Caja Rural de Navarra made its covered bond debut yesterday (Wednesday) after deciding to turn to the asset class to “open doors” to the capital markets again, and is very satisfied with the deal, a Eu500m no-grow five year, an official at the issuer told The CBR.

Miguel García de Eulate Martín-Moro, Caja Rural de Navarra

The transaction attracted Eu1.1bn of orders and was priced at 200bp over mid-swaps after being marketed at the 215bp over area during an initial price thoughts phase. A syndicate official away from the leads said the deal came 25bp though Bonos, which he suggested was an impressive result for an inaugural deal.

Guidance had been first set at the 210bp over area and then revised to 200bp-205bp over.

“We are really happy with the results, which exceeded our expectations,” said Miguel García de Eulate Martín-Moro, head of treasury and capital markets at Caja Rural de Navarra. “The deal got a very good reception. The feedback from our roadshow last week was good, but you never know until you open the books.”

The issuer is a regional co-operative bank focussed on retail banking in the Navarre and Basque regions and is mainly financed via retail deposits, which García de Eulate says distinguishes it from many other Spanish banks.

“At a time when others are trying to reduce their exposure to the capital markets and increase their deposit base we are doing this to diversify our funding base,” he said. “It’s a qualitative approach of opening doors.”

The issuer is not without capital markets experience, however, he noted, having sold a five year senior unsecured floating rate note in 2006, and issued securitisations, for example.

“We have been very happy with our deposit base, but felt that covered bonds are a good means of regaining access to the wholesale markets,” said García de Eulate. “As a product they have been more resilient to the financial crisis, in terms of confidence at least.”

He pointed out that Caja Rural de Navarra’s issuer and covered bond ratings are at the same level as Spanish banks such as BBVA. Caja Rural de Navarra is rated BBB by Fitch and Baa3 by Moody’s, in line with the Spanish sovereign, and its covered bonds are rated A3 by Moody’s.

“Even with a better cover pool we couldn’t get a higher covered bond rating because of the sovereign cap,” added García de Eulate.

The issuer does not intend to be a frequent borrower in the covered bond market, but is encouraged by the success of its debut and may return to the market depending on its balance sheet growth and financing needs, he said.

Around 100 accounts participated in the deal, with 81% going to foreign accounts. Germany took 32%, the UK 20%, Spain 19%, Scandinavia 12%, Austria and Switzerland 2%, France 7%, the Benelux 6%, and others 2%. Asset managers were allocated 66%, banks 23%, insurance companies 10%, and others 1%.