(Adds commentary from lead, investors and banker away)
By Robert Hogg
LONDON, March 23 (IFR) - Volkswagen is leaving nothing to
chance for its first euro unsecured bond since the emissions
cheating scandal and is offering a handsome premium to ensure
the trade goes smoothly.
The automaker is out with a €4bn-plus benchmark split across
four bonds, each for a minimum €1bn size.
"It's a 25bp-30bp new issue premium and I think it looks
decent," said a banker away from the deal. "You can argue the
curve is pretty steep, but they need to pay to get a yard in
each. It looks reasonable and I think it'll go really well."
VW is marketing a two-year floater at 45bp area over
three-month Euribor. The issuer is also selling a four-year at
60bp area over mid-swaps, a 6.5-year at 95bp area and a 10-year
tranche at 130bp area.
"The initial price thoughts look decent but they need to
be," said one investor.
"At the 10-year point I think VW should trade around 70bp
wide of Daimler, especially given the €100k denoms exclude
retail investors and the undercurrent of litigation in Europe.
That would suggest [fair value of] 110bp for the 10-year."
A second investor told IFR that the starting point looked
fine, but one dynamic to watch was how much slack would be left
in the pricing if VW keeps a tight grip on the overall volume. A
lead banker would not be drawn on whether there was a headline
target size for the trade.
"€1bn-plus means €1bn-plus, so we'll just see where it goes
from there," said the lead.
VW's senior spreads blew out by over 200bp after the scandal
broke in September 2015, but bonds have since bounced back with
the help of the ECB, which has been buying paper as part of its
Corporate Sector Purchase Programme.
Its €750m 0.75% August 2020s were bid at swaps plus 38bp on
Thursday, according to Tradeweb data, having traded as wide as
259bp after the scandal hit.
The new bonds are expected to price on Thursday via
Barclays, BNP Paribas, Citigroup, Mizuho, Societe Generale and
The expected issue ratings are A3 from Moody's and BBB+ from
S&P (both with negative outlooks).
(Reporting by Robert Hogg, editing by Helene Durand, Julian