New York City, July 22 (IFR) – Teva Pharmaceutical raised more
than US$ 20bn across 3 currencies this week via an
acquisition-driven bond that benefited from bottled-up demand
for corporate paper in a yield-starved market. Enormous order books in both Europe and the United States helped the
Israeli-based company capture incredibly appealing pricing in
what clearly stays a customers’ market. Investors had actually been making space for the well-telegraphed
deal since Teva announced its US$ 40.5 bn acquisition of
Allergan Generics previously in the year, while decreasing rates
across the industrialized world and a lack of current supply in the US
and European markets added inspiration to the transaction. In Europe, Teva provided bonds that priced up to 35bp inside
its secondary curve – and those impressive bonds, in turn,
tightened by an incredible 40bp throughout the execution process. Bankers said that such a result was unprecedented for an
M&A- driven trade. To take an informing example, the 12-year euro tranche was
priced inside where the business released notes with a similar
tenor in 2014, despite the fact that Teva’s ratings have because been
downgraded 2 notches by S&P. Unfavorable NIPs Things kicked off on Monday in US dollars with all 6
tranches of the US$ 15bn deal being released with unfavorable
Order books came to a head at around US$ 70bn on the dollar offering,
with only US$ 4bn of orders withdrawn after leads tightened
pricing by as much as 40bp. The dollar leg – which made up tranches from two to 30
years – followed an uninspired week in the US primary market
and, in spite of weaker conditions on Tuesday, the bonds rallied
hard as under-allocated investors scrambled to grab paper in the
secondary market. “To state that allocations for Teva bonds were cut-throat is
an understatement,” one syndicate lender far from the deal
stated. “Guys [who didn’t get allocations] are most likely fishing
around for extra bonds It’s a bit of a bloodbath, to be
truthful.” Even unfavorable new-issue premiums of approximately 15bp made little
difference to accounts with cash to put to work and excited to
The brand-new bond tightened 8bp-11bp on the break, far
outperforming other US high-grade credit that day. “This is insane,” one financier said. “How tight can these
things go?” Craze It was a comparable story for Teva’s foray into the euro market
on Wednesday, when it offered 4bn of bonds divided into 2020, 2024
and 2028 tranches.
Orders reached 30bn at one point, with the last book at
simply over 25bn. The peak level of demand was simply shy of the
32bn seen on AB InBev’s record-breaking 13.25 bn financial obligation splurge
in March that came amid a craze of buying just days after the
ECB announced plans to purchase corporate bonds. While financial stimulus from the ECB has further strengthened
financier enthusiasm for business issuance, a lack of brand-new
concerns also played its part in stimulating demand for Teva’s.
deal. “The book size was extraordinary but it is likewise indicative of.
the pent-up financier need in the business market – supply has.
been extremely thin,” stated Mark Lynagh, head of European corporate.
DCM at BNP Paribas, which was a joint lead throughout Teva’s 3.
deals last week, along with Barclays, Bank of America Merrill.
Lynch, Credit Suisse, HSBC and Mizuho. Investment-grade euro business issuance total led simply.
6.3 bn in the very first three weeks of July, prior to the Teva deal,.
compared to 9.7 bn in the exact same duration in June. The euro tranches were 18bp-26bp tighter on a mid-swaps.
basis on Thursday, in result repricing a curve that had currently.
come tight. “The need permitted the company to strongly revise.
prices, which in turn repriced the secondary market,” stated.
Sameer Patel, debt syndicate at Mizuho.” is unprecedented for a tactical M&A- driven bond trade,.
and it demonstrates how dysfunctional the secondary market is right.
now.” Teva quickly mopped up the rest of its acquisition.
moneying on Thursday in Switzerland, where it released a SFr1bn.
( US$ 1.02 bn) three-part offering, comprising two, six and.
nine-year tranches. The company was able to pull in prices on its SFr300m.
two-year tranche to a yield of 0.125% from a 0.15% indicative.
level, while the SFr350m six-year was priced at mid-swaps plus.
105bp versus mid-swaps plus 110bp area of IPTs, and its SFr350m.
nine-year tranche came at 135bp versus plus 140bp area.
( Reporting by Hillary Flynn; Laura Benitez; modifying by Paul.
Kilby and Shankar Ramakrishnan).