SBAB happy after adding strong sevens to curve

Sweden’s SBAB launched a Eu750m seven year senior unsecured transaction last Thursday (29 August) and an official at the issuer said it contributes to the bank’s goal of extending its maturity profile and was timed to take advantage of strong market momentum.

The deal was launched in a week when developments around the situation in Syria and the prospect of military action there made for volatile market conditions, with a syndicate official noting how “fickle” the market had been.

SBAB was able to take advantage of an improvement in sentiment amidst this, and last Thursday priced its Eu750m seven year deal at 65bp over mid-swaps, following initial price thoughts of the high 60s area. Leads BNP Paribas, Citi, Goldman Sachs and UBS built a Eu1bn order book.

Louise Bergström, head of investor relations at SBAB, said that the issuer had been monitoring the market and felt there was a good issuance opportunity. (See In Conversation for a fuller interview.)

“It was either then or later and we felt that it was better to come to the market before the rush in September rather than doing it later,” she said. “We always tend to do a bit of prefunding rather than being in the market when we absolutely have to.

“It’s about trying to take advantage of a good market backdrop.”

The issuer has been working on extending its maturity profile for some time, she added, and the seven year maturity made sense in this context after the issuer had done a five year senior unsecured transaction in the spring.

“That was a starting point and now we felt that there was an opportunity to prolong it even further,” she said. “Getting those strong points on the curve is important for us.”

Pricing at 65bp over mid-swaps was a very pleasing outcome, said Bergström.

“It also seemed that investors felt comfortable with the kind of new issue premium that they were getting as otherwise we would have seen more limited orders,” she said.

“We wanted to show a strong transaction to the market, but also ideally to see some performance in the after-market and therefore I think it’s important we do put a few basis points on the table.”

She put the new issue premium at around 10bp.

One week after being priced, the deal was a few basis points wide of re-offer, at around 67bp over, according to a lead syndicate official. This is where it was earlier this week, too, when Bergström said that this was not disappointing given the market backdrop.

“Other recently issued bonds have performed even less,” she said. “It feels like the market was a little bit softer at the start of the week and with the turbulence and uncertainty surrounding Syria, etc. there are always risks in the market that you are unable to predict or prevent, so overall we were very pleased with the transaction.”