Awards for Excellence 2019
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“A big theme of this year has been a greater focus on government balance sheets as a whole,” explains Michael Ellam, global head of public-sector banking at HSBC. “Before, you would look at the income deficit and how to finance it. Now we are working to optimise the balance sheet.”
Ellam joined HSBC in 2013 after stints as Downing Street’s director of communications under Gordon Brown and director general of international finance at HM Treasury.
“Public-sector business is central to the investment banking franchise,” he tells Euromoney. “We have a dedicated team of 70 bankers globally and work in 80 countries with sector-specific public-sector experts.”
These skills have been brought to bear in the efficient management of state assets for a number of borrowers this year: HSBC was sole financial adviser to the city government of Sharjah in the UAE in its majority investment in Invest Bank and executed the tender offer and consent solicitation for Mexico City Airport Trust after the project was scrapped.
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Michael Ellam |
In France, the bank was co-financial adviser and green bond structuring adviser to the €2.2 billion refinancing of the high-speed rail link from Tours to Bordeaux, and in the UK, HSBC advised on the complex, multi-creditor restructuring of Connect Plus, the concessionaire on London’s M25 orbital motorway.
Infrastructure financing is a particular strength of the franchise.
“Another theme has been cross-border infrastructure, particularly [China’s] Belt and Road [Initiative],” says Ellam. “We have a focus on emerging markets because that is where the infrastructure needs are. We stand at the nexus of governments, sponsors, investors, contractors and regulators.”
In Egypt the bank has signed a $834 million Sinosure-covered facility for the new Urban Communities Authority. It will finance residential and office projects in the new administrative capital and is the first time that Chinese banks have invited an international bank to a Sinosure deal in Egypt.
The bank was sole financial adviser to Saudi Arabia’s Public Investment Fund in its acquisition of a 15.2% stake in Acwa Power in July, a critical transaction for the fund. It involved a highly complex valuation of 40 projects in 10 countries across the Middle East, Africa, Asia and Europe.
The deal is part of Saudi Arabia’s Vision 2030 programme, in which HSBC has been closely involved. In August, local partner SABB delivered a customised automated fare collection solution to the Haramain high-speed rail project, one of the key parts of the country’s infrastructure programme.
A close relationship and dialogue are vital to building trust and ensuring best advice – Hector Snuggs
HSBC has had a long partnership with this sovereign. Saudi Arabia used to follow a two-day execution process but last October it opted for intra-day execution for the first time, to great success.
“We had worked with them from the beginning of their international issuance programme and we’re able to advise them on evolving as a borrower,” says Hector Snuggs, head of sovereign and supranational agency debt capital markets.
HSBC was joint arranger on the $12 billion Saudi Aramco debut international bond issue in April, a deal that attracted $100 billion in orders.
“We have worked with large borrowers this year on transactions that have very high levels of oversubscription,” says Snuggs. “We are very experienced in how to deal with this and in allocating transactions appropriately.
“Our experience is helpful to the issuer in knowing what size to take out of the market.”
All banks working with the Saudi sovereign last year have had to manage the negative headlines that followed the murder of Washington Post journalist Jamal Khashoggi last October.
“We are very aware of the news flow related to each client and keep them closely informed of any potential market impact,” Snuggs says. “A close relationship and dialogue are vital to building trust and ensuring best advice.”
Reference rate reform is perhaps the biggest challenge that the market faces, and public-sector issuers have a key role to play in this process.
HSBC is keenly involved in the transition, and was joint lead manager on the EIB’s debut £1 billion Sonia-linked issue in June last year and has worked on a second deal for the issuer in 2019, along with Sonia-linked bonds for the EBRD, IBRD and EDC.
“We did the first Sonia-linked floater last year for the EIB, helping the issuer and various investors set themselves up to buy, book and trade this new product,” says Snuggs. “Public-sector issuers have a very important role to play in developing alternative reference rates. They have close relationships with regulators and have the time to invest in developing new products.
“The first EIB deal was the most important as it telegraphed the importance of the transition to the market. We have subsequently had many calls with other issuers and investors to explain how the process worked.”
