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Empire of CBs -“ Italy’s convertible bonanza drives autumn issuance

It seems like people think of Italian CBs just as frequently as they do of the Roman Empire as exemplified in a recent TikTok meme — perhaps the two are related.

Italian companies have not wasted a second after the summer break, with several issuers printing chunky deals.

Year-to-date EMEA convertible bond issuance sits at USD 10.7bn from 45 deals, well ahead than the same period in 2022, when deal value stood at a meagre USD 3.8bn.

Issuance though is still at a far lower level than has been typical in the past two decades.

The closest YTD figure so far were 2012 (USD 12.9bn) and 2018 (USD 11.5bn). Ever since 2002, way higher volumes have been the norm, including USD 21bn in 2020 and USD 23bn in 2021, although it must be noted that these were at the hight of the Covid-19 pandemic.

Italy though is starting to become a regional hub for converts with issuance of USD 2.7bn from a several deals with a common thematic, according to year-to-date data.  

In late August, Saipem [BIT:SPM] benefitted from a quiet convertible bond market to attract a large cohort of long-only investors to a EUR 500m CB.

Eni [BIT:ENI later got strong uptake for a EUR 1bn convertible bond, although some buysiders were questioning how such a large oil major could be an issuer of a sustainability-linked bond.

Snam [BIT: SRG] then followed with a EUR 500m issuance of senior unsecured EU Taxonomy aligned transition bonds due in 2028, exchangeable for existing ordinary shares of Italian energy group Italgas [BIT:IG], the first-ever transition bond in the EMEA equity linked market, according to a source close to the deal.

Ivan Nikolov, a CB consultant, noted how all the CBs were from Italian energy-related companies and carried sustainability features. “It shows how CB issuance sometimes comes in droves from particular sectors and with particular features that are very much in demand,” he said.

The market is yet to see a sharp rise in CB issuance as had been expected in a higher interest rate environment, he said.

Many companies are still comfortable with low-cost debt raised in the wake of the Covid crisis, which is soon to hit a credit maturity wall in 2025 and 2026, he added.

Italy was followed in YTD terms by Germany and France as top issuance hubs; there were more deals on those exchanges but they were lower in value. There has also been over USD 1bn of CB issuance in Spain but that was due to a single deal from Cellnex Telecom [BME:CLNX] in July.

Tyrus Capital global convertibles portfolio manager Damien Regnier said that primary deals are great and accelerate the much-needed change in the composition of listed convertible bonds, adding more investment-grade names and better coupons to the tradeable universe.

The investor wished though that there would be more pushback on terms from buyers of new issuance, but added that benchmark tracking meant funds were buying deals to match the index rather than because terms are attractive.

Did you see last week’s ECM Explorer EMEA?

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