Case study

Diageo’s $2 billion Senior Notes quench the thirst of investors

14 Nov 2022 . 3 min read

Celebrating life, every day, everywhere

With 132 production sites and selling into 180 countries, Diageo is a global leader in alcoholic beverages with a wide range of 200 brands across spirits and beers, including household names such as Johnnie Walker, Smirnoff, Baileys, Tanqueray, and Guinness.

Headquartered in London, Diageo’s ambition is to be one of the best performing, most trusted and respected consumer products companies in the world. To deliver on this ambition, Diageo’s “Society 2030: Spirit of Progress” ESG action plan forms a core part of the company’s business strategy. The 10-year plan consists of 25 targets aligned to the UN Sustainable Development Goals.

Investors receptive to strong credits despite difficult markets

Seeking to return to the US Dollar market for the first time since April 2020, Diageo asked NatWest to support the bond issuance as an Active Bookrunner.

Whilst US Dollar issuance volumes had been lower than usual in the early autumn period due to the ongoing market volatility, investors rushed to place orders when Diageo announced a USD Benchmark 3-year, 5-year and long 10-year offering. Orderbooks reached a peak in excess of $10 billion, with investor demand skewed towards the long 10-year tranche, which received over $4.6 billion of demand, including particularly strong insurance and pension fund participation.

The 5-times oversubscription allowed Diageo to significantly tighten the pricing by 25-30bps on all three tranches, which resulted in moderate levels of attrition, leading to a final orderbook of over $7.7 billion. The final spreads offered a minimal new issue concession of just 5bps across all 3 tranches which exceeded expectations and outperformed the other deals in the market on the day. The tranches sizes were subsequently set at $500 million for the 3-year notes, $750 million for the 5-year notes and $750 million for the long 10-year notes. Proceeds from the bonds will be used for general corporate purposes.

Investors receptive to strong credits despite difficult markets

Liam Fahy, Corporate Financing & Risk Solutions, NatWest, said: “We’re delighted to have been able to support Diageo with this very successful transaction. The robust investor demand and favourable pricing outcome is a testament to Diageo’s strong credit fundamentals in spite of a challenging and volatile market backdrop.”

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