Sydbank in Eu500m 3s senior fixed rate debut

Oct 10th, 2013

Denmark’s Sydbank sold an inaugural fixed rate euro senior unsecured benchmark on Thursday, a Eu500m issue with a three year maturity that a lead banker noted was relatively rare in Nordic supply, while an official at the issuer said the deal was launched to refinance a February 2014 redemption.

Leads BNP Paribas, Danske Bank and RBS priced the no-grow deal at 77bp over mid-swaps, the tight end of guidance of 77bp-80bp over that was revised from the 80bp over area. Around Eu725m of orders were placed, with some 50 accounts participating.

Bjarne Larsen, deputy group chief executive at Sydbank, said that the transaction was launched as a refinancing for a senior unsecured issue maturing in February 2014 and that market conditions looked good for a deal.

“The market was there,” he told Nordic FIs & Covered. “We watched to see if the US situation had an impact, but it didn’t.”

SydbankFlickr_resizedThe transaction is Sydbank’s debut in fixed rate format in the senior unsecured market, although the issuer has sold many floating rate notes, according to Larsen.

“We typically only do one deal a year, so we won’t be back before next year,” he added.

He said that the issuer achieved its size and pricing goals for the transaction.

“Everything is in line with our targets, and we are satisfied,” he said.

A DCM official at one of the leads noted that there has been very little Nordic supply in the three year maturity, with most issuance from the region in five or seven years. However, the three year maturity fits well for lots of investors, and not only those in the Nordic region, he said, although Nordic participation was not surprisingly very high for the new issue.

A syndicate official away from the leads suggested that demand for the deal was modest, but the DCM banker said that several aspects of the deal pointed to it being a success, noting that it was priced at the tight end of guidance on the back of a high quality order book and that the short maturity meant there was a somewhat smaller pool of investors to tap into, with asset managers, for example, preferring a longer term maturity despite saying that they saw value in the deal.

Nordic accounts s took 75%, Germany and Austria 16%, the Benelux 3%, Italy 2%, and others 5%. Banks were allocated 74%, asset managers 17%, pension funds 6%, and insurance companies 3%.

With Sydbank having no useful comparables outstanding, and there having been little similar supply from its peers, finding comparables was not easy, said the DCM official. He said that based on Danske Bank’s curve, a new three year Danske deal would probably come in the low 60s or at around 60bp over mid-swaps, and that fair value for a new Sydbank three year was therefore probably around 75bp.

“We started with the 80bp area because Sydbank is a relatively rare issuer and we wanted to make sure that it got attention,” he said.

Sydbank is rated Baa1 by Moody’s on a senior unsecured basis.

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