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Context: Communicating with equity investors is the primary focus for corporate investor relations (IR) teams at companies whose stock trades publicly. To address issues of concern to fixed-income investors and analysts, some corporates send representatives from treasury to accompany equity IR teams to conferences. Not many NeuGroup member companies have staff dedicated to fixed-income IR.
But at a 2022 meeting of NeuGroup for Capital Markets sponsored by Deutsche Bank, the director of capital markets at one company with team members devoted to it described his company’s deliberate, proactive approach to IR for bondholders, and the benefits of the effort, which often show up most clearly when market or industry conditions become rough.
Member question: “How do you manage fixed-income analyst and investor relationships, if at all? I am wondering how many of you investment-grade (IG) issuers have a dialogue with sell-side fixed-income bank analysts and/or fixed-income investors.
- “We are relatively new in the IG issuer space and are working through how we will manage relationships.”
- In a follow-up email, the member told NeuGroup Insights, “We didn’t actively manage these relationships prior to being IG, other than deal marketing.”
Peer answer 1: “We hold quarterly Q&A calls with about 20 top fixed-income investors to answer credit-specific questions that are typically not covered during earnings calls.
- “We have received very favorable feedback from fixed-income investors, including one large investor that placed a particularly large order early in the book-building process.
- “The lead analyst indicated recurring updates and occasional in-person meetings allowed him to grow especially comfortable with credit and adding to an existing position.”
Peer answer 2: “We do not have recurring fixed-income investor outreach; rather, we focus on deal-linked marketing. I think the need could be a function of size of the debt complex and/or specifics in an individual company’s story (i.e. breaking into ‘IG land’ might be a good reason).”
NeuGroup Senior Director Scott Flieger told the member, “At the H2 2022 NeuGroup for Capital Markets meeting, a member provided an update on what they do regarding fixed-income investor relations. The member was a frequent borrower with a sizeable debt stack.” Mr. Flieger provided a link to an article based on the presentation that you can access by clicking here.
- The member asked whether the proactive approach described in the article was “generally in the minority for the participants or that most companies acted similarly?”
- Mr. Flieger said, “The proactive approach was most definitely in the minority. The presenting member was not suggesting everyone should take all the steps he follows, but was instead presenting a menu of options to consider.”
Deal marketing basics. Investment-grade issuers rarely do any marketing of their bond deals, according to Mr. Flieger, in part because investors can access relevant information in filings most companies make regularly with the Securities and Exchange Commission. However, he said marketing may take place may for these reasons:
- When a company is doing a very large bond deal to fund an acquisition, especially if their leverage (debt/EBITDA) ratio will increase. They market to make clear that the increase in leverage is temporary and will be lowered over the next year or two.
- When a company has not been to the market in a relatively long time, especially if they are in the lower end of the triple-B rating (Baa3 at Moody’s) or even just below investment grade (Ba1 at Moody’s).
