Repsol returned to ESG funding with an inaugural sustainability-linked bond on Tuesday, following its controversial green deal issued four years ago. But despite greater acceptance of oil sector issuers raising ESG debt, price progression was slow on the latest deal.

The Spanish oil company followed in the wake of Eni, which earlier this month became the first company from the sector to issue a sustainability-linked bond.

Repsol (Baa2/BBB/BBB) announced euro benchmark eight and 12-year senior unsecured notes at IPTs of 70bp–75bp and 90bp area over mid-swaps.

The shorter tranche carries a 25bp coupon step-up, triggered if the company fails to reduce its carbon intensity indicator by 12% by 2025, and the longer incorporates a 37.5bp step if the issuer misses its target to reduce its CII by 25% by 2030.

The different step-up amounts are a reflection of the number of coupons paid between the potential step-up date and each bond’s maturity, said a syndicate...

French frozen food company Picard is reviving a €1.71bn multi-tranche sustainability-linked high-yield bond much wider than where it had first hoped to bring it, two months after the company was unable to reach a compromise with investors on pricing.

The Lion Capital-owned company is playing it a bit safer this time around, adding two more banks to the line-up, cutting the length of the deal's maturities and offering chunkier yields. JP Morgan and Morgan Stanley have been added as joint global co-ordinators to the original line-up of Goldman Sachs and Credit Suisse.

In addition, the tenors have been switched up. The company (B3/B/B) on Monday announced three sustainability-linked tranches: €1.4bn in senior secured notes split between a €450m minimum five-year non-call two fixed-rate bond (issued via Picard Groupe) and a €450m five-year non-call one floating-rate bond (issued via Lion/Polaris Lux 4), and also a €310m six-year non-call 2.5 senior note (issued via...

The great fixed income trading boom touched off in the wake of the Covid-19 pandemic that powered record performance across the largest banks is coming to a close, according to bank executives at JP Morgan and Citigroup. The end will come just as the US appears to be taming the virus and largely reopening its economy.

Still, relative to historical trends, trading could be seen as humming along.

Both JP Morgan and Citi warned that trading would be down considerably from year ago levels when fixed income commodity and currency trading spiked to record levels across Wall Street. Compared to 2019, however, trading revenue remains robust and the boom in investment banking led by equity underwriting and M&A is likely to offset some of the trading decline – at least for JP Morgan in the second quarter.

JP Morgan CEO Jamie Dimon said the bank is expecting trading revenue of north of US$6bn in the second quarter ending June 30. That’s down about 38% from the year...

Italian postal service provider Poste Italiane is raising hybrid financing for the first time on Wednesday, largely to support and diversify the regulatory capital structure of its banking and insurance entities BancoPosta and Poste Vita.

At the outset bankers and investors thought that the trade should be well supported given the likelihood of strong domestic demand, the fact that the deal is a debut, appetite for credit diversification for hybrids is strong and the ties that the issuer has with the Italian government.

And indeed, it was. With books above €3bn, leads could set the yield on the €800m perpetual non-call eight-year at 2.625%, well inside the IPTs of 3% area.

Estimates of fair value were varied due to this being the borrower’s first hybrid. Leads said the deal landed flat to fair value, while bankers away offered fair value levels ranging from 2.5% to 2.75%. Regardless, it still came with enough yield to keep investors happy.

“We think that...

Nestle waded into the primary to raise €3.15bn across four tranches on Wednesday, and with solid demand and a limited or zero premium on the 20-year part, the deal demonstrated that investors are once again developing an appetite for longer-dated corporate euro issues.

The Swiss food and drink maker (Aa3/AA-) decided to take on fresh funding while conditions are supportive and competing supply low. While Dutch utility Tennet (A3/A-) printed a €650m 1.125% June 2041 last week as part of a triple-tranche exercise, that was a green bond and had its own dynamics.

“The market is open, they were looking for a window and the pricing that they wanted was available to them,” said a syndicate banker.

The only other euro high-grade corporate in the market was the EM-flavoured SPP distribucia - the Slovak Republic's natural monopoly gas distributor – with a €500m 10-year.

Nestle (Aa3/AA-) issued €1.25bn June 2026s, €750m June 2029s, €500m February 2034s and €650m...

Italian oil major Eni’s inclusion of indirect Scope 3 CO2 emissions in its new sustainability-linked financing framework will set a benchmark for other high-emitting companies seeking to raise ESG-linked debt, and is likely to put the company ahead of tightening standards.

Eni has created its own methodology to measure Scope 3 emissions, which although indirect typically account for the majority of a company’s CO2 emissions.

“Our methodology is comprehensive – it doesn’t exclude certain areas of the world or partnerships nor is it limited to operating activity or operating volumes,” said Francesco Gattei, Eni’s CFO. “It’s not limited to a subset of performance or activity – instead we’re including all our activity, which is a first.”

Scope 3 emissions are difficult to measure because they are outside each company’s direct control and relate to how customers use a company's products. Eni's methodology allows it to calculate and include Scope 3 emissions on the...

PA Housing’s debut sustainability bond got an overwhelmingly positive reaction from sterling investors and underscored the growing number of ESG financing tools being used by UK housing associations.

The issuer, which owns 23,000 homes across London, Surrey and the East Midlands, on Thursday became the third UK housing association to issue sustainable benchmark debt, following transactions from Clarion Housing and MorHomes.

“Sustainability and ESG are increasingly important topics for the sector and we see a lot of the housing associations exploring different financing tools,” said a DCM banker.

“And the sterling investor base is, in many ways, very forward-thinking when it comes to ESG, so we have good interest on that side of the market too.”

Investors were certainly happy to support PA’s first transaction, with the deal seeing a 23bp spread revision and landing some 10bp through fair value, according to a syndicate banker.

Barclays and Lloyds...

Wisconsin Electric Power Company is looking to issue an ABS deal next week to finance the dismantling of a coal-fired power plant following a similar deal from Southern California Edison in February that was received well by investors.

The single-class, Triple A rated transaction, WEPCo Environmental Trust Finance I 2021, is expected to raise US$118.81m and will be secured by a special fee the utility will collect from its customers. Barclays is the lead underwriter.

In November 2020, the Wisconsin state legislature approved the bond issuance for WEPCO to recover US$100m of the undepreciated costs associated with the environmental control activities at the Pleasant Prairie Power Plant.

This kind of securitization can lower the cost to customers on a present value basis compared with other methods of financing. In a pre-sale report, Fitch estimated the net present value benefits from securitization were around US$41m compared with traditional utility...

Single B borrowers are out in force in this week's European high-yield bond market, with at least four in the ratings bracket looking to take advantage of buoyant conditions to refinance debt.

Consolis (B2/B–), Kedrion (B1/B), Center Parcs (issue ratings: B–/B) and Standard Profil (B3/B–) have either landed or are marketing bonds this week to repay debt.

High-yield bankers said the market is still wide open, but that the amount of supply and variety of credits on offer mean that investors are being pickier on price.

"You can get in trouble launching a deal into this market – today you have to show more price to investors," said a banker. "It's not a demand issue but a price issue. Solid issuers are going to do really well, but other credits may have to differentiate on price."

Many of the borrowers are relatively rare visitors to the public high-yield bond market.

French building materials company Consolis is marketing its debut high-yield bond: a...

SBA Communications Corporation is preparing to sell this week the first cell tower securitization of the year, with demand for these telecom assets expected to grow as wireless service providers look to advance their 5G networks.

Investors are showing eagerness to get their hands on the US$1.165bn single-class issue, SBA Tower Trust 2021-1 after the cell tower company on Tuesday hired Barclays, Citigroup, Deutsche Bank and Mizuho as the lead underwriters, market participants said.

The note with a weighted average life of 5.5 years is expected to be rated A2 by Moody's and A by Fitch.

"The deal is going well so far. We just announced it this morning and momentum is building nicely," a source close to the deal said, adding the transaction could price on Thursday.

Most of the money raised will be used to repay two notes totaling US$800m that were issued in 2017, while the rest of the proceeds will be earmarked for transaction expenses and general corporate...

The first pulled deal in almost a year in the European high-yield bond market has done nothing to deter other borrowers, with at least six new transactions announced.

Center Parcs, Kedrion, Consolis, ZF Friedrichshafen, Lonza Specialty Ingredients and Rexel all announced bonds on Monday.

The flurry comes despite the surprise postponement of French frozen food company Picard's €1.71bn sustainability-linked bond issue. Investors said at the time that the pulled deal should not cause any panic. They said Picard could have placed the bonds but was unwilling to compromise on pricing.

"It's blue skies and choppy waters," said one London-based high-yield banker. "There's no playbook for this market. Central banks remain super-supportive, and that means the market is trading as if the economic numbers are very strong even though we aren't fully out of lockdown. There's still no clear picture as to how employment will look when businesses come off furlough...

United Airlines has squeezed the pricing on a US$9bn offering of bonds and loans that will be used in part to repay amounts borrowed under the US Treasury's CARES Act facility.

There was blowout demand for the Ba1/BB–/BB rated deal, with order books climbing north of US$30bn for the bonds alone by Tuesday evening.

With such strong demand, leads opted to drop the size of the secured bond portion to US$4bn from an initial US$5.5bn, while pushing pricing well below price talk. A US$2bn five-year note was launched at 4.375%, well below talk of 4.625%-4.75%, while a US$2bn eight-year note launched at 4.625%, below price talk of 4.875%-5.00%.

Leads boosted a seven-year term loan B to US$5bn, but were still able to drive pricing tighter, with the loan now coming at 375bp over Libor, with a 0.75% Libor floor and an original issue discount of 99.5, according to Refinitiv LPC. The airline was able to push the coupon on the loan some 75bp tighter than initial talk of...

Real estate investment trust New Residential Investment Corporation said on Wednesday it will acquire Caliber Home Loans Inc. for US$1.675bn in cash as a strong US housing market bolsters the mortgage lending business.

To finance the buyout, New Residential will sell 45 million common shares to raise about US$500m. The rest of the funding stems from US$675m in cash from New Residential and $500m from Caliber's own cash position, according to BTIG analyst Eric Hagen. New Residential estimated the price tag for Caliber is about 1.0x tangible book value.

"With this acquisition, we have significantly strengthened our capabilities to perform across interest rate environments,” Michael Nierenberg, chairman, chief executive officer and president of New Residential said in a statement.

New Residential and Caliber are both active issuers of private-label US residential mortgage-backed securities to fund the loans they originate. Caliber recorded US$80bn in loan volume...

Credit Suisse has recovered more than half of the assets put in supply chain finance funds linked to Greensill Capital, which collapsed last month. The failure led to the suspension of the Credit Suisse funds which had initially raised US$10bn from investors.

Before the latest announcement, US$3.1bn had already been paid back to investors. Now a further US$2bn has been collected and Credit Suisse said it would pay back a further US$1.7bn. That will leave a further US$600m cash in the funds, which has not so far been distributed. In all, the total cash, including that already returned, amounts to US$5.4bn.

In a statement, Credit Suisse Asset Management said it would continue to try to secure further recoveries and make payments “as soon as feasible in one or more instalments until the investors receive the funds’ total collected net liquidation proceeds”.

The firm is in discussions with Grant Thornton, joint administrators of Greensill Capital (UK) Ltd, and is...

Berlin Hyp broke new ground with the first sustainability-linked bond from a financial institution, a €500m senior preferred that suggested investor acceptance of the structure, but bankers said key regulatory questions must still be answered if the product is to be widely adopted by banks.

The German lender on Tuesday neatly imported the SLB product pioneered by corporates into the FIG space, hitting the market after holding investor calls on Monday.

Unlike the use-of-proceeds sustainable bonds commonly issued by banks and insurers, SLBs – also known as KPI-linked bonds – are not used to finance a specific pool of assets. Instead, corporate SLBs have typically featured penalty clauses such as coupon step-ups that are triggered if the issuer fails to meet ESG-related KPI targets.

Berlin Hyp's deal follows that example, with a 25bp coupon step-up enacted at the last coupon if the bank does not reduce the carbon intensity of its loan portfolio by 40% between...

US high-yield bond spreads are close to all-time tight levels, with investors taking confidence from a drop in expected default rates thanks to strong access to capital, government stimulus measures and low near-term debt maturities following heavy refinancing activity.

ICE BofA's high-yield index shows average high-yield bonds offer a spread of 324bp over Treasuries, just 8bp wide of the post-credit crisis low of 316bp seen in October 2018.

Some investors think the market could move even tighter from here, because the proportion of lower yielding Double B bonds in the index has increased since 2018, and many of the more troubled Triple C names have been washed out through bankruptcy and restructuring.

"We're not sure how much tighter [spreads] could go, but there's no catalyst for them to move wider from here. The index consists of more higher quality Double Bs and is longer duration than it has been in the past," said Adam Spielman, head of leveraged credit...

Diamond Resorts on Monday drew heavy investor demand for its US$319.4m timeshare securitization, fetching about US$3bn in overall orders.

The three-year, four-part deal, Diamond Resorts Owner Trust 2021-1, was the timeshare operator's first ABS transaction following Hilton Grand Vacations' US$1.4bn all-stock purchase from its owners Apollo Global Management, Reverence Capital Partners and other investors on March 10.

Like other recent timeshare offerings, new investors participated in the Diamond offering, propelling spreads to come in well inside their initial price talk, a source familiar with the deal said.

For example, the deal's US$83.18m Single A rated "B" note cleared at 150bp over swaps, well inside initial price thoughts in the 200bp area, while US$65.36m Triple B rated "C" note priced at swaps plus 215bp compared with an early assessment in the 275bp area, two buyside sources said.

Still these spreads are considerably wider than those in Travel...