Pohjola draws Eu2bn book for Eu1bn senior 7s

Pohjola Bank launched the OP group’s first benchmark transaction of the year on Tuesday, a Eu1bn seven year bond that took advantage of a lack of supply in the senior unsecured market coupled with strong demand.

The Finnish deal is only the second senior unsecured euro benchmark from a Nordic issuer in 2015, after Sweden’s Nordea on 5 February sold a Eu1bn 10 year at 43bp over mid-swaps, and came in a week when supply increased on the back of improved sentiment.

“Pohjola’s transaction was very well received by a robust market that has seen limited FIG euro senior supply year-to-date,” said a banker at one of the leads.

Deutsche, DZ, Nomura, Pohjola and Société Générale went out with initial price thoughts of the 40bp over mid-swaps area for the seven year issue. According to the lead banker, interest came in quickly and on the back of Eu1.75bn of indications of interest the leads officially opened books with guidance of 35bp plus/minus 2bp. The books were closed 45 minutes later, with a re-offer of 33bp over for a Eu1bn deal size.

“Without a doubt, it went really well, really well,” said Lauri Iloniemi, head of group funding at OP-Pohjola. “We were able to print Eu1bn, which is a fair-sized deal for us, and the Eu2bn book was of a very high quality with a lot of accounts — it is always pleasing for an issuer to see such a granular order book.

Iloniemi said that the pricing of 33bp over was in line with his hopes.

“That was pretty much where I wanted to end up,” he said, “and investors seemed to be pretty happy with that because the book had very little price sensitivity. It was a very smooth transaction for all involved.”

He said that the choice of the seven year maturity was logical.

“The last covered bond we issued in the latter part of last year was a 10 year, so we had no need for that maturity, while seven years seems to be the sweet spot for the senior investors,” said Iloniemi, “and it also went well with our liability management considerations.”

The Finnish group announced its results on 5 February and the transaction was launched after it updated its programmes, as well as holding a short roadshow the week before last.

“We spent a couple of days in Holland and in France,” said Iloniemi, “and got pretty nice participation from both of those countries as well.”

France was allocated 17% and the Netherlands 11%, while Germany and Austria received 28%, the Nordics 18%, the UK/Ireland 10%, Switzerland 5%, Asia 5%, southern Europe 5%, and others 1%. Asset managers took 51%, banks 25%, pension funds and insurance companies 12%, official institutions 10%, and others 2%.

Iloniemi said that OP-Pohjola’s funding in 2015 will be similar to 2014.

“Most likely we will have a couple of covered bonds and maybe two to three senior bonds,” he said. “It depends how the balance sheet grows, deposits form, what we do in private placements, and so forth.”