (Baa1/A-/A-) peaking at over €1.6bn, the size was set at €750m while the spread was tightened to 97bp.

THE GREEN APPROACH

Iren took a slightly different route as it went for a 10-year green bond, which was capped from the outset at €500m.

Iren (BBB, Fitch) began marketing at 140bp area over swaps, some 25bp-30bp back of fair value, according to a lead.

With books reaching more than €2.1bn, leads tightened pricing to plus 110bp.

Iren is an annual issuer in the bond markets and since its debut green bond in 2017 has only issued in that format.

Its €500m 1.5% October 2027 was bid at 99bp, while the €500m 1.95% September 2025 was at 84bp, according to Tradeweb.

"Increasingly, I think the green element is actually helping with getting a larger book, which of course can have a knock-on effect on pricing," said the lead.

More than 50% of investors that bought the 2025s when they were issued last year were specifically green investors, according to the company.

"They have a lot of green investments, so their issuance reflects this."

The leads were Banca IMI, Credit Suisse, Goldman Sachs, Mediobanca, Societe Generale, UBI Banca and UniCredit.

OPPORTUNISTIC EXOR

Exor, the holding company owned by the Agnelli family, also ventured out to the 15-year part of the curve for an opportunistic €300m no-grow through sole lead Morgan Stanley.

Several bankers away from the deal speculated it was underwritten by the US bank. A lead declined to comment.

The trade began marketing at 185bp area, before pricing was tightened to 170bp-175bp with orders in excess of €600m.

Fair value was put at around 155bp by the lead, based on Exor's January 2028s, which were bid at 125bp.

The deal saw interest from German insurers and asset managers, among others, as well as official institutions seeking relatively cheap paper.

Last year, Exor (BBB+, S&P) raised €200m through a 20-year club deal that priced with a three handle, so this transaction offered Exor attractive terms in comparison.

Although Exor's holdings include FCA and Juventus, less than 25% of its exposure is to Italy and the company itself is incorporated in the Netherlands.

ITALIANS AHEAD

The flow of Italian corporates coming to the market shows no sign of abating.

"As long as conditions remain, I would expect to see further issuance ahead of blackouts," said the lead on Iren.

One deal in the pipeline is Societa di Progetto Brebemi's quadruple-tranche project bond. The A35 Italian toll road operator is looking to raise funding to refinance the motorway's bank loans.

The roadshow began on Monday for a transaction expected to consist of a class A1 amortising floating-rate note due 2038, a class A2 amortising fixed-rate note due 2038, class A3 zero coupon notes due 2042, all senior secured, and a subordinated secured extendable floater.

(Reporting by Edward Clark; editing by Sudip Roy, Philip Wright)

((E.Clark@thomsonreuters.com; +442075427630;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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