Danske wraps up T2 with Eu500m, opts for 12NC7

Dankse was first out of the blocks in a busy FIG market this week, tapping the market early Monday morning with a Eu500m (Dkr3.73bn) no-grow 12 year non-call seven Tier 2 issue that an official at the bank said wrapped up adjustments it had wanted to make to its Tier 2 capital levels.

The deal marked a return to a market in which Danske Bank had been active last year while it awaited clarity on tax issues in order to be able to sell an Additional Tier 1. It did this in March, pricing a Eu750m CoCo with a temporary write-down loss-absorbing mechanism (7% trigger), but at the time made clear that it had plans to raise further Tier 2 capital.

“The investor community knew that we had plans to make some adjustments to our Tier 2, so it was then just a question of timing,” said Peter Holm, senior vice president, group treasury, Danske Bank. “Our capital management will respond to new developments, of course, but for now we have completed our plans.”

The deal comes after the issuer on 11 April redeemed Dkr24bn of government hybrid Tier 1, a move that had been high on the bank’s agenda and was behind Tier 2 issuance in 2013 and its AT1, and also follows an upgrade by Standard & Poor’s on 29 April ahead of the bank reporting its first quarter results on 1 May.

With an update of its EMTN programme completed, the issuer last week started to plan for launch of a Tier 2 early this week, said Holm.

“We thought there would be a good opportunity, and found the market in very good shape,” he said.

The mandate for the deal was the first to hit the screens in the FIG market on Monday morning, with leads BNP Paribas, Danske, RBS and Société Générale initially marketing the Eu500m maximum 12NC7 at the 165bp over mid-swaps area. Demand was strong, according to a lead syndicate banker, with indications of interest exceeding Eu2bn and the final order book containing some Eu4.7bn of orders from 310 investors.

The deal was priced at 152bp over, the tight end of guidance of 155bp-160bp, which the lead banker said meant no new issue premium was paid. The most relevant comparable was an October 2023 issue with four-and-a-half years to call (October 2018), which was trading at 138bp over, according to the syndicate official. That was a Eu1bn 10NC5 Tier 2 issue priced at 262.5bp over in late September.

Holm said that the issuer opted for a 12NC7 deal because it wanted to move away from the 10NC5 structure, which it used for its Eu1bn Tier 2 in the autumn, but noted as a positive that this week’s deal came at a much tighter spread than the September deal despite coming with a longer maturity.

“The spread was very encouraging,” he said.