The effect of the upcoming wave of supply from the European Union started to be felt in the European public sector market last week, with issuers keen to secure funds forced to pay higher than usual concessions to get their deals away.

While the SSA market has seen its fair share of newcomers over the years with the likes of ESM starting new large programmes from scratch, a shift in issuance patterns on such a scale has not been set in recent times.

The EU will embark on a massive programme to fund its €750bn recovery fund and €100bn Sure programme in September. Fifteen member states have requested support under Sure for €81.4bn in total, with Italy (€27.4bn), Spain (€21.3bn) and Poland (€11.2bn) among the biggest potential beneficiaries.

Although the funding will be spread over years, it marks a huge increase from the €52bn the EU currently has outstanding.

For borrowers wanting to get ahead of the EU juggernaut, this has meant having to pay higher...

UK e-commerce business The Hut Group filed a registration document as expected on Thursday for a London IPO, targeting primary proceeds of approximately £920m alongside undisclosed secondary selling.

Founded in 2004 in Manchester, The Hut Group is a digital consumer brands owner, retailing its own brands in beauty and nutrition alongside third-party brands through its THG Ingenuity end-to-end technology platform.

THG takes its own brands, including Myprotein and Lookfantastic, from proprietary product development through manufacturing, content creation, marketing, digital commerce and customer service, including global payment, hosting, courier and logistics.

The focus for the float appears to be on simplicity, with a fixed-price offering representing a pre-money valuation of £4.5bn. Taking into account new money, that suggests a post-money valuation of £5.42bn.

There is a minimum free-float of 20% but secondary is expected to be material, with an...

Warren Buffett's investment in financial stocks dropped by almost 40% in the first-half of this year as he slashed holdings in JP Morgan and Wells Fargo, exited Goldman Sachs, and saw the value of most of his bets slump.

But since the end of June, Buffett has added to his stake in Bank of America. Buffett's investment vehicle owned 1.03bn shares in BofA as of August 4, according to a regulatory filing, making it his biggest financial holding.

It also makes Buffett the biggest investor in BofA with a 12% stake worth more than US$26bn. His Berkshire Hathaway investment vehicle owned 925m BofA shares at the end of June worth US$22bn, and the same amount at the end of December, when they were worth US$10.5bn more.

Buffett is one of the world's most successful investors and is widely followed for tips on where to find value. He is one of the biggest investors in US financial firms, even after slashing his holdings in most of them since the start of this year,...

European FIGs are hitting the US high-grade bond primary market this week during a quiet time for most American companies.

Aside from a debut from Royalty Pharma on Monday, the European banks have had the market all to themselves as most look to add senior preferred funding in US dollars.

That part of the capital structure has delivered lackluster returns year to date for investors, but the structure received strong demand on a view that such issuance will be hard to come by in the coming year, CreditSights noted in a report this week.

Spreads could tighten in the niche sector as banks look to paydown upcoming senior preferred maturities and replace them with sub senior debt to meet MREL regulatory needs, according to the report.

Additionally, supportive central bank policies make senior preferred bonds less necessary for banks and excessive customer deposit inflows make the expensive funding less desired.

With that backdrop in mind, Finland-based...

High-grade corporate borrowers are jumping into a primary market hungry for new paper, as two issuers on Tuesday were able to erase concessions with heavily subscribed subordinated deals.

Since the euro primary arena reopened for corporates on Monday, supply has consisted entirely of hybrid debt, OMV and Solvay issuing bonds on Tuesday, following Vodafone's €2bn dual-tranche deal the day before.

Bankers are putting this down to an accommodating market, with investors eager to get their hands on both new bonds and high-yielding debt, with some issuers taking a more opportunistic approach to funding in order to take advantage of this.

"Conditions are certainly strong as we emerge from what was a very quiet summer period, so a number of issuers are taking advantage and getting on with their funding," said a banker.

"On the investor side, the higher absolute yields are certainly going down well."

In a sign of how strong the market is, both borrowers...

Updates with IPO filings

Ant Group has filed listing applications in Hong Kong and Shanghai today for a simultaneous A/H listing which could raise up to US$30bn in October at a more than US$200bn valuation, according to people close to the deal.

At US$30bn if market conditions allow, the listings would displace Saudi Aramco's US$29bn IPO as the world's largest.

Ant plans to offer not less than 3bn A+H new shares, equivalent to not less than 10% of its enlarged share capital, excluding a 15% greenshoe.

For the Shanghai leg, Ant filed for a proposed Rmb48bn (US$6.9bn) Star IPO to the Shanghai Stock Exchange.

It is common for companies listing on the Star market to raise more than the initial target if investor feedback is positive.

The Chinese digital payments unicorn just finished a Star IPO tutorial in 10 days, the shortest tutorial ever by an A-share IPO candidate. It had also applied for an overseas listing with the China Securities...

Launch details added

Royalty Pharma launched a US$6bn six-part bond on Monday for its inaugural US dollar high-grade offering after having already raised over US$2bn through an initial public offering earlier this year.

The world's largest buyer of pharmaceutical royalties, rated Baa3/BBB-/BBB-, garnered nearly US$10bn in demand before guidance, a banker away from the deal said.

The three, five, seven, 10, 20 and 30-year bonds were evenly split at US$1bn a piece with final spreads landing at Treasuries plus 80bp, 115bp, 155bp, 180bp, 225bp and 245bp, respectively, later on Monday.

Proceeds are slated to pay down two term loans coming due, one for US$3.85bn and the second for US$2.1bn, one lead banker confirmed.

The bond offering follows the company's US$2.175bn Nasdaq initial public offering in June, which remains the largest IPO of the year so far.

Royalty Pharma sold 77.7m shares at a price of US$28, and shares have since jumped to around...

BNP Paribas and Commerzbank reopened the euro bank market with successful senior unsecured trades on Monday, securing attractive levels while paying slim concessions, although investors made a clear display of price discipline.

The deals are the first euro benchmarks from the FIG sector since 22 July, ending a summer break that has seen spreads grind tighter, reclaiming more of the ground lost in the volatile early days of the coronavirus crisis.

BNP Paribas' eight-year non-call seven senior non-preferred (SNP) offering was marketed with initial price thoughts of mid-swaps plus 120bp area.

Sole bookrunner BNP Paribas then revised guidance to 95bp area with books in excess of €2.85bn. The spread was subsequently fixed in line with guidance at 95bp with books having dropped to €2.25bn-plus. The size was later set at €1bn.

Bankers said the positive result encapsulated the opportunities of the new issuance window, with BNP Paribas securing a tighter level...

Sweden and Germany are gearing up to sell their inaugural green transactions, joining the growing ranks of sovereign issuers turning to the bond market to brush up on their ESG credentials and clean up their economies.

The trades have been a long time coming, with the Swedish government starting to look into how to develop the green bond market back in 2016 while Germany said in 2019 that it would consider issuing green bonds.

Sweden is likely to emerge first, saying today that structuring advisor SEB along with joint leads - Barclays, Danske Bank, NatWest Markets, and Swedbank - will hold a global investor call on Wednesday and be available for one-on-one calls on Thursday.

"It's another good step for that whole market but Sweden as a country really is the standard bearer," a banker close to the deal said.

"As a population, they are very focused on these issues and that's coming through the debt office as well."

The Triple A rated country aims to...

Chinese digital payments unicorn Ant Group has kicked off preparations for a Shanghai Star IPO, paving the way for a simultaneous A/H listing that could fetch more than US$20bn in October.

Ant, the parent company of Alipay, China’s largest mobile payments business, has begun a tutorial with CICC and CSC Financial to familiarise itself with the listing requirements of the Star board before formally filing a listing application, according to a document published on the website of the Zhejiang bureau of the China Securities Regulatory Commission on August 14.

The tutorial process in the mainland Chinese market typically takes around three months, but some recent high-profile listings have shortened that timeframe considerably.

Last Friday, Ant also applied for an overseas listing with the China Securities Regulatory Commission, a prerequisite for its Hong Kong offering.

Ant’s Hong Kong listing application is expected to be filed as early as the week of...

Russian aluminium giant Rusal is getting ready to issue more sustainable debt after hitting key performance indicator targets on its US$1.085bn sustainability-linked loan despite the coronavirus crisis. It is considering a range of instruments, including a sustainability-linked bond issue.

Rusal will be monitoring the markets from September for a window to refinance more debt into a sustainable format, after seeing the margin on its sustainability-linked pre-export financing loan drop by 15bp to 210bp over Libor in July as a result of hitting its KPI targets.

The company is even ready to issue green bonds tied to a specific use of proceeds if market conditions allow.

"Rusal is very well positioned for ESG-linked debt instruments, so we continue monitoring markets for potential new transactions, maybe in the form of public debt like green bonds," said Oleg Mukhamedshin, Rusal’s director for strategy, business development and financial markets.

However,...

Underwriting banks are lobbying the European Central Bank to remove a roadblock to issuance of sustainability-linked bonds by making step-up payment structures eligible for its multi-billion euro bond-buying programmes but are also working on alternative structures as the wait for the next deal grows longer.

Neither the ECB's Corporate Sector Purchase Programme nor its newer Pandemic Emergency Purchase Programme will buy SLBs because they include a coupon step-up based on companies’ performance on environmental targets – and this is proving to be an impediment to issuance.

"There is some engagement happening right now directly with the ECB," said Farnam Bidgoli, head of sustainable bonds for EMEA DCM at HSBC.

The ECB’s bond-buying programmes have provided increasingly vital support during the Covid-19 crisis and the lack of eligibility for SLBs is becoming a bigger problem as banks and borrowers struggle to bring the next deal to the market.

Italian...

Argentina finalised a US$65bn-plus bond restructuring last week when it garnered support from three major creditor groups, ending debt talks that had seemed doomed to fail earlier this year.

The government said in a statement that it had cut a deal with the Ad Hoc Group of Argentine Bondholders, the Argentina Creditor Committee and the Exchange Bondholder Group – as well as other "significant holders" of its bonds.

With the backing of the majority of bondholders, the deal involving an exchange from old into new bonds is considered done, though the government has extended the deadline to August 24 to give stragglers a chance to participate.

Not only was the deal one of the first major restructurings to be completed amid the Covid-19 pandemic, but it also tested the limits of the collective action clauses introduced into Argentina's bonds when it last restructured its debt in 2005 and designed to prevent a repeat performance of the country's subsequent ill-fated...

Major US and European banks set aside more than US$70bn for loan losses last quarter, up from less than US$16bn a year earlier and far higher than the first quarter as they took an increasingly gloomy view on the impact of the Covid-19 pandemic on the global economy.

The expected credit loss, or impairment charge, across 27 major US and European banks in the second quarter was US$71.2bn, compared with US$15.6bn in the second quarter of 2019, according to IFR calculations.

The same banks' credit charge in the first quarter was US$58.2bn, up from US$16.1bn a year earlier. That meant the aggregate charge for expected credit losses in the first half of this year is US$129.4bn – a whopping US$97.7bn more than was booked in the first six months of 2019.

Several bank executives and analysts said there is a lot of guesswork in the numbers, however.

"We're very clear, we cannot forecast the future. We don't know ... It's unprecedented what's going on around the...

Network communications company Windstream has announced plans to raise US$1.4bn in the high-yield bond market next week as it looks to emerge from bankruptcy protection as a private company later this month.

The company announced on Thursday a US$1.4bn eight-year non-call three senior first lien note, with initial price thoughts of 8.25% area. It is expected to price the deal next Monday.

Proceeds from the bond offering will be used, along with other new sources of cash, to repay the company's debtor-in-possession financing, fund emergence costs, and provide cash recoveries to certain creditors, as well as general corporate purposes.

The company is also offering a seven-year first lien term loan for a total of US$2.15bn of first lien debt, as well as a US$500m four-year super senior revolving credit facility, according to Moody's.

Moody's has assigned the first lien bonds and term loan a B3 rating.

In addition, Windstream will look to exit...

The volume of bonds downgraded across European credit slowed again in July, but Bank of America analysts caution that the pace of economic recovery is far from certain and worsening conditions have the potential to quickly trigger a pick-up in credit deterioration.

Across investment-grade and high-yield credit, the amount of bonds downgraded slowed to €17.3bn in July, down from €20.3bn in June and a peak of €132.4bn in March, according to BofA research. Year-to-date net downgrades have now reached €401bn.

Notably, high-yield stole the limelight last month, recording positive net upgrades of just below €1bn. In contrast, the pace of IG downgrades increased in July to €19.1bn, up from €13.1bn the prior month.

This, however, is less cause for concern than it initially appears, reflecting Fitch's withdrawal of its ratings for Innogy, prompting the mechanical downgrade of €7bn of debt. Adjusting for this, IG downgrade volumes would have been €12.1bn in...

Israel's Delek Drilling printed one of the biggest emerging market bond deals of the year when it raised US$2.25bn on Tuesday for its Leviathan gas project to help it take down imposing debts.

The issuer split the fundraising across four tranches, selling a US$500m three-year at 5.75%, a US$600m five-year at 6.125%, a US$600m seven-year at 6.50% and a US$550m 10-year at 6.75%.

The deal will help Delek finance debt undertaken for the development of the Leviathan field, one of the largest natural gas fields in the eastern Mediterranean.

The company, which has a 45.34% stake in the Leviathan field, faces over US$2bn of maturities in the next six to 12 months, including a US$1.75bn four-year construction loan financing from 2017 that matures in February 2021.

"It doesn't naturally fit in anyone's sweet spot," said a source, who added the currency, location of the assets and ratings could all have deterred potential buyers.

"It was a pretty unique...

Virgin Australia kept bondholders waiting for details of the size of the haircut that prospective new owner Bain Capital intends to implement when it unveiled plans for its future on Wednesday.

Virgin announced plans to slash its workforce and simplify its network, and pledged to emerge from administration with a strong balance sheet "worthy of an investment-grade rating", without giving further details. It plans to release a detailed report on August 25, ahead of a second creditors' meeting now scheduled for September 4.

This meeting has been delayed by a week to allow administrators at Deloitte more time for negotiations and to give creditors, including their formal representative group, Virgin's Creditors Committee of Inspection, longer to examine the proposals.

If the most recent secondary market prices are any guide, Bain is seen imposing a huge bondholder haircut of around 90%.

Australia's second largest airline owed about A$6.8bn (US$4.9bn) to...