SEB, SR euros, Nordea sterling in Nordic senior supply spree

Nov 8th, 2012

SpareBank 1 SR Bank and SEB took advantage of strong market conditions and compressed spreads to tap the euro senior unsecured market this week, while Nordea Bank made the most of a good issuance opportunity in sterling.

SEBSkandinaviska Enskilda Banken’s Eu1bn seven year deal was the last of the flurry of Nordic euro supply, with leads Deutsche Bank, JP Morgan, RBS, SEB and UBS starting the execution process late yesterday (Wednesday) morning after a stable market opening. Initial price thoughts were set at the high 70s over mid-swaps, but with an order book of around Eu2bn and limited price sensitivity the leads were able to fix the re-offer spread at 72bp over, following guidance of the 75bp over area. Some 150 accounts, led by French and German investors, are understood to have participated.

A syndicate official on the deal said that it outperformed against the wider market and closed unchanged yesterday despite a weaker market tone and US-driven spread widening in the afternoon, although another market participant noted that the deal was around 3bp wider today (Thursday).

“It only took a couple of hours and SEB had another blow-out deal at hand,” said the lead syndicate official. “The issuer managed to tighten the spread from high 70s IPTs and only left a marginal new issue premium.”

Viet Le, FIs, covered bonds and ABS syndicate manager at Crédit Agricole CIB, said that SEB had timed its deal well.

“The issuer hit a good execution window, with yesterday set to be the last issuance opportunity for the week given central bank meetings today and a holiday in Spain on Friday,” he said. “They took advantage of further spread compression within core jurisdictions and found a good window to extend their curve.”

At 72bp over, SEB priced its seven year 148bp tighter than where it sold a long five year benchmark in January (220bp over), according to Le.

“Technicals are very supportive with investors starving for any sort of new issue supply,” he added, “which suggests that a tighter print would also have been possible along with a smaller new issue concession at the IPT stage, but at 72bp the issuer got a strong result and is hardly paying any new issue premium.”

A banker familiar with the deal said that some accounts had reservations about participating in the transaction because they felt that the FIG market had little tightening potential, with the longer maturity also an issue for some, but that there is sufficient liquidity in the market for these reservations not to have got in the way of the leads building a strong order book.

Germany took 27% of the bonds, France 26%, the UK 13%, Nordics 13%, the Benelux 9%, Switzerland 5%, and others 7%. Asset managers were allocated 68%, banks 16%, pension funds and insurance companies 10%, and others 5%.

Norway’s SpareBank 1 SR Bank set new records for itself with a Eu500m five-and-a-half year senior unsecured issue on Monday, pricing at the tightest spread and off the largest order book yet for the issuer, according to a lead syndicate banker.

The 2% May 2018 deal is also the longest dated fixed rate benchmark to be priced by the Norwegian issuer, the largest member of the SpareBank 1 Alliance, and its second this year, following a Eu500m five year deal sold in March.

“It was extremely successful,” said the lead syndicate official.

Leads Commerzbank, Credit Suisse, DZ Bank and Société Générale announced the trade on Monday morning with initial price thoughts of the 115bp over mid-swaps area, incorporating a new issue premium of around 20bp to give the transaction good momentum, according to a syndicate official at one of the leads. In less than one hour of bookbuilding investors expressed interest exceeding the envisaged Eu500m deal size, he said.

An “exceptional” investor response allowed the leads to revise guidance to 105bp-110bp over, he added, and eventually fix the spread at 105bp over, providing a new issue concession of 10bp, with the final order book having reached Eu1.3bn.

The re-offer spread is said to be the tightest and the order book the largest yet for a SR Bank euro benchmark, with the number of accounts in the order book — 150 — also a new record.

Dag Hjelle, head of treasury at SpareBank 1 SR-Bank, told NFIC that the issuer is very happy with the transaction, especially in light of the investor work that the issuer has carried out over the past few years.

“That is paying off and we have more attention than we used to,” he said. “We had around 150 investors in the book, which is more than in the past.”

However, he noted that there is potential for progress to be made on pricing, with SR-Bank typically coming substantially wider to some of its Nordic peers despite being of a similar credit quality.

“We think the spread differential versus some of our peers is too big, and hope that further investor work will increase familiarity with our name and help bring down the spread.”

A lead syndicate banker noted that SR-Bank’s deal came after SpareBank 1 Midt-Norge (SMN) had recently explored issuance opportunities but not come to market, with another market participant saying that accounts’ familiarity with the issuers, or lack thereof, may have played a role.

Le at Crédit Agricole CIB said that SR-Bank had achieved a good result that could encourage other Norwegian issuers, noting a lack of French investor participation in the deal as a surprising aspect and one that could be addressed by targeted investor work aimed at increasing these accounts’ familiarity with the credit.

The UK took 42%, Germany 33%, Nordics 7%, Switzerland 6%, southern Europe 3%, Asia 3%, Austria 2%, and others 4%. Funds were allocated 48%, banks 31%, insurance companies and pension funds 8%, central banks and agencies 5%, retail 4%, and others 4%.

A week after peer Swedbank sold a £250m three year FRN, Nordea Bank on Tuesday tapped the sterling market with a £500m seven year fixed rate issue via Deutsche Bank and RBS. The deal was priced at 120bp over Gilts, 5bp inside guidance, after meeting with investor demand totalling around £1bn.

“Nordea is a name with access to the sterling market,” said Crédit Agricole CIB’s Le, “with the basis swap being favourable and, there being a lack of domestic supply as a result of the Funding for Lending Scheme, the issuer was able to take advantage of a good issuance opportunity.”

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