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Awards for Excellence citations: BPCE, Santander UK, Montepio, BHH

In the second round of citations for the winners of The Covered Bond Report Awards for Excellence 2020, we highlight the qualities and achievements of the transactions recognised as our euro and global deals of the year, and peripheral and core deals of the year.

Euro deal of the year: BPCE SFH
€1.25bn 0.01% May 2030 green covered bond
Bookrunners: Barclays, CaixaBank, Credit Suisse, Goldman Sachs, ING, Natixis, UniCredit

The biggest order book in over seven years is a strong argument in favour of BPCE SFH receiving our euro deal of the year award for its €1.25bn 10 year green covered bond on 19 May and few would quibble with our decision to honour it thus. The deal was also the longest-dated euro benchmark in 11 weeks, further extending the recovery its compatriots had progressively built in previous weeks.

A green post-pandemic recovery is now under discussion and BPCE’s blow-out was both its inaugural green covered bond and the first since the coronavirus crisis hit financial markets. The green factor was deemed key to the magnitude of both the tightening and demand experienced by the issuer.

It is also worth noting that while BPCE’s trade may have reaped some of the rewards engendered by preceding deals, the French bank had itself earlier helped sow the seeds of recovery when on 24 March it sold the first €1bn Eurozone trade since volatility struck the market.

Global deal of the year: Santander UK
$1.25bn 1.625% February 2023 & £1bn February 2027 Sonia FRN covered bonds
Bookrunners: Credit Suisse, HSBC, RBC, Santander, TD

“Not the usual boring kind of covered bond.” A veteran syndicate banker’s description of Santander UK’s €2.3bn-equivalent dual-tranche transaction of 4 February is something of an understatement, if not inaccurate.

The £1bn seven year floating rate note was the longest-dated Sonia-linked covered bond yet and in itself was variously proposed for sterling or innovative deal of the year. However, the UK issuer went beyond its home market and paired the sterling trade with the first 144A dollar benchmark from the country since 2012, a $1bn three year transaction that was also the first dollar covered bond with a soft bullet extension period linked to SOFR.

With books of £1.8bn and $1.7bn, respectively, Santander UK could put together a transaction that only its parent could compete with for size over the awards qualification period and which also proved a timely visit to the market. Compatriot Nationwide Building Society offered flattery the next day, following up with a $1bn three year.

Peripheral deal of the year: Caixa Económica Montepio Geral
€500m 0.125% November 2024 obrigações hipotecárias
Bookrunners: Commerzbank, Natixis, NatWest, UniCredit

When Banco Montepio on 7 November 2019 sold its second ever euro benchmark, few market participants were expecting tightening of some 16bp to a re-offer inside fair value, or a €3bn-plus book, but that is what the Portuguese issuer ultimately achieved.

The transaction came after the rebooting of CBPP3, but was the first conditional pass-through (CPT) euro benchmark to be launched during an active phase of the programme since CPTs had been excluded at the start of the year.

Market participants at and away from the leads paid tribute to the relatively small Portuguese bank’s achievement in attracting a “magnificent” order book comprising well over 140 accounts to a product unsupported by the ECB and not to everyone’s taste. The demand allowed for a surprisingly large pricing move to 40bp over mid-swaps and pricing at a yield of 0.212% for the €500m five year, putting down an impressive marker for Montepio and similar credits.

Core deal of the year: Berlin Hyp
€1bn 0.01% August 2022 mortgage Pfandbrief
Bookrunners: BayernLB, Commerzbank, Crédit Agricole, JP Morgan, UniCredit

Berlin Hyp has never been one to shy away from breaking new ground and it did so again on 20 August 2019, when it sold the most negative yielding benchmark covered bond ever, a €500m three year Pfandbrief priced at minus 0.588%.

The German issuer had already in November 2017 sold the first negative-yielding euro benchmark and Helaba had on 26 June last year taken the asset class’s first step back into negative territory, but Berlin Hyp’s new benchmark tested new lows below the ECB deposit rate after yields plunged over the summer to levels dubbed “brutal” by a syndicate banker away from the leads.

The bold move paid off, as the issuer could size the Pfandbrief at €1bn on the back of a final order book of €1.15bn comprising 38 accounts – not numbers that would normally win a deal one of our awards, but it’s an upside down world when it comes to negative yields.

Read the first round of citations here.

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