Strong momentum for Aktia covered allays initial nerves

Apr 10th, 2014

Aktia Bank issued a Eu500m no-grow five year covered bond on Monday, with an official at the issuer noting that the deal gained traction quickly, allaying some nervousness about how it would fare after softening in the wider market late last week.

AktiaThe Finnish issuer was one of five to come to market this week, with UniCredit Bank Austria also pricing a deal on Monday and Lloyds Bank, Banca Monte dei Paschi di Siena, and UBS out with euro benchmarks in the following days.

Broader market sentiment improved over the course of the week, with equities turning positive mid-week after an earlier sell-off, although the primary market in bonds had shown itself largely undisturbed by the initially weaker tone.

More than Eu1.1bn of orders were collected for the Aktia deal, which was priced at 8bp over mid-swaps after initial price thoughts of 10bp-12bp over.

The deal is Aktia Bank’s second since switching issuance of covered bonds from Aktia Real Estate Mortgage Bank to the universal bank, which brought with it a Moody’s Aaa rating of the programme.

Timo Ruotsalainen, head of treasury at Aktia Bank, said that the deal went “fantastically well”.

“The deal went well, thanks in large part to the lengthy roadshow we carried out beforehand,” he told The Covered Bond Report. “The time on the road allowed us to deepen our investor community.”

The Finnish issuer held a series of investor meetings last week, which ran from 25 March until Thursday (3 April). A syndicate official away from the leads said he was surprised that Aktia had not issued last week, but added that the deal was “excellent”.

“The market is still in amazing shape, and it appears very easy to issue without fear,” he said, adding that renewed tensions in eastern Ukraine over the weekend did not seem to have affected the covered bond market.

Ruotsalainen said that the deal gained traction quickly, putting to rest some concerns following a negative turn in market conditions on Friday.

“It did not take too much time to get going, with the order book growing rapidly,” he said. “In the morning I was a bit nervous though about how it would proceed as market sentiment seemed to have soured on Friday.”

Commerzbank, JP Morgan, LBBW and Nordea were bookrunners. A syndicate official at one of the leads said that the pricing included a new issue premium of 2bp, and noted that recent covered bonds from Nordic issuers had performed well on the secondary market.

“This was a good, solid transaction, with a lot of diversification,” he said of Aktia’s deal. “The issuer had to provide a little bit of a new issue premium, but this was worth it to attract the investors.”

Ruotsalainen said that several factors influenced the timing of Aktia’s deal.

“The decision to go ahead was based in large part on what we had told investors, and on our desire to get the deal out prior to the Easter holidays and the bank entering its blackout period,” he said, adding that the bank also wanted to issue prior to European parliamentary elections in May.

Aktia Bank announces its first quarter results on 6 May.

Aktia has no concrete plans for further benchmark covered bond issuance this year, according to Ruotsalainen, but is “ready and capable” should the need arise.

He said that the final order book for the deal was very granular.

Germany and Austria took 54%, the Nordics 12%, the Benelux 9%, the UK and Ireland 7%, Switzerland 6%, Asia 6%, central and eastern Europe 5%, and others 1%.

Banks were allocated 49%, central banks and agencies 29%, funds 19%, and insurance companies and pension funds 3%.

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