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Deal Defense: Building a United Front When Debt Underwriters Grouse

By April 27, 2021No Comments

The weeks and days leading up to the sale of a company’s debt can be nonstop crazy. Then there’s the bank group.

After weeks of extremely busy days, late-night phone calls and early morning meetings, you’re just days away from a multibillion-dollar debt issuance. The phones are ringing and one (or more) of the calls is from a co-lead bank, still complaining about its share of the deal. After you manage to get off the phone, they call your boss to complain. Welcome to the rough-and-tumble world of debt offerings.

  • At a recent meeting of NeuGroup’s Treasurers’ Group of Thirty meeting, one member and two guests each walked the group through their experiences with recent bond deals.
  • What became apparent: You need nerves of steel, a finance team singing from the same hymnal and the ability to cope with discontented bankers.

Different details, similar pushback. The presenters had underwriting groups and banks of varying sizes, with different configurations of leads and co-leads. But no matter the details, they all described general disgruntlement flowing from either individual banks or all of them over their roles in the deal.

  • “There is no lack of ego” with the banks, said one panelist, adding that all the big banks think they should lead the debt offering.
  • One of the issues that made each presenter displeased: There was always one bank more unhappy than the others that would fight to the end.
  • At the same time, the dissatisfaction of bankers is a sign to some treasurers that they are managing the process correctly. “You know you haven’t done your job if people aren’t complaining; but wow, do they complain,” said one presenter, referring to her syndicate.
    • Added another member, “If people are happy, I feel I did my job wrong.”

Defending against the end around. One panelist said dissatisfied banks have called her boss, asking for more and better. “You have to have a united front,” she said. And the CFO who takes that call should just say, “The decision has been made.”

  • Another panelist said she met with the CFO ahead of time. “I make decisions with boss jointly and get sign-off, [and] everyone knows why we’re doing what we’re doing.”
  • “You have to be a united front as an issuer,” said another of the panelists.

Keep raters updated. In preparing for issuance day, panelists said keeping the rating agencies informed was key. “Good to keep rating agencies in loop,” said one participant.

  • Thus, they “make sure they were quickly talking with rating agencies, and banks in our syndicate every quarter” after the decision to issue debt.

The time is right, no matter what. Panelists said they more or less stuck with their issue dates. One issuer had picked early January of 2021.

  • There was a lot of concern with January, what with the worsening pandemic, the storming of the US Capitol, and Georgia runoffs ahead.
  • There were a lot of questions about whether this “go date” would work, the panelist said. But treasury overcame the obstacles and produced a good outcome.

Oversubscribed. Despite all the Sturm und Drang in the lead-up to the debt issuance, all three panelists said their deals were oversubscribed.

  • Two panelists said theirs were 3.5-4 times oversubscribed while a third said they were 6 times oversubscribed.
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Justin Jones

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