Nordea seeks OK to move Finnish covered to new issuer

Nordea today (Friday) launched a consent solicitation in respect of covered bonds issued by Nordea Bank Finland, seeking approval for a new demerged entity, Nordea Hypoteksbank, to assume the role of issuer while the Finnish bank is converted into a branch of the Swedish parent.

The demerger of the Finnish covered bond operations of Nordea from Nordea Bank Finland into Nordea Hypoteksbank Abp (Nordea Mortgage Bank plc), was approved at an extraordinary general meeting of the Finnish bank yesterday (Thursday). Nordea is turning its national subsidiary banks in the Nordics into branches of the Swedish parent under a “One Nordea” strategy and is demerging the covered bond-related businesses of its Finnish bank into the new covered bond issuer.

Nordea said in its announcement of the consent solicitation today that the demerger and related changes are being undertaken in order to preserve the existing covered bonds’ status as covered bonds under the Finnish Covered Bonds Act. It noted that the structure of its Finnish covered bond programme will also be aligned with its programmes in Denmark, Norway and Sweden.

The move is subject to regulatory authorisation, including the obtaining of a mortgage credit bank licence in accordance with Finnish legislation. The planned demerger date is 1 July 2016.

Moody’s said today (Friday) that the demerger, in and of itself and as of this time, will have no rating impact on covered bonds issued off the covered bond programme of Nordea Bank Finland (NBF).

“Under the proposed demerger, the assets and liabilities of NBF’s covered bond business, including the covered bonds issued under NBF’s covered bond programme, would be transferred to the new issuer,” the rating agency said. “However, the covered bond rating would remain linked to the credit strength of NBF. This is because NBF will establish a liquidity line for the benefit of the new issuer with a view to ensuring that the new issuer has sufficient funds to meet its payment obligations under the covered bonds.

“Moody’s notes that NBF will provide a secondary guarantee of the covered bonds transferred to the new issuer under the demerger,” it added. “This secondary guarantee will not apply to bonds issued by the new issuer after the demerger is completed.”

In the consent solicitation Nordea is seeking bondholder approval for the changes.

“The interests of covered bondholders are of foremost importance to the issuer,” said Nordea. “The issuer and Nordea Bank AB have taken, in their opinion, necessary steps to ensure the interests of covered bondholders are adequately protected post the implementation of the demerger and the completion of the cross border merger, via the execution of the deed poll as well as the NBF Guarantee.”

An early participation fee of 10 cents is available. The early instruction deadline is 18 March, the expiration deadline 30 March and meetings are scheduled for 1 April.

Deutsche Bank, Merrill Lynch International and Nordea Bank Danmark are solicitation agents.