SpareBank 1 joins euro covered spree as Aktia begins roadshow

Jun 6th, 2013

Norway’s SpareBank 1 Boligkreditt was one of four issuers to launch benchmark euro covered bonds this week despite market conditions remaining tricky after the recent turn in sentiment, while Aktia Bank has embarked upon a roadshow ahead of a debut in its new guise.

SpareBank 1The Norwegian issuer launched a Eu1bn seven year issue alongside a Eu1bn OBG for Italy’s UniCredit and Eu500m deals for Austria’s Raiffeisen-Landesbank Steiermark and Germany’s Deutsche Hypothekenbank.

SpareBank 1 Boligkreditt opened order books on Tuesday morning for its Eu1bn no-grow seven year. Leads Deutsche Bank, LBBW, Natixis and UniCredit priced the deal at 18bp over, the tight end of guidance of 18bp-19bp over that was revised from the 20bp over area, which is also where initial price thoughts were set.

The final order book stood at Eu1.5bn, according to a lead syndicate official, with all orders good at re-offer.

“It was a successful deal,” he said.

Vincent Hoarau, head of financial institutions, covered bond and ABS syndicate at Crédit Agricole CIB, said the deal was well timed.

“Volatility edged higher at the beginning of the week and the issuer was well advised to tap the market now, with there being little upside in waiting,” he said. “The weaker tone fed through to the secondary market where spreads drifted wider in some core covered bond segments throughout the week, but Nordic secondary spreads held very tightly.”

The pick-up in primary market-related activity, with several other issuers on or planning roadshows, came amid more fragile global market conditions in the past fortnight. Syndicate officials said that the market is open and capable of absorbing new issues, albeit with lower levels of oversubscription and a somewhat more cautious and generous approach to pricing.

“The market has the capacity to take down primary market supply, but the days of pricing flat, with a small concession or through fair value are gone,” said one. “You need to pay up.”

Another echoed this assessment, saying that price sensitivity is in evidence and that new issue premiums are clearly needed, but that this can be easily managed.

A banker away from SpareBank 1’s deal said that it came with a new issue premium of around 5bp. He attributed the active primary market to issuers realising that there is little spread tightening potential left, and therefore deciding to avail themselves of execution opportunities when they arise rather than wait.

“Plus, what’s a little new issue premium?” he asked. “The stock markets have showed that volatility can come back quickly, and there are a range of arguments why volatility could become a feature again.”

The eventual onset of summer holidays will also influence decisions, he added.

Aktia Bank hopes to launch its debut issue before the onset of the Nordic holiday season and began a roadshow today (Thursday) for its first covered bond.

Timo Ruotsalainen, managing director, Aktia Real Estate Mortgage Bank, told Nordic FIs & Covered last week that it was targeting a deal by the end of the month.

Finland’s Aktia group has already issued covered bonds, but did this through Aktia Real Estate Mortgage Bank (REMB) alongside Finnish savings and co-operative banks. Last year it announced that it would switch to issuing directly out of Aktia Bank, a change decided on in response to rating pressure.

Moody’s on Friday assigned a provisional Aaa rating to the bank’s covered bonds, which paved the way for Aktia Bank to announce its issuance plans on Monday, with Crédit Agricole CIB, JP Morgan, Nordea Markets and UniCredit being mandated.

“The timing of the announcement of the roadshow mandate is entirely linked to Moody’s rating on Friday,” Ruotsalainen, told Nordic FIs & Covered.

The roadshow will last well into next week.

“Aktia has not issued a public covered bond for almost two years, so we want to do this properly,” he said. “We want to update investors who used to invest in the Real Estate Mortgage Bank, and give investors time to update limits if they need to.”

The bank aims to launch its debut issue before the onset of the traditional summer holiday period in several Nordic countries, added Ruotsalainen.

Aktia Bank will issue sub-jumbo benchmarks, he said, with other triple-A rated Nordic covered bonds serving as a pricing reference.

“Talking about pricing is dangerous territory for an issuer, but the market has been very supportive for covered bond issuance lately and I hope that this will continue,” said Ruotsalainen.

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