Nykredit plans first senior secured euro driven by OC rationale

Nykredit Realkredit is planning a roadshow for a senior secured issue that will be its first euro benchmark where the proceeds are being used for covered bond overcollateralisation purposes rather than, as previously, for reasons of CRD compliance.

Senior secured issuance pursuant to §15 of Danish legislation – also known as Junior Covered Bonds – issued by Nykredit in euros has hitherto been from capital centres used to issue Særligt Dækkede Obligationer (SDOs), which are CRD compliant and where the senior secured debt is used to meet related continuous LTV compliance requirements.

However, covered bond issuance from capital centre D, which the new senior secured bonds are being issued out of, is in the form of Realkreditobligationer (ROs), which are not CRD compliant. Legislative changes in December allowed issuers to sell senior secured bonds for reasons other than CRD compliance, for example rating purposes or general OC management.

Nykredit Realkredit first took advantage of this option in May with a Dkr2bn (Eu268m) deal and now plans to do so in euros.

“It’s not for CRD compliance,” said Morten Bækmand Nielsen, head of investor relations at Nykredit Realkredit, “but more for general liquidity management.”

The issuer has mandated BNP Paribas, HSBC, Natixis, Nykredit Markets and UniCredit to arrange investor meetings starting on 11 November.

“We have seen very good distribution previously into Scandinavia and German speaking countries,” said Bækmand, “and this time we will be putting focus on getting an even wider distribution.”

Nykredit Realkredit’s last senior secured euro benchmark was a Eu500m five year issue in April, which was priced at 102bp over mid-swaps after attracting some Eu1.4bn of orders. On that deal, Danish accounts were allocated 35% of the paper, Germany 23%, the Benelux 12%, Sweden 8%, Finland 5%, Austria 5%, France 4%, Switzerland 3%, and others 5%.