Jyske sells €500m senior fixed debut, SBAB returns

Apr 8th, 2016

Jyske Bank sold a debut €500m fixed rate senior unsecured benchmark bond yesterday (Thursday), and an official at Jyske explained that it had moved away from its previously preferred FRN format because of a changing regulatory environment. SBAB on Monday sold its first fixed rate senior issue in two years.

JyskeFacade_aften300Jyske had previously been active in the senior benchmark market only to print floating rate notes, having sold around one per year since 2011.

Merete Poller Novak, head of debt IR and capital markets funding at the Jyske Bank Group treasury, said the Danish issuer opted to make its fixed rate debut after having observed a shift in the euro investor base, driven mainly by new regulation.

“With the LCR, our traditional FRN treasury investor base is no longer as deep as it used to be,” she said. “Most treasuries have to focus their investments on LCR-compliant investments, i.e. covered bonds – so there is just not so much space for senior anymore.

“Furthermore from an S&P SFR perspective – and in the light of the upcoming NSFR (Net Stable Funding Ratio) – an extension of the duration of our own senior funding is also prudent to ensure dynamic compliance.”

Novak added that Jyske had been encouraged to hit the market after an improvement in sentiment over the last two weeks, which, she said, was demonstrated by a €1bn five year senior issue for Danske last week that attracted over €4bn of demand.

Jyske announced a mandate for the €500m (DKK3.72bn) no-grow five year issue on Wednesday, with leads BNP Paribas, Danske, JP Morgan and LBBW.

The deal was then launched on Thursday morning with initial price thoughts of the 70bp over mid-swaps area, and was subscribed within the first hour. The spread was then set at 65bp, on the back of over €800m of orders.

Around 100 accounts were in the final order book, with banks taking 39%, fund managers 26%, insurance companies and pension funds 26%, and central banks and official institutions 9%. Investors from the Nordics were allocated 39%, Germany and Austria 24%, southern Europe 11%, the UK and Ireland 10%, Asia 6%, Switzerland 4%, the Benelux 3%, France 2%, and others 1%.

“Ultimately the book allowed for slightly tighter pricing, but it has never been our strategy to squeeze out the last basis point – we want to leave a few basis points on the table to support positive secondary performance,” said Novak. “This trade is our first footprint in the fixed rate universe, and we are here to establish a long term presence.”

Novak added that in the coming years Jyske aims to continue issuing at least one senior benchmark a year, and said in the light of the regulatory environment fixed rate issuance will be “a natural part” of its issuance strategy.

“All together with our recent euro covered benchmark out of our mortgage arm BRFkredit – and two planned euro covered transactions a year over the coming years – we are thus now on the path to becoming a frequent euro bond issuer,” she said.

BRFkredit, a Danish mortgage credit institution wholly owned by Jyske Bank, sold a debut, €500m five year covered bond on 16 March.

Sweden’s SBAB sold its first euro-denominated fixed rate senior unsecured bond in over two years on Monday.

Leads BAML, Barclays, Credit Suisse and HSBC launched the five year issue with initial price thoughts of the 65bp over mid-swaps area, before fixing the size at €500m (SEK4.64bn) and setting guidance of the 60bp area. The deal was then re-offered at 57bp, with the book closing at around €940m with more than 60 accounts.

Syndicate officials said the deal had gone particularly well given that there was competing senior supply on Monday, with Credit Suisse selling a dual tranche €2.75bn three year and 10 year issue, and LeasePlan a Eu750m four year.

SBAB’s deal offered a new issue premium of 4bp, according to a lead syndicate official.

Banks bought 51% of the deal, fund managers 35%, insurance companies and pension funds 13%, and central banks and official institutions 1%. Accounts from Germany and Austria took 47%, southern Europe 14%, the Nordics 12%, France 12%, the UK 5%, Asia 5%, the Benelux 2%, and others 3%.

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