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In association with
NORDIC FIs
& COVERED
INSIDE:
4 Nordic euro covered bond and
senior unsecured spread data
Thursday, 6 November 2014
Stadshypotek Eu1.25bn 7s
face mixed CBPP3 dynamics
Sweden’s Stadshypotek set a new
post-crisis tight for non-Eurozone
seven year covered bonds with a Eu1.25bn issue at 2bp through midswaps on Monday, and an official at
the issuer said the result was encouraging, even if technicals – in the shape
of the European Central Bank’s third
covered bond purchase programme
(CBPP3) – are in his eyes outweighing
credit quality in relative pricing.
The deal came amid a flurry of primary
market activity from Eurozone issuers eligible for CBPP3, with Spain’s Banco Sabadell, France’s Compagnie de Financement Foncier (CFF) and BNP Paribas
Home Loans SFH, and Italy’s UBI Banca having issued euro benchmarks since
last Friday. CFF’s Eu1.5bn seven year
issue set a new tight for non-German euro
benchmarks on Monday with a re-offer
spread of 5bp through mid-swaps.
Thomas Åhman, deputy head of treasury at Svenska Handelsbanken, Stadshypotek’s parent, said that the timing of
the new issue was based on the issuer’s
usual policy regarding covered bond issuance in foreign currencies.
“When we are issuing covered bonds
in currencies other than the Swedish krona, it’s not about raising new liquidity,
it’s about long term diversification,” he
said. “But when we do that diversification we need to find windows where the
euro market, for example, is at an all-in
cost comparable to the Swedish market.
“This means that first we need to look
at where we think spreads are in euros,
and then you have the basis swap into
the Swedish krona, and then you have
spreads in the Swedish market. At this
time we saw that euros was on a par with
Swedish krona, and that’s why we decided to issue in euros.”
Covered bonds in general but especially those from Eurozone issuers eligible
for CBPP3 have rallied since the programme was announced at the beginning
of September. The ECB announced on
(continued on page 2)
Issue 103
SEB debut AT1 to test
market, with scarcity,
quality seen boding well
Skandinaviska Enskilda Banken (SEB)
is expected to launch its first Additional Tier 1 (AT1) issue shortly, in the US
dollar market, after having begun a
roadshow on Monday.
The deal will be only the second AT1
from Sweden, after Nordea sold the first
Swedish AT1 on 17 September, a $1.5bn
(Eu1.2bn, Skr11bn) transaction split into
five and 10 year tranches. Nordea’s $1bn
perpetual non-call five tranche set a coupon low for an AT1 of 5.5%.
However, since that time there has
been no further AT1 issuance out of Europe, with the wider financial markets
having soured after Nordea’s issue and
then the outcome of the European Central Bank’s Comprehensive Assessment
having been awaited.
Vincent Hoarau, head of FIG syndicate
at Crédit Agricole CIB, said the deal should
be something of a test of the market.
“The book size, its granularity, and
more importantly secondary performance will give us a good idea of the
real shape of the market,” he said.
SEB has mandated Bank of America
Merrill Lynch, Goldman Sachs, JP Morgan, SEB and UBS for the transaction,
(continued on page 2)
Latest Nordic FI benchmarks
Senior unsecured (z spreads mid)
JYBC
POHBK
MINGNO
3mE+50
1.125%
1.500%
06/17
06/19
05/19
31bp
24bp
36bp
Covered bonds (asw spreads mid)
NDASS
SHBASS
SBAB
1.000%
0.625%
0.625%
11/24
11/21
10/21
-4bp
-3bp
-3bp
Source: CACIB trading 5/11/14
Page 1
Thursday, 6 November 2014
Issue 103
Stadshypotek encouraged by result
(continued from page 1)
Monday afternoon that CBPP3 purchases settled up to last Friday – which only
constitute secondary buying given that no
eligible primary deals had settled by then
– reached Eu4.779bn, up Eu3.075bn from
a week earlier, representing an increased
rate of buying even taking into account
the previous week’s total only having
covered three days of the programme.
Åhman said the tightening of the market on the back of CBPP3 had helped euro
levels become competitive, but that while
spreads had been getting lower the basis
swap between Swedish kronor and euros
had been going in the opposite direction.
“That is why it is so difficult to plan issuance in euros,” he added. “It’s getting
a little bit three dimensional and these
things are moving all the time.”
Swedish krona spreads had meanwhile
been relatively stable, although slightly
tighter over the past month, he said.
On Monday morning leads BNP Paribas, Deutsche, HSBC, Nomura and Svenska Handelsbanken went out with initial
price thoughts of the low single-digits
over mid-swaps, then set guidance at
flat area, before fixing the spread at 2bp
through, which Åhman said was in line
with his initial expectations of somewhere
around flat to minus something.
“But then of course it is a little bit harder to pencil that in as well, because we are
not a euro-in, which means we are not going to have huge orders in our order book
from the ECB,” he added. “Even though
we clearly think that our credit is maybe
much stronger than another covered bond
issuer, you clearly see a difference in dynamics when the ECB is coming in for
them and buying huge clips at almost any
price. If you make a direct credit comparison between covered bonds, it’s quite
clear that the market is pricing in technicals over credit quality.
“But even though we didn’t have the
central bank support, we still had a really
good order book with real money investors in it, which was of course really encouraging and we are really happy with
the result.”
Stadshypotek had a book of Eu2.1bn
with 84 accounts, with CBPP3-eligible
issues of the past week typically having
attracted over Eu3bn of orders, including
chunky Eurosystem orders reportedly of
as much as Eu700m.
Germany was allocated 41% of Stadshypotek’s deal, the UK 21%, France
19%, Switzerland 5%, Asia 4%, the Nordics 4%, and other Europe 4%. Banks
took 58%, fund managers 31%, central
banks and official institutions 7%, insurance companies and pension funds 4%.
Åhman said that the Eu1.25bn size
was in line with the issuer’s initial plans
and its typical euro benchmark sizes.
SCBC recently became the first Swedish issuer to use a soft bullet covered
bond, and Stadshypotek is considering
making the change, according to Åhman.
“There is a fair chance that it can happen,” he said, “but we haven’t taken that
decision yet. But as I see it, hard bullet
or soft bullet, the market doesn’t seem
to see a difference between them when it
comes to pricing.” n
Nordic FIs & Covered Bonds
Neil Day
Managing Editor
[email protected]
+44 20 7428 9575
In association with
Vincent Hoarau
Head of FIG Syndicate
[email protected]
+44 20 7214 6162
Page 2
Julian Burkhard
Global Head of Capital Solutions,
Head of FI DCM Nordics & UK
[email protected]
+44 20 7214 5472
Florian Eichert
Senior Covered Bond Analyst
[email protected]
+44 20 7214 6402
Produced by NewType Media,
publisher of The Covered Bond Report
SEB seen following in
Nordea’s footsteps for
debut, dollar AT1
(continued from page 1)
which will have a 8% CET1 temporary
write-down trigger at the group level
(and 5.125% at the bank level). According to Fitch, SEB had a CET1 ratio of
16% at the end of June.
The Nordea issues are expected to
be a key reference for SEB’s issue and
Neel Shah, financials desk credit analyst
at Crédit Agricole CIB, highlighted the
similarities between the two credits as
well as their strengths.
“SEB’s buffer to trigger is roughly the
same as Nordea’s,” he said, “and they
also have limited issuance to do – like
Nordea, there will probably only be two
in total from SEB.”
SEB said in a presentation that it has
limited AT1 requirements over the coming years, and that the transaction represents an optimisation of its capital structure in light of upcoming redemptions of
legacy hybrid Tier 1.
Shah said the deal should be well received, particularly given a domestic investor base that is keen to participate and
a wider general lack of Nordic AT1 supply – away from the two Swedish banks,
only Danske has brought AT1 supply
from Scandinavia.
Nordea’s perp non-call five issue is
trading at a yield of around 5.25%,
according to Shah, while its perp noncall 10 is at around 6.1%. He suggested
that, with an expected dividend yield
on SEB equity at 4.25%, longer dated
issuance might prove more attractive
to investors.
“I expect SEB to come marginally outside Nordea, because Nordea is a slightly better credit,” he added. SEB is rated
A1/A+/A+ and Nordea Aa3/AA-/AA-.
“The performance of the SEB AT1
will be more driven by general market
sentiment, but the volatility of Swedish
AT1s should be lower relative to peers
given the stronger buyer base.”
A further supportive factor will be – as
with Nordea – that the AT1 is investment
grade-rated: Fitch has assigned the deal
an expected BBB- rating.
Shah said that a size of $1bn-$1.25bn
could be envisaged given the size of the
legacy hybrid Tier 1 that is coming up
for refinancing next year. n
Issue 103
Thursday, 6 November 2014
Euro Nordic covered bond & senior unsecured secondary spreads
Nordic benchmarks: covered versus ASW, senior unsecured (shaded) versus Z spreads, 5/11/14.
ISIN
Coupon
Maturity
Mid Spd
AKTIA (*AKTIA REMB)
XS0640889803*
3.125
22/06/2016
-8
XS0946639381
1.125
25/06/2018
-6
XS1056447797
1.000
15/04/2019
-7
BRF
XS0882166282
2.500
31/01/2018
43
DANBNK
XS1113212721
0.375
26/08/2019
-6
XS0469000144
4.125
26/11/2019
-9
XS1071388117
1.250
11/06/2021
-2
XS0519458755
3.750
23/06/2022
3
XS0802067636
2.500
09/07/2015
3
XS0627692204
3.875
18/05/2016
8
XS0751166835
3.875
28/02/2017
13
DNBNO
XS0728790402
2.375
11/04/2017
-15
XS0877571884
1.000
22/01/2018
-10
XS0992304369
1.125
12/11/2018
-9
XS0794233865
1.875
18/06/2019
-8
XS1117515871
0.375
07/10/2019
-7
XS0637846725
3.875
16/06/2021
-1
XS0759310930
2.750
21/03/2022
-1
XS0856976682
1.875
21/11/2022
-1
XS0522030310
3.875
29/06/2020
24
XS0595092098
4.375
24/02/2021
35
XS0732513972
4.25
18/01/2022
37
EIKBOL
XS0736417642
2.250
25/01/2017
-7
XS0851683473
1.250
06/11/2017
-10
XS0794570944
2.000
19/06/2019
-2
XS1044766191
1.500
12/03/2021
1
JYBC
XS0856532618
3mE+110bp
20/05/2015
10
XS1078186001
3mE+50bp
19/06/2017
31
LANSBK
XS0926822189
1.125
07/05/2020
-3
MINGNO
XS0893363258
2.125
21/02/2018
27
XS1069518451
1.500
20/05/2019
36
NDASS
XS0478492415
3.500
18/01/2017
-15
XS0731649660
2.375
17/07/2017
-17
XS0965104978
1.375
20/08/2018
-14
XS1014673849
1.250
14/01/2019
-10
XS0778465228
2.250
03/05/2019
-9
XS0874351728
1.375
15/01/2020
-8
XS0591428445
4.000
10/02/2021
-4
XS1132790442
1.000
05/11/2024
-4
XS0801636571
2.250
05/10/2017
12
XS0916242497
1.375
12/04/2018
11
XS0728763938
4.000
11/07/2019
18
XS0520755488
4.000
29/06/2020
26
XS1032997568
2.000
17/02/2021
35
XS0801636902
3.250
05/07/2022
26
NYKRE (*senior secured)
LU0787776052*
3.250
01/06/2017
40
LU0921853205*
1.750
02/05/2018
40
LU0996352158*
1.750
28/01/2019
45
Source: Crédit Agricole CIB Trading, Bloomberg — See disclaimer on page 4
ISIN
POHBK
XS0785351213
XS0646202407
XS1076088001
XS1045726699
XS0758309396
XS0540216669
XS0931144009
XS1077588017
XS1040272533
SAMBNK
XS0693226978
XS0834714254
XS0640463062
SBAB
XS1117542412
XS0968885623
SEB
XS0548881555
XS0894500981
XS0988357090
XS0614401197
XS0628653007
XS0730498143
XS0592695000
XS0972089568
XS0854425625
XS1033940740
SHBASS
XS0760243328
XS0906516256
XS1050552006
XS1135318431
XS0490111563
XS0732016596
XS0794225176
XS0965050197
XS0693812355
XS0819759571
SPABOL
XS0495145657
XS0820929437
XS0738895373
XS0995022661
XS0942804351
XS0587952085
XS0674396782
SPAROG
XS0853250271
XS0965489239
XS0876758664
XS1055536251
SWEDA
XS0496542787
XS0925525510
XS1069674825
XS0768453101
XS0740788699
XS1045283766
Coupon
Maturity
Mid Spd
1.625
3.500
0.750
1.500
2.625
3.000
1.250
1.125
2.000
23/05/2017
11/07/2018
11/06/2019
17/03/2021
20/03/2017
08/09/2017
14/05/2018
17/06/2019
03/03/2021
-16
-12
-9
-3
4
7
16
24
35
2.750
1.625
3.875
19/10/2016
27/09/2019
21/06/2021
-13
-7
2
0.625
2.375
07/10/2021
04/09/2020
-3
40
2.625
1.500
1.625
4.125
3.750
3.875
4.250
2.000
1.875
2.000
16/10/2017
25/02/2020
04/11/2020
07/04/2021
19/05/2016
12/04/2017
21/02/2018
18/03/2019
14/11/2019
19/02/2021
-14
-8
-7
-4
9
10
16
21
21
39
1.875
1.000
1.000
0.625
3.750
3.375
2.250
2.250
4.375
2.625
21/03/2017
19/06/2018
04/01/2019
10/11/2021
24/02/2017
17/07/2017
14/06/2018
27/08/2020
20/10/2021
23/08/2022
-16
-11
-7
-3
3
3
2
14
25
30
3.250
1.250
2.750
1.500
1.500
4.000
3.375
17/03/2017
28/02/2018
01/02/2019
20/01/2020
12/06/2020
03/02/2021
07/09/2021
-10
-11
-10
-5
-3
-2
-1
2.000
2.125
2.125
2.125
14/05/2018
27/02/2019
03/02/2020
14/04/2021
37
39
46
62
3.375
1.125
1.125
2.375
3.375
1.500
22/03/2017
07/05/2020
21/05/2021
04/04/2016
09/02/2017
18/03/2019
-17
-6
-5
5
15
18
Page 3
Thursday, 6 November 2014
Issue 103
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