Multinational oil and gas firm BP captured attention last summer with its $12bn-equivalent hybrid bonds issue across five tranches, encompassing three currencies and maturities between five and 10 years.
The motivational force behind this vast transaction was to:
1. Equip BP with a more resilient, overall financial framework amid an external trading environment caught in the grip of unprecedented oil price and COVID-19-related volatility;
2. Enable the firm to diversify its capital base, with hybrids set to form a key part of its financial structure going forward; and
3. Underpin the organisation’s strong, investment-grade credit ratings, while improving its leverage metrics.
On 15 June 2020, the Federal Reserve announced updates to its Secondary Market Corporate Credit Facility (SMCCF), signalling that it would begin to purchase a ‘broad and diversified’ portfolio of corporate bonds to support market liquidity and the availability of credit for large employers. The Fed’s statement factored auspiciously into the timing of BP’s plans.
The following day, the firm held virtual-roadshow calls with more than 140 fixed-income investors to drum up interest in the issue, and on 17 June the transaction was greenlit. After a surge of interest involving more than 1,000 investors, the scale of the deal was upsized from its initial volume. By the time the dust settled, the transaction – driven by the efforts of a tireless treasury team – had broken several records:
“The key component that makes this deal stand out is its hybrid nature: a complicated, multi-tranche approach, marked by innovation and impressive scale. In regards to energy transition, BP is right at the forefront of this huge challenge facing its industry.”
Provider: Citi
Structure: $12bn-equivalent, multi-tranche debut hybrid transaction, consisting of two tranches at $2.5bn, a third at €2.5bn, a fourth at €2.25bn and a fifth at £1.25bn, with maturities of between five-and-a-quarter and 10 years.
In October, IHG successfully priced a dual-currency transaction split into a €500m tranche at four years and another of £400m at eight. Concurrently, the firm announced a capped, cash tender offer on the outstanding proportion of a prior £400m bond, set to mature in November next year. In the worst-ever year for the hospitality industry, IHG refinanced its COVID Corporate Financing Facility package of £600m and reduced refinancing risk – ultimately repaying 57%.
The judges noted the impressive execution given such little visibility on how trade would play out as the pandemic continued. IHG’s financing policy was in a strong position, and its seasoned treasury and management teams accentuated the company’s healthy credit story prior to launch.