SEB secures Yankee access in accomplished US covered start

May 23rd, 2013

SEB added another string to its bow by making its US dollar covered bond debut on Tuesday, pricing a $1.5bn five year deal on the back of strong demand and only 1bp wide of where Stadshypotek tapped the market last week.

SEBThe deal came two months after Skandinaviska Enskilda Banken sold its first senior unsecured deal in US dollars, and had been planned for a while as part of the issuer’s long term diversification strategy, according to John Arne Wang, head of treasury management at SEB.

“It wasn’t an opportunistic trade,” he told Nordic FIs & Covered. “Euros have been our main diversification market but we wanted to add dollars to further strengthen that and bolster our investor reach.”

The deal was timed to avoid running into the holiday season in the US and was a “natural extension” of roadshow meetings taking place at the end of last week and early this week, said Wang.

“It’s also not a given that the market will have the same positive momentum going forward, so we wanted to take advantage of that,” he added.

The US dollar market has been experiencing a flurry of activity recently, with Australia’s Westpac Banking Corporation on Wednesday launching a $1.25bn five year to make it three US targeted covered bonds in less than a week.

Leads Bank of America Merrill Lynch, Barclays, Deutsche Bank, Goldman Sachs and SEB priced SEB’s $1.5bn deal (Eu1.16bn, Skr9.96bn) at 43bp over mid-swaps, following guidance of the 45bp over mid-swaps area plus/minus 2bp. Some $2bn of orders were placed for the deal and, according to the leads, the deal had the highest number of investors ever in a Scandinavian US dollar covered bond, 68, and relied the least on the top five to 10 accounts.

“The deal was priced at more or less the same level at which SEB could issue in euros and secured our access to the Yankee market,” added Wang.

“We had received very positive feedback so in that sense I am not surprised by the outcome but we are very happy with it.”

The issuer paid up versus its domestic market, but not significantly so, he added. An analyst noted that the basis swap advantage of US dollar issuance over euros is negligible.

The order book was very strong, said Wang, with good participation from SSAs, who took 34% of allocations. Asset managers bought another 34%, banks 19%, and insurance companies 13%. US and Canadian investors drove the deal, accounting for 57% of allocations, followed by Nordics and Asia with 14% each, core Europe 13%, and others 2%.

SEB’s deal came 1bp wide of where fellow Swedish issuer Stadshypotek sold a $1.25bn five year last Thursday (16 May), which bankers away from the transaction said was a good outcome for SEB.

Stadshypotek attracted some $1.7bn of demand to price its covered bond at 42bp over. At that level, the deal was the tightest Nordic US dollar covered bond ever, so the pricing was fair, said Thomas Åhman, deputy head of treasury at Svenska Handelsbanken, Stadshypotek’s parent.

At 42bp over the pricing was arguably a few basis points inside where the issuer would fund in the euro benchmark covered bond market, he added, but its main focus is diversification.

“Over time it is important for us keep working on long term diversification,” said Åhman, “and when you see markets offering fair pricing you need to take the opportunity.

“The reception was really good and the dollar market is slowly developing in the right direction.”

He said that the issuer had been working on documentation for a while and, when this was ready, decided to visit the dollar market after having received many inquiries and expressions of interest.

Email this to someoneShare on LinkedInTweet about this on TwitterShare on Google+Share on FacebookShare on RedditDigg thisPin on PinterestShare on Tumblr
Tags: , , , ,