SMN in strong senior return, narrows gap to peers

SpareBank 1 SMN sold its second euro fixed rate senior unsecured benchmark on Tuesday, a Eu500m no-grow five year issue that was priced 35bp tighter than its debut last year and, according to an official at the Norwegian bank, came with a narrower spread differential to its peers.

The deal was announced on Monday afternoon after what a syndicate official at one of the leads described as a “rip-roaring” open in the European markets, with the issuer taking advantage of a “super window”.

Dag Olav Uddu, head of treasury at SpareBank 1 SMN, said that the issuer had been monitoring the market for a while and was flexible as to the timing of a deal, with this week striking it as offering good issuance conditions.

“The deal went pretty well,” he said. “We started at the 80bp over area and tightened the spread to 70bp. The spread between us and the national champions fell since our debut, by around 20bp, and I think although our spreads have come down there is still room for performance.”

Leads BNP Paribas, Citi, Commerzbank and DZ built an order book of around Eu2.2bn and priced the deal at 70bp over mid-swaps, the tight end of guidance of 70bp-75bp over that followed initial price thoughts of the 80bp over area.

There were 210 investors in the book, according to Uddu.

At 70bp over, the deal paid a new issue premium of some 5bp, according to a lead syndicate banker. Comparables included SpareBank 1 SR Bank 2.125% February 2019s and February 2020s, which were trading at z-spreads of 54bp and 57bp over, respectively, according to the syndicate official, with fair value for SMN Bank’s deal in the mid-60s over mid-swaps.

He said that, in line with recent transactions, orders were “very sticky”, which allowed pricing at the tight end of guidance. The bonds closed 7bp tighter in the secondary market, he added.

At 70bp over, this week’s deal was priced 35bp tighter than the bank’s inaugural euro fixed rate senior unsecured transaction, a Eu500m no-grow five year that came at 105bp over in February 2013 on the back of nearly Eu1.3bn of orders.

The Nordics took 30%, Germany and Austria 41%, the UK and Ireland 7%, France 6%, Benelux 5%, Asia 3%, Switzerland 3%, southern Europe 3%, and others 2%. Banks were allocated 45%, asset managers 37%, insurance companies and pension funds 14%, and SSAs 4%.