Credit bash crowds out Crillon
Use your debt lest someone else does
The good, the bad and the illiquid
In June a €500 million ($510 million) deal by French construction and communications company Bouygues threw the new corporate-bond market in Europe into chaos. The borrower had mandated Crédit Agricole and Lehman Brothers to do a Eurobond deal, but it was assumed that this would be aimed at domestic investors. Early price discussions involved a price of around 70 basis points over OATs; extremely tight for an unrated debut borrower in the Euromarket, but theoretically possible if selling to retail investors in France.
As the deal size was relatively large, there was not sufficient demand for all the paper from French investors. The corporate market was becoming overcrowded and rising government bond yields were bringing more volatility. Lehman realized that the only way to drum up demand abroad was to increase the spread to 95bp. The two banks managed to come to an agreement and launched the repriced deal at 95bp on June 17, after a roadshow in Paris and investor meetings in London.
The deal aroused a lot of bad feeling, as the earlier price had become known in the market.