* Air France reconsiders bond timing
* Weakness creeps in on Deutsche Bank news
By Laura Benitez
LONDON, Sept 30 (IFR) - Air France-KLM steered clear of the
European bond market on Friday, becoming the latest corporate
issuer to put funding plans on hold as investors grapple with
the wider implications of Deutsche Bank's turmoil.
The unrated Franco-Dutch airline held a global investor call
on Thursday to test appetite for a six or seven-year
euro-denominated senior unsecured benchmark deal.
It was also considering a 10-year fixed-rate Reg S senior
unsecured tranche by reverse enquiry, according to a note sent
out by the lead banks on Thursday.
Unless specified otherwise, issuers typically begin
marketing an expected bond shortly after concluding investor
calls or meetings.
However, reports that investors were reducing their
financial exposure to Germany's largest lender shook the market
on Friday and Air France-KLM did not go ahead with its
"The market is not great with the Deutsche Bank news
weighing on sentiment today and as an unrated credit with a
finite investor base the borrower has to be cautious," a lead on
the upcoming Air France deal said.
"It's a German holiday on Monday so timing will most likely
be the middle of next week, subject to the market, but we will
Earlier in the week, German airline Deutsche Lufthansa
walked away from a seven-year 500m deal after investors showed
little interest for the price it was showing.
HSBC and Societe Generale are global coordinators and joint
bookrunners and Citigroup, CM-CIC, Commerzbank and Goldman Sachs
are joint bookrunners to arrange the deal.
While there has been a delay in Air France-KLM's plans, that
is not to say that the market is shut. Investment-grade
corporate issuance reached 7.6bn-equivalent this week, although
cracks began to appear by the close of the week.
Subordinated debt typically bares the brunt of market
volatility, and true to form this week, freshly priced hybrid
paper from EnBW and Total weakened in the secondary market on
Total's 2.708% 1bn NC6.6-year hybrid deal fell to a cash
bid of 99.3 after pricing on Thursday at 99.997, according to
Tradeweb prices on Friday.
"Total rammed pricing in way too aggressively on Thursday,
and timed it to perfection by coming just after the OPEC
meeting," one investor said. "It wasn't a surprise to us that it
weakened on the break, and luckily we withdrew our order at the
Similarly, EnBW's 3.375% 725m 60.5-year hybrid also fell
slightly to a cash bid of 99.039 by Friday, after pricing on
Wednesday at 99.399.
The iBoxx non-financials corporate index dropped nearly 10bp
by the end of the week to swaps plus 59bp, from highs of 68bp on
(Reporting By Laura Benitez)