UK Opens Bond Market With Cigarettes, Alcohol After Brexit
The UK has reopened its corporate bond market with cigarettes and alcohol.
British American Tobacco and Jack Daniel’s whiskey maker Brown-Forman sold sterling bonds on Thursday, ending a month-long shutdown surrounding the nation’s vote to leave the European Union. BAT’s deal comprised £500 million of notes, while Brown-Forman issued £300 million of securities, according to data compiled by Bloomberg.
Borrowers are slowly returning to bond markets as volatility following the Brexit vote shows signs of waning and central bank stimulus sends funding costs tumbling. US beer maker Molson Coors Brewing reopened Europe’s credit markets Wednesday with the first corporate euro bond sale since June 20.
"Sentiment seems to have changed in the market over the last two days and risk appetite has returned,” said Paola Binns, a portfolio manager at Royal London Asset Management in London, which oversees about £85 billion.
Brown-Forman’s 12-year sterling notes will yield 150 basis points more than UK government bonds, the data show. The company also sold €300 million of 10-year securities, which priced to yield an 85 basis-point premium over benchmarks.
“We consider our inaugural step into the European debt capital markets to also be a milestone in our company’s international development,” said Jane Morreau, chief financial officer at Louisville, Kentucky-based Brown-Forman.
BAT’s bonds were sold to yield 130 basis points above gilts. The notes were marketed at a premium that “looks quite attractive given our view on the Brexit impact,” said Mondher Bettaieb-Loriot, head of corporate bonds at Vontobel Asset Management in Zurich, which oversees about 95 billion Swiss francs ($97 billion) of assets. Vontobel was participating in the BAT sale, he said.
A London-based spokesman for BAT confirmed the deal.
Investors can expect periods of volatility that may curtail issuers’ access to markets following the UK vote, said Jonathan Brown, co-head of global investment-grade syndicate at Barclays in London, one of the banks that managed the deals.
“Investors are making the assumption that supply could be more limited than they might have expected a few weeks ago, so it’s a good time to go and invest,” said Brown. “They also can’t afford to have cash on deposit at the moment because they get charged money, which reinforces the need to keep looking at the primary market.”
News by Bloomberg, edited by Hospitality Ireland