SBAB satisfied with positioning on Eu750m senior comeback

Apr 18th, 2013

Swedish government-owned SBAB on Monday sold its first senior unsecured fixed rate euro benchmark since April 2011, a Eu750m five year deal that was more than three times subscribed, with pricing justifiably positioning the issuer at the tighter end among its Nordic peers, according to its treasurer.

Per Tunestam, treasurer at SBAB, said that the transaction had been planned for some time, with the issuer having the aim of adding a second point to its senior unsecured fixed rate euro curve after a Eu750m three and a half year deal from April 2011.

“The five year was a natural follow-on to that transaction,” he told Nordic FIs & Covered.

In launching the deal the issuer took advantage of conducive market conditions and apparent strong demand for high quality issuers, in particular from the Nordic region, given a lack of supply, he added.

The issuer prepared for its re-entry into the euro market with a series of investor meetings over several weeks, and the investor work paid off, said Tunestam.

“The deal was very well received,” he said. “The pricing puts us at the tighter end in the context of our Nordic peers, which we feel is where we should be based on our credit.

“The transaction has traded in quite a few basis points since it was executed and we feel that we have positioned ourselves well with the trade.”

The transaction also fit with a slightly amended asset-liability management strategy, according to Tunestam.

“Our previous strategy was for our funding to be split roughly 50/50 between domestic and international issuance,” he said. “For various reasons we are now slightly reducing our international issuance and going forward we will primarily focus, apart from the domestic market, on the euro market.”

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Viet Le, FIs, covered bonds and ABS syndicate manager at Crédit Agricole CIB, said that SBAB timed its deal well amid improving market conditions and a strong bid for core paper.

“Early in the new quarter investors are sitting on piles of cash and eager for new issues,” he said. “Buying a rare and strong credit like SBAB just makes perfect sense for them at the moment.

“The pricing was remarkably tight and certainly confirms the issuer’s position among the top Nordic names.”

Leads BNP Paribas, Goldman Sachs, JP Morgan and RBS priced the no-grow deal at 57bp over mid-swaps, the tight end of guidance of the 60bp over area, after gathering Eu2.5bn of orders within one hour and 15 minutes.

They had opened books with initial price thoughts set in the low 60s area, with orders reaching Eu1.2bn within half-an-hour, and then set official guidance at the 60bp over area and announced the deal as a Eu750m no-grow.

“SBAB is an infrequent issuer in the international capital markets and investors seized the opportunity to increase exposure to the name,” said a lead syndicate banker.

The deal came after Nordea Bank last Monday (8 April) sold a Eu1.5bn five year senior unsecured bond that reopened the European bank bond market after the Cyprus turmoil, with the lead syndicate banker noting that SBAB’s deal was priced only 2bp wider than where Nordea’s benchmark came.

Real money accounts dominated SBAB’s order book, with 125 investors participating. Asset managers took 39%, insurance companies and pension funds 24%, banks 18%, and central banks and SSAs 15%. The Nordics were allocated 25%, France 24%, Germany 17%, the UK 12%, the Benelux 8%, Asia 5%, and others 9%.

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