A Eu500m three year deal for Credito Emiliano on Wednesday that was the Italian bank’s first obbligazioni bancarie garantite issue achieved 80% international distribution and the issuer told The Covered Bond Report that this was particularly welcome given the importance of covered bond funding for the bank.

“Looking at the fact we were able to reach a good portion of investors, not solely from Italy, allows us to be more confident going forward,” said Rossella Manfredi, head of finance at Credito Emiliano.

Italian accounts took 20% of the issue, while the UK was allocated 21%, France 21%, Germany 21%, the Benelux 7%, Austria/Switzerland 5%, Iberia 2%, Nordics 2%, and others 2%.

“We are not a big bank,” added Manfredi, “so this many international investors applying for covered bonds is very good. Our expectations were for a higher percentage from the domestic market, so we are pleased and happy at this kind of result.

“I would say the covered bond is the only options really for medium to long term funding.”

The Italian issuer announced its new mortgage backed OBG programme in August 2010.

“We were ready to issue our first covered bond in the end of November,” said Manfredi.

The bank then roadshowed in Germany, France, Italy and the Nordics in November and December.

“Talking with investors made us realise there was not that much interest in it, with it being the end of the year,” said Manfredi. “At the end of the year there are also some technical points which restrict the price you can issue at.”

Credito Emiliano therefore decided to wait, she said. It considered issuing in the first quarter but several factors, including the Greek debt situation, deterred it.

Manfredi said that last week the issuer saw spreads on Italian sovereign debt improving, and on the back of a UniCredit OBG transaction, which attracted over Eu3bn orders for a Eu1bn no-grow, decided to launch its trade.

“You have a spread which is mainly related to the Italian sovereign risk,” said Manfredi. “We saw that the Italian spread was improving, so we decided to go for it.”

She said the pricing was fair considering the Italian situation.

“We are a very safe, conservative bank and if we had been a bank out of Germany or France the spread would have been much lower,” she said. “We are paying more not because of the quality of the bank but simply because of Italy.”

Funds were allocated 67%, insurance companies 16%, banks 15%, and others 2%.