Swedbank follows up covered bond with £300m senior deal

Apr 10th, 2015

Swedbank on Wednesday sold a well-received £300m (Eu414m, Skr3.87bn) four year senior unsecured deal, making a quick return to the sterling market after having sold a £500m three year covered bond on 25 March, with an official at the issuer noting the diversification on offer and the attractive funding levels thanks to favourable currency swaps.

SwedbankLeads Barclays, HSBC and RBS launched the £300m four year senior transaction with initial price thoughts of the Gilts plus 80bp area, gathering orders of more than £300m.

The 80bp level was maintained for the re-offer and the deal increased beyond the issuer’s minimum £250m size, with the leads having built a final order book of around £350m.

“It went as expected, there were no surprises,” said Ulf Jakobsson, head of funding at Swedbank. “We are quite satisfied with this result.”

It was suggested that a smaller transaction could have been priced at a tighter level, but Jakobsson said the issuer did not opt for size over spread.

“Our experience from sterling transactions, compared to euro transaction, is that most investors expect full allocations,” he said. “Yes, we could probably have done a little bit less, but we did what the investors wanted and expected from us and that is more important.”

Jakobsson explained that funding in sterling offers the issuer diversification.

“We reached accounts that we most likely wouldn’t have reached with a euro or dollar transaction,” he said.

Accounts from the UK were allocated 85% of the deal, Asia 7%, Switzerland 6% and others 2%. Fund managers took 49% of the deal, insurance companies and pension funds 41%, central banks and official institutions 9%, and others 1%.

Jakobsson said it was difficult to calculate how much of a concession the deal offered, as the issuer had no fixed sterling senior deals outstanding, but he said the end result was a couple of points inside where an equivalent euro transaction would have been priced.

“Right now, with the basis swaps in Swedish kronor, the levels are attractive,” he said.

This, together with the diversification, was the main driver of the deal, Jakobsson added, noting the issuer had also on 25 March sold a £500m three year covered bond in sterling.

Leads Nomura and RBC launched that floating rate note with initial price thoughts of the 22bp area for a benchmark-sized issue and priced it at Libor plus 20bp on the back of a £650m order book.

“That transaction generated more interest from the investor community than we anticipated,” said Jakobsson.

In terms of public transactions, Jakobsson said Swedbank’s funding plan for this year was similar to 2014, with the issuer hoping to launch two senior transactions and two covered bond transactions, one in dollars and one in euros.

“So far we have done a dollar senior transaction and a euro covered,” he said, “so in that respect we have a euro senior and a dollar covered to look at and hopefully execute later in the year.”

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