What Is Bid Wanted In Competition?
Bid wanted in competition (BWIC) is a situation where an institutional investor submits its bond bid list to various securities dealers. Dealers are then allowed to make bids on the listed securities. The dealers with the highest bids are subsequently contacted.
Bid Wanted In Competition Explained
A bid wanted in competition approach works best on more liquid securities. For situations where more illiquid bonds are involved, an investor uses a dealer. An order with a predefined spread range is submitted to a dealer, and it is up to the dealer to fill that order within a limited time span. Although a bid-wanted announcement may not help a seller obtain the highest possible price for a security, this sales format provides a much higher level of privacy, which could be more valuable to certain sellers who do not want to divulge that they are shifting their financial positions.
BWICs are an increasingly popular method for investors to offload paper and free up cash. The idea is that this cash can then be invested in new primary market deals. Sellers can exit positions in the auction process and simultaneously capture a lot of attention if they so chose. Traders and investors can place their highest offers out in the open in an attempt to outbid the competition.
Two Examples of Bid Wanted in Competition
In 2015, Bloomberg reported a conflict between the Public Sector Pension Investment Board of Canada and the hedge fund Saba Capital Management. The Pension sued Saba Capital for mis-marking certain bonds, noting that Saba’s bids-wanted-in-competition (BWIC) process produced bids with depressed prices. Furthermore, the Pension mentioned that Saba did this intentionally in order to underpay the board. Saba sent out a bid-wanted-in-competition to eight banks, who then disseminated it their clients. Five out of the eight banks "could not provide any firm bids whatsoever."
In September 2017, Reuters reported that CQS was selling a €200 million portfolio of loans via a Bids Wanted In Competition (BWIC) process. Sources mentioned that bids were due on September 26. This BWIC entailed 50 names. The average bid is 99.5 percent of face value. Larger positions included the following:
- €8.5 million of HES Beheer (a Dutch ports services company)
- €8.5 million of Schenck Process (a German technology group)
- €8.1 million of Springer (a German publisher)
- €8.3 million of CEP (a French insurance broker)
- €7 million of Median Kliniken (a German rehabilitation clinics group)
- €7 million of a UK cinema operator
- €7 million of Wind (an Italian telecom company)