News on EMEA’s newly issued securities 23 November 2020

Dan Barnes Welcome to Primary Markets TV for Europe, Middle East and Africa – your update on newly issued securities in the region – I’m Dan Barnes. Coming up this week in terms of new issues we’re seeing in the market, we have two IPOs on the London Stock Exchange, is AIM Market, a small cap firms, with an expected 100 million pound issue from online clothing and footwear retailer, N Brown Group on the 23rd of November, that’s today. And on the 25th, a 3.3 million pounds issue from Richland Resources. We still don’t have a confirmed date for the launch of Kistos, a newly incorporated, closed-end investment company, focused on the energy sector, but that’s slated to join AIM in late November. The LSE has seen a lot of new bonds reports over the past week, notably from the banking sector, along with several from the European Bank for Reconstruction and Development, two new issues from Toyota, and several new bonds from Asia Pacific-based issuers supported by HSBC. In Vienna, Wiener Boerse has real estate developer Aventa AG, listing today on the 23rd of November, on it’s direct market plus segment. Last week, real estate specalist Techno Solutions launched on the Borsa Italiana on the 9th. We have no new issues in Italy on the calendar this week. In Spain last week, the BME bond market saw a 600 million euro sustainable bond admitted to trading via the Bilbao Stock Exchange from the Basque government, and that was on the 18th of November. On Friday, the 20th, they admitted to trading the first dual-covered bonds program from Banco Caminos and Bancofar. This novel issueing structure in this fixed income market will allow Banco Caminos and Bancofar, to place differently covered bond issues over the course of the year, up to a combined 600 million euros. I’m joined now by Bryn Jones, head of fixed income for RathBones, and Tom Williams, head of energy and  infrastructure at Downing LLP. Guys, welcome to the show.

Bryn Jones Hi, good to see you.

Tom Williams Thanks for having me.

Dan Barnes Bryn, in fixed income, are new issuing volumes and activity levels where you might expect for this time of year?

Bryn Jones Yeah, we’re predominantly focused on the sterling market. I think into the US election, we got a be quiet. But more recently, we’ve seen a bit of uptick in some new issuance. Overall, though, sterling this year has been pretty quiet relative to other years. So when we are seeing issuance, demands are quite high. I mean, there was an issue for Tritax today; a green deal, 250 million pound deal, 2 billion pounds have been ordered, so, nearly 10 times oversubscribed. So there’s excess demand chasing a lack of supply at the moment.

Dan Barnes  That’s pretty interesting. And what about finding value in the primary markets?

Bryn Jones Normally in the initial price talk, it looks quite attractive. Fx, there was a housing association bond this week that came, and it was looking quite attractive on the IPT, and then by the time the deal came on, it compressed into a secondary market spreads of trading. We’re seeing that happening a lot as demand, as I say, outstrips supply. So, I don’t think there’s a huge amount of new issue premium at the moment because of that.

Dan Barnes Are there any sectoral trends that you’re following?

Bryn Jones Yeah, definitely ESG, green sustainability-linked notes, and we saw this Tritex one. Yeah, I’d say majority of deals coming now are either green on sustainability-linked. Every syndication desk, we’re speaking – we spoke to some big US banks this week – and they’re setting up the ESG sustainability-linked syndication desk, so it seems to be what’s happening.

Dan Barnes That’s great thanks very much. And in terms of government bonds in EMIR, I know you are very sterling-focused, but do you have a sense of how they’re doing in terms of issuance and attractiveness?

Bryn Jones Well, the big macro thing, is there’s been a huge amount of fiscal deficits, an increase in government debt to pay for COVID-19, and various other things. In the UK we know that, that’s increased quite significantly. But at the same time, it’s monetization adapts and central banks are buying it. So, all governments are having to issue it. It’s been lapped up, in New Zealand for effectively monetizing the debt for every dollar they’re issuing is being brought up. So, one would argue in a normal environment, such issuance would mean that you’d need to write a premium or a yield premium, but that doesn’t seem to be happening. The most exciting thing that has happened in the last couple of weeks is the announcements of green gilts, which we’ve been lobbying the government for, for over 10 years. And it’s a welcome thing for us, because in our ethical mandates, it means now we can manage liquidity and risk in duration a lot better.

Dan Barnes That’s great. Bryn, thanks very much. Now Tom, we’re wondering if you could tell us about the IPO of your renewables infrastructure trust. Why are you coming to the market now and what are you going to be raising capital for?

Tom Williams Yeah, thanks. I think the answer to why now is really that the opportunity is now. We are seeing a lot of transactions in this space, a lot of very attractive transactions. We’re looking to raise a 200 million fund. We have 60% of that in seed assets and assets under exclusivity, and a further 1.5 billion pipeline, so we can very clearly demonstrate that, that opportunity is here and now. And what we’re hearing from investors on the appetite for this vehicle is, that they look at the wider peer group, and it’s about 9 billion, and it’s trading at a circa 16% premium, and that clearly indicates that there’s a huge appetite for these long-dated cash flows delivering stable dividends. And what that is indicating to us is that there’s clearly space for another offering that is well-thought through in the sector.

Dan Barnes Very much so. Obviously, we’re seeing a lot of interest in the green area at the moment. When you see the appetite from investors, is that coming from both institutional investors and retail investors? Can you tell us a bit about who you think is going to be the priority?

Tom Williams Yeah, we’re seeing appetite across the board, actually. So, Downing LLP is quite an experienced manager. You’ll be aware we have about 1.2 billion under management. And an awful lot of that is from retail investors as well as institutional investors. And we’re finding that this message about the fund investing in renewable energy and infrastructure projects – in the UK and northern Europe, particularly the Nordics – is resonating with people. Not only in that retail space, not only in the institutional space, but also in that money manager and wealth manager area as well. So it is really finding appeal across the board.

That’s fantastic. Well, I hope it goes very well. Tom, Bryn, thanks very much.

Tom Williams Thank you.

Bryn Jones Cheers!

Published on November 23, 2020