Outlook 2017: Giant offers mark 2016 for liability management; financials prominent

New York, Dec. 30 – Barclays Bank plc started the year 2016 in liability management with a giant offer for eight series of dollar-, euro- and sterling-denominated notes.

The London-based bank announced its tender on Jan. 4 – and set a pattern that was followed throughout the year.

Multi-billion dollar liability management exercises were frequent in the year, with many reaching into the tens of billions of dollars.

And financials were prominent.

Barclays details

In its offer, Barclays accepted $1,277,324,000 of the $2 billion of outstanding 2.5% senior notes due 2019, $795,113,000 of the $1,597,978,000 of outstanding 6.75% senior notes due 2019, $835,886,000 of the $1,774,363,000 of outstanding 5.125% senior notes due 2020 and $1,474,260,000 of the $2.25 billion of outstanding 3.75% senior notes due 2024.

The bank also accepted tenders for three series of euro-denominated notes and a series of sterling-denominated notes, buying €150,642,000 of the €1,482,885,000 of outstanding 4.875% notes due 2019, €435.02 million of the €1.25 billion of outstanding 2.125% notes due 2021, €257,577,000 of the €1 billion of outstanding 2.25% notes due 2024 and £221,768,000 of the £403,174,000 of outstanding 5.75% notes due 2021.

Barclays said the offers were made as part of its ongoing liability management, intended to support the group’s transition to a holding company capital-and-term-funding model in line with regulatory requirements.

The dealer manager was Barclays. The tender agent was Lucid Issuer Services Ltd.

Deutsche Bank’s auction

The following month, Deutsche Bank AG announced a Dutch auction tender offer for up to $2 billion and €3 billion of notes.

The bank said its “strong liquidity position” allowed it to make the offer to buy back the debt without making any change to its funding plan for the year.

Deutsche Bank AG, London Branch was the dealer manager and tender agent.

AT&T exchanges DirecTV notes

On Feb. 19, AT&T Inc. announced an offer to issue global notes in exchange for 16 series of senior notes issued by DirecTV Holdings LLC and DirecTV Financing Co., Inc. and guaranteed by DirecTV Group Holdings, LLC, a wholly owned subsidiary of AT&T.

Covered by the transaction were $14.75 billion of dollar notes, €500 million in euros and £1.1 billion in pounds.

In exchange, the company was offering par amount of global notes with the same coupon and maturity for each $1,000, €1,000 or £1,000 principal amount of notes tendered by the early participation date.

Several other issuers carried out similar transactions during the year where they exchanged notes on a one-for-one basis in order to change the issuer or otherwise amend terms, sometimes with a small cash payment as well.

The dealer managers for the dollar offers were BofA Merrill Lynch, Credit Suisse and Deutsche Bank Securities. The dealer managers for the euro and sterling offers were Merrill Lynch International, Credit Suisse and Deutsche Bank AG, London Branch.

Global Bondholder Services Corp. was the exchange agent and information agent for the dollar offers and Lucid Issuer Services Ltd. had the same role for the euro and sterling offers.

Adelphia distressed exchange

Although not as big as some of the year’s other transactions, an issuer related to the former Adelphia Communications Corp. had an unusual offer, announced on March 3.

ACC Claims Holdings, LLC said it would issue limited liability company interests in exchange for a total of $4.21 billion of allowed senior note claims, trade claims and other unsecured claims against Adelphia Communications.

Deutsche Bank Securities Inc. was the dealer manager. D.F. King & Co., Inc. was the exchange agent and information agent.

Nordea amends covered bonds

Many issuers carried out consent solicitations to amend covered bond programs during the year.

One of the biggest was from Nordea Bank Finland plc, which on March 4 began soliciting noteholder consents to modify the terms of a number of series of notes in connection with its proposed merger with Nordea Bank AB.

Nordea Bank AB plans to simplify its legal structure by merging its three wholly owned banking subsidiaries, Nordea Bank Denmark A/S, Nordea Bank Finland plc and Nordea Bank Norge ASA, into Nordea Bank AB, as three separate cross border mergers, according to a company press release.

In Finland, the relevant provisions for a cross-border merger have been implemented into the Companies Act, and as such the issuer will be dissolved and will cease to exist, Nordea Finland noted.

The solicitation affected €15.77 billion and CHF 150 million of covered bonds.

The solicitation agents were Deutsche Bank AG, London Branch, Merrill Lynch International and Nordea Bank Danmark A/S. The tabulation agent was Lucid.

Verizon tender

The same day, Verizon Communications Inc. announced three tender offers for 34 series of notes issued by itself and its subsidiaries.

The company offered to purchase any and all of the $5.13 billion of group 1 notes, any and all of the $2.45 billion of group 2 notes issued by various subsidiaries and up to $4 billion aggregate purchase price of notes in a waterfall offer, a cap subsequently lifted to $5.5 billion.

The lead dealer managers and lead solicitation agents were Goldman Sachs & Co., RBC Capital Markets, LLC and Santander Investment Securities Inc. The co-dealer managers were MUFG, CastleOak Securities, LP, Drexel Hamilton, LLC, Samuel A. Ramirez & Co., Inc. and Siebert Brandford Shank & Co., LLC.

The information agent and depositary was Global Bondholder Services Corp.

Credit Agricole buys bonds

Also in March, Credit Agricole SA tendered for covered bonds and tier 2 bonds.

It subsequently upsized the offer and repurchased €3,061,350,000 of covered bonds issued by Credit Agricole Home Loan SFH and €1,235,560,520 of tier 2 bonds issued by Credit Agricole, representing all of the bonds tendered in the offer.

After the tender, the French bank said Credit Agricole Home Loan would seek bondholder consent to change the covered bonds to soft bullet from hard bullet.

The company said the tender offer is part of its plan to “optimize its balance sheet through the partial reinvestment of capital gains expected from the simplification of the Credit Agricole Group’s corporate structure announced for 2016.”

GE Capital buys overseas bonds

On April 25, GE Capital announced tender offers for a number of series of notes issued by GE Capital Australia Funding Pty. Ltd., GE Capital Canada Funding Co. and GE Capital UK Funding Unlimited Co.

The tender included A$1.85 billion of GE Capital Australia notes, C$5.15 billion of GE Capital Canada notes and £3.39 billion of GE Capital UK notes.

Deutsche Bank was the global coordinator with Barclays Bank plc, Royal Bank of Canada, Sydney Branch, RBC Dominion Securities Inc. and RBC Europe Ltd. as dealer managers.

Lucid Issuer Services was the global tender agent and information agent.

Anheuser solicits consents

In April, Anheuser-Busch InBev SA/NV began a solicitation of consents to amend a number of note series in connection with its proposed merger with SABMiller plc.

A total of €11.1 billion and £1.8 billion of notes were affected.

The company said it issued several series of notes to help fund the merger and is taking care to treat all of its noteholders on a consistent basis and, to this end, is seeking to align the conditions with the terms under its €40 billion euro medium-term notes program to allow for the merger and to enter into amended terms for each note series to effect this alignment.

The solicitation agents were BNP Paribas, Deutsche Bank AG, London Branch and ING Bank NV, Belgian Branch.

The tabulation agent was Lucid Issuer Services.

Nationwide amends bonds

In another exercise affecting covered bonds, Nationwide Building Society in May began a consent solicitation to modernize a number of covered bonds issued under its €45 billion covered bond program.

The issuer was asking bondholders to approve proposed swap-related changes to the program and to amend the bank account structure of the program.

Nationwide said it is looking to bring the program up to date and in line with other U.K.-regulated covered bond programs.

Barclays Bank plc was the solicitation agent. Citibank, NA, London Branch was the information and tabulation agent.

AT&T’s $7 billion exchange

AT&T was back in the liability management market in August with private exchange offers for 21 series of notes.

In the pool 1 offer, the company was offering a new series of senior notes due 2048 in exchange for nine series of outstanding notes. AT&T will accept an amount of notes that results in the issuance of no more than $2.5 billion of new 2048 notes.

In the pool 2 offer, the company was offering a new series of senior notes due 2049 and cash, as applicable, in exchange for 12 series of outstanding notes issued by various subsidiaries and predecessor companies. AT&T will accept an amount of notes that results in the issuance of no more than $2.5 billion of new 2049 notes.

The information agent was Global Bondholder Services Corp.

JBS seeks consents

Also in August, JBS USA Lux SA and JBS SA began consent solicitations to amend several series of notes totaling $6.03 billion to allow the proposed reorganization of JBS SA.

The solicitation agents were BofA Merrill Lynch and Banco Bradesco BBI SA.

The information agent was D.F. King & Co., Inc.

Credit Suisse amends

Another financial launched a major consent solicitation in August.

Credit Suisse AG asked noteholders to allow it to amend a number of note series to comply with Swiss regulations for large banks deemed “too big to fail.”

As part of the reorganization, Credit Suisse AG has established a wholly owned subsidiary, Credit Suisse (Switzerland) Ltd., a new Swiss bank that will assume the assets, liabilities, employees and contracts of the company.

The offer covered numerous notes and covered bonds in various currencies.

Credit Suisse Securities (Europe) Ltd. was the solicitation agent. Lucid Issuer Services Ltd. was the tabulation agent.

SNAM prepares for spinoff

On Aug. 30, Italian natural gas infrastructure company SNAM SpA set a bondholder meeting to approve amendments to 12 series of notes totaling €8.47 billion and ¥10 billion.

The consent solicitation was related to the company’s aim “to separate Snam Group’s gas distribution activities in Italy from its gas transportation, dispatching, regasification and storage activities in Italy and abroad.”

The solicitation agents were BNP Paribas, Goldman Sachs International, Citigroup Global Markets Ltd., J.P. Morgan Securities plc and Societe Generale.

The tabulation agent was Citibank, NA, London Branch.

First Gulf amends for merger

October saw another financial, this one from an emerging markets issuer, soliciting consents.

Abu Dhabi’s First Gulf Bank PJSC began soliciting consents for a number of bond issues related to a planned merger with National Bank of Abu Dhabi PJSC.

The bank is asking for consents to approve the planned merger and so that the deal constitutes a “permitted reorganization” under the note terms and to agree to release and waive all rights and claims as a result of the merger.

Affected were numerous series of notes issued in multiple currencies.

The solicitation agents were Barclays Bank plc, HSBC Bank plc, National Bank of Abu Dhabi PJSC and Standard Chartered Bank.

The tabulation agent was Citibank, NA, London Branch.

Lloyds tenders, exchanges

Also in October, British bank Lloyds Banking Group plc began a cash tender offer for 13 series of its notes and two exchange offers for eight series of its notes.

The bank offered to buy any of $5.5 billion of notes from five series and up to $2 billion from another eight series.

Lloyds said it launched the tender offers “in order to provide the holders of the notes with an opportunity to have their notes repurchased while maintaining a prudent approach to funding and liquidity as part of the group's ongoing liability management.”

Concurrently, Lloyds began an exchange offer for up to €3 billion from eight series of euro-denominated debt securities.

The tender and exchange agent was Lucid Issuer Services Ltd.

The global coordinator was Lloyds Bank. The joint dealer managers for the tender offers were BNP Paribas, Deutsche Bank Securities Inc. and UBS Ltd. The joint dealer managers for the exchange offers were BNP Paribas and Deutsche Bank Securities.

JPMorgan buys securities

Although smaller, JPMorgan Chase & Co.’s offer announced on Oct. 31 was unusual because it was aimed at trust preferred securities.

The bank offered to buy seven series totaling $3.23 billion.

Level 3 seeks to amend

In one of the biggest high-yield transactions of the year, Level 3 Communications, Inc. began a consent solicitation for $5.92 billion of notes from eight series on Nov. 10.

The transaction was in connection with a proposed acquisition of the company by CenturyLink, Inc.

Level 3 was asking to amend the notes to avoid making a change-of-control offer under the note terms, because the occurrence of a change of control and a ratings decline related to the buyout would require the company to make an offer to repurchase the notes at 101% of par plus accrued interest, according to a company announcement.

The solicitation agents were BofA Merrill Lynch at and Morgan Stanley. The information agent was Global Bondholder Services Corp.

RWE, innogy reorganize

Also in November, RWE AG and two subsidiaries began consent solicitations for 15 series of notes and an exchange offer for two series of notes.

RWE was asking to substitute innogy SE as the debtor under its notes, subject to the proviso that RWE will not become guarantor of the notes.

innogy Finance BV, formerly RWE Finance BV, and innogy Finance II BV, formerly RWE Finance II BV, also began consent solicitations to allow them to replace RWE with innogy as guarantor.

The company was seeking the changes in order to reflect the separation of innogy from the RWE Group and in order to simplify the intra-group financing structure.

On Dec. 1, 2015, RWE announced plans to pool the grid and infrastructure, retail and renewables business segments of the former RWE Group in Germany and abroad into a newly established subsidiary, innogy.

In addition, RWE is offering new notes issued by innogy in exchange for its €500 million 3.5% notes due October 2037 and ¥20 billion reverse dual currency notes due February 2040.

The new notes have substantially the same conditions as those of the notes exchanged, including maturity date.

Citigroup Global Markets Ltd. and Royal Bank of Scotland plc were solicitation agents for the consent solicitations and dealer managers for the exchange offer. Lucid Issuer Services was tabulation and voting agent for the consent solicitations and exchange agent for the exchange offer.

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