SpareBank 1 picks dollars for first 2013 deal to leverage US work

SpareBank 1 Boligkreditt priced a $1bn five year deal yesterday (Wednesday) after choosing the US dollar market over euros for its first benchmark covered bond of the year to capture momentum from a recent roadshow in the US, while a French issuer is also said to be eyeing dollars.

The transaction takes year-to-date US dollar supply to $9.5bn (Eu7.27bn) across seven deals. A French issuer is said to be eyeing a return to the dollar market – a deal from the jurisdiction would be the first since a CM-CIC Home Loan $1bn five year in November last year.

Leads BNP Paribas, Barclays, Citi, JP Morgan built an order book of just under Eu1.3bn for SpareBank 1’s transaction, and priced the deal at 50bp over mid-swaps, the tight end of price thoughts of the low 50s over.

The deal is the Norwegian issuer’s first benchmark covered bond since November 2012, when it sold a $1bn seven year at 70bp over, and was launched to build on momentum generated by a roadshow conducted in the week of 8 April, said Eivind Hegelstad, chief operating officer and head of investor relations at SpareBank 1 Boligkreditt.

“We spent two weeks in the US in October 2012 and had two teams there for one week in April this year, so we covered a lot of ground,” he said. “A few months ago we were thinking about the euro market first for 2013, but then after the marketing we decided to move with dollars first.”

The issuer has not had a strong need to tap the capital markets recently given that a few of its parent banks have raised funding independently in the past six months, via senior unsecured deals, said Hegelstad, but it will be present in the euro benchmark market this year.

SpareBank 1 Boligkreditt issues covered bonds on behalf of the member banks of the SpareBank 1 Alliance. SpareBank 1 SMN Bank sold a Eu500m five year senior unsecured deal on 14 February, and SpareBank 1 SR Bank sold a Eu500m seven year senior unsecured issue in January, and a Eu500m five-and-a-half year in November.

At 50bp over, SpareBank 1 Boligkreditt paid hardly any new issue premium, and not much more than where it probably would have priced a euro deal, said Hegelstad. Placing bonds in the US dollar market is important for a long term investor diversification strategy, he added – yesterday’s deal was the issuer’s fifth benchmark in US dollars since 2010.

Forty-six accounts participated in the transaction, up from the issuer’s previous US dollar covered bond, according to Hegelstad, with Asian investors accounting for a larger share than in the past.

“The Asian component is the most noticeable increase,” he said, “and reflects two long tours that we did in the region as well as the strong and vibrant interest there.”

North American investors took 60%, Asia 25%, and Europe 15%. Asset managers were allocated 31%, banks and trusts 25%, SSAs 24%, insurance companies and pension funds 10%, private banks 6%, and others 4%.

For operational reasons this week was the best window for a trade, said Hegelstad, after the issuer finished its roadshow on 12 April and last week finalised documentation, and with bank holidays and first quarter results coming up later in May.

“It is possible that we would have lost some of the momentum if we had let the deal drift into late May,” he said.