Reverse yankee issuance: View from the buy side

By:
Philip Moore
Published on:

There’s nothing wrong with being shareholder-friendly. But when you’re a domestically oriented US company preparing to print your first euro-denominated bond, it’s questionable whether a strapline emphasising shareholder value is the most expedient to choose for an online investor-relations presentation.

'Run by shareholders, for shareholders’ was, however, the title chosen by Kinder Morgan for an investor presentation dated February 4. Just under a month later, the Houston-based oil and gas pipeline company, which is rated Baa3/BBB-/BBB-, began roadshowing its inaugural euro-denominated bond issue. The €1.25 billion transaction, which was led by Barclays, Deutsche, Société Générale and UBS, was split into a €500 million 12-year tranche and a €750 million seven-year bond.

Surfing a wave of oversubscribed US corporate issues in February and March, the Kinder Morgan issue was successful enough, with the shorter-dated tranche increased from an originally planned €500 million. But bankers reported at the time that the Kinder deal differed from many of the other US corporate euro transactions early in the year in that it did not appear to achieve tighter pricing than the borrower could have accessed in dollars.

  Companies that have a very valid rationale for issuing euros, are the names I’d be looking to buy. But because Kinder Morgan has no European business, its issuance in euros is purely opportunistic, which is a warning flag for us

Chris Bullock

That had something to do with the timing of the issue, which was launched into a market starting to show signs of indigestion. Perhaps, however, it had as much to do with the fact that Kinder Morgan has no revenues or assets in euros, meaning that its debut euro transaction was an entirely opportunistic response to outstandingly attractive funding conditions in euros.