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By Laura Benitez
LONDON, May 16 (IFR) - Orders peaked at over €3bn for French
holding company Rallye's unrated €350m five-year bond, which is
set to price at a 4.375% yield, a telling sign that the
investment-grade corporate market is super hot, investors said.
It will be the first bond from Casino's controlling
shareholder since a report in December 2015 from short-seller
Muddy Waters labelled the French retailer's financial statements
as 'literally meaningless'.
After holding investor calls on Monday, Rallye officially
began marketing an expected €300m long five-year deal at initial
price thoughts of low 5% yield.
Guidance was set at 4.75% area, and was later revised to
4.375%/4.5% for an upsized deal. In the end final terms came at
4.375%, as orders were reconciled at €2.6bn from over €3bn.
The borrower drew a heavily subscribed order book despite
many investors telling IFR they were steering clear, calling the
new bond 'ring-the-bell top of the market stuff'.
However, a lead banker said the "outstanding success of
(the) issue has discredited" those investors.
The yield is attractive in the low-yield environment and
comparable to where single B credits have issued paper recently.
Norican, rated B/B2, priced a €340m 2023 senior unsecured deal
at 4.5% earlier this month.
"Basically it was oversubscribed as it had been pre-marketed
so extensively," said one hedge fund manager who placed an
He thought the order book was inflated by leveraged
investors trying to maximize their allocation, who will then
seek to flip the bonds.
"There are a lot of people flipping the market and getting
involved on a leveraged basis without having to put up any
capital due to the nature of the market."
Many real money investors are still cautious about buying a
credit they view as having an opaque financing structure.
The report from Muddy Waters in December 2015 prompted
closer examination from rating agencies of the complex debt
structure of France's Casino and its parent Rallye.
Consequently, Casino was junked last year; S&P downgraded
the credit to BB+ with a stable outlook in March 2016, and Fitch
to BB+ with a stable outlook the following month.
One investor said a yield close to 4% is indicative of how
hot the market is.
Another investor said: "I expect they had a large proportion
of the book already soft circled at a price of say 5%. It should
be interesting when Casino goes into reverse or sells off."
BNP Paribas, HSBC, ING, Natixis, NatWest Markets, Societe
Generale and UBS were bookrunners on the transaction.
(Reporting By Laura Benitez, editing by Sudip Roy and Alex