A Eu500m four year transaction for Deutsche Pfandbriefbank (pbb) achieved the goals the issuer had in mind for the new issue, an official at the bank told The Covered Bond Report. The deal was the first non-triple-A benchmark this year.

Leads BNP Paribas, Commerzbank, Deutsche Bank and LBBW yesterday (Tuesday) priced pbb’s issue at 75bp over mid-swaps off an order book in excess of Eu550m, with 75bp representing the tight end of guidance of 75bp-80bp over.

Andreas Schenk, head of treasury at pbb, said that the issuer achieved what it set out to do.

“We didn’t want to raise more than Eu500m, and would not have increased the size had demand been higher,” he said. “We priced the deal at the lower end of the spread range, the book was oversubscribed, and the four year maturity reflected the maturity of our real estate assets.”

A syndicate official at one of the leads pointed out that the deal is pbb’s second mortgage backed benchmark in four months after the issuer received final approval from the European Commission of state aid following the restructuring of pbb’s business model. Pbb sold a Eu500m five year issue at the end of September last year.

The syndicate official also said that the four year maturity on pbb’s deal differentiated it from high supply in the five year range, with fellow Pfandbrief issuer Aareal Bank having successfully tested the four year maturity the day before. Aareal priced a Eu500m four year mortgage-backed deal at 58bp over on Monday, opening the Pfandbrief market in 2012.

Schenk said that the beginning of a new year is an important time for many issuers, as demonstrated by a busy primary market, and that pbb had always had in mind to tap the benchmark market in January if possible.

A syndicate official at one of the leads put the new issue premium on pbb’s Pfandbrief at around 15bp, and said that this was in line with preceding benchmark supply.

Another said that the leads focussed on secondary Pfandbrief levels and providing an attractive new issue premium rather than on relative value considerations.

“It was a very solid trade,” he said. “The covered bonds are one of the few non-triple-A rated Pfandbriefe and therefore it’s quite successful.”

Pbb’s covered bonds are rated Aa1 by Moody’s and AA+ by Fitch and Standard & Poor’s.

Schenk said that because as a mortgage Pfandbrief the transaction was strongly oriented toward domestic investors the lack of a triple-A rating did not harm the issue.

“For many German investors a triple-A rating is not decisive,” he said. “As long as the rating is reasonable they value the German Pfandbrief more than a triple-A rating.”

German investors took 83% of the bonds, France 7%, Asia 4%, Scandinavia 3%, and others 3%. Banks were allocated 48%, central banks 29%, funds 18%, and others 5%.

A syndicate official said that purchases made under the ECB’s covered bond purchase programme (CBPP2) accounted for most of the central bank take-up.

Pbb has been linked to discussions about the issuance of structured covered bonds in Germany, having mentioned that it was analysing their possibility at an event in September, but Schenk played down any such plans.

“We look at all refinancing possibilities,” he said, “and structured covered bonds are certainly not unattractive, but we do not have a project to issue structured covered bonds.”