Aktia Bank is planning to launch its first covered bond this month after a roadshow starting this Thursday, and an official at the issuer discussed the change from previous issuance through Aktia Real Estate Mortgage Bank with The Covered Bond Report.

The Finnish Aktia group has already issued covered bonds, but did this through Aktia Real Estate Mortgage Bank (REMB) alongside Finnish savings and co-operative banks. Last year it announced that it would switch to issuing directly out of Aktia Bank, a change decided on in response to rating pressure.

Aktia Bank obtained a concession to operate as a mortgage from the Finnish financial supervisory authority in March. Moody’s on Friday assigned a provisional Aaa rating to the bank’s covered bonds, which paved the way for Aktia Bank to today announce its issuance plans today (Monday).

“The timing of the announcement of the roadshow mandate is entirely linked to Moody’s rating on Friday,” said Timo Ruotsalainen, managing director, Aktia Real Estate Mortgage Bank.

The issuer has mandated Crédit Agricole, JP Morgan, Nordea Markets and UniCredit. The roadshow commences on Thursday (6 June) and will last well into next week, according to Ruotsalainen.

“Aktia has not issued a public covered bond for almost two years, so we want to do this properly,” he said. “We want to update investors who used to invest in the Real Estate Mortgage Bank, and give investors time to update limits if they need to.”

The bank aims to launch its debut issue this month, before the onset of the traditional summer holiday period in several Nordic countries, added Ruotsalainen.

Aktia Bank will issue sub-jumbo benchmarks, he said, with other triple-A rated Nordic covered bonds serving as a pricing reference.

“Talking about pricing is dangerous territory for an issuer, but the market has been very supportive for covered bond issuance lately and I hope that this will continue,” said Ruotsalainen.

Aktia had previously floated the possibility of allowing holders of Aktia REMB covered bonds, which were downgraded from Aa1 to Aa3 in October, to switch into new Aktia Bank covered bonds and Ruotsalainen said that the idea still needs to be discussed with investors.

“The original idea came up when the covered bond rating was under pressure to fall below the double-A level,” he said. “If that had happened there would have been a few investors that would not have been able to keep the bonds.

“But now taking into account the supporting market conditions I would guess that investors are fairly happy keeping the REMB bonds and I hope that we are able to convince them that the support and structure will remain as it has been.”

The Aktia REMB cover pool is in run-down and no new covered bonds will be issued publicly.

“We are here to take care of the businesses related to running the pool down and finance it as it is being wound down,” said Ruotsalainen. “At the moment the pool redeems about Eu50m per month based on the normal repayment schedule of the loans.

“All the owners of the REMB, including the savings banks and POP banks, are committed to keeping the old mortgage bank business in as good shape as it has been, and to comply with Finnish covered bond legislation. “

Aktia Bank will be merging with its parent, Aktia plc, on July 1.

“The merger is to streamline the structure of the organisation so we don’t have the plc holding entity anymore, but everything is lined up under Aktia Bank plc, which in the future will be the listed public entity,” said Ruotsalainen. “The biggest structural change is that both the life insurance and the real estate agency businesses will become subsidiaries of the new listed bank entity whereas before they were subsidiaries of the holding company.

“In that sense structurally it is not a huge change but about bringing the group under one umbrella and one name so you don’t have any questions about the role of the holding company. The merger will have a small impact on total capital adequacy levels and the tier one capital ratio but only a minor one.”