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Fast-Approaching Brexit Deadline Spurs Pound-Bond Sales Rush

Fast-Approaching Brexit Deadline Spurs Pound-Bond Sales Rush

(Bloomberg) -- Bayerische Motoren Werke AG and life insurer Just Group Plc are among six borrowers selling pound bonds on Wednesday, as issuers rush to lock in financing before potential market upheavals around the looming Brexit deadline.

The deluge will push sterling sales for the month above 16 billion pounds ($19.9 billion), including a gilt deal, according to data compiled by Bloomberg. That’s the highest monthly tally since January, when a then-March Brexit date turbocharged the usual start-of-the-year rush.

Issuers may be stepping up sales now because upcoming earnings blackout and the countdown to the Oct. 31 Brexit date are likely to hinder sales next month. U.K. Prime Minister Boris Johnson has pledged to take the country out of the European Union on schedule -- with or without a deal -- even after suffering an unprecedented legal defeat in the Supreme Court.

“Companies are very keen to get issuance out of the way before U.K. uncertainty becomes even more fraught,” said Gordon Shannon, a portfolio manager at TwentyFour Asset Management, which oversees 15.3 billion pounds.

BMW is selling a benchmark-sized five-year note, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The luxury-car maker, which regularly issues pound bonds, has three notes totaling about 700 million pounds maturing by year-end, Bloomberg data show.

U.K. Borrowers

Just Group is marketing 125 million pounds of subordinated Tier 2 notes at a yield of 8.125% to 8.25%. That would be the biggest yield of any pound debt sale this year, Bloomberg data show. Another U.K. borrower WM Morrison Supermarkets Plc sold notes on Tuesday, following deals by issuers including ITV Plc and Barclays Plc last week.

Still, Metro Bank Plc scrapped a pound sale of senior non-preferred bonds on Monday after the promise of record coupons failed to win over investors. The troubled lender opted against the sale due to “current market conditions,” according to an emailed statement.

Overseas borrowers have also flocked to the pound market, as U.K. investors seek to put money to work with issuers less exposed to Brexit risks. French lenders Banque Federative du Credit Mutuel SA and Credit Agricole SA were both in the market on Wednesday, along with Kreditanstalt fuer Wiederaufbau. The German state-owned bank, better known as KfW, is marketing a 250 million-pound tap of a 1.375% 2024 note. It has a 4.8 billion-pound note due in December.

“For European issuers in particular it has become cheaper to issue in sterling than euros,” said Luke Hickmore, an investment director at Aberdeen Standard Investments. “And, with the books for recent sterling issues having been so big, I can see why they have printed.”

To contact the reporters on this story: Hannah Benjamin in London at hbenjamin1@bloomberg.net;Lyubov Pronina in Brussels at lpronina@bloomberg.net

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Neil Denslow

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