The reception enjoyed by a 12 year Caisse de Refinancement de l’Habitat deal yesterday (Monday) surpassed the issuer’s hopes, CRH’s chairman told The Covered Bond Report, with a 2024 maturity chosen in response to signs of strong demand for 12 year paper and in a bid to provide its shareholder banks with funding that is as long term as possible.

Around Eu3.3bn of orders were placed for the 12 year CRH issue, which was sized at Eu1.75bn and priced at 120bp over mid-swaps, the tight end of guidance of 120bp-125bp, revised from the 125bp over area.

Barclays Capital, BNP Paribas, Crédit Agricole, Natixis, RBS and UBS were lead managers.

The deal is CRH’s second euro benchmark this year, coming after a Eu2bn 10 year with which it opened the market in January. It is only one of two 12 year euro deals to have been priced this year, with CM-CIC Home Loan SFH selling the other, a Eu1.25bn issue launched on 10 January.

Henry Raymond, chairman and chief executive at CRH, said that the issuer did not launch a second euro transaction sooner in part for practical reasons, such as a busy work travel schedule that took in countries such as Asia and Israel, and that the new issue project developed over the weekend after his return to France from a trip to London.

“We have our own internal rhythm and were not in a rush after our last issue,” he told the CBR. “This weekend I felt it would not be a bad idea to not wait too long because the market is in good shape.”

He said that he opted for a 12 year deal because there was evidence of strong demand for that particular maturity.

“We were created to provide long term funding,” he added, “and with all the collateralisation and cross-commitments and such that we require of our shareholder banks it seems fair to provide them with as funding that is as long term as possible.

“That is what I prefer.”

The yield level on CRH’s transaction was a topic of discussion among syndicate officials away from the deal yesterday, but Vincent Hoarau, head of covered bond syndicate at Crédit Agricole, said the leads did not feel it was necessary to target a specific yield.

“It was obvious that by paying a reasonable new issue premium the deal would work because investors are looking for high quality paper and long dated assets,” he said. “CRH’s benchmark was well awaited, after the issuer was first in blackout and then on a roadshow, with scarcity of primary market supply in the meantime helping the transaction to work well.”

He put the new issue premium at around 7bp.

CRH’s Raymond said that the issuer is satisfied with the transaction.

“Some people are asking why CRH did not do a larger deal,” he added, “but the banks have a certain level of demand and even though they have funding needs there was no particular reason to push the deal size.”

Because of the 12 year maturity CRH’s deal is not eligible for the ECB’s second covered bond purchase programme (CBPP2), but Raymond said this was not a concern.

“From the moment I gain confidence in a transaction it’s normal that I don’t need to look to any protective measures,” he said. “I knew that we had the potential to do a large deal, even if it surpassed my hopes.”

There are few European issuers that are able to sell 12 year deals in the prevailing market, according to Raymond.

He said that 120bp “is too much”, but that this was the level at which a transaction was possible.

“And because the deal was not fully allocated it is performing well,” he added, “so everyone is happy.”

Syndicate officials away from the leads variously saw the deal at around re-offer and around 1bp-2bp tighter, with one saying that the pricing was fair. He put the new issue premium at around 5bp, noting that tightening of covered bonds spreads in general has stalled.

Another put the new issue concession at around 10bp and said that the market was “crying out” for a deal like CRH’s, with reverse enquiries across the curve for paper.

More than 130 accounts participated in the deal, with Germany and Austria taking 36%, France 31%, southern Europe 9%, the UK 7%, the Benelux 7%, Asia 3%, Switzerland 2%, and others 5%. Asset managers were allocated 38%, insurance companies 34%, banks 17%, central banks and supranationals 9%, and others 2%.