debt capital markets update€¦ · uzbekistan priced its inaugural us$1 billion dual-tranche bond...
TRANSCRIPT
Debt Capital Markets Update
London Stock Exchange plc
Q1 2019
Contents
1. Trends in Global Debt Capital Markets
2. Key DCM transactions listed in London
3. Focus on…
❖ Saudi Aramco’s debut bond
❖ International Securities Market MTF
❖ Where Can You Find Us… Q1 and Q2
❖ Your LSEG team
Trends in Global Debt Capital
Markets: Q1 2019
4
Changing Global Macro DynamicsQ1 2019 Global DCM deal making has been weaker than in previous years
The US Treasury curve has flattened substantially – reversing rates
dynamics from last year
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
3.1
3.3
1M 2M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y
Yie
ld %
Yield @ 31st Mar 18 Yield @ 30th Sep 18 Yield @ 31st Mar 19
Key Events Calendar: May to July 2019
Date Event
3 May Unemployment
3 May Unemployment
8 May Export/Import
10 May GDP 3M/3M
29 May 30Y Mortgage Rate
06 Jun ECB Policy
13 Jun Construction
19 Jun FOMC
Date Event
28 Jun FDI/GDP
5 Jul Unemployment
12 Jul Industrial
12 Jul Export/Import
17 Jul CPI
17 Jul CPI
25 Jul ECB Policy
31 Jul FOMC
Global DCM issuance down 12% Q1 18 vs Q1 19 by volumeAnnual Supply by Quarter
Q1 global issuance has been weaker vs Q1 18 outside AsiaComparison of Q1 Supply
3.02 3.20 3.16 2.80
0
2
4
6
8
10
12
2016 2017 2018 2019
Vo
lum
e (
$ t
rillio
n)
Q1 Q2 Q3 Q4
1.26 1.34 1.28 1.16
0.93 0.99 1.03
0.91
0.44 0.39 0.40
0.40
0.34 0.35 0.34
0.23
0.01 0.05 0.05
0.04
0.05 0.08 0.06
0.05
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2016Q1 2017Q1 2018Q1 2019Q1
Vo
lum
e (
$ t
rillio
n)
North America Europe Asia Pacific Japan MEA Latam & Carribean
Source: Dealogic
5
Q1 2019 Debt Listings By Exchange
— 264 bonds were issued on London Stock Exchange during Q1 2019; $94bn in debt capital raised. 151* were syndicated
deals raising $71bn
— Global exchanges have seen a decline in bonds listed in Q1 2019 v Q1 2018.
Source: Bloomberg, as of 31st March, 2019
Note: Based on individual tranches issued. Duplicates for 144A and RegS are consolidated. Structured Products are excluded
*Dealogic for syndicated deals only
Steady increase in London listed bonds from 2015 Capital Raised by Leading Bond Listing Venues Q1 18 vs. Q1 19*
897
990
902
1,068
264
0
200
400
600
800
1,000
1,200
2015 2016 2017 2018 2019YTD
No
. B
on
ds
Is
su
ed
322
499
201
140
278 249
151
133
-
100
200
300
400
500
600
0
20
40
60
80
100
120
140
LUX DUB LSE SGX
No
. O
f B
on
ds
Cap
ita
l R
ais
ed
($
bn
)
2019Q1 Number of Bonds 2018Q1 Number of Bonds 2019Q1
6
Leading Position for Jumbo IssuancesTransactions across key exchanges > USD1bn
0
50
100
150
200
250
300
350
400
2014 2015 2016 2017 2018 2019YTD
Am
ou
nt
issu
ed
($b
n)
LSE LUX DUB SGX
Source: Dealogic, contains sovereign and corporate issuances only. April 2019
London Stock Exchange has a leading position for large global issuers, who tap markets frequently across different currencies, tenors and structures.
7
DCM Highlights: Q1 2019
8
Key Q1 Highlights
USD 3,250m
2.63%, 5Y
Jan 2019
Supranational
Main Market
USD 2,000m
8.00%, Perp
Mar 2019
Financials
ISM
EUR 1,750m
0.25%, 5Y
Jan 2019
Financials
Main Market
USD 1,750m, 7.60%, 10Y
USD 1,500m, 8.70%, 30Y
Feb 2019
Sovereign
Main Market
USD 500m
3.88%, 5Y
Mar 2019
Financials
ISM
USD 1,400m, 7.85%, 10Y
USD 1,000m, 6.85%, 5Y
Mar 2019
Sovereign
ISM
USD 750m, 7.88%, 8Y
USD 3,250m, 8.13%, 13Y
USD 1,000m, 8.95%, 32Y
Mar 2019
Sovereign
Main Market
USD 1,000m
3.88%%, 5Y
Jan 2019
Financials
Main Market - Sukuk
USD 1,000m
3.00%, 5Y
Mar 2019
Municipalities
Main Market
GBP 600m
1.39%, 5Y
Mar 2019
Financials
Main Market - Sonia
EUR 500m
0.38%, 3Y
Jan 2019
Financials
ISM
GBP 600m
1.42%, 5Y
Mar 2019
Financials
Main Market - Sonia
USD 500m, 4.75%, 5Y
USD 500m, 5.38%, 10Y
Feb 2019
Sovereigns
Main Market
INR 21.5bn
9.72%, 5Y
Mar 2019
Municipalities
ISM - Masala
CNY 150m
3.76% 5Y
Mar 2019
Financials
Main Market – Dim Sum
BRL 200m
7.00%, 5Y
Feb 2019
Supranational
Main Market
INR 10bn
8.22%, 3Y
Mar 2019
Financials
ISM - Masala
EUR 750m, 0.63%, 5Y
USD 874m, 1.88%, 12Y
Mar 2019
Materials
Main Market
99
Sovereign TransactionsQ1 saw Uzbekistan’s debut, Sri Lanka’s first deal on ISM and Ghana tap in dollars up to 30 years
Uzbekistan
Uzbekistan priced its inaugural
US$1 billion dual-tranche bond
offering in February. The offering
was formed by a dual US$500mm
4.750% tranche due February 2024
and a US$500mm 5.375% due
February 2029. The issue was
heavily oversubscribed and well
diversified, as final books stood at
c. US8.5bn.
The bond marked history as
Uzbekistan's inaugural
international sovereign bond
issue.
February 2019
Sri Lanka
Sri Lanka raised $2.5 billion in the
largest offshore dollar bond
offering ever. The issuance on
ISM drew a more diversified
investor base with greater
proportion of UK/EU investors
compared to the country’s
previous dollar issuance in 2017.
Sri Lanka chooses London Stock
Exchange for largest offshore
dollar bond offering
February 2019
Egypt
The triple tranche listing raised
$750 million in five year notes at a
coupon of 6.20%, $1.5 billion in
thirty year notes at a coupon of
8.70%, and $1.75 billion in 10
year notes at a coupon of 7.60%.
Despite market volatility, the
combined order book peaked at
$19.5 billion.
February 2019
Ghana
Ghana became the first Sub-
Saharan African sovereign to tap
the markets in 2019
March 2019
“As a global market, London is
committed to supporting Egypt’s
economic development and
growth programme through
capital rising on our markets”
Nikhil Rathi, CEO, London Stock Exchange plc
Ghana’s triple tranche issuance
raised $3 billion and received
healthy orders in excess of $20
billion – one of the largest ever for
a bond from Sub-Saharan Africa.
1010
Masala Bonds A deep market for new and repeat issuers
London Stock Exchange is the largest global centre for Masala Bonds
27 Masala bonds currently active
49 Masala bonds listed historically
11 Active Issuers
$7.6bn Amount Raised
Source: Bloomberg, London Stock Exchange, April 2019
In March 2019, London Stock Exchange welcomed Kerala
Infrastructure Investment Fund Board’s (KIIFB) debut
Masala bond, the first sub-sovereign entity in India to tap the
offshore rupee international bond market. The INR 21.5
billion ($312 million equivalent) senior secured fixed-rate
bond has a five-year tenor with a 9.723% coupon.
In March 2019, India’s largest mortgage lender, HDFC
returned to market and raised INR 10 billion ($145 million
equivalent). The senior unsecured fixed-rate bond has a
three-year tenor with a 8.220% coupon.
1111
Dim Sum Bond Market2018 saw a revival in offshore RMB bonds
Source: Bloomberg, London Stock Exchange, April 2019*2019E estimates assume same activity levels from 1 January to 27 February 2019 continuing for rest of year.** 2019E deal count is extrapolated from 2019 YTD activity.
- This quarter, LSEG contributed to City of London’s “London RMB Business Quarterly” in partnership with the People’s Bank of China Representative Office for Europe
- London’s dim sum bond market was more active in 2018 than previous years. Dim sum and China’s domestic markets are intrinsically interconnected as complementary funding sources
- London is seen by issuers from Belt and Road countries as the destination of choice for capital raising
0
200
400
600
800
1000
1200
1400
1600
0
100
200
300
400
500
600
2014 2015 2016 2017 2018 2019E
No
. d
eals
Vo
lum
e (
RM
B b
illi
on
s)
Volume 2019 rest-of-year estimate* Deal count (RHS)**
Dim Sum Bond Issuance Volume (RMB bn)
Dim Sum Bond Issuance Volume vs Offshore RMB Deposits
0
2
4
6
8
10
12
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016 2017 2018
Off
sh
ore
de
po
sit
s (
RM
B t
n)
Dim
Su
m v
olu
me (
RM
B b
n)
Dim Sum volume (RMB billions)
Offshore RMB deposits RHS (RMB trillions)
1212
SONIA-linked Floaters Continue to GrowOver £12bn of FRNs linked to Sonia issued, larger than £-LIBOR in Q1
SONIA Bond Issuance on LSE
Source: Bloomberg, Bank of England, April 2019 as at data from 31st March 2019
Data includes active and matured bonds
All duplicate bonds are consolidated
Capital Raised
£12.5bn
71% of which has been
raised during the first
quarter of 2019Issuer Name Issue Date Amount Issued (£m) Tenor Industry
Virgin Money 28/3/2019 500 5 Financials
Skipton Building Society 27/3/2019 600 5 Financials
National Westminster Bank 22/3/2019 750 4 Financials
Coventry Building Society 19/3/2019 100 5 Financials
EBRD 28/2/2019 950 5 Supranational
TSB Bank /United Kingdom 15/2/2019 750 5 Financials
Santander UK 12/2/2019 1,000 5 Financials
Australia & New Zealand Banking Group 24/1/2019 750 3 Financials
Royal Bank of Canada 24/1/2019 400 1 Financials
EBRD 18/1/2019 550 3 Supranational
International Finance Corp 18/1/2019 500 3 Supranational
Commonwealth Bank of Australia 17/1/2019 260 1 Financials
Lloyds Bank 14/1/2019 750 3 Financials
Nationwide Building Society 10/1/2019 1,000 5 Financials
Commonwealth Bank of Australia 10/12/2018 125 1 Financials
Yorkshire Building Society 19/11/2018 500 5 Financials
Coventry Building Society 13/11/2018 500 5 Financials
Royal Bank of Canada 12/10/2018 400 1 Financials
Santander UK 20/9/2018 1,000 3 Financials
Royal Bank of Canada 13/9/2018 350 1 Financials
Lloyds Bank 13/9/2018 750 3 Financials
0
1
2
3
4
5
6
7
8
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Sept Oct Nov Dec Jan Feb Mar
2018 2019
No
. o
f D
eals
To
ta C
ap
ital R
ais
ed
(£b
n)
Tota Capital Raised ($bn) No. of Deals
First covered SONIA
issuance, £600m (5Y)
First covered SONIA
issuance, £500m (5Y)
First covered SONIA
issuance, £750m (4Y)Issuers
with Royal Bank of
Canada raising £1.15bn
from three issuances
15
13
DCM Focus: Saudi Aramco
1414
Saudi Aramco’s Landmark Debut IssuanceJoint largest O&G debt issuance
Saudi AramcoSaudi Aramco, the world’s most profitable company, lists its debut $12bn multi
tranche dollar issuance
⎯ The deal, listed in London under an unlimited GMTN programme, attracted orders in
excess of $100bn from institutional investors helping achieve an extremely attractive cost
of funding.
⎯ Saudi Aramco’s GMTN programme provided the first opportunity for global investors to
view its financials, a significant event in Saudi Aramco’s capital markets’ journey.
⎯ The success of the transaction is reflective of company’s vision and ambition, as well as
the effort undertaken by its management and advisors over many years to make its debut
transaction successful.
⎯ The transaction displayed the confidence that market has in the UK’s regulatory
framework, English Law documentation and the depth of capital markets based in London.
Issue Date 9th April 2019
Issue Size $12bn
Tranches
(Coupon %, Tenor)
$1bn (2.750%, 3Y), $2bn (2.875%, 5Y),
$3bn (3.500%, 10Y), $3bn (4.250%,
20Y), $3bn (4.375%, 30Y)
Issuer Rating
(Moody’s/Fitch)A1 / A+
London Stock
Exchange MarketMain Market
Joint Lead Managers JP Morgan, Morgan Stanley
Legal Advisors to
IssuerWhite and Case
⎯ Largest order book for an emerging market bond
⎯ Largest corporate bond from the Middle East
⎯ Joint largest Oil & Gas bond ever
⎯ Priced through the Kingdom of Saudi Arabia’s international bond
issue across the curve, a remarkable achievement
⎯ The transaction attracted both emerging market bond investors
and funds focussed on investment-grade and developed markets
15
DCM Focus: International
Securities Market (ISM)
1616
65 bonds
listed on London’s
International
Securities Market
(ISM)
14 countries
Diverse global
reach
£18.5 billion
Money raised on
International
Securities Market
32 issuers
Sovereigns and
corporates
ISM saw its most successful quarterDeals across sectors, geographies and IG/HY (as of 31 March)
Source: London Stock Exchange Data, FactSet, April 2019 as at data from 31st March 2019
*Sector and region graphs are based on the capital raised
Across multiple continents (£bn)* ISM Issuance
— £18.5 billion has been raised on
ISM since its launch, 28% of
which was raised in Q1 2019
— Q1 2019 saw £5.2 billion raised,
3.2x more than 1Q18
— ISM is home to 19 programmes
from issuers from across the
world and 2 landmark sovereign
transactions from Fiji and Sri
Lanka
— The ISM Rulebook was updated
in Q1, with key derogations in
place including for MAR 17
announcements and Insurance
Linked Securities (ILS), see next
slide for further information11.4
6.0
0.70.4
APAC
Europe
NorthAmericaAfrica
0
2
4
6
8
10
12
14
0
1
2
3
4
5
6
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2017 2018 2019
No
. o
f D
eals
To
tal
Cap
ital R
ais
ed
(£b
n)
Tota Capital Raised (£mn)
1717
What’s New on ISM?Rule changes improving benefits for issuers
Insurance Linked Securities
Enables UK authorised ILS issuers to be admitted to ISM with
tailored documentation disclosure and publishing
requirements suitable to ILS
Future Incorporation by Reference
Allows an issuer to incorporate information that has been
published in accordance with Article 17 of Market Abuse
Regulation1 by reference into its admission particulars
Hardwired Derogations
Provisions have been extended to provide for the omission of
financial information and certain disclosure where the
guarantor group represents more than 25% but less than 75%
of the consolidated profits and assets of the group’s audited
consolidated financial information and provided that the
guarantee prevents structural subordination.
Additional Benefits for Issuers
Dual establishment of programmes on both Main Market and ISM, at
no additional charge, enables securities to be admitted to both
markets interchangeably under the same documentation, providing
flexibility as follows:
1. Incorporation by reference of future financial information as well
as announcements made under Article 17 of MAR
This negates the need for an issuer to file supplementary
prospectuses – securities can be admitted to ISM during windows
where an issuer would typically need to file a supplement on the Main
Market. This maximises an issuer’s market windows and also reduces
legal drafting costs
2. Inclusion of additional terms and conditions not included within
the base prospectus
This ensures that if the T&Cs for specific types of issuance are not
included in the base documentation, this can be added into the pricing
supplement, saving on the requirement to either produce a drawdown
prospectus or update the programme (e.g. green bonds, SONIA-
linked)
On 25 February 2019, the ISM Rulebook was updated to reflect
new features for issuers, based on a market consultation process
1 https://www.fca.org.uk/markets/market-abuse/regulation
1818
Benefits of ISMAn Efficient and Expedient Process
ISM
Applicable
RegulationMTF Market
ReviewerLondon Stock
Exchange
Listing Documents Admission Particulars
Designation Professional only
Disclosure
ObligationsISM Rulebook/MAR
Simplified disclosure regime for certain issuers
Local GAAP accepted
Enhanced incorporation by reference
provisions
Common derogations hardwired into Rulebook
Sensible treatment of SPV structures
No equity-like requirements for convertibles
Enhanced flexibility on inclusion of information
in pricing supplements
19
DCM Focus: Where Can You
Find Us? (Q1 and Q2 Events)
20
Fixed Income London Stock Exchange Events Calendar Q1 and Q2 2019
London Stock Exchange’s inaugural UK Debt Capital Market Forum was
held on 1 March 2019, in partnership with ICBC - London Branch and
Barclays. The event was attended by key decision makers in the DCM
community and live-streamed by 100+ viewers through LSEG’s issuer services
platform, SPARK.
Rohan Churm, Head of Foreign Exchange Division at Bank of England
delivered the keynote speech: “Where next for fixed income markets: Thriving in
a world of change” (available here) – a must read for both the economic historian
and the futurist, as well as the Lewis Carroll aficionado (Pub Quiz – What is the
‘Red Queen hypothesis’?). Panels that followed discussed the sterling bond
market, financing China’s growth, scaling up UK’s Green Bond Market and
switching to Sonia. Participants included Aberdeen Asset Management, Amundi,
EBRD, IFC, ICMA, FCA, Linklaters, S&P Global Ratings, RBCC, Tideway UK,
UK Debt Management Office among others.
We look forward to welcoming you to future editions.
Conference Date Location
The Central and Eastern European
Forum 201915 Jan - 16 Jan Vienna, Austria
IFLR India Capital Markets Forum 16 Jan Mumbai, India
UK Debt Capital Markets Forum 01 Mar London
Bonds, Loans and Sukuk Africa 13 Mar - 14 MarCape Town, South
Africa
Bonds, Loans and Sukuk Middle
East 26 Mar- 27 Mar Dubai
London ILS Conference 04 Apr London
IFLR London Capital Markets
Forum04 Apr London
ICMA Annual General Meeting 15 May - 17 MayStockholm,
Sweden
ACT Annual Conference 21 May - 22 MayManchester,
England
Global ABS Conference 11 Jun - 13 Jun Barcelona, Spain
Global Borrowers and Bond
Investors Forum18 Jun - 19 Jun London, England
Watch a replay of the conference and key panels here: https://www.lseg.com/markets-products-and-services/our-
markets/fixed-income-markets/2019-uk-debt-capital-markets-forum-roundup
21
DCM Focus: Your LSEG team
Dr. Darko Hajdukovic
Head of UK Fixed Income, Analytics
and Investment Funds
+44 20 7797 3306
Omair Mohyal
Fixed Income Product Specialist
+44 20 7797 3913
Global Sales & Relationship Management
Alex Imseeh
Fixed Income Sales Associate
+44 20 7797 3750
N. America, Europe & India
Sarah Ellena
Manager, Fixed Income & Funds
+44 20 7797 3872
Latin America, China & Japan
Elena Chimonides
Fixed Income Product Specialist
+44 20 7797 1509
Product Development & Innovation
Federica Giacometti
Fixed Income Sales Associate
+44 20 7797 2465
UK, Middle East & Asia Pacific
Shrey Kohli
Director, Fixed Income & Funds
+44 20 7797 4313
David Ashaolu-Coker
Fixed Income Product Specialist
+44 20 7797 4633
UK & Africa
23
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