Michelin up to USD 600m CB book covered, seen pricing towards midpoint
05 JAN 2018
French tyre maker Michelin’s [EPA:ML] USD 500m to USD 600m offering of 2023 non-dilutive convertible bonds (CBs) has been covered on the extended deal size, a source close to the deal said.
A message was sent out to investors at 09:15 GMT, he said, adding that further price guidance would follow at a later stage.
The bonds will be issued at an issue price of 95.50% to 100% of their nominal value, corresponding to an annual gross yield to maturity of 0% to 0.79%. The conversion premium has been set at 30%. Michelin issued USD 500m worth of bonds exactly one year ago, at ranges of 98%-100% of nominal value and 23%-28% premium. It priced at the rich end for investors, as reported.
This time around, the bond looks likely to price around midpoint, according to a UK-based buysider. The range is rather wide, making harder to say where the pricing should end up, he conceded.
At the cheap end, the bonds would be priced fairly to the option market, but Michelin can go for midpoint pricing, based on the level the old paper has corrected to, he said. There is a lot of Michelin paper to choose from, so top end pricing is less likely, the buysider added.
The bonds are structured in such a way that they seem to have the advantages of cross-currency USD-EUR paper, but as the optionality is priced in EUR, which has a flatter curve than the USD, there is less optionality, the buysider said. This structure is not new, he said. The paper mimics USD bond flow, which enjoys a steeper curve, but as the strike is set in EUR, the advantage of this is limited, he continued.
BNP Paribas, HSBC, JPMorgan and Societe Generale are the bookrunners, according to the buysider.
A representative for Michelin was unavailable for comment.