Fears that an escalation of the Ukraine crisis could hamper a Berlin Hyp mortgage Pfandbrief yesterday (Monday) morning were quickly overcome, with an official at the issuer telling The CBR he was happy with the pricing and response from investors following a pre-deal roadshow.

Bodo Winkler, Berlin Hyp

Bodo Winkler, head of investor relations at Berlin Hyp, said that renewed tensions between Russia and Ukraine over the weekend had raised the prospect of the market proving challenging and had been discussed before the final decision to proceed with the new issue was made, but that ultimately they had not affected execution.

Leads Commerzbank, Credit Suisse, DZ Bank, JP Morgan and LBBW went out with initial price thoughts of the mid-swaps plus mid to high single-digits area, then revised guidance to the 7bp area after gathering more than Eu500m of indications of interest. They then fixed the pricing at 5bp over on the back of a Eu700m order book, with final demand totalling over Eu800m from some 50 accounts.

“We are really happy with the pricing, which was in line with our expectations and is a fair price,” Winkler told The Covered Bond Report. “It should allow one or another basis points’ performance in the secondary market for investors, and for us it was a good price as well.”

A syndicate official at one of the leads put the new issue premium at 2bp, citing Berlin Hyp February 2018s trading at minus 6bp and a Deutsche Kreditbank seven year launched in February still bid at its re-offer of 6bp over.

The deal is Berlin Hyp’s first benchmark Pfandbrief of the year, although the German bank sold a Eu750m senior unsecured benchmark in January. The issuer has in parallel with this issuance been explaining the restructuring of the Landesbank Berlin group, whereby it is directly owned by LBB Holding, which is in turn owned by the German savings banks, rather than being indirectly owned via Landesbank Berlin AG, which is instead an affiliate of Berlin Hyp and being rebranded Berliner Sparkasse.

“Due to this reorganisation process it was even a little bit more important for us to get this investor feedback in advance, and I think it helped us in the end,” said Winkler. “We were really very happy with the order book that we generated and we saw names that we had met before the deal, which is always good news.”

Germany was allocated 89% of the bonds, Italy 3%, the UK 2%, Switzerland 2%, and others 4%. Banks took 67%, asset managers and pension funds 21%, central banks and SSAs 5%, insurance companies 4%, and others 3%.

The Pfandbrief benchmark is the first for Berlin Hyp since it issued a Eu1bn five year in January 2013 at 1bp through mid-swaps, its February 2018s, which faced an uphill struggle at launch – although the deal was successfully tapped for Eu125m at 9bp through mid-swaps in October.

Winkler said that in light of that experience the issuer is announcing “benchmark” transactions rather than jumbo or Eu1bn deals, with the latter practice having contributed to its difficulties with the February 2018s.

“What we had learned from last year’s deal was you are not fully rewarded by investors if right from the beginning you say, right, let’s do a jumbo,” he said. “We saw that many other issuers just said, OK it’s going to be a benchmark deal and then let’s see what the size is.

“So we decided quite early, and we communicated this to the market throughout the last year, that we would announce our next deals as benchmarks as well.”

However, Winkler said that this was not a factor in yesterday’s new issue.

“If you look at what Berlin Hyp has issued in the past years, it was often five year maturities,” he said. “Seven years is quite long for us.

“If you look at our cover pool the average maturity is somewhere around five years and we of course look very carefully which maturities we issue, and it would have been very difficult for us to issue Eu1bn in seven years. It was therefore in this special case never the aim to issue Eu1bn.”