DLR Kredit sold Dkr4bn (Eu536m) of senior secured debt pursuant to Section 33e of Danish covered bond legislation on Wednesday, finding good demand for its debut in the format despite coming in the midst of the auction season for traditional Danish covered bonds.

The deal was split into two floating rate tranches, Dkr3bn of October 2015 paper and Dkr1bn of October 2017 paper. Leads Danske and Nordea went out with price guidance of three month Cibor plus 135bp-145bp for the three year and plus 170bp-180bp for the five year.

The books were open for three hours, by which time the deal was one and a half times covered. This resulted in final pricing of plus 135bp for the three year paper and plus 175bp for the five year.

A syndicate official at Danske said that the natural comparables for the deal were senior secured bonds from Nykredit and Realkredit Danmark, which he said have a “large pool” of such issues outstanding. He said that the three year paper was priced about 20bp wide of where Nykredit and RD trade, with the five year paper about 10bp-15bp wider.

He said that two reasons could explain the bigger pick-up on the shorter dated tranche: firstly, Nykredit and RD shorter dated paper having performed quite strongly in the past couple of months, and therefore possibly being considered a little rich; and secondly, DLR Kredit being keener on the shorter maturity and the larger size raised through the three year bond calling for a wider spread.

The Danske syndicate official added that the Dkr3bn size of the three year tranche was comparable to the size of senior secured bonds that DLR Kredit’s much larger peers, Nykredit and RD, have issued, but that the Dkr1bn five year tranche was unusually small. He added that the five year might therefore lend itself to being tapped in future.

The investors who participated in the deal were mainly domestic accounts, according to Pernille Lohmann, investor relations manager at DLR Kredit, although a few foreign investors were also involved, with the Danske syndicate official putting their share at just under 10%. He said that about 50 investors placed orders for the bonds.

DLR Kredit launched the deal this week ahead of the start of its December auctions on Monday. Nordea Kredit, Nykredit and RD all began their auctions last week, but the Danske syndicate official said that DLR Kredit’s senior secured deal was not overshadowed by them.

“We still saw quite significant interest for this format, even if the auctions are going on,” he said. “It was encouraging to see that this was easily absorbed and there will still be investor demand for further deals.”

Senior secured bonds pursuant to Section 33e of Danish covered bond legislation are also known as Junior Covered Bonds.