Stadtsparkasse München issued its first sub-benchmark Pfandbrief today (Thursday), a “specialist” Eu250m 10 year that was priced at 9bp through mid-swaps, shortly after the savings bank received its first covered bond rating, AA+ from Fitch last week.

Stadtsparkasse München (SSKM) announced yesterday (Wednesday) that it had mandated BayernLB and Stadtsparkasse München to lead manage the Eu250m no-grow mortgage Pfandbrief. The deal was launched this morning with guidance of the mid-swaps minus 8bp area. After around one-and-a-half hours, the leads announced that books had exceeded Eu250m, and the spread was subsequently fixed at minus 9bp.

“This was something of a specialist transaction, but it looks like it achieved the issuer’s targets,” said a banker away from the leads.

Another banker away from the deal agreed, calling it “a private placement deluxe”.

A syndicate banker at one of the leads said the deal is Stadtsparkasse München’s first deal of Eu250m or larger, and therefore the issuer’s first deal eligible for preferential LCR treatment under.

Stadtsparkasse München had Eu310m of covered bonds outstanding as of June this year. These comprise four mortgage-backed deals, the largest being a Eu140m issue. The issuer’s cover pool totalled Eu1.378bn, comprising 71% residential mortgage loans and 29% commercial loans.

According to Fitch, Stadtsparkasse München holds two Pfandbrief licences for the issuance of public-sector Pfandbriefe and mortgage Pfandbriefe, and launched its first public-sector Pfandbrief in 2004 before following with a first mortgage Pfandbrief in 2014.

“In contrast to other savings banks, Stadtsparkasse München mostly issues publicly tradeable bearer bonds with relatively high nominals,” added the rating agency.

Fitch assigned Stadtsparkasse München’s mortgage Pfandbriefe a AA+ rating, on stable outlook, on Tuesday of last week.

The rating is based on Stadtsparkasse München’s issuer default rating (IDR) of issuer A+, an IDR uplift of two notches and a recovery uplift of one notch. The recovery uplift is limited to one notch and the covered bond rating directly linked to the IDR because Fitch has applied a limited rating uplift approach, as the data provided does not enable it to perform a full analysis.

“The data, however, was sufficient to allow Fitch to conduct a broad asset analysis and estimate the covered bonds to benefit at least from good recoveries should they default,” added the rating agency.

Fitch said that should the issuer provide data allowing for a full analysis, this would allow it to test for timely payment and enable the assignment of an additional notch of recovery uplift.

Photo: Stadtsparkasse München headquarters, Munich; Credit: Stadtsparkasse München