Sparkasse KölnBonn launched a Eu500m seven year mortgage Pfandbrief yesterday (Tuesday) whose guidance was revised tighter twice in a “challenging process of finding the right pricing” for the German savings bank’s return to the public covered bond market, according to an official at the issuer.

Ralph Rutemöller, Sparkasse KölnBonn

Leads Deutsche Bank, DZ Bank, Helaba, LBBW and RBS started taking indications of interest on Monday afternoon with initial price thoughts set in the low double-digits area.

They opened books on Tuesday with guidance at 12bp over mid-swaps, which was first revised to 10bp-12bp and revised again to 10bp plus or minus 1bp. The deal was then priced at 9bp over mid-swaps.

Ralph Rutemöller, responsible for funding and collateral management in the asset-liability management at Sparkasse KölnBonn, said that he was pleased with the outcome of the transaction.

“We are very happy of having been able to price a seven year deal in the single-digit area,” he told The Covered Bond Report.

The deal was launched on the back of the positive outcome to a European roadshow that took place last week, he said.

“Finding the right pricing levels for the deal was challenging,” said Rutemöller. “During the roadshow it was difficult to establish which issuers could be considered as our peers and subsequently identifying the right pricing levels.

“We could not use as comparables issues of other Sparkassen, as there are no Pfandbriefe of German savings banks outstanding on the public market. So we decided to look at recent issues of German Pfandbrief issuers, but there weren’t many.”

Therefore the issuer decided to give it a go and set IPTs in the low double-digits, said Rutemöller.

“When we opened books the next morning, demand was very high so we revised the pricing down two times,” he added.

The transaction was supported by favourable market conditions and positive investor feedback collected during the roadshow, according to Rutemöller.

“After the roadshow we were confident that investor response would be high,” he said.

“There is a lot of demand for German Pfandbriefe,” he added, “there is practically no Sparkasse KölnBonn paper around, and investors like new names.”

Rutemöller said that investor feedback indicated a preference for a seven year deal.

“We opted for a seven year deal as it allowed us to offer a coupon of at least 1%,” he said.

According to a lead syndicate banker, more than 80 accounts participated in the transaction and the order book surpassed Eu1bn.

German investors took 75%, the Nordics 8%, the UK and Ireland 6%, Asia 4%, Austria 3%, Switzerland 2%, and the Benelux 2%.

Banks were allocated 54%, funds 36%, central banks and official institutions 4%, insurance companies 4%, and others 2%

Rutemöller said that the roadshow was conducted to inform investors about the issuer as it had been five years since its last deal.

“We wanted investors to familiarise themselves with our name and our history,” he said. “We were the first Sparkasse to issue covered bonds, with our first issue launched in 2002.”

He said that during the roadshow Sparkasse KölnBonn announced that it would be a regular issuer, with a target of at least one benchmark mortgage covered bond per year.

Rutemöller said Sparkasse KölnBonn’s public sector covered bond programme remains active but will only be used for private placements.