Danske profits from better tone to sell Eu750m senior

May 29th, 2015

Danske Bank and SBAB took advantage of last week’s reopening of the euro FIG market to issue Eu750m senior unsecured fixed and floating rate benchmarks, respectively, this week, as the better tone was maintained in spite of ongoing concerns about Greece.

DanskeThe Danish bank was able to extend its curve with the launch of a Eu750m short five year fixed rate benchmark on Tuesday, while the Swedish issuer’s Eu750m three year FRN on Wednesday was its first euro senior benchmark in floating rate format in more than three years (see separate article for more on SBAB’s transaction).

The deals came after a reopening of the euro financial institutions market on Thursday of last week (21 May) after a two week hiatus by Swedbank via a Eu750m seven year senior unsecured issue. Other issuers also took advantage of the improved tone to launch senior unsecured and covered bonds this week, and further supply is anticipated.

“Despite the continued headlines arising from Greece, it’s been encouraging to see primary markets return to action,” said Robert Chambers, FIG syndicate manager at Crédit Agricole CIB. “Oversubscription levels on recent deals haven’t been enormous, but deals have still been able to move pricing levels from IPTs to landing.

“Next week there’s a lot of economic data around, with the ECB on Wednesday and non-farm payrolls on Friday. Then there’s holidays in Germany on Thursday that might rule out the end of next week, so we could have a busy start given the amount in the pipeline.”

Danske moved ahead with its Eu750m short five year benchmark on Tuesday after a public holiday on Monday in parts of Europe, including Denmark.

“All financial issuers have a funding plan to fulfil during the year,” said Peter Holm, senior vice president, group treasury, at Danske Bank, “and we have to make our issues when market windows are there. We found we had a market which was functioning, particularly in euros, and we had been approached by a number of investment banks suggesting that now was the time to consider the five year segment.

“And after some positive signs in the market during the course of the latter part of last week, we decided we would review the situation after the long weekend. We decided that the market was OK yesterday (Tuesday) morning and we pushed the button and did the deal.”

The deal comes after Danske issued two shorter dated benchmark floating rate notes in 2014.

“Of course we could have done a floating rate note or a fixed rate issue,” said Holm, “but there have been wishes for Danske Bank to extend our fixed rate curve, so we felt now was a good time for us to do a deal and make our mark out there after not having been in the fixed rate markets for some time.

“We wanted to show our name again to the investor community.”

Danske also opted for the senior unsecured issue rather than a covered bond.

“We were looking at both the covered market and the senior market,” said Holm, “and a covered bond was definitely also an opportunity. But it’s relatively seldom that a covered bond is not a possibility and if you have been seeing uncertainties in the market in my opinion you would rather have completed a deal in the senior space than in the covered if you have the opportunity.

“So when we had the chance to push the button for a senior, we said let’s put aside any idea about a covered bond.”

Leads BAML, Banca IMI, BNP Paribas, Danske and HSBC went out on Tuesday morning with initial price thoughts of the high 40s over mid-swaps area for the 4 May 2020 issue. Within two hours orders topped Eu1.2bn and books were opened with guidance of 42bp-45bp over. Books were closed half an hour later at Eu1.35bn and a Eu750m issue printed at 42bp over.

“From the outset the issue gained solid traction and grew steadily, despite competition from other deals in the market,” said a banker at one of the leads.

Holm said that the pricing was at the tight end of the issuer’s expectations.

“Our expectations are not always equal to what the market delivers, but that was our ambition and we ended up there, so we are pleased,” he said. “What was important to us was to do a deal that was well received and not to overdo it.

“You always consider both price and the size of the issue, and I think we hit the right balance between the two. We had a nice deal and a nice book, with good support from the traditional investor community.”

More than 100 accounts participated in the deal, with 39% going to Germany and Austria, 15% to the Nordics, 13% to the UK and Ireland, 10% to the Benelux, 8% to France, 8% to southern Europe, 6% to Asia, and 1% elsewhere. Asset managers were allocated 46%, banks 25%, pension funds and insurance companies 17%, and central banks and official institutions 12%.

Nordea Bank meanwhile issued senior unsecured paper in the sterling market. It sold a £300m (Eu421m, Skr3.90bn) 2.375% seven year deal at 90bp over Gilts via Barclays and UBS.


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