HYPO NOE yesterday (Wednesday) successfully executed plans to bring forward into the first half of this year a benchmark covered bond it had earmarked for 2012, according to a funding official at the bank, and is happy with the timing and outcome of its Eu500m no-grow 10 year trade.

Leads Credit Agricole, DZ Bank, Erste Group, HSBC, and UniCredit priced the public sector backed Pfandbrief at 88bp over mid-swaps, the tight end of guidance of the 90bp over area that was revised from 90bp-95bp over. Initial price thoughts were in the mid-90s.

A lead syndicate official said the bonds were trading a few basis points tighter this (Thursday) morning, and that deal execution was very successful.

Nearly Eu1.5bn of orders were placed for the deal during around one hour of bookbuilding, according to the banker, with 95 accounts participating.

Herbert Pabisch, senior funding manager at HYPO NOE Gruppe Bank, said that the issuer’s goals were achieved.

“It was clear that we would only do Eu500m,” he said, “but we are very happy with the strong demand and that pricing could be tightened.”

Liquidity needs for 2012 meant that the issuer would need to tap the benchmark market, said Pabisch, with the issuer keen to bring issuance forward into the first half of this year to ensure this funding was in hand.

The transaction follows release of the group’s 2011 financial results on 25 April, with the issuer aiming to be ready as quickly as possible to make use of the next available issuance window that presented itself after this, according to Pabisch.

“In hindsight it appears that we did indeed hit a good window,” he said.

Seven and 10 year maturities were the main options for the new issue, according to Pabisch, to extend the issuer’s maturity profile to beyond 2017, when several bonds come up for redemption in connection with the expiry of federal state guarantees.

“It was then an internal preference to go with a 10 year maturity,” he said.

According to Erste Group analysts, HYPO NOE increased its issuance activity at the end of 2006 into the first quarter of 2007 because of the expiring federal state guarantee, for maturities until 30 September 2017 (see chart).

“The bank was using the good window of opportunity for refinancing to amass

liquidity,” they said.

HYPO NOE has some Eu2.5bn of debt to repay in 2017.

Germany bought 62% of the bonds, Austria 21%, France 11.5%, the Nordics 2.5%, and others 3%. Insurance companies were allocated 40%, banks 34%, asset managers 17%, corporates 4%, central banks 3%, and retail/private banks 2%.

HYPO NOE Gruppe Bank maturity profile (as at February 2012)

Source: Erste, Bloomberg