LF Hypotek €500m covered sets 2016 Nordic sevens tight

Apr 8th, 2016

LF Hypotek sold a €500m (SEK4.64bn) seven year covered bond on Tuesday, building an almost three times oversubscribed book while also setting the tightest price of any Nordic issue in the maturity this year.

LF5200Länsförsäkringar Hypotek’s deal was launched into a busy market, with France’s Caffil selling a €1.25bn 10 year covered bond and New Zealand’s ASB Finance a €500m five year on Tuesday.

Leads Barclays, Commerzbank, Danske and LBBW launched the €500m no-grow seven year issue with guidance of the 20bp over mid-swaps area, before revising guidance to the 18bp area on the back of over €800m of orders. The spread was then set at 15bp with the books above €1.4bn, with over 70 accounts.

“It’s good to see them tighten the price in a fair bit, and they’ve done that while getting the deal almost three times oversubscribed,” said a banker away from the leads.

A syndicate official at one of the leads noted the deal is the tightest priced Nordic seven year benchmark year-to-date.

“It was a very smooth execution,” he added. “It was a rather active day, but the book built quickly and we had no problems finding a home for this bond.

“In the end the quality of the book supported a good move from first guidance to the re-offer.”

Banks were allocated 37% of the deal, asset managers 32%, official institutions 27% and insurance companies and pension funds 4%. Accounts from Germany took 54%, the Nordics 14%, Austria 12%, Asia 5%, the Benelux 4%, Switzerland 4%, the UK and Ireland 3%, France 2%, and southern Europe 2%.

Syndicate officials at and away from the leads said fair value for the new issue was in the low teens, seeing LF Hypotek’s March 2021s at 9bp, mid, and April 2022s at 11bp. They also cited 2021-2023 paper from Swedbank, SEB, SCBC and Svenska Handelsbanken at 9bp-10bp.

Syndicate officials said the differential between LF Hypotek and the Swedish national champions is appropriate given LF Hypotek is a less established issuer, which generally taps the euro covered bond market once per year. LF Hypotek’s last euro-denominated benchmark covered bond came in April of last year, a €500m seven year issue.

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