Jyske welcomed back in rare public euro visit, merger benefits seen

Jyske Bank priced a well-received Eu500m (Dkr3.73bn) three year senior unsecured FRN in a rare visit to the euro benchmark market yesterday (Wednesday), with the deal also its first public euro issue since the Danish bank’s merger with BRFkredit in April.

Jyske has a strong deposit base and is a rare issuer in the benchmark debt capital markets. However, it aims to maintain a regular presence in the market and with no public euro issue since November 2012 felt it was about time to return to the public market this year, according to Merete Poller Novak, head of debt IR and capital markets funding at Jyske Bank.

A new issue had to await completion of Jyske’s merger with BRFkredit at the end of April and a subsequent update of the issuer’s EMTN programme, however, she said.

“With the positive ECB announcement last week, timing for this week seemed perfect, so off we went,” she said.

The mandate for the deal was announced on Tuesday afternoon, with leads Danske, DZ, JP Morgan and LBBW going live with a Eu500m no-grow transaction with initial price thoughts of the high 50s over three month Euribor on Wednesday morning.

This generated good momentum, according to syndicate bankers at the leads, with more than Eu800m of indications of interest registered before the leads officially opened order books with guidance of the 55bp over area. Twenty minutes later the spread was fixed at 52bp over amid next to no spread sensitivity, and the books were closed shortly thereafter comprising some Eu1.2bn of orders.

More than 100 investors from across Europe made for a granular and highly diversified order book, noted lead syndicate officials. Novak said that the distribution shows that Jyske has succeeded in establishing strong access to a European investor base, with 81% of the bonds placed outside Denmark.

“The structure did not appeal to everyone, with the three year maturity too short for insurance companies and too long for French money market funds, for example,” she said, “but on the other hand the structure was very well received by German investors, especially German bank treasuries.”

Germany and Austria took 44%, Denmark 19%, Nordics ex-Denmark 17%, the UK and Ireland 7%, the Benelux 4%, southern Europe 4%, Switzerland 2%, and France 2%. Banks were allocated 73%, asset managers 12%, central banks and agencies 7%, pension funds and insurance companies 6%, and corporates 2%.

Novak noted that the bonds have tightened since pricing and were today (Thursday) roughly trading in line with a Nykredit Bank June 2016 issue.

“This reflects the strengthening of our credit profile after the merger with BRFkredit,” she said.

She noted that S&P has indicated that the removal of government support from Jyske’s rating by the end of 2015 will probably be offset by an improvement in Jyske’s standalone credit profile due to the potential to strengthen capital and earnings (the RAC ratio), and that this has allowed Jyske to maintain a stable outlook.

The merger of Jyske Bank and BRFkredit turned Jyske Bank Group into one of the four largest Danish financial groups, with total assets of nearly Dkr500bn.