Rights Issue Report 3Q17

Transcription

1 Rights Issue Report 3Q17 Analytical report covering European Rights Issues under ECM coverage exploring highlights, drivers of activity, and forward-looking market trends Analyst Amit Rawtani, CFA Deputy Editor ECM Sofia Cerqueira

2 EUR bn Deal Volume Overview 17 YTD issuance tops 14 FY high Fewer but larger rights issues seen FIG capital repair, M&A-purposed dominate Cumulative Issuance Value 4 14 issuance EUR 4.9bn 4 The third quarter of 17 saw issuance totalling a burgeoning EUR 9.2bn from only five rights issues. This brings total issues year-todate (YTD) up to EUR 48.13bn, already surpassing the full-year high of EUR 4.94bn in M&A-related cash calls were predominant this quarter, amounting to EUR 8bn and accounting for 87% of all 3Q17 issuance (also 87% in 3Q16, EUR 8.2bn). Balance sheet repair exercises, however, continue to drive activity, accounting for 68% of all issuance YTD (EUR 32.6bn). This compares to 7% of all issuance in the first three quarters of 16, reflecting EUR 12.7bn raised. 2 2 The slew of financial services rights issues this year sees the sector posting the highest activity by an overwhelming margin. Since the beginning of the year, EUR 3.6bn have been raised in this sector, accounting for 74% of all issuance during this period. This compares to the EUR.1bn raised in the first nine months of 16, reflecting only 23% of issuance for the period. 1Q 2Q 3Q 4Q EURm 16 EURm high This quarter saw a single but notable EUR 1bn Real Estate rights issue intended for M&A funding. Volume 16 Volume 17

3 EUR bn Highlights and Drivers Banco Santander EUR 7bn most notable deal Real Estate and Chemical firms tap equity Issuance by Sector 3 FY16 9M16 9M17 Spanish lender Banco Santander [BME:SAN] was the primary driver of issuance this quarter, raising EUR 7bn to replenish capital ratios, following the absorption of smaller troubled, Banco Popular Espanol. The banking resolution was noticeably neat, wiping loss-bearing subordinated instruments to leave senior bondholders unhindered while pricing equity down to a single Euro. This wind-up and consolidation into a larger institution sets a precedent to consider in future banking rights issues, given Banco Popular had successfully carried out its own substantial EUR 2.bn rights issue to implement a turnaround only a year prior. 2 Amongst the flurry of big banking rights issues, smaller institutions have successfully found investor appetite to raise equity. The latest of these was Vestjysk Bank [CPH:VJBA], which launched and completed a EUR m capital raise (4% of its market cap) late this quarter, after Santander s issue. French real estate firm Gecina [EPA:GFC] successfully raised EUR 1bn (12% of its market cap) to fund M&A, receiving 98.9% in initial acceptances. Swedish chemical firm Getinge [STO:GETI-B] raised EUR 443m (11% of its market cap) to fund business investment, receiving 99.2% initial acceptances.

4 Market Trends Financial Services pipeline Non-financial firms coming to market Growth activity funding The financial services pipeline remains active with another Spanish lender, Liberbank [BME:LBK], in the process of raising EUR m (6% of its market cap) intended to bolster its balance sheet. Italian Banca Carige [BIT:CRG] is also inching closer to a capital increase. There is activity beyond the world of banking, though. Servicesfocused Equiniti Group [LON:EQN] and shipping company Hapag- Lloyd [ETR:HLAG] are collectively targeting EUR 488m in proceeds in their ongoing cash calls. A sizeable Bayer [ETR:BAYG] rights issue is still being anticipated to finance a Monsanto [NYSE:MON] acquisition. The firm recently attained EUR 1bn from the disposal of a 6.9% stake in Covestro [FRA:1COV], but it told this news service the size of the cap hike would be unaffected by these proceeds. Percentage of issuance by use of proceeds % 3Q16 3Q17 9M16 9M17 9% 8% 7% 6% % 4% % Growth-focused M&A and business investment-purposed issuances have received resilient investor appetite, with acceptances reaching as high as 99.9% and averaging 94.84%. Such sentiment could encourage further equity funding for growth, as companies keep a watchful eye on cost of capital and potential interest rate changes in the future. % % % B/S Repair Business Investment M&A

5 For more information on European Rights Issues, including a full shadow pipeline of potential issuers, click here if you are an MM ECM subscriber or here if you are a DR subscriber. EMEA Queen Street Place London EC4R 1BE United Kingdom sales@acuris.com Americas 3 Hudson St. 4th Floor New York, NY 13 USA sales.us@acuris.com Asia Suite Grand Millennium Plaza 181 Queen s Road, Central Hong Kong sales.asia@acuris.com