Handelsbanken in senior Kangaroo debut amid European burst

Apr 4th, 2014

Svenska Handelsbanken priced an inaugural Kangaroo senior unsecured benchmark on Tuesday, a A$650m (Eu438m, Skr3.93bn) dual tranche issue that was part of a mini-wave of Australian-targeted European issuance benefitting from local majors being in blackout, according to a syndicate banker.

Svenska HandelsbankenOLYMPUS DIGITAL CAMERABarclays Bank led the way last week with a A$1.3bn deal, also a dual tranche transaction, with Svenska Handelsbanken next with its deal this week and HSBC and Rabobank following suit.

Handelsbanken has previously sold Kangaroo covered bonds, but had yet to tap the market with a senior benchmark. Its debut was split into a A$450m five year fixed rate tranche and a $A200m five year floating rate note, with more than A$800m of orders placed from 80 accounts.

Both tranches were priced at 95bp, the fixed rate deal over mid-swaps and the FRN over quarterly BBSW. The coupon on the fixed rate tranche was 4.5%.

Australian investors took 48%, Asia 38%, and Europe 14%. Institutional buyers were allocated 69%, banks 26%, and private banks 5%. CBA, HSBC, JP Morgan and NAB were leads.

A syndicate banker on the deal said Barclays led the way last week, showing there is good demand for high quality European issuers in the five year maturity. However, he noted that whereas Barclays’ deal is repo-eligible Handelsbanken’s is not, and that this helps explain the difference in size between the Swedish and UK issuers’ deals, in particular with respect to the FRNs, as this is a focus for bank treasuries.

Barclays priced a A$600m fixed rate tranche and a A$700M FRN, each at 110bp over. HSBC followed Handelsbanken into the Kangaroo market this week, yesterday (Thursday) pricing a A$500m three year FRN at 63bp over, while Rabobank today sold a A$100m 10 year issue at 125bp over mid-swaps.

“There is a bit of appetite for European issuers, and three of the four Aussie majors are in blackout so investors know that there won’t be a rush of domestic supply,” said the banker on Handelsbanken’s deal.

He pointed out that 10 years is a rare maturity for Kangaroo issuance and that Rabokbank was able to price its deal some 15bp inside its euro levels.

“It was worth their while even for the small size,” he said. “It will be interesting to see if it opens up more supply in the maturity.”

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