Nordea and Pohjola strong in dollar and euro senior moves

May 9th, 2013

Nordic issuers Pohjola Bank and Nordea tapped into a global rally to price senior unsecured issues in the euro and dollar markets, respectively, on Tuesday, with each achieving attractive levels, according to lead syndicate officials.

Finland’s Pohjola Bank sold a five times oversubscribed Eu500m five year deal inside its curve on Tuesday, with leads Crédit Agricole CIB, HSBC, JP Morgan and Pohjola pricing the deal at 50bp over mid-swaps, in line with guidance and inside initial price thoughts of the mid to high 50s.

Some 160 accounts participated in the transaction, placing around Eu2.5bn of orders.

“It’s rare and it’s Nordic, so it is extremely appealing,” said Vincent Hoarau, head of FIs, covered bond and ABS syndicate at Crédit Agricole CIB.

The level of oversubscription was very impressive but not surprising, he added, since the deal was the Finnish issuer’s first appearance on the public euro senior unsecured market in over a year.

“The timing was spot on given the undersupply and excess cash in the market,” said Hoarau.

Pohjola’s last senior deal was a Eu750m five year issue priced at 118bp over mid-swaps in March 2012.

The new five year deal was marketed as a Eu500m no-grow, which was a sensible strategy, said Alex Sönnerberg, Nordic FIG DCM origination, Crédit Agricole CIB.

“Much can be said about optics, but if funding needs are limited a good way to manage expectations and gain momentum for a new deal is by capping the deal size from the outset,” he said. “This strategy may also help to put pressure on the new issue’s spread and consequently achieve a tighter level than would otherwise be possible.”

At 50bp over mid-swaps the deal was priced at a very competitive level, according to Hoarau.

“That is an outstanding result for a senior unsecured trade,” he said. “We knew from the outset that with a huge book and a capped deal size we would have the power to tighten the spread significantly and I think the pricing strategy was rightly designed around this.”

The deal tightened some 4bp in the secondary market on the break, he added.

Nordea sold a triple tranche US dollar senior unsecured bond at historically attractive levels versus its peers on Tuesday, raising $2.5bn (Eu1.9bn) across the three tranches to meet its size objectives, according to a lead syndicate official.

The issuer raised $625m apiece in three year floating and fixed rate tranches, and $1.25bn via a five year fixed rate tranche. Around $1bn of demand came in for each of the three year offerings and some $2.25bn for the five year tranche to take total orders to $4.25bn.

The FRN was priced at 46bp over three month Libor, the three year fixed at 60bp over Treasuries, and the five year at 88bp over Treasuries. Bank of America Merrill Lynch, Citigroup, Goldman Sachs and JP Morgan were lead managers.

A syndicate official on the deal said the issuer achieved its size objectives, having targeted $2bn-$2.5bn across all tranches, and achieved a strong pricing outcome.

“If you look at where the issuer financed itself on the coupon and spread it is very similar to Svenska and Rabobank going back five weeks ago,” he said. “Historically Nordea has traded back of those names by at least 10bp so the market between the end of March and the middle of May has been beneficial for the issuer.”

He noted that Rabobank and Svenska Handelsbanken sold five year senior unsecured issues in the dollar market at the end of March with coupons of around 1.625% and priced at 88bp over and 87bp over, respectively. Svenska’s was a $2bn that was part of a dual tranche issue, and Rabobank on 19 March sold a $1.5bn five year.

A syndicate banker away from the leads said that market sentiment is “amazing” and that deals such as those for Nordea and Pohjola show that “the world is yours, wherever you go”.

At 88bp over Treasuries, Nordea did not pay a premium versus where it would be able to fund itself in euros, he added.

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