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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CONSUMER STAPLES
- The paper/hygiene manufacturer’s bonds have had a strong week with spreads on their EUR 29s and 31s tightening by 14bps and 30bps respectively to bring YTD moves to roughly -40bps and -110bps.
- Spread performance has been volatile this year, with spreads tightening into their earnings release in late January before rewidening on the disappointing results which were vague on guidance and implied a weaker pricing/costs outlook.
- Essity received regulatory approval in early March for the sale of its Vinda unit for SEK ~19bn (roughly 0.75x turns of EBITDA) – S&P’s base case is for a temporary reduction in leverage to ~1.5x by the end of the year from 2.3x at FY23 against thresholds of 2-3x.
- On 01 March it was reported that bondholders wrote a letter arguing the sale is a breach of the EMTN’s cessation of business clause which would trigger early repayment. On 11 March Essity announced the signing of an SEK 44bn facility through to the end of the year with an option to extend if needed – we see just over this amount outstanding under their EMTN programme and view this facility as driving performance in recent sessions.
- We also note that the exact use of the sale proceeds is not certain - Essity do not have a firm leverage target and instead aims to maintain its IG rating which gives the BBB+ issuer room to focus on M&A or, more likely, distributions.
- A potential catalyst for spreads could be the issuance of new guidance as part of one of the deal announcements likely to come before the transaction closes – while the 2023 report was vague on guidance, some earlier reports have given more specific targets, and the market seems to be looking for increased visibility.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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