Danske back in euros to add to Eu1bn sevens covered bond tally

Feb 21st, 2013

Danske Bank launched a Eu1bn no-grow seven year deal today (Thursday) that marked the Danish issuer’s return to the euro benchmark covered bond market after almost two years of absence and was the third seven year issue of the week.

DanskeLeads Barclays, Crédit Agricole CIB, Danske Bank, Santander and UniCredit priced the deal at 30bp over mid-swaps after having gone out with initial price thoughts in the mid to low 30s over mid-swaps area and guidance in the 32bp over area.

A syndicate banker at one of the leads said that the pricing was “bang-on in terms of where we aimed at arriving”.

The deal was well received, he added, with orders amounting to Eu1.65bn.

“The deal offered good diversification for investors,” he said. “They can benefit from the solidity of a Danish issuer, and the quality of Swedish and Norwegian assets in the cover pool.”

The bonds are backed by the issuer’s international (“I”) cover pool, comprising Swedish (54%) and Norwegian (46%) residential mortgages.

Danske’s new seven year deal came after a Eu1bn seven year issue launched by Société Générale SFH yesterday (Wednesday). That deal attracted Eu2bn of orders and was priced at 33bp over mid-swaps. Danske’s deal also came after another Nordic issuer, SEB, placed a Eu1bn seven year issue on Monday at 15bp over on the back of Eu1.5bn of orders.

A syndicate banker away from the Danske leads said that the choice of maturity was appropriate.

“You target what is in demand in the market,” he said.

The lead syndicate banker said that the seven year maturity was targeted because it fit well within Danske’s curve, and was also chosen in light of the positive outcome of recent seven year trades.

Initial price thoughts were set at a level designed to offer some pick-up over those recent trades, he added.

“We were mindful that this was the third transaction of the week and were prepared to be more generous,” he said.

The issuer concentrated on the senior unsecured market last year, and was active in covered bonds outside of the euro market and in private placements. However, Danske’s Finnish subsidiary, the former Sampo Bank, sold a Eu1bn seven year covered bond in September 2012.

The lead syndicate banker said that comparables included outstanding Danske issues, November 2019s and June 2022s. The new issue offered “a few basis points” over those issues, he said.

Outstanding issues of Danske’s Finnish subsidiary were also taken into account, he said.

A syndicate banker away from the leads said that Danske achieved a good result, especially considering that market conditions at the time of the transaction were not so strong.

The lead syndicate banker acknowledged that there was some volatility in the market in the morning.

“However, we felt that this transaction was not such a long dated one as to depend on yield volatility,” said the syndicate banker.

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