Pohjola Swiss debut takes deal spree to Eu2.4bn with Samurai

Jun 19th, 2014

Pohjola Bank launched its first fixed rate senior unsecured transaction in the Swiss franc market on Monday, a Sfr300m (Eu246m) seven year deal that ends a run of four deals in three weeks for the OP-Pohjola group, following a benchmark covered bond, a euro senior benchmark, and a Samurai.

OP-Pohjola_HQ_January_31_2009-300The Swiss franc deal took the amount raised through the public transactions to Eu2.43bn, with OP Mortgage Bank having sold a Eu1bn five year covered bond on 4 June, and Pohjola a Eu750m five year senior unsecured benchmark on Tuesday of last week (10 June) and a ¥60bn (Eu433m) Samurai the following day.

The new, 1% July 2021 Swiss franc deal was led by Credit Suisse and Schweizer Verband der Raiffeisenbanken (SVRB) and priced at 30bp over mid-swaps.

The Finnish bank held some non-deal meetings in Switzerland with SVRB last month and the new issue followed positive feedback from investors, who were “craving” such an issuer, according to a lead syndicate official.

Lauri Iloniemi, head of group funding at OP-Pohjola, said that the issuer had wanted to get its benchmark covered bond and senior unsecured trades in euros out of the way before making the rare appearance in Swiss francs.

Pohjola in 2011 issued a subordinated transaction in Swiss francs and also a private placement-style senior floating rate note, but had not previously launched a fixed rate senior unsecured Swiss franc deal. The lead syndicate official said that a lack of other supply from Finland has meant that Swiss investors have been underinvested in Finnish names, while these are seen as generally conservative and therefore attractive credits.

This, he said, contributed to Pohjola coming inside “well respected” domestic credit LGT, which issued a Sfr300m May 2021 bond at 38bp over mid-swaps in January. The syndicate official described the level achieved by Pohjola as “very attractive”.

The deal is understood to have provided the Finnish issuer with all-in funding of around 57bp over mid-swaps in euros. Pohjola last week sold the tightest five year senior unsecured euro benchmark of 2014 at 48bp over mid-swaps.

By way of Nordic references, the lead syndicate official noted that Pohjola came around 10bp wide of where Nordea would be seen in seven years, with the Swedish issuer having priced a Sfr200m five and a half year deal at 17bp over mid-swaps in March.

The lead syndicate official said that seven years has become the favoured “mid-maturity” in Swiss francs, taking over from five years, because of the steepness of the curve, with yields in 10 years, for example, being three times that in five years. He noted that coupons and yields of around 1% can be achieved in seven years and that investors are moving along the curve to get this.

The deal was sized at Sfr300m — described as “good-sized” for the Swiss franc market — in response to the strong demand, said Iloniemi.

“We are very happy with the transaction,” he said. “It showed that there is good appetite for our name in Switzerland.”

Demand was predominantly professional money, according to the lead syndicate banker, with asset managers taking around 60%, insurance companies 12%, pension funds 7%, and 21% going to banks, including high net worth type money alongside some bank treasuries.

Iloniemi said that the Swiss franc trade was undertaken for diversification reasons, similar to its issuance in the Samurai market, which the Finnish group tapped for only the second time on Wednesday of last week (11 June).

Its ¥60bn Samurai was twice the size of a ¥30bn debut in the Japanese market launched a year ago, in June 2013. According to a banker at the leads — Daiwa, Nomura and SMBC Nikko — the size of the new issue reflected the ¥60bn order book.

The deal was split into a ¥42.4bn five year fixed rate tranche and a ¥17.6bn three year tranche. Bookbuilding had begun on 5 June at yen swap offered plus 4bp-5bp for the three year and plus 7bp-9bp for the five year, and these were refined to plus 5bp and plus 8bp, respectively, on the third day of marketing. The final pricing was set at these spreads, which represented levels 11bp and 9bp tighter than what Pohjola achieved in the same maturities for its debut last year, according to the lead banker.

“Pohjola’s solid credit story, Aa3/AA-/A+ ratings and position as the largest Finnish financial institution allowed them to achieve a highly competitive pricing, even versus new issue levels in euros,” he said. “This follow-on issue has allowed Pohjola to further diversify their investor base within the Japanese investor community, more than doubling the number of accounts involved since their debut deal.”

Iloniemi said that the level on the five year tranche was roughly the same as achieved in euros. He said that the new issue had been planned for a long time and that the issuer visited Tokyo-based and regional Japanese accounts last month.

According to the lead banker the relative sizes of the two tranches reflected the respective levels of demand. City banks were allocated 35% of the five year tranche, specialised banks 5%, life insurance 7%, property insurance 4%, asset management 3%, regional banks 16%, Shinkins 12%, and others 18%. Life insurance took 17% of the three year tranche, regional banks 23, Shinkins 12%, and others 38%.

Svenska Handelsbanken, which has issued before in the Japanese markets, has filed to sell up to ¥400bn of Samurai and ¥300bn of Uridashi bonds. A market participant said he understood the filing to have been done to give the bank the flexibility to issue but to be unrelated to any immediate issuance plans.

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