Yorkshire Building Society drew Eu1.9bn of demand from 90 accounts for its first euro covered bond in nearly four years yesterday (Wednesday), a deal that an official at the issuer said was mainly about reintroducing the credit to European investors and went very well.

Yorkshire’s last euro covered bond was priced in September 2010, and yesterday’s deal is also only the second UK euro issue this year, after Lloyds Bank sold a Eu1bn seven year at 15bp over mid-swaps in April.

Leads Danske Bank, DZ Bank, JP Morgan and Natixis priced Yorkshire’s new issue, a Eu500m no-grow seven year, at 22bp over mid-swaps. The deal was initially pitched with a spread of the high 20s, which triggered indications of interest of around Eu1bn, according to a banker on the deal. Guidance was then set at the 25bp over area, which he said accelerated the pace of bookbuilding and led to the re-offer spread being set some 20 minutes later. Nearly Eu2bn of orders were in the final order book, with 90 investors participating.

“The undersupplied UK asset class was very much welcomed by asset managers, who took almost half of the issue, leaving fewer than usual bonds for banks,” said the lead banker.

Asset managers were allocated 47%, banks 35%, pension funds and insurance companies 9%, and central banks and agencies 9%. Germany and Austria took 69%, the Benelux 6%, Nordics 5%, the UK and Ireland 5%, Switzerland 5%, Asia 5%, and others 5%.

Chris Parrish, group treasurer at Yorkshire Building Society, said that the transaction went very well.

“There was very strong demand from the off, and we are very pleased,” he told The Covered Bond Report. “It’s particularly pleasing to get such a good following without having gone on a full roadshow.”

The issuer announced the mandate for the deal last Thursday (29 May) and held a few one-on-one investor calls and a global investor call over the following days, but there was no need for face-to-face meetings, according to Parrish, who pointed out that that Yorkshire did extensive investor work before a senior unsecured transaction in March and subsequently some non-deal related investor meetings.

“Our main focus was to get ahead of the ECB meeting given its potential to distract, and because there wasn’t any requirement for face-to-face meetings we decided to move quickly,” he added.

The issuer was a little bit delayed because it needed to update its swap documentation given how requirements had changed since it was last in the market, but this was “nothing too troublesome”, said Parrish.

The issuer limited the deal size to Eu500m because the transaction was more about reintroducing the issuer as a credit to the European covered bond investor base than needing to secure additional funding, he added.

“We wanted to achieve benchmark status and Eu500m was sufficient to tick that box,” said Parrish.

The transaction amounted to good diversification of Yorkshire’s investor base, he added, highlighting a strong take-up of the covered bonds by German and Austrian accounts and limited distribution to UK accounts.

Investment bank opinions about where the issuer could price a deal ranged fairly widely, according to Parrish, who said that initial price thoughts of the high 20s was slightly wide of some indications but a fair reflection of recommendations.

“The pricing we achieved shows the premium we need to pay versus other issuers due to the ratings differential, but we are pleased with it,” he said. “It struck a good balance and we hope the bonds will perform.”

Yorkshire’s covered bonds are rated Aa1/AA+ by Moody’s and Fitch, compared with triple-A ratings for its larger UK peers.