Pohjola holds off Tier 2 after fleeting reopening of subordinated supply

Pohjola Bank mandated leads for a euro-denominated Tier 2 benchmark on Monday, but despite a smattering of Additional Tier 1 (AT1) and Tier 2 supply this week a deal for the Finnish issuer did not emerge against the volatile market backdrop.

The Finnish bank named BAML, JP Morgan, Pohjola and Société Générale as lead managers at the start of the week, when market conditions were relatively stable, with launch slated for “the near future, subject to market conditions”.

Landesbank Baden-Württemberg then on Tuesday reopened the Tier 2 sector with the first such issue since mid-April after a period during which several subordinated transactions had been put on hold, with the German issuer launching a 10 year transaction.

However, with market conditions starting to deteriorate once more the Eu500m issue was priced flat to initial price thoughts, at mid-swaps plus 240bp. The issue showed that “the sub space isn’t a walk in the park”, in the words of a syndicate official away from the leads.

“That being said,” he added, “it will not be the last deal that gets done but doesn’t necessarily get the ‘blow-out’ verdict.”

A banker involved in Pohjola’s mandate said that conditions obviously changed dramatically after the announcement on Monday and that they will continue to monitor the market.

The difficulties in navigating the market were evident in the covered bond market (see separate article) as well as in senior unsecured.

Credit Suisse, for example, went out with a dual tranche deal on Wednesday comprising a three year FRN and a 10 year fixed rate leg, but abandoned the longer piece when sufficient demand failed to materialise. The FRN was priced in the middle of IPTs, at three month Euribor plus 34bp, and sized at Eu1bn.

A first AT1 issue from BNP Paribas meanwhile met with a mixed reception on Wednesday. The French bank priced its perpetual non-call seven deal in the middle of IPTs, at 6.125%.

Bank of Ireland nevertheless showed the possibilities in sub debt by pricing an inaugural, Eu750m AT1 yesterday (Thursday) on the back of a seven times oversubscribed order book. The bank was able to tighten pricing from 7.625% to 7.375% for the perpetual non-call five deal.

A syndicate official said that it is difficult to predict whether the market would be open next week.

“Greece is still flying around,” he said, “and the situation is ebbing and flowing quite a lot. On Wednesday rates were 10bp wider at one point during the day and on Thursday they were 10bp tighter.

“Deals could come if there is some stability, but it’s hard to call.”

Pohjola’s last public Tier 2 issue was a Eu500m 10 year bullet in 2012. It last tapped the market on 12 May with a £700m (Eu976m) dual tranche senior unsecured deal comprising a three year FRN and a seven year fixed rate tranche.