SMN targets peers after Eu500m five year debut

Feb 21st, 2013

SpareBank 1 SMN paid up to sell an inaugural fixed rate euro senior unsecured transaction last Thursday (14 February), but hopes that the spread between it and its Norwegian peers will narrow over time after an encouraging investor reception, said an official at the issuer.

The Norwegian issuer had been monitoring the market for some time, having gone on a roadshow in the autumn of 2012 and then again in January this year, and felt there was an issuance opportunity after the end of Carnival and Chinese new year festivities, said Dag Uddu, head of treasury at SMN Bank.

“After some discussions we decided to go ahead on Thursday,” he told Nordic FIs & Covered. “We were afraid there would be competing supply this week and also saw a positive tone in the market and wanted to utilise that.”

Leads Citi, DZ Bank, LBBW and UniCredit went out with initial price thoughts of the 115bp over mid-swaps area on Thursday morning for the five year deal and quickly gathered more than Eu500m of orders before setting official guidance at 110bp-115bp over. The final order book for the Eu500m deal was just shy of Eu1.3bn, which allowed the leads to fix the re-offer spread at 105bp over.

A syndicate banker on the deal said that the pricing offered a concession of around 20bp versus where SpareBank 1 SR Bank 2% May 2018s were trading, and that this included a general new issue premium and a concession for the issuer being new to the fixed rate senior unsecured market.

Uddu said the leads took a defensive approach to pricing and that the spread was larger than he would have hoped, but that this was designed to focus investors’ attention and that the leads were also able to tighten the spread.

“For an inaugural transaction we realised we had to pay up,” he said, “and give investors something extra, but we hope that the spread between us and our peers will decrease.”

The bonds closed the day around 5bp tighter than re-offer, and were trading around 90bp today.

Some 180 accounts placed orders for the deal. Uddu said that these included new investors and that there was good support from Germany, too, which was positive.

“We are very satisfied with the investor take-up,” he said. “The German interest came in very early, which gave the deal good momentum.”

Germany took 43%, Nordics (excluding Norway) 13%, the UK 11%, Norway 10%, France 7%, Switzerland 7%, Asia 3%, Italy 2%, Austria 2%, and Iberia 2%. Asset managers were allocated 39%, banks 35%, insurance companies and pension funds 14%, private banks 6%, central banks and agencies 5%, and others 1%.

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