CASA gets $6bn book for $1.75bn SNP return

Crédit Agricole braved a downbeat tone in the US dollar primary market on Monday and was rewarded with a $6bn book that allowed it to price its largest deal in the currency since 2014 and all but conclude the French bank’s upsized 2023 funding programme.

In the wake of the FOMC’s 20 September unexpectedly hawkish pause, the US market had suffered rates volatility compounded by bearish equity market undertones, prompting some financial institutions to hold off executing potential deals at the start of the week.

However, Crédit Agricole SA (CASA) proceeded with its first senior non-preferred (SNP) transaction in dollars since 2021, a six year non-call five benchmark with an anticipated size of $1bn-$1.25bn but to be sized appropriate to demand.

Daniel Kim, director, US syndicate, at sole bookrunner Crédit Agricole CIB in New York, said that among factors giving confidence to proceed with the deal was the scarcity of SNP issuance from the French bank, which is also not expected to issue in size before year-end given that ahead of the deal it had already raised some €23bn of a recently-upsized €25bn programme for 2023.

The bank also saw a window of stability in rates on Monday morning, while cognisant that the headwinds facing the market could increase — the possible US government shutdown over the weekend was looming, while this Friday sees the latest employment report released ahead of a long weekend taking in Monday’s Columbus Day holiday.

“We knew that the opportunities out there would be somewhat limited,” said Kim, “so we had to take leadership and strike when the opportunity presented itself.”

Drawing comfort from a positive start to an APAC-focused Korea Land & Housing dollar bond it was already working on, Crédit Agricole thus entered a quiet market alongside a two year senior deal from ANZ, with initial price thoughts of the Treasuries plus 200bp area for the October 2029 non-call October 2028 Reg S/144A US dollar benchmark, rated Aa3/A+/A+.

By the New York open, the bank had received a higher than expected $1.4bn of indications of interest from Asian, European and Middle Eastern accounts. Further demand prompted the issuer to accelerate execution and communicate 170bp “the number” pricing and an upsized $1.5bn-$1.75bn range. The deal was ultimately sized at $1.75bn (€1.64bn) with a final order book of $5.9bn and 153 investors allocated bonds, 81% to the US, 12% to Europe, and 5% to Asia.

“Typically a transaction like this would come in the context of $1bn-$1.25bn,” said Kim, “but the astronomical order book behooved us to somewhat appease some of those investors’ needs.”

The pricing move of 30bp from IPTs was larger than typically witnessed on recent Yankee supply, reflecting the strength of demand, but also the lack of visibility on CASA SNP levels, given its absence from the dollar market in the format. The new issue concession was put at around 5bp, while the premium versus equivalent euro funding was put at around 8bp, understood to be the lowest achieved by an EU bank in SNP format this year.

Kim noted that the deal had tightened to 165bp by mid-week against a backdrop of continued volatility and weakness, maintaining the French bank’s track record of appropriately-sized and priced and well-performing dollar issuance.

“It sets the stage for increased opportunistic US dollar issuance across the capital structure,” he added.