SKK1.25bn tranche ‘cherry on cake’ of debut Jyske AT1

Sep 13th, 2016

A debut, dual tranche DKK1.5bn equivalent AT1 for Jyske Bank on 7 September was more than twice oversubscribed, and comprised the first benchmark Swedish krona AT1 from a non-domestic name, with a Jyske official deeming the result a testament to years of work in the Swedish market.

JyskeFacade_aften300The dual currency issue came after a global call and a series of investor meetings across the Nordics at the start of September, which in turn came after Jyske announced its first half results on 18 August. The Additional Tier 1 issue is the Danish banking group’s first hybrid capital issue in over a decade.

Merete Poller Novak, head of debt investor relations and capital markets funding at Jyske, said the Danish issuer opted for a wide-ranging roadshow to be open to issuing in other Scandinavian currencies alongside Swedish krona, but said the currency was always expected to be the anchor of the planned transaction.

“In a broader context the Swedish krona trade is the cherry on the cake of many years of persistent debt investor work and activity in the Swedish krona market – which has come to be a market we appreciate a lot, with many long lasting investor relations,” she said. “As the market environment has changed and we have moved into a negative interest environment – as the new normal – many of our anchor Swedish krona investors that we have known for years have also moved further down the capital structure from senior to Tier 2 and further into the AT1 universe.

“If an investor knows a credit well, and is comfortable with the credit and able to buy AT1, then this is the hot product now.”

Following the conclusion of the roadshow on 6 September, Jyske leads Danske, JP Morgan and Nordea launched the deal on 7 September.

The books were opened with initial price thoughts of the three month Cibor plus mid-to-high 500bp area for a Danish krone tranche and the three month Stibor plus low 600bp area for a Swedish krona tranche.

After about one-and-a-half hours, the size of the Danish krone tranche was set at DKK500m (EUR67.2m) and guidance at the 530bp-550bp area, and the Swedish krona tranche at SEK1.25bn (EUR131m, DKK974m) and guidance at the 580bp-600bp area. Both tranches were then priced at the tight end of guidance, with the order books closing at DKK1.1bn and SEK2.9bn, respectively (approximately EUR450m combined).

Both tranches then tightened around 25bp, according to syndicate bankers.

“We are very pleased with the pricing and also happy for the strong secondary performance of the bonds,” added Novak. “Leaving something on the table for investors has always been the best strategy to secure capital market access for the long run – market conditions are not always as benign as they were when this trade was executed.”

Syndicate bankers close to the deal said the Swedish krona tranche proved particularly popular with international investors, with Norwegian accounts in particular taking a sizeable share.

Jyske’s AT1 comes after a SEK1bn 10 year non-call five Tier 2 in May and is part of the group’s move towards long term targets including a capital ratio of 17.5% and a core equity ratio of 14% (fully-loaded CRD IV). Following the AT1 issue, Jyske Bank’s hybrid Tier 1 capital and Tier 2 capital toal DKK3.6bn, or 2.0% of weighted risk exposure.

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