Cajas Rurales Unidas priced a Eu500m three year deal yesterday (Tuesday) that was aimed at presenting the new Spanish issuer to the market, against a background of strong market conditions for peripherals, an official at the issuer told The Covered Bond Report.

The deal was priced at 290bp over mid-swaps by leads Crédit Agricole, Nomura, Santander and Société Générale, after initial price thoughts and guidance were set at the 300bp over mid-swaps area.

More than 100 accounts participated in the transaction, placing Eu900m of orders.

Miguel Gadea Martin, head of investor relations at Cajas Rurales Unidas, told The CBR that the outcome of the deal exceeded expectations.

“We were impressed by the number and the amount of orders that the deal managed to attract,” he said.

At 290bp over mid-swaps, the deal was priced 110bp over Bonos, according to Gadea Martin.

Contributing to the positive outcome of the deal were supportive market conditions and investor work CRU carried out in early April, when the issuer engaged in a European roadshow, said Gadea Martin.

The deal was CRU’s first transaction since the merger between Cajamar and Ruralcaja that led to its creation in November, and the first issue from a Spanish co-operative bank since 2010.

“One of the aims of the deal was to present ourselves to the market,” he said. “We want to become a regular issuer.”

Gadea Martin said that deciding on the deal pricing was challenging given the lack of supply from Spanish issuers in recent months. Cajamar has some outstanding covered bonds that were acquired by CRU as part of the merger, but they mature in 2014.

“One of the references we used was a Banco Popular 2017 issue, but we decided to offer a bit of a pick-up over it because of our lower rating,” he said.

Banco Popular’s cédulas are rated A3 by Moody’s, while CRU’s cédulas are rated Baa2 by Moody’s and BBB by Fitch.

A lead syndicate official also mentioned Bankia and AyT bonds as issues used as references. They were trading at around 250bp over mid-swaps, plus/minus 10bp, with the leads feeling that a “reasonable” pick-up was needed given that CRU is a new entity. A 2014 issue from a CRU predecessor was trading at around 250bp over, but is quite illiquid, he added.

According to Gadea Martin, the three year maturity was targeted because it fit the issuer’s maturity profile and following the investor feedback received during the April roadshow.

“It also let the company diversify its funding sources for the next years,” said Gadea Martin.

“A deal with a longer tenor wouldn’t have been so attractive to the market,” he added.

After the roadshow, CRU waited for the best market conditions to launch its inaugural cédulas deal.

“We wanted to tap the market this week because of the strong backdrop,” he said.

The deal was launched on the same morning that Portugal returned to the public market, with a Eu3bn 10 year sovereign bond issue that attracted more than Eu10bn of orders.

“Portugal launching its first sovereign issue since 2010 was a signal of the market being open to deals from peripheral issuers, although we decided to proceed with the deal before knowing of the Portuguese auction,” said Gadea Martin.

He said that with bank holidays taking place in the UK on Monday, and in France and Germany on Wednesday and Thursday, Tuesday was the only available day to launch the cédulas transaction this week.

Spanish accounts took 39%, Germany 20%, the UK 20%, Portugal 6%, Switzerland 5%, Finland 2%, France 2%, and others 6%. Fund managers were allocated 63%, banks 15%, hedge funds 8%, insurance companies 8%, private banks, pension funds 1%, and corporates 1%.