Jyske in possible senior finale after T2 capital high

Jun 8th, 2017

Jyske returned to the senior unsecured market for possibly the last time on 23 May after in March selling its biggest capital trade, a four times covered Eu300m 12 year non-call seven Tier 2 that investors welcomed as a rare opportunity to buy a yieldy euro trade from the Dane.

JyskeFacade_aften300In May 2016 Jyske Bank had sold its first subordinated debt issue in 10 years, a SEK1bn Tier 2, and followed that up with a DKK1.5bn equivalent AT1 in Danish kroner and Swedish kronor in September, and the new euro Tier 2 represents the penultimate step in the bank filling up its 2% Tier 2 and 1.5% AT1 buckets by mid-2018 — as of the end of the first quarter they totalled a combined 3.1% of REA.

After a two team, six day roadshow, leads BNP Paribas, Danske Bank, Goldman Sachs and LBBW opened books for the Eu300m (DKK2.23bn) no-grow Tier 2, rated BBB, on 30 March with initial price thoughts of the 210bp over mid-swaps area—versus comparables such as Danske 26NC21s at 108bp and Nykredit 27NC22s at 180bp. Guidance was revised to 190bp-195bp after orders surpassed Eu1.3bn, and the deal was ultimately priced at 190bp on the back of a Eu1.4bn book. The paper then tightened in the secondary market and was bid at 177bp over a week after launch.

“We had this one trade to do in the euro space and we are really satisfied with it,” said Merete Poller Novak, head of debt investor relations and capital markets funding at Jyske. “We are overly happy with the investor interest, which is a combination of years of work, a very nice roadshow and perfect timing – all these three things came together.

“We have succeeded in building quite high investor recognition despite limited issuance activity, but with only one senior FRN a year until 2016, investors, for example those in London, had never been offered a real credit product. So while we took the first steps in our capital activity in the Scandi markets, we could actually do something in reasonable size in Tier 2 and wanted to take the opportunity to do a euro trade.”

She noted that euro Tier 2 spreads were meanwhile some 100bp tighter than a year previously.

“Having only this one trade to do, we hoped that we would be able to hit the market at the optimal time, to pick the best possible window, and I’m just grateful that in hindsight we succeeded in doing that,” said Novak.

“And we are very happy to see the trade perform in the secondary market,” she added. “You always try to get the best possible price, but our strategy has always been to leave a little space for secondary performance as we want investors to be left feeling good about the credit.”

The Danish bank returned to the market on 23 May to sell a Eu500m no-grow three year senior floating rate note.

Leads BNP Paribas, DZ, JP Morgan and LBBW went out with IPTs of three month Euribor plus the 40bp area before fixing the spread at 35bp with books approaching Eu1bn. Orders ultimately totalled Eu1.9bn after just over an hour of bookbuilding.

“The success of Jyske’s transaction reflects the strong market position of the issuer and underpins the very strong international investor sponsorship the solid credit enjoys,” said a banker at one of the leads, with new accounts joining established buyers of the credit in the book.

Novak said the trade could be Jyske’s last senior unsecured benchmark, given the anticipated arrival of Danish MREL instruments, possibly around year-end, upon regulatory and legislative moves.

“There might be one more ‘old-style’ senior next year,” she said, “but eventually we do expect our long term senior unsecured (Eu2.5bn-Eu3bn) to be gradually replaced by senior non-preferred issuance.”

Meanwhile, the only other euro benchmark from the group scheduled for this year is a euro covered bond from mortgage arm BRFkredit, most likely in the third quarter.

Email this to someoneShare on LinkedInTweet about this on TwitterShare on Google+Share on FacebookShare on RedditDigg thisPin on PinterestShare on Tumblr
Tags: , , , , ,