SEB fills T2 bucket as 12NC7 draws ‘pure end-user interest’

SEB priced a Eu1bn 12 year non-call seven Tier 2 issue last Thursday (22 May), which an official at the issuer noted is the first Swedish deal this year to feature a 12NC7 structure and was launched into a market that had lost some momentum.

The subordinated debt issue was launched to meet regulatory requirements for Tier 2 capital of 2% of risk-weighted assets and to cover additional Pillar 2 requirements for Tier 2 capital, said John Arne Wang, head of treasury management at SEB.

Before Thursday’s transaction the bank had Tier 2 capital of 1.1%.

The deal is the fourth Nordic Tier 2 transaction this year, and the first from Sweden to feature a 12NC7 structure. Svenska Handelsbanken and Swedbank have raised subordinated capital this year but did so with 10NC5 deals.

Wang said that the structure was chosen because investors showed a preference for it over 10NC5 and it was a better fit for SEB’s maturity profile.

“With a 12NC7, you can offer investors additional yield from the swap curve without having to pay up much for it,” he said.

The deal was launched into a market that had lost some of the momentum from the heights of a few weeks ago but was nonetheless still in good shape, according to Wang.

Leads Deutsche Bank, Goldman Sachs, Morgan Stanley, RBS and SEB priced the Eu1bn 12NC7 issue at 145bp over mid-swaps, after guidance of 145bp-147bp over. This followed initial price thoughts of the 150bp over area.

Nordics took 23% of the SEB Tier 2 securities, Germany 21%, the UK 13%, Switzerland 10%, the Benelux 10%, France 9%, Asia 7%, southern Europe 4%, and others 3%.

Asset managers were allocated 46%, insurance companies and pension funds 34%, SSAs and central banks 7%, banks 6%, and others 7%.

More than Eu1.5bn of demand was registered for the issue, with Wang emphasising the quality of the order book.

“There was no inflation in the order book, and all of the demand was pure end-user interest,” he said.

“That is probably a function of less momentum in the market than what was experienced two to three weeks ago, when a lot of order books were inflated due to investors jumping on the bandwagon.”