Nordics ride senior wave, smaller names provide highlights

Feb 19th, 2016

Nordic banks and insurers sold Eu4.5bn of senior debt this week in a resurgent market, led by Nordea but with rarer issues for Santander Consumer Bank Nordic and Sampo deemed highlights, while Stadshypotek sold a Eu1.25bn seven year covered bond.

Santander signageIn the first week of stability in February – as the volatility of recent weeks subsided and equity and credit markets rallied – issuers flocked to take advantage of the reopening of the market, with supply from financial institutions mostly weighted towards senior unsecured.

While only one Nordic euro benchmark covered bond emerged this week, Nordic issuers contributed five of 10 euro benchmark senior deals totalling almost Eu10bn this week.

Nordea kicked things off on Monday, with leads BNP Paribas, Goldman Sachs, Nordea and UBS went out with initial price thoughts of the 90bp over mid-swaps area for a seven year fixed rate tranche and of the high 40s over three month Euribor area for a three year FRN tranche.

The size of the fixed rate tranche was fixed at Eu1.25bn and the spread at 80bp, and the size of the FRN fixed at Eu750m and the spread at 45bp. The combined books totalled Eu2.4bn, with demand skewed towards the fixed rate tranche.

A syndicate official at one of the leads said the fixed rate tranche offered a new issue premium of 12bp and the floating rate tranche 5bp.

On Tuesday, Santander Consumer Bank Nordic leads Citi, Danske, HSBC, Santander and UniCredit launched a Eu500m three year deal with IPTs of 130bp-135bp over mid-swaps. They then moved to guidance of 120bp-125bp, will price within range, on the back of over Eu1.4bn of orders, before fixing the spread at 120bp.

The book closed in excess of Eu1.7bn with around 190 accounts. Asset managers were allocated 58% of the deal, banks 19%, pension funds and insurance companies 12% and central banks and official institutions 11%. Accounts from Spain bought 24%, Germany and Austria 16%, France 13%, the Nordics 13%, the Benelux 12%, the UK 8%, Switzerland 5%, Asia 2%, and others 7%.

Skandinaviska Enskilda Banken (SEB) followed on Wednesday, with leads BAML, Barclays, BNP Paribas, Goldman Sachs and SEB launching the Eu1bn August 2021 deal with IPTs of the 80bp area, before moving to guidance of the 75bp area. The deal was then re-offered at 73bp, with the book at Eu1.5bn at the last update.

DNB Boligkreditt rounded off the week, launching its deal on Friday in spite of a softer session on Thursday afternoon that syndicate officials said had little impact on overall market sentiment.

Leads BNP Paribas, Citi, Goldman Sachs and Société Générale priced the Eu750m seven year issue at 90bp over mid-swaps on the back of orders of around Eu800m, after having launched the deal with IPTs of the 95bp area.

Syndicate officials said the deal offered a new issue premium of around 15bp, based on DNB’s secondary curve.

Syndicate officials noted that demand for the new Nordic issuers seemed to have fallen through the week, in line with the rest of the week’s senior issues, but attributed this to the quantity of supply since the market’s reopening.

“It does feel as though oversubscription levels dipped and demand has tailed off a little, but for me that’s just indicative of investors being choosier now they can be, while spreads have tightened, rather than any issues with these deals, per se,” said one.

Another banker said that demand felt stronger at the shorter end of the curve.

“My takeaway from this week’s deals is that there is a very large depth of liquidity in the three year maturities, which Santander and Sampo went for,” he said. “What has been proved to some extent this week is that as one pushes further out the curve, demand is more limited.

“Clearly, SEB and DNB are different kettles of fish to Santander and Sampo, but these national champions will have a larger universe of investors to call on. The smaller issuers, meanwhile, are the kind of trades you’ll see once per year, so for me these are more interesting.”

Sampo upsizes to Eu500m

Insurer Sampo Oyj hit the market with its deal on Wednesday. Leads Citi, Danske, Deutsche and Nordea launched the Eu500m no-grow May 2021 issue with IPTs of 135bp-140bp over mid-swaps, before moving to guidance of 125bp-130bp, will price within range, on the back of over Eu1bn of orders. The spread was then fixed at 125bp, with the book closing at over Eu1.25bn.

Following feedback from a European roadshow, Sampo had decided to upsize the transaction from Eu300m to a benchmark size.

Fund managers bought 58% of the deal, pension funds and insurance companies 25%, banks 10%, central banks and official institutions 6%, and others 1%. Accounts from the Nordics were allocated 38%, Germany and Austria 21%, the UK and Ireland 13%, France 10%, southern Europe 8%, Switzerland 5%, the Benelux 4%, and others 1%.

A syndicate official away from the deal called it a very good transaction, noting that it was one of the first issues in the financials space away from national champion-type names since the recent bout of volatility subsided.

“I’d be very happy with the result if I were them,” he added. “They got pretty strong demand for a name like that.”

However, he noted that whereas recent, better known issuers had come with initial price thoughts of around the 25bp area and ended up with new issue premiums of 15bp-20bp, Sampo had gone out with IPTs of around 30bp and ended up with a 20bp NIP.

“So it was a bit more generous than the core names,” said the syndicate official, noting that yesterday (Thursday) it was trading around 12bp inside re-offer.

Stadshypotek reflects market moves

Stadshypotek on Monday printed the only benchmark Nordic covered bond of the week in the international markets. Leads Barclays, BNP Paribas, Commerzbank, Danske and Handelsbanken launched the Swedish issuer’s seven year deal with guidance of the 22bp over mid-swaps area, before revising guidance to the 20bp area plus or minus 1bp, will price in range, on the back of books over Eu1.5bn. The spread was then set at 19bp, before the size was fixed at Eu1.25bn.

“This is a good outcome, and I think we ticked all of the boxes in terms of our objectives when we announced the deal,” said a syndicate official at one of the leads.

Stadshypotek’s new issue followed successful deals two weeks earlier for Swedish peers Swedbank, which printed a Eu1.25bn five year on 3 February, and SEB, a Eu1.5bn five year on 4 February. Those deals were priced at 14bp over mid-swaps, with Swedbank attracting over Eu2.8bn of demand and SEB more than Eu2.4bn.

The lead syndicate official said the spread differential between Stadshypotek’s new issue and the two deals reflected both its longer maturity and a weakening in the market in the meantime.

“Obviously the market dynamics have changed and we have seen a weakening in spreads since Swedbank and SEB were in the market,” he said. “With hindsight, this was a very good day to do a deal, but we have seen how quickly markets can turn around and going out early on a Monday you need to offer a bit more.

“However, thanks to the price dynamics on the day we were able to price the deal with a new issue premium in line with the recent trades.”

Syndicate officials said the deal offered a new issue premium of around 5bp, seeing Stadshypotek February 2021s and November 2021s at 12bp, mid.

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