BRFkredit sold a maiden euro benchmark covered bond today (Wednesday), attracting over Eu1.2bn of demand to a Eu500m five year issue but leaving room for performance by pricing it in the middle of revised guidance despite having the possibility of achieving a tighter spread.

The Danish issuer’s deal had been expected after it held a European roadshow last week and announced a mandate for a Eu500m no-grow five year issue yesterday afternoon, with some bankers noting that by coming today it avoided clashing with a euro-denominated debut covered bond from Norway’s Sparebanken Sør Boligkreditt yesterday morning.

The Danish mortgage credit institution – which is wholly owned by Jyske Bank – had previously only issued a euro-denominated benchmark in the senior unsecured market, with one such issue outstanding.

BRFkredit leads BNP Paribas, Danske, LBBW and UniCredit launched the Eu500m no-grow five year issue with guidance of the 22bp over mid-swaps area, before revising guidance to the 20bp area on the back of books “well in excess” of Eu1bn. The deal was then re-offered at 20bp, with the book closing in excess of Eu1.2bn with 58 accounts.

“This is an exceptional outcome for an inaugural trade,” said a syndicate official at one of the leads.

He said the leads had been in discussions with the issuer over whether to tighten the spread further than the revised guidance, but said the issuer had decided to against it.

“The size and quality of the book would have easily supported an outcome of 18bp-19bp, but the issuer for very good reasons decided to stay at 20bp,” he said. “They did not want to lose any accounts – even though there was little sensitivity – and they wanted to leave room for performance and leave some pick-up on the table.

“It should not be read as a bad sign at all that the spread was not tightened further.”

Syndicate officials away from the deal said it was encouraging that the deal was over twice subscribed on a busy day, with Axa Bank Europe and Crédit Agricole also in the market with benchmark deals totalling Eu4bn (see separate articles).

“This always looked like it’d be a good deal,” he said. “Yes this is a debut, but it’s Jyske, which is a good, well known name.”

Syndicate officials at and away from the leads said fair value was difficult to calculate as BRFkredit has no outstandings, but cited the most recent deal from fellow Danish issuer Danske, a Eu1bn March 2021 issue, as trading at 14bp, mid.

“That differential feels about right for a new issuer,” said a syndicate official away from the leads.

The lead syndicate official noted that Danske’s March 2021 issue was backed by mixed collateral, whereas BRFkredit’s deal is backed only by Danish mortgages.

“It’s not an exact comparable,” he said. “I’d say at 20bp, BRF are offering a pick-up of 4bp-5bp from Danske’s curve, which was the intention with this debut deal.”