JPMorgan Drops From Bond Sale After Pricing Deters Investors

JPMorgan Chase & Co. stopped running a public bond sale mid-way through the marketing process after it was unable to source sufficient demand at a particular price, according to people familiar with the matter.

The bank, along with BNP Paribas SA, was mandated to sell a 75 million-euro ($92 million) deal for automotive component manufacturer Adler Pelzer Holding GmbH earlier this month. But when the transaction priced, Adler named only BNP Paribas as the bookrunner.

The event underscores the ongoing rivalry between Europe’s investment banks which has become more intense in recent years as central banks’ cheap money policies fuel record volumes of debt sales.

U.S markets have seen similar levels of heightened competition. Last May United Airlines Holdings Inc. scrapped a bond deal that was led by JPMorgan due to its disappointment over the terms offered. Less than two months later Goldman Sachs Group Inc. swooped in to win the lead role on a new multibillion-dollar debt deal for the airline.

Representatives for BNP Paribas and JPMorgan Chase declined to comment.

Investor Limits

It’s an unusual development for a bank to drop out during a live bond sale, and shows that there are limits to what investors are willing to pay despite their hunger for yield.

The Adler deal, which will be added to the firm’s existing 350 million euro bond, took weeks to get off the ground because investors were overwhelmed by the record amount of junk bond sales and passed on an offering that would be small and potentially too illiquid to trade.

It meant that during the marketing process, banks had to dig deep to find investor interest, and at the right price. JPMorgan attempted to place the deal with investors at a cash price of between 94 and 95 but were unable to find sufficient demand, according to a person familiar with the matter.

Meanwhile, BNP Paribas was able to place the deal with investors, albeit at a lower price of 92.5. The price equates to a yield of around 7%. Higher-yielding securities have been scarce this year, typically leading to oversubscribed bond sales, despite analysts sounding the alarm on rich valuations.

JPMorgan Drops From Bond Sale After Pricing Deters Investors

European high-yield bonds are on track to post their first monthly loss since September with returns for the sector delivering negative 0.03%, according to Bloomberg Barclays indexes.

Signs of waning appetite for the sector have also emerged in recent fund flow data. Investors in Europe withdrew $189 million from high-yield funds last week, adding to the $126 million pulled from the previous week.

©2021 Bloomberg L.P.

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