Handelsbanken sells senior as UniCredit shows covered open

Aug 16th, 2012

Svenska Handelsbanken sold a Eu1bn 10 year fixed rate senior unsecured benchmark into a buoyant market this (Thursday) morning, as syndicate officials declared covered bonds open after UniCredit sold the first Italian benchmark in a year on Tuesday.

HandelsbankenLeads Crédit Agricole CIB, Natixis, Société Générale and UniCredit priced the Eu750m long five year obbligazione bancarie garantite almost 100bp inside Italian government bonds after building a book of Eu2.2bn, making the deal the first covered bond ever to be priced clearly through the respective sovereign.

Handelsbanken’s issue — which had a book of Eu1.8bn — came amid a flurry of senior unsecured issuance, with BFCM having sold a Eu900m 10 year deal and ANZ a £250m three year on Tuesday, and BNP Paribas also tapping the market today, with a Eu1bn seven year benchmark.

Leads Bank of America Merrill Lynch, Credit Suisse, HSBC, JP Morgan and Handelsbanken went out with IPTs of the 85bp over mid-swaps area for the new issue, and set the final spread at 80bp. A syndicate official away from the leads said that this compared with a secondary level for Handelsbanken’s outstanding October 2021 paper of 73bp bid.

“Svenska Handelsbanken did a three year senior unsecured benchmark back in July at mid-swaps plus 60bp,” he said, “and they were trading in the context of plus 30bp this morning. BNP Paribas has meanwhile tightened from 150bp to 80bp, so spreads have halved in the past two months.

“Both deals are going very well today,” he added.

UniCredit’s landmark deal was the first benchmark covered bond since a Eu1.5bn seven year ABN Amro Bank transaction on 24 July.

“The timing was decisive as the deal was launched in the context of a lack of supply and a much better market backdrop and investor mood after Draghi’s supportive comments in early August,” said Vincent Hoarau, head of covered bond syndicate at bookrunner Crédit Agricole CIB.

“The covered bond squeeze in the secondary market, the level of redemptions in covered bonds, as well as the overall lack of investment alternatives also made the deal possible at this level.”

Syndicate officials said that in the wake of UniCredit’s reopener other issuers will now be looking to issue sooner rather than later.

“The Nordics are back and there is also interest from France, so a pipeline is building up and mandates are being awarded,” said one. “With the success of UniCredit, all the issuers are aware that the market is there.

“This puts them in a position where they do not have to wait too long and face a queue in September.”

Hoarau said that issuers would be well advised to take advantage of the issuance window given how quickly volatility can return and market conditions deteriorate, potentially as the summer break draws to a close. He said that SSA supply in September and a potential repricing of that sector could stop the global credit rally and indirectly weight on covered bond spreads.

“Headlines risks will increase significantly when everyone get back to their desks,” he said. “Smart issuers might anticipate that and decide to catch the issuance window in the second half of August.”

Nordic banks would be appropriate candidates, he suggested, given their recent good secondary spread performance — even if their needs are not high.

“They are all very well-funded and advanced in their programme for the year,” said Hoarau. “Danish, Swedish and Norwegian issuers also benefit from a huge portion of their funding activity being executed in their own currencies.

“Nevertheless, given the absolute spread levels all could now achieve in the primary market, some could decide to adopt an opportunistic approach and tap the market shortly.”

The last benchmark Nordic covered bond was a Eu650m seven year transaction for Terra BoligKreditt issued on 12 June.

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