Sterling attractive as Nordea Eiendomskreditt sells £400m FRN

Jan 8th, 2016

Nordea Eiendomskreditt attracted £425m of orders for a £400m (€545m) three year floating rate  covered bond on Wednesday, which, alongside similar issues for Lloyds beforehand and Bank of Nova Scotia afterwards, bankers said shows sterling to be an attractive option for issuers.

Nordea Frogner Oslo NNFICNordea announced the mandate for the new issue from its Norwegian arm on Tuesday, when the UK’s Lloyds opened the sterling market with a £750m three year FRN that attracted £850m of orders.

Leads Barclays, Nordea, RBC, RBS launched Nordea’s three year floater with IPTs of the 42bp over three month Libor area, before maintaining that level for guidance and then fixing the spread at 42bp on the back of £425m of orders. The size was then set at £400m (NOK5.24bn, SEK5bn), with the book closing in excess of £425m.

“We got a good response and found good traction, and we’re happy with that,” said a syndicate official at one of the leads.

UK investors took 76% of the paper, France 12%, Asia 10%, Luxembourg 1%, and Switzerland and Germany 1%.

The deal is the second benchmark sterling covered bond from Nordea Eiendomskreditt, after the issuer made its debut in the currency with a £500m three year FRN in September 2014.

A syndicate official away from the leads said it was difficult to calculate fair value for Nordea’s new issue due to a lack of comparable Norwegian sterling paper outstanding.

“The issuer is not Nordea per se, and it is difficult to compare this to issuers like Danske or the UK names,” he said. “However, at 42bp this has come with a premium to Lloyds’ deal yesterday (Tuesday), which makes sense given the credit differential.”

Lloyds had on Tuesday priced its £750m three year FRN at 37bp over three month Libor, after having announced the deal with IPTs of the high 30s and attracted some £850m of orders.

“That deal went very well, and I think alongside Nordea it shows sterling remains a good option with good arbitrage to be had,” said the syndicate official.

Canada’s Bank of Nova Scotia then sold a £400m three year FRN on Thursday at 45bp over three month Euribor.

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