(Adds banker comment and context)
By Laura Benitez
LONDON, April 5 (IFR) - Volkswagen is capitalising on the
insatiable demand for the euro deal that marked its return to
the global capital markets last month, and is now tapping
investors for sterling debt.
Volkswagen Financial Services is marketing a dual-tranche
four and eight-year benchmark bond - a comeback trade for what
was one of Europe's most frequent corporate bond issuers until
it admitted cheating in US emissions tests in September 2015.
VW was last in the sterling market in April 2015 with a
"It was a matter of time before they returned to the
sterling market and it was important that they did the euro
first. But with that out of the way and it going so well, there
was nothing to stop them," a lead on the deal said.
Initial price thoughts for the four-year tranche are Gilts
plus 135bp, and 155bp for the eight-year.
The 1.750% April 2020 bond is bid at Gilts plus 119bp, from
a wide of plus 308bp in September 2015, according to Tradeweb.
It was originally sold at plus 70bp.
At the end of last month, the troubled automaker issued its
first euro unsecured bond since the cheating scandal, attracting
€25bn of demand for the €8bn multi-tranche transaction.
However, unlike that deal, which was issued out of its
International Finance subsidiary, today's transaction is being
issued out of its Financial Services arm, rated A2/BBB+ by
Moody's and S&P.
Consequently, VW Financial Services does not qualify for the
Bank of England's Corporate Bond Purchase Scheme, unlike March's
euro deal (rated A3/BBB+ negative/negative by Moody's and S&P),
which received support from the European Central Bank's
Corporate Sector Purchase Programme.
According to a lead, the borrower's sterling funding is
typically issued out of its Financial Services arm.
Bookrunners on today's deal are Barclays, Goldman Sachs and
Volkswagen also plans to return to the US dollar market this
year, and to the hybrid sector in the second half of the year,
Joerg Boche, VW's head of treasury, said on an investor call
(Reporting By Laura Benitez; Editing by Philip Wright)