Ålandsbanken debut shows options for smaller issuers

Ålandsbanken made its covered bond debut with a Eu200m dual tranche issue yesterday (Wednesday), and its group treasurer said it is pleased to have tapped the market after a lengthy lead-up.

Finnish issuer Ålandsbanken sold a Eu100m three year fixed rate covered bond at 55bp over mid-swaps and a Eu100m two year floating rate note at 45bp over six months Euribor. Danske Bank and SEB were lead managers.

“We are very happy that Ålandsbanken was able to print this deal,” said a syndicate official at one of the leads. “It shows that there are options for smaller mortgage banks to tap the market.”

The covered bonds are backed by Finnish residential mortgages.

Anders Gustafsson, group treasurer at Ålandsbanken, said that the issuer is very pleased to have been able to enter the market.

“It’s been a lengthy process,” he said, “because we didn’t have a rating before and we issued under new Finnish legislation that allows direct issuance off your balance sheet.

“We’re very happy to have finally managed to come out with a deal.”

Ålandsbanken received a licence to issue covered bonds from the Finnish Financial Supervisory Authority (FSA) in July 2011 and finalised a Eu1bn EMTN and covered bond programme late last year.

Standard & Poor’s this summer assigned a preliminary rating of AA to the programme.

The issuer aims to tap the market regularly with small deals, added Gustafsson, as the bank is not big enough to sell benchmark-sized transactions.

“Around this size is what we want to do,” he said. “Our main aim is euros, but we may also issue in Swedish kronor, and are open to private placements if the appetite is there.”

The deal follows a brief roadshow in Finland, the bank’s home market, a few weeks ago, said Gustafsson, which also provided most of the investors in the order book, in addition to some German accounts.

The main comparable for pricing was Ålandsbanken’s Finnish peer, Aktia Bank, according to Gustafsson, with Ålandsbanken’s covered bonds as anticipated coming slightly wider on account of the smaller size of the issuer.

According to S&P, the initial cover pool comprises typically amortising mortgage loans with a maximum maturity of 30 years, denominated in euros, with each mortgage originated within the Ålandsbanken branch network. It noted that the bank’s stated strategic focus on high-net-worth customers means that the loan sizes have a barbell distribution, i.e. a relatively high proportion of the loans are above-average in size.

“Given that the issuer continues to focus on its geographical heartland of the Åland Islands,” added S&P, “a large proportion (22.6%) of the loans in the cover pool are secured on properties on the Åland Islands. That said, a relatively small proportion, just 1.7%, of the total cover pool comprises mortgages on summer houses.”

Norway’s Storebrand Boligkreditt last Wednesday (29 August) announced a mandate for a Eu250m covered bond, awarded to Commerzbank, Danske Bank and DNB. The Covered Bond Report understands that the issuer received positive feedback on its credit quality and is considering a range of factors, including the cross-currency swap, as part of making a decision on the timing of a possible transaction, which is not thought to be imminent.

Storebrand is a rare covered bond issuer in the euro market and its borrowing is concentrated on covered bond issuance mainly in the Norwegian capital market. The last Norwegian benchmark euro covered bond was a Eu1bn six year issue for SpareBank 1 Boligkreditt on 20 August.

Nordea Bank AB yesterday sold a Sfr350m eight year issue at 48bp over mid-swaps via Barclays and UBS.