Skandiabanken joins Swedish ranks with Skr3.3bn of FRNs

Skandiabanken has joined the ranks of Swedish covered bond issuers, having last week inaugurated a new covered bond programme with a Skr3.3bn (Eu381m) dual tranche FRN issue backed by a cover pool of Swedish residential mortgages.

The deal followed a roadshow that involved meeting investors in Sweden as well as Norway, with the issuer also having set up a cover pool of Norwegian residential mortgages and planning to be active in the Norwegian covered bond market.

Its first covered bond was a Skr3.3bn dual tranche issue priced via Danske Bank, SEB and Swedbank last Tuesday (17 September). The deal comprised a Skr1.3bn five year floating rate note, priced at 54bp over three month Stibor, and a Skr2bn January 2016 FRN, priced at 15bp over three month Stibor.

The deal was well oversubscribed, attracting some Skr8.5bn of orders.

“It came out at a very good level and there was quite good interest,” said Fredrik Böhm, deputy head of treasury at Skandiabanken. “We wanted two different maturities and the deal went more or less how we expected.”

The issuer is preparing to sell a Norwegian krone-denominated deal next, according to Böhm.

“We want to issue fairly regularly both in Norway and Sweden, but more with on-tap issues than big benchmarks,” he said, adding that the issuer opted for floating rate notes for several reasons.

“First, our initial cover pool consists of floating rate loans,” said Böhm, “second, our issuance volumes will not be large enough to build benchmark bonds, and lastly we want to build a curve with different maturities.

Demand for the issuer’s debut covered bond was skewed toward the five year tranche, according to Peter Swärd, head of syndicate at SEB, who added that although the investor take-up was generally in line with expectations bank treasuries were somewhat surprisingly more interested in the five year tranche. This can be explained by the steepness of the yield curve and the higher coupon on offer in the longer dated tranche, he said.

The pricing on Skandiabanken’s deal positions the issuer between Länsförsäkringar Hypotek and Landshypotek, according to Swärd, although he said that it is difficult to make comparisons given that most Swedish issuers, except Landshypotek, have benchmark, fixed rate, covered bonds outstanding.

“From time to time they issue floating rate notes, sometimes below, sometimes on the benchmark curve, and sometimes they pay up,” he said, “but usually everyone compares how you come out versus the benchmark curves.

“Stadshypotek, SEB and Nordea are usually the benchmark for Länsförsäkringar Hypotek and Landshypotek, and now also Skandiabanken.”

At 15bp over Stibor, Skandiabanken’s January 2016 tranche offered a premium of 4bp-5bp to the Stadshypotek curve, he said, and the five year a 7bp premium.