Stadshypotek returns to form with $1.25bn five year deal

Svenska Handelsbanken subsidiary Stadshypotek sold a $1.25bn (Eu970m) five year covered bond yesterday (Thursday), attracting some $1.7bn of demand in a return to form after a difficult euro benchmark in March.

Credit Suisse, Goldman Sachs, JP Morgan and RBC went out with initial price thoughts of the low to mid 40s over mid-swaps, then went out with official guidance of 42bp-44bp over, before fixing the pricing at 42bp over mid-swaps, according to a syndicate official at one of the leads. The spread was equivalent to 57.95bp over US Treasuries.

“It’s a good price for them,” he added. “Given that Stadshypotek had a bit of a hard time with their last deal, the euro, this was a good result.”

In March Stadshypotek priced a Eu1bn five year deal 5bp wider than initial price thoughts after encountering resistance from investors.

The new dollar issue attracted demand of $1.7bn from 45 accounts, said the syndicate banker, adding that this was a good number for a dollar covered bond.

“It speaks very well for the dollar market and the volume of demand that can be achieved, albeit not all of it having been placed in the US,” he said. “We saw significant central bank participation.”

Vincent Hoarau, head of FI, covered bond and ABS syndicate at Crédit Agricole CIB, said that Stadshypotek had impressed with the well timed and comfortably oversubscribed deal.

“At 42bp over US dollar mid-swaps, the all-in funding cost is also very competitive and the arbitrage versus funding in euros was marginally favourable for the issuer,” he said.

“However, there has been little supply in the euro market where spreads have compressed a lot recently,” he added, “and the funding advantage in US dollars is therefore likely to disappear.”

The lead banker noted that the deal tightened 1bp in the secondary market.

Stadshypotek’s last visit to the dollar market was a $1.5bn seven year issue priced at 72bp over mid-swaps in late September.