Aircraft Pfandbriefe made a convincing debut in the benchmark market today (Tuesday) via a NordLB Eu500m five year no-grow issue that was more than twice subscribed after the leads juggled a range of pricing inputs to settle on guidance of 55bp-60bp over mid-swaps.

The issuer finished a roadshow yesterday (Monday), with leads Commerzbank, Deutsche Bank, NordLB, RBS and UniCredit moving quickly this morning to take indications of interest on the basis of initial price thoughts of the 60bp over mid-swaps area. Official guidance was set at 55bp-60bp over when the order books were opened shortly thereafter, with some Eu1.1bn of orders placed (on a pre-reconciliation basis).

The deal will be priced at the tight end of guidance, 55bp over.

“To have a nice order book of Eu1.15bn for a Eu500m deal for such a brand new product is a real success,” said a syndicate official at one of the leads. “It is a very nice outcome for this new asset class of aircraft Pfandbrief.”

Bankers away from the leads said the deal went well, with one citing the appeal of the Pfandbrief product and its legal framework, continued limited benchmark supply and good availability of funds to invest as reasons for the transaction’s success.

Another said that the transaction was sure to go well, with domestic savings bank accounts likely to view it as an attractively priced Pfandbrief, and with the limited size of the deal and its novelty value also contributing to its success.

“It’s either the tightest aircraft financing you will ever see or the cheapest Pfandbrief you will ever see,” he said. “It’s neither fish nor fowl at that level.”

A syndicate official said it is hard to know where fair value lies given the unprecedented nature of the asset class, and that the pricing will have had to take into account factors such as the bonds’ A2 rating from Moody’s, a first for Pfandbriefe, and the “exotic” collateral, but that a certain degree of guesswork or “gut feeling” will necessarily have been involved.

“Ahead of the deal I doubt anyone had a clear, strong view about pricing,” he said. “It had to be attractive, but it’s not senior either so the collateral has to be rewarded.”

The Covered Bond Report understands that the assignment of the A2 rating did not have much of an impact on pricing thoughts that were already under development at the time.

The syndicate official added that at 55bp over the pricing will be at the mid-point between where a traditional five year Pfandbrief would come, in the 5bp-7bp over range, and where the issuer has sold five year senior unsecured private placements at 100bp over to slightly wider.

The spread over Bunds is “enormous”, he added, amounting to 135bp.

Another syndicate banker saw the deal as coming 20bp inside senior unsecured levels and 45bp-50bp wide of where a new public sector Pfandbrief would be priced, and said that this seemed reasonable.