Credit Index Performance
Spreads edged wider for a second consecutive week, reflecting seasonal weakness, geopolitical tensions (US–Iran), AI-related concerns, and private credit noise. Despite Friday’s U.S. Supreme Court ruling that Trump’s IEEPA tariffs were unlawful, the market reaction was muted, with spreads broadly unchanged today.
Weekly Focus: Bayer - Settlement Reinforces Litigation Containment by YE26
Bayer announces $7.25bn class settlement as part of push to resolve 65k outstanding Roundup cases.
- Settlement & SCOTUS appeal work in conjunction: mgt is leveraging on positive developments in SCOTUS appeal to incentivise plaintiffs to come to the table and limit opt-outs from the settlement.
- Settlement ahead of SCOTUS limits execution risk: binary outcome of SCOTUS appeal is reduced by pre-settling ahead of SCOTUS decision; increases likelihood that litigation will be “contained” by YE26.
- Funding is front-loaded and positions Bayer for a recovery in 2027 onwards: cash outflow of €5bn in 2026 (results in negative FY26E FCF) followed by €1bn of outflows over 2027-31.
- Funding is less credit friendly vs expectations: no use of approved equity raise which also limits hybrids issuance; we estimate c.€2bn max hybrid issuance and €3bn of additional senior supply in 2026.
- Ratings risk: ratings risk is mainly concentrated with Moody’s where leverage is already above ‘Baa2’ thresholds; we see 2026 outflow increasing leverage metrics by +0.5x.
We reiterate our recommendation for selective positioning in Bayer (as per our previous report):
- $ Seniors: trade c.20bps wider on XCCY and we see 10-15bps of upside >8Y.
- € Seniors: we see little upside here and also note potential higher issuance risk.
- € Hybrids: although we still see further upside, we note that due to the popularity of the extension trade into BAYNGR 7 NC31, we see limited upside for extending up the curve.
Primary Issuance Activity
A solid week of activity with €10.85bn printed across the senior and hybrid public markets, of which €5.35bn senior and €5.5bn hybrid, making it an unusual occurrence of more Corp hybrid supply compared to senior supply. Looking ahead we expect issuance volumes to remain similar to the previous weeks, picking up in March as black-outs end.
Corporate Updates
- Stellantis: New Report - Strategic Reset, Hybrid Issuance & Near-Term Catalysts.
- Renault: posts FY25 results in-line with analyst estimates although releases slightly disappointing FY26 guidance.
- Enel: releases new Strategic Plan '2026-28'.
- Repsol: reported solid Q4 results and committed to €1.9bn shareholder distributions in 2026.
- Naturgy: reports in-line EBITDA and net income.
- Enagas: given FY26 outlook, we expect credit metrics to remain commensurate with its current credit ratings.
- Orange: reports strong FY25 figures and in-line medium-term guidance.