Aktia sells rare Eu200m senior unsecured FRN during covered switch

Nov 22nd, 2012

Aktia Bank sold a Eu200m three year floating rate note today (Thursday), making a rare appearance in senior unsecured format while it makes the transition from issuing covered bonds via Aktia Real Estate Mortgage Bank to issuing directly.

The November 2015 issue was priced at three month Euribor plus 113bp after leads Nordea and UniCredit built a book of slightly over Eu300m on the back of initial price thoughts of the 120bp area and guidance of the 115bp area.

Anders Ehrström, head of treasury at Aktia Bank, told Nordic FIs & Covered that there were two reasons for the Finnish issuer coming to market with the senior unsecured floater now.

“Firstly, there seems to be fairly good demand on the market despite the relatively late time of year,” he said. “And secondly, in order to ensure a smooth transition in getting ready to issue covered bonds directly from our balance sheet, having some additional liquidity came in handy.

“As we are not yet in the position to issue covered bonds directly from Aktia Bank’s balance sheet, the option of issuing senior unsecured was utilised.”

The Eu200m size was fixed from the outset, said Ehrström.

“We were trying to combine the best of both worlds,” he said. “Given the size of our balance sheet the amounts that we can issue are limited, and Eu200m was the maximum we currently had the capability to issue.

“Meanwhile, although we assumed that we would have a fairly good home bid, we wanted to include some distribution outside Finland, which was why we had the two leads. We are very happy and grateful for everyone who was interested in our name.”

The deal was preceded by investor meetings in Helsinki and a conference call for international investors. Finnish accounts took almost 60% of the paper, with mainly German and Danish investors taking the rest.

Ehrström said that, with Aktia not having a senior curve, the main comparables were Danish and Norwegian senior unsecured paper from similar issuers.

The most recent Nordic senior unsecured floating rate note was a Eu500m two-and-a-half year deal for Denmark’s Jyske Bank on Tuesday of last week. That was priced at 117bp over three month Euribor.

Aktia is aiming to be ready to issue covered bonds directly in the first quarter of next year, having taken the decision to do so mainly because the rating it will be able to achieve on the covered bonds will be higher than those of Aktia Real Estate Mortgage Bank, which were recently downgraded from Aa1 to Aa3.

“Going forward, the major parts of our funding will be our direct customer deposits and covered bonds, but the proportion of senior debt will definitely increase,” said Ehrström.

According to an Aktia investor presentation, its Eu9.018bn of funding as of September comprised 41% retail deposits, 37% covered bonds and 22% other.

Next year Aktia Bank will be merged with its parent, Aktia plc.

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