THERE IS A case for arguing that votes cast by fixed-income investors for Spain in this year’s best borrowers survey should count double. If they did, it still wouldn’t give the Tesoro enough votes to challenge Germany’s Finanzagentur at the top. However, it would make the Spanish Treasury’s achievement over the past 12 months even more impressive than its ascent from 47th last year to 11th in 2011 already is.
Pain not in Spain
Less than a year ago, there was no shortage of commentators who were publicly forecasting that Spain would default. It still might. But the chances of a Spanish rescheduling seem more remote now than they did last summer.
Until recently, it was assumed that if Portugal ran aground, so would Spain. And if Spain was the next of the dominos to fall, the same assumption went, the days of the euro project itself would be numbered. That view is less widespread these days, although the country has not entirely de-linked itself from the eurozone’s troubled periphery. For doing more than its fair share to pull the European market up by its bootstraps, issuers and investors across the fixed-income universe have a lot to thank Spain for – even if they don’t hold Spanish bonds.
The credit for that goes to the Tesoro for delivering a transparent story about the Spanish credit, rather than for indulging in petulant buck-passing. "The Tesoro has not looked to blame investors for speculation about the prospects for Spain. It has not blamed the CDS market, nor has it blamed the banks," says Sean Taor, global head of public sector debt capital markets at RBC Capital Markets in London. "Instead, it has focused on keeping the market informed about developments in the economy and the banking industry and on maintaining a dialogue with dealers and investors about its funding plans."
One of the most visible examples of this relationship with the investor community is the frequency with which the Tesoro updates the comprehensive presentations on its website. These feature historical as well as prospective data on everything from the latest developments in the Spanish banking and real estate markets through to updates on the Tesoro’s funding plans. In a virtual world full of useless and outdated (and often undated) web pages, the Tesoro’s online presentations are a breath of fresh air.
You don’t need to be convinced about all the information transmitted in these presentations to be impressed by the detail of data they provide. There are plenty of investors who think Spain is a long way from being out of the woods, and that neither the banks nor the housing market are half as resilient as the Spanish authorities would like them to think.
Since last July, however, investors have been prepared to give Spain the benefit of the doubt in the primary and secondary markets. Don’t just take this survey’s word for it. Look at the relatively high level of foreign ownership of Spanish debt, which "has remained far more stable than in smaller euro area countries, at about 50%", according to a recent Fitch update.
More tellingly, look at investors’ response to Spain’s most recent syndicated benchmarks. Its €6 billion, 10-year transaction at 225 basis points over swaps in January generated demand of €12.5 billion from 234 investors, with only 27% placed in Spain. When it pushed out to 15 years, with a €4 billion issue in March priced at 217bp over swaps, the book was worth more than €7 billion, with 72% distributed outside Spain.
Among other European sovereign borrowers, there are some surprise movements up and down the table in this year’s survey. Poland’s slide might look a harsh judgement on an economy that weathered the crisis so well and continues to generate strong demand in the new-issue market. The leap into the top 10 by the Netherlands, meanwhile, might raise eyebrows among investors who are growing tired of waiting for the much-heralded Dutch syndicated benchmark in the dollar market.
Deutsche Finanzagentur balances bunds and bills
The European sovereign borrower that remains firmly entrenched in the same position as 2010, however, is Germany. Once again, the Finanzagentur was the clear winner of Euromoney’s best borrower survey, extending its lead over the second-placed European Investment Bank by a wide margin. This strengthened position at the top might partly reflect the role played by Germany’s Finanzagentur in January’s jaw-dropping issue for the European Financial Stability Fund. It is, after all, curious that the EFSF – able to generate well over €40 billion for its debut bond – should be ranked 46th, sandwiched between Heidelberg Cement and Tesco.
The Finanzagentur’s extended lead at the top of this year’s survey is also a function of the strength of the German credit in a world of diminishing risk-free benchmarks. And it reflects the helping hand that Germany’s Bund market has been given by the constitutional ruling on its so-called debt brake (Schuldenbremse). Indeed, so many external factors seem to have combined in favour of Germany in the past 12 months that there is a lot of truth in a remark made by one banker to Euromoney. The Finanzagentur, this observer says, could have "closed the door and turned off its website and still won this year’s borrowers survey".
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"In good as well as bad times, we have always stuck to an issuance strategy based on predictability, reliability and transparency"
Carl Heinz Daube, Finanzagentur |
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Perhaps. However, Carl Heinz Daube, managing director of the Frankfurt-based Bund issuer, the Deutsche Finanzagentur, says there is a lot more to it than that. "Of course we benefit from the strength of the German credit but I think our success as a borrower comes from a mixture of the credit and our funding strategy," he says.
