SR Bank goes long to open Nordic senior mart, SMN mandates roadshow

Jan 17th, 2013

Norway’s SpareBank 1 SR Bank sold the first public Nordic euro senior unsecured issue of the year on Monday, a Eu500m seven year deal that is the issuer’s longest benchmark in euros, and SpareBank 1 SMN has announced a roadshow mandate.

SR Bank’s transaction came just over two months after the issuer’s last senior unsecured deal in the euro market, a Eu500m five-and-a-half year issue.

Dag Hjelle, SR Bank

Dag Hjelle, head of treasury at SpareBank 1 SR Bank, told NFIC that the issuer tapped the market a little bit sooner than anticipated, and that its ability to do so was thanks to investor work it has done.

“The work we did previously and the investor contact we have had allowed us to move when there was a favourable market window,” he said. “We didn’t have to do a roadshow and could proceed after having had a couple of update calls last week.”

A small hike in swap rates, with investors also interested in the higher yield on offer via a seven year deal, provided the foundation for the transaction, according to Hjelle, with the issuer wanting to add another point on its yield curve. SR Bank now has five fixed rate euro benchmarks outstanding.

Leads BNP Paribas, Commerzbank, JP Morgan and Nomura announced the transaction on Monday morning without any pre-sounding, according to a syndicate official on the deal, and met with an “exceptional investor response” to initial price thoughts of 90bp-95bp over mid-swaps, with indications of interest exceeding the targeted Eu500m deal size in less than an hour. The spread was then revised to 85bp-90bp, and fixed at 85bp over on the back of around Eu1.2bn of orders from more than 120 accounts.

At 85bp over, the seven year transaction came 20bp tighter than where SR Bank re-offered its shorter dated issue in November, and Hjelle said that the issuer is very satisfied with the outcome of its latest deal.

“We were hoping for pricing in the mid-80s, and achieved this,” he said. “We think the transaction was very well received and that the pricing is relatively good compared with our peers.

“We’re very happy with the size and composition of the order book,” he added, “which included a couple of new and interesting accounts — I couldn’t have hoped for a better transaction.”

Germany was allocated 26% of the bonds, France 21%, the UK 18%, the Benelux 9%, Switzerland 6%, Nordics 5%, Asia 5%, Austria 4%, southern Europe 3%, and others 3%.

Funds were allocated 38%, banks 34%, insurance companies and pension funds 21%, central banks 6%, and others 1%.

Meanwhile, SpareBank 1 SMN on Wednesday announced the mandate for a roadshow starting 23 January, which could lead to a senior unsecured transaction being launched.

The issuer explored issuance opportunities last year but, according to Dag Olav Uddu, head of treasury at SMN Bank, was not satisfied with the market possibilities then.

“Now the market looks much better so we decided to do a roadshow and hear the feedback from investors,” he told NFIC.

A senior unsecured capital markets transaction would be the issuer’s first deal in the public euro market since 2010, according to Uddu, when it sold a Eu500m three-and-a-half year floating rate note.

“We issue private placements every year, but it’s been a while since we did the last public deal,” he said. “The domestic market has been very competitive in that period so we mainly utilised that, and also the covered bond company.”

SMN Bank, like SR Bank, raises covered bond funding through SpareBank 1 Boligkreditt, a credit institution wholly owned by the banks participating in the SpareBank 1 Alliance.

Citigroup, DZ Bank, LBBW and UniCredit have the mandate for SMN Bank’s roadshow.

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