DNB gets post-Lehman LT2 tight, SHB out, Aktia on road

Sep 19th, 2013

A Lower Tier 2 transaction from DNB and a US dollar senior unsecured deal from Svenska Handelsbanken hit the market today (Thursday), with sentiment buoyed by a surprise decision against tapering by the Fed yesterday. Meanwhile, Aktia will roadshow for a senior transaction in euros.

The US central bank had been widely expected to announce a scaling back of its asset purchase programme, and market participants were caught by surprise when it on Wednesday said that it would stay the course. It also said that an accommodative monetary policy will be maintained for some time after the end of the quantitative easing programme.

“Seeing as the market was already pricing in the taper, yesterday’s announcement led to a very strong rally of mostly everything,” said a credit strategist this morning.

However, in the euro market at least the reaction became more mixed as the morning progressed, according to a syndicate official, although the overall response remained positive.

DNBDNB tapped the euro subordinated debt market to achieve what a lead syndicate banker said was the tightest print for a callable Lower Tier 2 transaction since the collapse of Lehman Brothers.

Leads Deutsche Bank, DNB, Goldman Sachs, HSBC and UBS priced a Eu750m (Nkr5.91bn) 10 year non-call five issue at 177bp over mid-swaps on the back of a Eu3.3bn order book involving more than 200 accounts, said a banker on the deal. The subordinated debt was initially marketed at 185bp-190bp over, with official guidance subsequently set at the 180bp over area.

At 177bp over, the deal is the tightest callable Lower Tier 2 issue since the collapse of Lehman Brothers in 2008, said the lead syndicate banker. Nordea sold a 10 year non-call five at 170bp earlier in 2008, he noted.

DNB’s Lower Tier 2 issue also came at a low premium over the bank’s senior debt, he added, with 10 year senior DNB paper likely to clear at around 90bp.

“They’re probably one of the first to break the 100bp spread between sub and senior,” he said. “DNB is a price sensitive borrower and they timed it very well.”

Thor Tellefsen, senior vice president and head of long term funding at DNB, said that the issuer had been planning for some time to launch a Lower Tier 2 transaction before the end of the year.

“We thought it was a good time after the Fed decision and the market response to it,” he said. “It is part of our regular refinancing of Lower Tier 2 capital that we have called and it goes toward meeting Basel capital requirements.”

The issuer printed a Eu750m deal, the maximum targeted.

Svenska Handelsbanken was out with a dual tranche senior unsecured transaction in US dollars on Thursday, marketing a three year floating rate note at 50bp-55bp over dollar Libor and a five year fixed rate tranche at 112.5bp over Treasuries. Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs and Morgan Stanley are lead managers.

The deal comes after an active funding period for the Swedish bank in the second half of August, when it first reopened the FIG flow primary market in euros after a summer lull with a Eu1.25bn seven year issue and then sold a £250m four year sterling deal.

Aktia Bank is holding a roadshow throughout next week ahead of a senior deal. The Finnish bank last sold a senior unsecured issue in November 2012, a Eu200m three year FRN, and Timo Ruotsalainen, head of funding at Aktia Bank, told Nordic FIs & Covered that it was about time for the issuer to return with a senior deal.

“We do not yet know the way regulations will turn out, but there are suggestions that we can’t be so dependent upon covered bond funding, and that we need to balance a little our sources of funding,” he said. “Another argument in favour of issuing now is that market conditions seem to be fairly good at the moment.

“The deal will also put us in a comfortable position when paying back old Aktia Real Estate Mortgage Bank debt maturing in November, with the next time we come to the market probably being with a covered bond and in Q2 next year.”

The new issue is expected to be larger than last year’s Eu200m issue. The leads are Commerzbank, LBBW and Nordea.

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