Nykredit in first RO senior secured, DLR plans §15 return in Dkr

DLR Kredit is planning to launch its second senior secured issue later this month, a Dkr2bn (Eu268m) maximum deal, while Nykredit has become the first Danish mortgage bank to take advantage of legislative changes allowing §15 issuance out of RO capital centres.

Nykredit Realkredit was out with its self-led Dkr2bn floating rate January 2016 senior secured deal yesterday (Wednesday).

The issue is launched out of capital centre D, a realkreditobligationer (RO) capital centre that the issuer used to use for all its lending before new CRD-compliant Danish covered bond legislation was introduced in 2007.

As such, it is the first time that a Danish mortgage bank has taken advantage of December legislative changes that allow issuers to sell senior secured bonds for purposes other than ensuring continuous LTV compliance requirements in connection with the Capital Requirements Directive (CRD) are met.

“This is the first time that we are making use of the new legislation and issuing a senior secured deal for rating purposes and general OC management,” said Morten Bækmand, head of investor relations at Nykredit Realkredit.

As at the end of 2012 the size of capital centre D was Dkr224bn.

DLR Kredit has mandated Jyske Bank, Sydbank and Spar Nord Bank to lead manage a senior secured issue pursuant to §15. The new issue is planned for later this month and will refinance the issuer’s remaining outstanding (Dkr2.5bn) government guaranteed senior debt, which matures in July, according to Pernille Lohmann, investor relations manager at DLR Kredit.

“We want to be out in good time, and market conditions look good,” she said.

The issuance is designed to provide DLR Kredit with a buffer to withstand the risk of potential further property price falls and still meet continuous LTV requirements, according to Lohmann.

The deal would be DLR Kredit’s second but also last senior secured issue for the time being, she said, unless, for example, rating agency requirements change or there is a significant change in property price developments, and this is one of the reasons why DLR Kredit decided against a euro senior secured deal.

“We had been talking about a euro deal with some market participants, but that requires more explanation and as we do not expect to do more senior secured deals in the foreseeable future we preferred to stay in the domestic market,” she said.

“It seems that there is appetite and we hope for a good level.”

Realkredit Danmark opened a Dkr3.5bn §15 floating rate bond issue on 19 April, according to Danske analysts. The bonds mature on 1 January 2014, pay a coupon of three month Cibor plus 25bp, and were marketed by way of ordinary bond sales.

• Denmark’s mortgage banks have begun detailing forthcoming sales. Nykredit and Nordea said this week that they will hold floater auctions on 30 and 29 May, respectively. Realkredit Danmark will auction euro denominated three year SDROs on 17 June.

• Markit has created new country indices for Denmark and Finland as well as five others within its iBoxx EUR Benchmark index, moving bonds into these from an “other covered” sub-index it is discontinuing.