Nordea’s new Finnish entity considers Q4 debut after demerger
Nordea Mortgage Bank, a new Finnish issuing entity established following a demerger of Nordea Bank Finland, is looking into possibilities in the euro market and could launch its first euro covered bond in the fourth quarter of 2016, an official at Nordea told The CBR.
Nordea announced on Monday that it had completed the demerger of Nordea Bank Finland over the weekend, as part of a strategy under which Nordea plans to turn each of its national subsidiary banks into branches of the Swedish parent.
Andreas Larsson, head of debt investor relations and ratings at Nordea, told The Covered Bond Report that Nordea Mortgage Bank could launch its first euro covered bond during the fourth quarter of this year.
“Now that the new company is registered we are starting to look into the issuance possibilities in the euro market again,” he said.
Larsson added that Nordea Mortgage Bank’s approach to issuance will be consistent with that of Nordea Bank Finland.
“It is only a change of name,” he said. “We will continue with the same cover pool, and do not plan any changes to our issuance.”
Nordea Bank Finland sold its last benchmark covered bond, a Eu1.25bn 2022 issue, in October 2015.
The outstanding covered bonds of Nordea Bank Finland, along with all assets and liabilities relating to the former issuer’s covered bond business, have been transferred to the new entity Nordea Mortgage Bank. Bondholder approval for the transfer was obtained in a consent in April.
In a sector comment published yesterday (Tuesday), Moody’s said that the credit quality of the transferred covered bonds, and any new issuance from Nordea Mortgage Bank, will continue to reflect the credit strength of Nordea Bank Finland. It said this is because Nordea Bank Finland established a committed liquidity line for the benefit of Nordea Mortgage Bank with a view to ensuring that it has sufficient funds to meet its obligations, with the liquidity line to apply equally to the transferred bonds and any new issues.
Moody’s also noted that the transferred covered bonds will continue to have recourse to Nordea Bank Finland under a guarantee, although Nordea Bank Finland will now be a secondary guarantor of the bonds rather than the primary obligor. The rating agency views this change as being credit neutral.
Any new issuance from Nordea Mortgage Bank will not be covered by the guarantee and will therefore not have recourse to the former issuer.
“In this respect, new issuance under the Finnish covered bond programme will be consistent with the Nordea group’s programmes in Sweden, Norway and Denmark,” said Moody’s. “In the covered bond programmes in these countries, the credit quality of covered bonds reflects the credit strength of the rated parent through the provision of a committed liquidity line.
“However, bondholders do not have a senior unsecured claim against the rated parent.”