BNP’s Refusal to Sell Morrison Bond at Big Discount Angers Peers

Claire Ruckin, Bloomberg News

A customer places goods in to a paper bag at a Morrisons supermarket, operated by Wm Morrison Supermarkets Plc, in Saint Ives, U.K., on Monday, July 5, 2021. Apollo Global Management Inc. said Monday it's considering an offer for Morrison, heating up a takeover battle for the U.K. grocer. , Bloomberg

(Bloomberg) -- BNP Paribas SA, one of the lead banks arranging the debt-financed buyout of Wm Morrison Supermarkets Plc, angered fellow lenders by holding on to its portion of the bonds to avoid declaring a loss while advising others to sell.

While the other 15 banks on the deal offloaded the 545 million euros ($569 million) at the end of May, BNP Paribas decided to hold on to its £50 million or so portion, according to people familiar with the matter who declined to be identified discussing private information. The French bank decided not to sell to Pimco at a steep discount of 85% of face value.

There are a number of banks on any underwritten deal and the lead banks take a more active role on the syndication strategy and sell down. By not selling, BNP Paribas has avoided having to mark down the loss, instead kicking the can down the road, the people said. But the move has sparked discontent within the lending group, with many complaining they were directed to a sale that a lead bank itself didn’t believe in, the people added. If BNP is holding out for a higher price, they said, other banks are wondering whether they should have done the same.

A spokesperson for BNP declined to comment.

The sale of the top-ranked 2027 senior secured notes, which pay 4.75% interest, should have finished the bond sell-down that started with 1.2 billion of junior notes in February.

BNP’s decision to hold out for a better price has yet to be vindicated. The bond was quoted at 77.75% of face value on July 4, according to Bloomberg data, meaning at 85% BNP could have missed quite an attractive price to sell, given the market deterioration since then.

Goldman Sachs, BNP Paribas, Bank of America and Mizuho provided initial underwriting and were joined by a further eight banks in September 2021 including Banco Santander SA, Rabobank, Deutsche Bank, Intesa Sanpaolo, MUFG, NatWest, Societe Generale and SMBC. HSBC, ING, Lloyds and RBC joined the lineup in December.