Danske in rare senior FRN, SEB adds to Nordic Tier 2

May 22nd, 2014

Danske Bank completed its first euro benchmark flow funding exercise of the year yesterday (Wednesday), a Eu750m three year senior unsecured floating rate note felt to be best suited to a softer market, while SEB was today out with the fourth Nordic Tier 2 issue of the year.

Danske EntranceAPPDanske raised Eu750m at 39bp over three month Euribor, with more than Eu1.1bn of orders placed for the deal. The 39bp spread was the tight end of guidance of the 40bp over area, which followed initial price thoughts of the low 40s.

The deal is Danske’s first senior unsecured benchmark since July 2012, with the issuer having more recently concentrated on bolstering its capital. In March it sold its inaugural Additional Tier 1 and last week a Eu500m 12NC7 Tier 2 early wrapped up a series of subordinated debt transactions begun last year.

Yesterday’s senior unsecured transaction follows redemption of a Eu1bn two year floating rate note (FRN) that matured in the middle of March, according to Peter Holm, senior vice president, group treasury, Danske Bank.

He said that the senior unsecured FRN format was chosen in response to weaker market conditions since late last week.

“We always consider all options, and in this case with the market having been softer this week we thought that the right approach would be a FRN, and three years was a good maturity,” he said.

“The process was relatively quick and the bonds are trading 39bp/37bp this morning, so they are performing quite nicely.”

Barclays, Credit Suisse and Danske were lead managers. A syndicate banker on the deal said that there is less and less free float in the secondary market for FRNs and that the leads felt the three year maturity was “the investor sweet spot on minimum spread requirement and line availability”.

Danske’s deal is only the third senior unsecured benchmark FRN from a Nordic champion since the issuer last came to the market in 2012, he added.

According to the issuer’s most recently updated long term funding plan, Danske is aiming to raise Dkr30bn-Dkr50bn (Eu4bn-Eu6.7bn) in 2014, including subordinated debt issuance. Holm said that the issuer has raised some Dkr19bn so far, with further benchmark funding moves, such as euro covered bonds, on the agenda for this year.

SEB nets Eu1bn Tier 2

SEB launched the fourth Nordic subordinated debt issue of 2014 today (Thursday), a Eu1bn 12 non-call seven Tier 2 issue that was priced at the tight end of revised guidance. The deal comes after the Eu500m Tier2 12NC7 for Danske on Monday of last week (12 May), and Eu750m and Eu1.5bn 10NC5 deals for Swedbank and Svenska Handelsbanken in February and early January, respectively.

Leads Deutsche, Goldman Sachs, Morgan Stanley, RBS and SEB priced SEB’s new issue at 145bp over mid-swaps, the tight end of guidance of 145bp-147bp over that was revised from the 150bp over area.

Orders totalled Eu1.5bn, with some 112 accounts participating, according to a syndicate banker on the deal, who said that as a top credit the issuer mainly drew real money demand and that the order book was therefore of high quality.

The issuer had been monitoring the market for a few days and today was felt to be a good issuance window, he added.

At 145bp over, the pricing of the Tier 2 deal did not incorporate a new issue premium, according to the lead banker. Handelsbanken’s and Swedbank’s 10NC5 issues are trading at around 125bp over, he said, and the extension of the curve to a 12NC5 is worth around 20bp. Swedbank’s Tier 2 was priced at 140bp over on 17 February, and Handelsbanken’s at 143bp over on 6 January.

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