Sp Central Bank cheered by debut Eu500m senior bond

The Central Bank of Savings Banks Finland (Sp Central Bank) on Tuesday sold an inaugural Eu500m five year senior unsecured bond, reopening wholesale funding for the Savings Banks Group and achieving the issuer’s target of building a large, highly granular order book.

Leads Crédit Agricole CIB, LBBW and Nordea launched the Eu500m no-grow five year senior unsecured issue with initial price thoughts of the 90bp over mid-swaps area, before moving to guidance of the 85bp-90bp area after having gathered IOIs approaching Eu700m. With orders approaching Eu1bn, the re-offer was fixed at 83bp. Books were closed 30 minutes later at more than Eu1.1bn, with 115 accounts participating.
“We are happy with the pricing outcome, we are happy with the size of the order book, and we are very happy with the high granularity,” said Kai Brander, head of treasury at Sp Central Bank.
“What we really wanted to do was to reach as many investors as possible. In the end we got 115 investors involved, meaning that the average ticket size was below Eu5m. That is just great.”
Asset managers were allocated 41% of the deal, banks 29%, insurance companies and pension funds 25%, and central banks and official institutions 5%. Accounts from the Nordics took 48%, Germany, Austria and Switzerland 33%, southern Europe 9%, the UK and Ireland 6%, France 3%, and others 1%.
“Despite the issuer being a solid credit, extensive marketing work had to be done to get investors to initiate coverage and put credit lines in place,” said Viet Le, financial institutions and covered bonds syndicate manager at Crédit Agricole CIB. “Taking that into consideration, and that it is an inaugural issue, this is a great result.”
Noting that it was difficult to find good comparables for the new issue, Le said the deal offered a concession of around 10bp, citing Aktia October 2017 paper quoted at 52bp, bid.
“But this is very theoretical,” he added.
Le said that the outcome showed that the work put in on a roadshow, which ran from 15-23 April, had paid off. Brander agreed the roadshow went well, adding that the most important topic that often came up during investor meetings was the structure of the amalgamation of the Savings Banks group.
Sp Central Bank is the central credit institution of the Finnish Savings Banks Group and the operational arm of Union Cooperative, which is responsible for the capital adequacy and liquidity of the group. The group’s 25 member savings banks (Säästöpankki), Union Coop and Sp Central Bank operate as a single entity for regulatory purposes.
The Finnish Savings Banks had raised wholesale funding via Aktia Real Estate Mortgage Bank covered bond issuance, until in 2012 Aktia switched to direct issuance and the joint issuance arrangement ceased. The group’s wholesale funding channels had been closed since then.
Brander added that the issuer chose to come to market this week because it had wanted to use these channels as soon as they were reopened.
“A couple of weeks before we did this transaction the markets had not been as good as they had been before,” he said. “But despite that I would say that our transaction went very well.
“We cannot complain.”
Brander said that Sp Central Bank’s intention is to become a regular issuer.
“This means in practice that we will launch two, sometimes maybe three, deals per year,” he said. “Whether these will be senior unsecured or covered bonds, or a combination of both, we can’t tell yet.
“But this is definitely an encouraging start,” he added.
The Savings Banks Group is working on setting up a mortgage bank that could issue its first covered bond in very late 2015, but is likely to enter the market in early 2016.