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New BPCE issuer off to sure start with Eu2bn deal

BPCE SFH reopened the covered bond market yesterday (Tuesday) with a Eu2bn five year obligations à l’habitat issue priced at 63bp over mid-swaps. Leads Danske Bank, HSBC, Natixis, Santander and UniCredit built an order book of some Eu3.5bn in two hours.

The process started with a whisper on Monday, when some parts of Europe were on holiday, of the mid to high 60s. After reaching a shadow book of Eu1bn on Monday, the leads decided to move quickly and launch the transaction promptly on Tuesday morning.

“I think, maybe, the word ‘fantastic’ should be used for this transaction,” said a syndicate official at one of the leads. “Having such a large order book and on top of this having new and very important old accounts and a final print of 63bp over mid-swaps, well that’s a brilliant situation.

“Our total order book of roughly 140 investors is sending a message that – after Easter and whatever else went on in different countries – there is money to be spent in the covered space.”

Nordics investors took 29%, France 25%, Austria and Germany 22%, the UK 10%, Asia 5%, and others 9%. Fund managers took 49%, central banks and public authorities 19%, insurance companies and pension funds 14%, banks 15%, and others 3%.

He said that price guidance was reached by comparing the curves of the covered bonds of the two issuers that merged to create BPCE (Banque Fédérale des Banques Populaires and Caisse Nationale des Caisses d’Epargne), and that a new issuer premium was added.

“We priced very close to the two old curves,” said the syndicate official.

“For me, the success of this transaction is an indication that the new law will make them trade better,” he added.

The deal was a debut for BPCE SFH and the first obligations à l’habitat benchmark in euros. Unlike other French institutions, BPCE set up a new SFH rather than convert its old issuers to operate under the new framework, partly because it had two issuers previously, Banques Populaires Covered Bonds and GCE Covered Bonds, that were established before the merged group was formed.

A banker away from the leads expected more French issuers to follow BPCE.

“There should be more from France after the success of BPCE,” he said. “It’s something investors like and it’s good quality.”

However, one banker put the success of the issue down to pricing he described as very generous.

“It’s a great deal, no doubt,” he said, “as they did Eu2bn, which is more than either of their two old issuers would do, and we have to bear that in mind. But I think they could have done that at 60bp.

“Maybe they were concerned that in the past BP Covered Bonds and GCE Covered Bonds were not the best because the group was issuing quite often – with CFF part of the same family as well – and they wanted to adopt a defensive attitude.”