Sun setting on 2015 issuance after Handelsbanken highlight

Dec 11th, 2015

Svenska Handelsbanken sold its first euro senior unsecured benchmark in over two years on Monday, attracting over Eu2.4bn of orders for a Eu1.25bn seven year, but in spite of this and some other successful supply in the FIG markets, bankers said issuers could now be done for the year.

Svenska HandelsbankenOLYMPUS DIGITAL CAMERAHandelsbanken’s deal arrived after a period of limited senior unsecured supply, with a Eu750m long five year issue for Swedbank on 26 November the first benchmark from a Nordic issuer since SEB sold a five year FRN on 8 September.

Other issuers tapped the senior market this week, but supply was biased towards the dollar market, and a Eu500m four year from Commerzbank, for example, was described as a mostly domestic affair. Syndicate officials said the Swedish bank’s new issue was the highlight.

“Svenska was definitely the better deal out there this week,” said Viet Le, financial institutions and covered bonds syndicate manager at Crédit Agricole CIB. “It showed us that demand for senior paper is strong for the right name and/or right jurisdiction, while investors continue to weigh the implications of the German subordination law across Europe.”

Leads BAML, Barclays, Credit Suisse, Handelsbanken and Société Générale launched the Eu1.25bn seven year issue with IPTs of the mid to high 70s over mid-swaps area, before fixing the spread at 70bp. The book closed with orders approaching Eu2.5bn.

“It was exactly the type of result you like to see, in what was a fairly volatile market,” said a syndicate official at one of the leads. “I think the issuer was pleased with the outcome, given the size of the book and the price at which we got it done.

“With Svenska having been out of the senior space for a long time, investors were pleased to see this name in the market, and it was a good deal for both sides.”

Asset managers were allocated 61% of the deal, insurance companies and pension funds 23%, banks 10%, and central banks and official institutions 6%. Accounts from the UK and Ireland bought 34%, France 18%, the Benelux 16%, Germany and Austria 14%, the Nordics 6%, Switzerland 5%, Southern Europe 3%, Asia 3% and others 1%.

The lead syndicate official said the best comparables were the issuer’s August 2020s at 44bp, bid, and October 2021s at 56bp, and that based on these the deal offered a new issue premium of 7bp-8bp.

He said this premium was at the lower end of the range of new issue premiums seen on recent senior deals.

“Most recently, Santander and Westpac paid slightly higher new issue premiums for seven year deals, of around 12bp or so,” he said. “But you would expect a name like Svenska to be able to achieve a low new issue premium.”

Westpac followed Handelsbanken into the market on Tuesday, pricing a Eu650m long five year issue at 65bp over mid-swaps and attracting around Eu900m of orders, and a syndicate official away from the deal said the eventual size was disappointing.

“While they got a decent price, they couldn’t get the size, and it seemed like they were unfortunate and the market chose that particular day to turn off for the year,” he said. “I think any syndicate would have thought that was a good day to launch, but with hindsight Svenska had taken a good size out of the market.

“There is still a very strong market for senior, given the lack of supply, and I don’t think Westpac’s result should scare anyone off doing deals in January.”

Some Eu3bn of benchmark covered bond supply hit the market this week, with a Eu1.25bn three year issue for CIBC, a Eu500m four year from UniCredit Bank AG, and a Eu1.25bn 10 year for Intesa Sanpaolo defying the expectations of some syndicate officials that supply would dry up this week.

Wojtek Niebrzydowski, vice president, treasury, at CIBC, said the issuer decided to launch its new euro-denominated benchmark on Monday in order to hit the market ahead of anticipated heavy supply early next year.

“We are led to believe that January is going to be extremely busy,” he said, “so if one can get a deal done on reasonable terms before the end of the year, then why not go ahead?”

Syndicate officials noted that each of this week’s new issues attracted sizeable demand – with Intesa described as the highlight after attracting Eu2.5bn of orders – and that the leads of each deal found sufficient traction to tighten the spread.

They said this demand suggests more deals could be done next week, but were unsure of whether issuers would test the market.

“We are fading out,” said one syndicate official. “I would not be surprised to see one or two more opportunistic exercises early next week, but I think we are more or less done.”

Le also noted that activity was slowing, adding that market participants will next week await the conclusion of a Federal Reserve meeting on Wednesday, at which an announcement on a potential rate hike is expected.

“With markets selling off towards the end of the week, limited client inquiries and liquidity drying up fairly quickly, as well as the FOMC meeting mid-week, my guess would be that we are done for the year in terms of benchmark supply.”

Email this to someoneShare on LinkedInTweet about this on TwitterShare on Google+Share on FacebookShare on RedditDigg thisPin on PinterestShare on Tumblr
Tags: , , ,