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WorldJanuary 2 2014

Bosch und Siemens Hausgeräte makes a home market debut

Unlisted white goods manufacturer Bosch und Siemens Hausgeräte chose an unregulated Frankfurt market to launch its debut Eurobond issue targeting institutional investors only. Despite the unusual approach, the deal was more than twice oversubscribed.
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Bosch und Siemens Hausgeräte makes a home market debut

Bosch und Siemens Hausgeräte (BSH) is a rock-solid German business that has delivered strong, stable growth since it was founded almost 50 years ago by Robert Bosch and Siemens. The group specialises in household appliances, such as ovens, washing machines and freezers, and its brands, including Neff, Gaggenau and Zelmer, have come to epitomise quality and reliability.

Two years ago, BSH tapped the dim-sum market but it had never launched a Eurobond issue. In the second quarter of 2013, however, the group began to consider taking the Euro-plunge. “We started thinking about a Eurobond issue early last summer. We had not accessed the market before but conditions seemed highly conducive to a debut issuer. By the onset of autumn, we could not imagine the market getting any better,” says Andreas Stolzenburg, head of corporate finance at BSH.

As a large, established business, BSH has a number of relationship banks, most of whom were keen to take a leading role in its debut Eurobond deal. Mindful of its appeal, the group embarked on a competitive process to select the lucky bookrunners.

“We only looked at the line bankers that we really do business with and we sent them a questionnaire asking them about their views on topics such as structure, tactics, investor base, legal issues and the market in general. We then selected three bookrunners,” says Mr Stolzenburg.

Unregulated market

The chosen banks were Deutsche, Société Générale and UniCredit, and BSH told them from the start it was keen to focus on institutional, not retail investors. The choice was fortunate. Siemens is a public company but Robert Bosch is a family business and BSH is not a listed entity. As such, it publishes results just once a year. Bonds listed on regulated European exchanges have to publish semi-annual results so this was not an option for BSH.

“We wanted to target the wholesale market so the Freiverkehr was an obvious destination for us as it is geared towards institutional investors and is located in Frankfurt,” says Mr Stolzenburg. The Freiverkehr is an unregulated market, however, and is seldom used for senior bonds issuance.

“Most companies that issue bonds are publicly quoted so they are very familiar with the regulated markets. We are not. However, we could have gone to a regulated market, if we wanted to target retail investors and issue quarterly statements. But that was not the direction we wanted to go in,” says Mr Stolzenburg.

For some companies, this choice could have had serious consequences as regulated markets provide a degree of comfort to certain investors. BSH had certain advantages, however. First, the company itself is extremely well regarded. Second, both its shareholders are blue-chip names. Third, BSH has a robust business model that has proved highly defensive in recent years. And fourth, the group secured an ‘A’ rating from Standard & Poor’s.

“We included S&P from the beginning of the process. We gave it certain key documents and it signalled its thinking ahead of our actual issuance,” says Mr Stolzenburg.

The group opted to use only S&P, deciding this was sufficient for a business of its calibre. “We have a lot of trust and confidence in S&P and we have built up a good relationship with it over the years,” says Mr Stolzenburg.

The group, advised by its bookrunners, also felt a full-blown roadshow would not be necessary. Having announced its intention to tap the Euromarket on a Monday, the group held a call with investors the following day and launched its transaction on Wednesday, November 6.

Strong demand

The target amount was €500m, the maturity was November, 2020, and initial price thoughts ranged between 45 and 50 basis points above mid-swaps. Demand was extremely strong and the order book soon reached €1.3bn, at which point investors were guided towards a price of mid-swaps plus 45 basis points. Ultimately, the deal was priced at a spread of 42 basis points, equivalent to a coupon of just 1.875%.

“We could have raised €1bn but the issue was for general corporate purposes and we only wanted €500m so there would have been no point increasing the size of the deal,” says Mr Stolzenburg.

Investor appetite was particularly noteworthy because seasoned Eurobond issuer LVMH tapped the market on the same day. The luxury goods group achieved marginally tighter pricing but for BSH, as an inaugural issuer, this was expected.

The bookrunners also thought demand would come primarily from Germany, particularly given the unlisted nature of the bonds. However Germany and Austria accounted for 27% of the deal, with 34% going to France and 20% to the UK and Ireland. More than 60% of investors were fund managers, supplemented by insurers, pension funds and banks.

“We were very pleased with the result, absolutely satisfied in every way,” says Mr Stolzenburg. 

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