SBAB in Eu750m senior return, covered next up

SBAB launched its first benchmark euro senior unsecured floating rate note since January 2012 on Wednesday, a Eu750m (Skr6.94bn) three year issue that the issuer’s head of investor relations said is likely to be followed by a euro benchmark covered bond by the end of the third quarter.

The Swedish issuer abstained from the euro senior unsecured market last year after having issued two fixed rate euro benchmarks in 2013, but returned to tap into the burgeoning euro FIG market this week.

“We saw a window of opportunity and of course we have a certain amount of funding to do for the full year,” said Louise Bergström, head of investor relations at SBAB, “and with all the new rules and regulation you can’t exclude the fact that you probably need to be doing senior as well as covered.

“The recommendation was that there was an opportunity and we are very pleased with the outcome.”

According to a banker at one of the leads – BNP Paribas, Credit Suisse, Natixis and RBS – the issuer moved to take advantage of the market’s momentum on Wednesday morning after the successful execution of recent deals and checking the market for competing supply.

Books were opened with IPTs of three month Euribor plus the low 30s for the three year FRN and grew to almost Eu1bn in an hour and a half. An hour later guidance was revised to 30bp plus or minus 1bp with books over Eu1bn, and half an hour after that books were closed and the price fixed at plus 30bp.

“I think we could have gone a little bit tighter if we had wanted, but it was fair pricing and for us it’s important to leave something on the table for future performance,” said Bergström.

Banks were allocated 36%, SSAs 33%, asset managers 20%, insurance companies and pension funds 10%, and corporates 1%. Germany and Austria took 37%, the Nordics 16%, southern Europe 8%, France 7%, the Benelux 4%, the UK and Ireland 4%, and Asia 23%.

“We said we wanted to do a benchmark deal and given that it is an FRN you can go anywhere from Eu200m-Eu300m up to a larger size, and we were very pleased with the result,” said Bergström. “It was a very granular order book and we saw a lot of interest out of a variety of regions.”

SBAB last issued a euro covered bond benchmark in September 2014 via its Swedish Covered Bond Corporation subsidiary, a Eu1bn seven year, and Bergström said that the issuer will probably return with a euro benchmark by the end of the third quarter if market conditions allow.

“What we said when we did our last transaction is that we are going to be more regular in the euro covered bond market,” said Bergström, “coming to the market with a euro covered bond benchmark at least once a year. It’s in our plan to be issuing liquid euro denominated benchmark transactions in both senior unsecured as well as covered bond format. We had planned one or two international transactions for this year and now, having done one, the next transaction will most likely be a covered.

“It could be either before or after summer depending on the market conditions,” she added, “but most likely it will be either a five or seven year transaction some time before the end of Q3.”

SBAB has meanwhile revised upwards its funding programme for the year.

“With the low rates at the moment, we are seeing a good inflow of demand for Swedish mortgages, and we have somewhat upsized our annual funding needs,” said Bergström. “At the beginning of the year we were looking at Skr50bn; now it’s looking more like Skr55bn.”