The Deals of the Year 2018 winners from Europe.

Bonds: Corporate 

WINNER: Volkswagen’s €8bn multi-tranche bond 

Lead managers: Barclays, BNP Paribas, Citi, Mizuho, Société Générale, UniCredit

In late 2015, Volkswagen’s future seemed to hang in the balance. Revelations that it had gamed emissions testing sparked a scandal that forced its chief executive to step down, tarnished its reputation as a green leader in the auto industry, and cost it €25bn in fines, remediation, compensation to customers and recall expenses. 

Yet the German carmaker has bounced back in a way few other companies could. It has completed a swift and successful restructure, profits for 2017 were double those of 2016, and it has staged a successful return to the senior bond markets. 

In March 2017, Volkswagen ended its 19-month hiatus from the international debt markets in style by selling its – and the German corporate world’s – biggest ever euro-denominated bond. The €8bn deal consisted of four tranches: €2.5bn in two-year floating rate notes, €2.5bn in 10-year fixed rate notes, and €1.5bn of four-year and 6.5-year notes. The order book peaked at some €25bn, allowing the deal to be upsized and final price guidance to be set 15 basis points inside of initial price thoughts. Each tranche was between 2.4 and four times oversubscribed and Europeans dominated the buyer base – demonstrating Volkswagen’s recovery on its home turf.  

The fundraising’s success is testament to the return of investor confidence in the issuer, and the efforts of the banks that brought the deal to market. 

The deal paved the way for Volkswagen to become a regular, once again, in the international bond markets. Four months later it sold a Ä3.5bn hybrid bond and in December Volkswagen Bank, newly separated from the firm’s financial division, made its first foray into the bond markets with a Ä2bn deal. Pricing was tightened in these follow-on deals, confirming that investors are not punishing Volkswagen for the emissions scandal. 

Bonds: SSA 

WINNER: Greece’s 3bn bond and switch offer 

Financial adviser: Rothschild

Bookrunners: Bank of America Merrill Lynch, BNP Paribas, Citi, Deutsche Bank, Goldman Sachs, HSBC

The Greek government’s €3bn return to international bond markets back in April 2014 proved a false dawn. It ended the sovereign’s four-year expulsion from the debt markets following a sovereign debt restructure that imposed hefty losses on investors. But little over a year later, the country entered yet another eurozone bailout programme and in mid-2015 found itself on the brink of a eurozone exit. 

In mid-2017, Greece staged yet another comeback, which is proving to be longer lived. Athens’ sale of €3bn in five-year paper in July 2017 was a resounding success. It was accompanied by an accelerated switch offer, which saw nearly 40% of outstanding paper maturing in April 2019 tendered for the new notes. Running the switch tender and new issue simultaneously meant new investors were competing with legacy investors. This, combined with a recent rating uplift from Moody’s and an improved outlook from Standard & Poor’s, led to tighter pricing. Initial price thoughts were set at 4.875% but the notes printed with a 4.375% coupon – 32.5 basis points tighter than the 2014 deal, representing a sizeable reduction in the government’s debt costs. 

It was a swift execution. HSBC, as billing and delivery agent, achieved same-day settlement of the tender and newly issued notes; normally these would settle a few days before the final completion date. This optimised certainty for the issuer. 

The transaction is a vote of confidence in Greece’s recovery and a barometer of its ability to exit its Ä86bn bailout programme in August 2018. Not only did the deal attract €6.5bn-worth of orders, but 86% of the paper was sold outside of Greece. It helped rebuild the government’s yield curve, which three of the country’s biggest banks capitalised on by staging their own return to the international covered bond markets over the following six months.

Bonds: FIG 

WINNER: Bank of Ireland’s dual-tranche Tier 2 

Joint lead managers: BNP Paribas, Citi, Davy, Morgan Stanley, UBS

Bank of Ireland’s (BoI’s) $925m-equivalent capital issuance in September 2017 was a success on multiple fronts for the country’s biggest lender by assets. 

First, the dual-tranche deal’s pricing exceeded expectations. Following initial price thoughts, the $500m 10-year non-call five tranche tightened by 30 basis points (bps) to finish at Treasuries plus 250bps. Meanwhile, the £300m ($421m) 10-year non-call five tightened by 15bps to Gilts plus 270bps. With the sterling paper carrying a yield of 3.235% and dollar notes a yield of 4.24%, BoI’s deal priced in line with investment grade credits, belying its sub-investment grade rating (Ba1 from Moody’s and BB from Standard & Poor’s). The sterling order book was oversubscribed more than 4.5 times and the dollar book 9.5 times. 

Second, it marks the first step by BoI – and the Irish banking sector – towards a capital structure favoured by the Eurozone Single Resolution Board. Two months before the deal, BoI had become the country’s first bank to reorganise itself into a holding company (holdco) structure, from which it would issue all capital and other instruments to satisfy its obligations under the EU’s minimum requirement for own funds and eligible liabilities regime, better known as MREL. The holdco structure is favoured by regulators because it allows for a so-called single point of entry in any resolution scenario. The Tier 2 deal marked the BoI’s inaugural capital markets sale from its holdco. 

The third point of note is BoI’s currency strategy. The bank has a multi-currency balance sheet, and it makes sense to currency match its borrowings with its assets. The joint lead managers announced the deal as a dollar and/or sterling trade, maintaining optionality for BoI depending on investor appetite. The multi-currency outcome was ideal for BoI, and was reportedly the first dual-tranche Tier 2 denominated in dollars and sterling.


WINNER: UniCredit’s 13bn rights issue 

Joint global coordinators and bookrunners: JPMorgan, Mediobanca, Morgan Stanley, UBS, UniCredit 

o-joint global coordinators: Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC

UniCredit faced one of its toughest ever years in 2016. Its circa €11bn loss was more than double that of any other bank in The Banker’s 2017 Top 1000 ranking. Much of this was due to €12.2bn in one-off charges to clean up its balance sheet as part of a group-wide restructure, but it sent the bank’s all-important common equity Tier 1 capital (CET1) ratio below the 10% required by the European Central Bank.  

This did not last for long. In March 2017, UniCredit finalised Italy’s biggest ever rights issue – and Europe’s biggest in eight years – to bring its capital ratios in line with the world’s most resilient systemically important banks. It was an ambitious move. The €13bn deal equalled 80% of UniCredit’s market capitalisation, and was launched shortly after Italy’s failed constitutional referendum and as the country’s fifth largest bank, Monte dei Paschi di Siena, was embarking on a state-backed recapitalisation. 

Yet it was a transaction to which all participants were 100% committed. It was fully underwritten by a syndicate of 10 banks, and the issuer’s CEO and chief financial officer travelled some 100,000 kilometres in little over a month to muster support for the deal. It worked; investors took up 99.8% of the rights on the first day. 

Its success laid the groundwork for a much stronger balance sheet by the end of 2017. UniCredit finished the year with a fully loaded CET1 ratio of 13.6% and adjusted net profit of €3.7bn. It kicked off 2018 by becoming the first Italian bank to issue a senior non-preferred bond – a €1.5bn deal that was nearly three times oversubscribed. The bank’s turnaround is far from complete, but its rights issue has certainly steered it in the right direction. 

Green finance 

WINNER: Covanta and GIG partnership and refinancing 

Financial adviser: Macquarie

In 2017, Europe’s green bond universe continued to expand via new-style instruments and increasingly sophisticated reporting and assessment criteria. But in choosing the region’s green finance deal of the year, it was hard to look past the tie-up between energy-from-waste (EfW) projects operator Covanta and the Green Investment Group (GIG). 

GIG, the new name of the UK Green Investment Bank following its acquisition by Macquarie, entered a joint venture with Covanta to develop, fund and own EfW projects in the UK and Ireland. They are quickly progressing towards their goal of becoming one of the UK’s biggest EfW platforms. The pair have identified six projects for the platform which have the combined potential to treat 2 million tonnes of residual waste per year, and in late 2017 GIG took a 50% stake in Covanta’s new Dublin EfW plant. 

The €136m investment enables Covanta to take out most of its capital in the Dublin plant and reinvest it in the platform’s pipeline. Macquarie led an impressive €272m refinancing, which de-levered the project by replacing its expensive senior and junior debt, plus a 13.5% convertible preferred instrument held by BlackRock. The Dublin EfW’s new debt stack consists of a €396m senior loan and Ä50m second lien junior loan. With interest rates of 3.1% and 5.2%, respectively, and 15-year tenors, the refinancing has drastically reduced the plant’s finance costs and extended its debt maturity.  

The refinancing saw Macquarie coordinate a group of nine lenders from around the world, some of which had limited experience with EfW assets in the region. The deal was further complicated by the plant’s limited operational history (it officially started in late 2017) and it being a public-private partnership with Dublin City Council.

Infrastructure and project finance 

WINNER: Markbygden Ett Wind Farm’s 800m financing 

Financial adviser: Macquarie 

Financiers: Nordbank, NordLB

The Markbygden ETT wind farm in northern Sweden comprises 179 wind turbines, and once operational will be Europe’s biggest single onshore wind farm. Dubbed the North Pole Project, it is of huge importance to Sweden, which has committed to becoming fossil fuel free. 

In 2017, project sponsors GE Energy Financial Services and the Green Investment Group injected €800m of capital into the project, including close to €500m in non-recourse debt supported by the European Investment Bank (EIB), commercial lenders NordLB and Nordbank, KfW IPEX-Bank and German export credit guarantees (otherwise known as Hermes cover). 

The 13-tranche financing was attractively priced, despite only minimal support from the Swedish renewable subsidies scheme, and included the first Hermes-covered loans to be extended by the EIB. Yet perhaps the most impressive part of the deal is the offtake agreement. The deal is backed by a 19-year fixed price and fixed volume power purchase agreement (PPA) with a unit of Norsk Hydro, one of the world’s biggest aluminium producers. It is thought to be the biggest renewable PPA involving a corporate offtaker, and will account for a large portion of the 650 megawatts produced by the wind farm. The PPA is so robust that financiers were not swayed by the fact the offtaker is unrated.

Its sheer size – plus first-of-its-kind hedging commitments that guarantee supply to the offtaker – helped de-risk the project, which gave it access to long-term financing at a lower cost. At a time when European government subsidies are being rolled back, the Markbygden ETT financing proves it is possible to secure private funding for greenfield windfarms despite the fact that feed-in tariff schemes are disappearing. The financing is a strong benchmark for financing renewables projects in a world beyond government support.  

Islamic finance 

WINNER: Winner: Gap Insaat’s $118m sukuk 

Sole arranger: Aktif Bank

Despite having a predominantly Muslim population, Turkey has been relatively slow to enter the international sukuk markets. The first transaction from its financial sector came in 2010 and the sovereign followed suit two years later. The market has continued to evolve, thanks to regulatory reforms and the government’s desire to see Istanbul become a hub for Islamic finance. 

The market’s most notable development in 2017 was the first international sale of a mudarabah sukuk from a local corporate. The $118m mudarabah – a partnership arrangement whereby capital is provided by one party and labour by the other – was issued by real estate developer Gap Insaat on May 10.

International sukuk sales by the country’s corporates are still a rarity, particularly dollar-denominated transactions. It was the firm’s debut international sukuk and the first sukuk ever to be listed on the Irish Stock Exchange’s Global Exchange Market (better known as GEM). The deal is also notable in that there is no guarantee. Coupons and principal repayment rely solely on the ability of the underlying asset – a class A office building in Istanbul – to generate adequate revenues. The proceeds are being used to refinance and pay outstanding construction costs for this building.

In accordance with local law, the seven-year sukuk was issued via an asset lease company established by arranger Aktif Bank, which in turn transferred the proceeds to Gap Insaat to be used to repay loans relating to one of its buildings in Istanbul. 

The deal sees Aktif Bank, which led the issuance of the first Islamic debt instrument on the Istanbul Stock Exchange six years ago, continue its pioneering role in the local sukuk market by acting as transaction administrator and sole arranger.

Leveraged finance 

WINNER: Stada’s 3.175bn financing package 

Bookrunners: Barclays, Citi, Commerzbank, Jefferies, JPMorgan, Nomura, Société Générale, UBS

Bain and Cinven’s takeover of Frankfurt-listed pharmaceutical group Stada was a saga. The target’s board backed the private equity firms’ offer in May 2017, but the deal failed to get the necessary 75% shareholder participation. The terms were renegotiated to reduce the shareholder threshold to 67.5%, but shareholder support still fell short. 

In July, the buyers upped their offer, and managed to have the threshold reduced even further. The third time was a charm. The deal completed within months, and, at a total value of Ä5.3bn (including debt), it was Europe’s biggest take-private in four years and Germany’s biggest ever.

There was speculation whether the on-again, off-again nature of the deal would jeopardise any financing put in place for the original offer. If it was conditional on that deal going forward, it could – in theory – have fallen away after the bid failed. But in September these fears were put to rest when a knock-out €3.175bn financing package came to market to back the deal. It consisted of a €400m revolving credit facility, a €1.7bn equivalent term loan B, €735m in senior secured notes and €340m in senior notes. 

It was one of the European leveraged finance market’s most anticipated deals of the year. Both bond tranches were oversubscribed multiple times, prompting the senior secured portion to be upsized. The Banker understands they were among the tightest secured and unsecured bond prints for a leveraged buyout financing. In terms of complexity, the term loan tranche was the most notable part of the package thanks to a delayed draw element that was put in place to accommodate the public-to-private nature of the transaction.


WINNER: British American Tobacco’s $25bn acquisition facilities 

Underwriters: Bank of America Merrill Lynch, Citi, Deutsche Bank, HSBC, Royal Bank of Scotland

In the first weeks of 2017, British American Tobacco (BAT) agreed to pay $49.4bn to acquire the 58% of shares in US rival Reynolds that it did not already own. When the deal closed in July 2017, it created the world’s biggest public tobacco company. A mega-merger such as this is only possible, however, with strong financial backing. Luckily for BAT, five of its core relationship banks – Bank of America Merrill Lynch, Citi, Deutsche Bank, HSBC, Royal Bank of Scotland – stepped up to the plate and fully underwrote $25bn-worth of acquisition financing to support BAT’s purchase. 

The package consisted of four facilities: a $15bn one-year bridge loan at 40 basis points (bps) over Libor; a $5bn two-year bridge paying 45bps over Libor; a $2.5bn three-year term loan at Libor plus 75bps; and another $2.5bn five-year term loan paying Libor plus 85bps. It is notable that the debt package – which amounted to the biggest syndicated loan of 2017 – was fully underwritten by just a handful of lenders. At a time when the amount of balance sheet being allocated to investment banking is shrinking, deals like this demonstrate that in certain situations the ability to make large loan commitments cannot easily be replicated.

Both bridge loans could be extended by BAT for six months, but this was not needed. The firm refinanced both facilities within 10 days of the acquisition closing, via an impressive $21.5bn bond take-out in which the same five underwriters were instrumental once again. Over two days in early August, BAT raised $17.25bn via an eight-part deal, and £450m ($631.3m) and Ä1.1bn via a dual-currency deal. The end-to-end service by these banks for such a large deal shows there will always be a place for relationship banking.


WINNER: ChemChina’s $43bn acquisition of Syngenta 

Lead financial adviser to ChemChina: HSBC 

Financial adviser to Syngenta: UBS

Over the past few years, the mergers and acquisitions (M&A) universe has seen its fair share of bold combinations. But few have been as audacious as ChemChina’s $43bn takeover of publicly listed Swiss agribusiness Syngenta. 

When announced back in February 2016, the deal had its doubters. It required sign-off by 20-odd antitrust regulators (including the notoriously strict European Commission), the navigation of Swiss and US takeover rules due to the target’s dual listing, a huge amount of debt finance as it was an all-cash deal, and approval on national security grounds. 

Some feared the prospect of a Chinese state-owned enterprise controlling crop protection products in North America – where Syngenta generates a substantial portion of its revenues – would hit opposition from the opaque yet powerful Committee on Foreign Investment in the US, better known as CFIUS. 

This did not materialise, however, and the deal completed in May 2017 thanks to the army of bankers and other advisers that got it across the line. Officially the deal took 18 months, starting with Syngenta’s rejection of ChemChina’s first offer back in November 2015. But in reality the mega-merger was much longer in the making. UBS helped Syngenta fend off an unsolicited takeover approach from the US’s Monsanto earlier that year, before steering its client towards a strategically and financially superior deal. Meanwhile, ChemChina is rumoured to have courted Syngenta – at least from afar – for a number of years. 

The deal was a win for Syngenta shareholders. They received a 25% premium on the closing share price, and ChemChina committed to continue the Swiss business’s stringent corporate governance standards. It is the biggest Chinese outbound M&A deal ever, and it may hold on to this title for some time given the government’s crackdown on capital outflows.


WINNER: Abengoa’s $9.9bn restructure 

Financial adviser to ad hoc group of noteholders: Houlihan Lokey  

Financial adviser to Abengoa: Lazard

Corporate restructures are inevitably messy affairs, but the hurdles that were overcome to recapitalise and reorganise Spanish conglomerate Abengoa were particularly challenging. Deteriorating liquidity, regulatory changes and shifting market conditions in its key countries forced the group to file for pre-insolvency in late 2015 under local Spanish law. This kicked off a two-and-a-half year-long restructuring, which many believe set a template for future cross-border reorganisations of similar scale.

With operations and subsidiaries in more than 80 countries, the restructure had to be implemented through various carefully coordinated court processes around the world. In addition to the Spanish Homologación process, it required US Chapter 11 proceedings (a condition precedent for the overall transaction to complete), a UK company voluntary arrangement, Dutch proceedings and various local bankruptcy processes in Latin America. 

Financial advisers were faced with a hugely complex capital structure consisting of €15bn of different types of loans, bonds and guarantees, €5bn of debt related to trade creditors, and a divergent lender-base of local and international banks, insurers, hedge funds and pension funds. Furthermore, the group was intertwined by intercompany loans between its many subsidiaries. 

The company needed a huge cash injection and to write off a significant chunk of its debt. In the end, 70% of the face value of the debt was equitised and exchanged into 40% of Abengoa’s equity. More than €1bn of new money was made available to the company, on top of a circa €307m bond line facility from its relationship banks. After the restructure, its capital structure was streamlined into eight tranches of debt (much of which is dual currency and in loan and note format) across six different collateral pools.

The restructure wiped some €9bn from Abengoa’s debt stack, and left it with a much simpler corporate structure and a reconstituted board.

Securitisation and structured finance 

WINNER: National Bank of Greece’s 750m covered bond 

Joint lead managers: Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, HSBC, NatWest Markets, UBS 

Co-lead managers: Commerzbank, National Bank of Greece

A major benefit of Greece’s July 2017 return to international bond markets was the fact other Greek institutions could follow in its footsteps. None seized this opportunity like the National Bank of Greece (NBG). 

The same month as the sovereign’s deal, the national champion bank met with more than 100 investors on a non-deal roadshow – an important exercise for borrowers that have lost market access – to pave the way for a transaction of its own. NBG used the meetings to draw attention to its two-year strategic funding plan, aimed at building a healthy liability structure and regaining public markets access in a sustainable way. 

A secured format, and with a short tenor, was deemed the most appropriate way to kick off the new funding strategy and keep costs within reason. Sentiment at the 2017 ECBC Global Covered Bond Congress in Barcelona during September confirmed that the market was indeed ready for such a transaction. 

Following the positive investor reception during a four-day deal-specific roadshow, NBG announced its – and Greece’s – first ever conditional pass through (CPT) covered bond. Initial price thoughts for the three-year notes were around the 3.25% area, 50 basis points (bps) inside the Greek sovereign curve. As orders came in, guidance was tightened to 3% plus or minus 10bps. With a final order book of more than €1.9bn from 110 accounts, the size was set at €750m and the price at 2.9%, 85bps inside the sovereign.

Observers were impressed by the pricing, and the significant support from UK real money investors. Bankers on the deal believe it gave comfort to the buy-side and suggested that Greek banks were worth looking at. Indeed, shortly thereafter two of the country’s other big lenders, Eurobank and Alpha Bank, issued CPT covered bonds of their own.


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