DLR Kredit Dkr2bn senior secured deal benefits from tightening

DLR Kredit sold a heavily oversubscribed Dkr2bn (Eu268m) October 2016 senior secured issue on Tuesday, benefitting from a tightening of spreads after the ECB rate cut at the beginning of May, according to the issuer and leads.

The floating rate transaction was priced at 85bp over three month Cibor, after price indications of 90bp over, via leads Jyske Bank, Sydbank and Spar Nord Bank.

The re-offer spread compares favourably with where the issuer’s previous senior secured issuance was priced, with market conditions having improved since then, Pernille Lohmann, investor relations manager at DLR Kredit, told Nordic FIs & Covered.

“There was no reason to wait and we felt the timing was good after the holidays,” she said. “The deal met with very strong demand, with a very good bid-to-cover.”

DLR debuted in the asset class, also known as Section 15 bonds, in November, selling a Dkr3bn October 2015 FRN at 135bp over and a Dkr1bn October 2017 issue at 175bp over.

“Spreads on those transactions tightened quite substantially although they are not traded very much,” said Lohmann. “The spread to other issuers is also tighter than in the past.”

This could have several explanations, she added, including investors getting more comfortable with DLR’s credit, the issuer reporting strong results, and a lack of supply.

The issue is said to have come around 15bp wide of Nykredit Realkredit’s curve. The latter recently sold a Dkr2bn January 2016 FRN at 53bp over, triggering a tightening across the market.

Orders for DLR’s deal amounted to Dkr11bn, according to Palle Broman, head of equity and bond trading at Jyske Bank, with around 50 accounts participating.

“The investor base was quite broad,” he said. “The market is very good, and the entire market tightened dramatically after the last ECB meeting.”

Jyske, Sydbank and Spar Nord Bank are three of DLR Kredit’s major shareholders, and this was the first time that they lead managed a senior secured transaction for the issuer, according to Broman.

“We are pleased that we were able to price a successful deal,” he said.