Eurobank is plotting regular capital markets issuance, having returned with a Eu500m covered bond on Tuesday, its head of global markets and treasury told The CBR, highlighting the price and spread versus the sovereign. Piraeus meanwhile completed a Eu500m EIB-led placement.

The deal was Eurobank’s first public deal in the capital markets since June 2014, when it issued a senior unsecured benchmark, and its first benchmark covered bond.

The new issue came two weeks after National Bank of Greece (NBG) reopened the Greek market with the first bank bond since the country’s debt crisis, a Eu750m three year covered bond.

Anastasios Ioannidis, general manager, global markets and treasury, Eurobank, said the conclusion of the second review of the current adjustment programme of the Hellenic Republic and the issuance of a Eu3bn five year Greek government bond at the end of July paved the way for Eurobank’s re-entry.

“At that time, we understood that there was another Greek bank that was interested in going out with a covered bond,” he told The CBR. “Seeing the outcome of the NBG transaction, it was a very easy decision to go ahead afterwards with a similar transaction, knowing that there was demand out there for this kind of asset at a yield that was compatible with what we could afford to pay.

“Our strategy was not to be in the market first, but after NBG went out and the outcome was known, we wanted to be out in the market as quickly as possible.”

Eurobank chose a covered bond over alternative instruments due to the lower costs and better execution offered by secured issuance, Ioannidis said, adding that the bank had chosen to issue an inaugural benchmark so the deal was more liquid and could be used as a first point on the curve for future transactions.

“We had two targets,” he added. “Firstly, we wanted to prove that we could regain market access – obviously it is not assured that we will be able to be a frequent issuer just after one transaction, but the sooner you do the first, the sooner you can look forward to the next.

“Secondly, we wanted to reduce our Emergency Liquidity Assistance (ELA) funding. Most of the proceeds of this bond will go to reducing our ELA exposure.”

It is currently expected that Eurobank will fully disengage from ELA funding in 2019.

Following the completion of a four day European roadshow on Monday, leads Barclays, Commerzbank, Goldman Sachs, JP Morgan, NatWest Markets and UBS launched the Eu500m no-grow issue on Tuesday morning with initial price thoughts of the 3.25% area.

The leads then announced books had exceeded Eu1bn, and subsequently revised guidance to the 3% area plus or minus 2bp. The deal was ultimately re-offered at 2.98% on the back of books of around Eu1.2bn, pre-reconciliation.

The deal was seen trading at around re-offer today (Friday).

“We are very happy with the result,” said Ioannidis. “The price that we got is comparable to NBG’s, and we consider that one of the most important factors in this deal being a success.

“We issued at roughly the same spread to the sovereign, the only difference being that in the meantime the sovereign yield went up, which affected the price we could achieve.”

The deal was deemed to have been priced 80bp inside the sovereign, in line with NBG’s trade, with bankers seeing interpolated fair value for a new three year government bond at around 3.78%.

“We are happy the yield had a 2 in front of it, rather than a 3,” said Ioannidis. “It was easy in the end to get a universe of investors that were happy to stay in the book at the final price, even though we pushed the yield a little below 3%.

“Investors that had already invested in the NBG transaction might have had a bit less of an interest in our transaction. But on the other hand, people that did not invest in NBG and saw that it went well could participate in our transaction.”

Full distribution statistics have not yet been disclosed, but some 85% of orders in the book came from international investors.

Eurobank took steps to ensure that its issuance is eligible for purchase under the ECB’s covered bond purchase programme, including increasing the programme’s overcollateralisation to 25% and other minor changes – such as to cover pool data reporting.

Ioannidis said that the Eurosystem did not participate in the issue and is yet to pick up any of the bonds on the secondary market.

“We understand it might take a bit longer for them to get acquainted with the new instrument and check everything is in place,” he said.

It is understood that the Eurosystem is also yet to buy NBG’s issue.

Ioannidis said the new issue is not intended to be a one-off, and represents the first step of a plan for repeat capital markets issuance.

“Assuming that everything will remain as is, so we have political and economic stability in Greece and we don’t have too much noise out of the third programme review of the state or the stress tests, our intention is to be in the capital markets on a regular basis,” he said.

“That could be through the covered bond market or eventually through senior unsecured, which we need to do at some point in order to build up MREL-eligible securities on our balance sheet.”

Piraeus Bank on Tuesday priced its Eu500m five year covered bond at 250bp over three month Euribor.

The deal was announced on 29 September as part of a Eu700m funding package for Greek SMEs and mid-caps, agreed with the European Commission. The deal is backed by residential mortgages, but the proceeds will be channelled to support Greek SMEs and mid-caps.

The European Investment Bank (EIB) took Eu350m of the deal, the European Investment Fund (EIF), Eu50m, and the European Bank for Reconstruction & Development (EBRD) Eu30m. No further details of the distribution were released.

Credit Suisse was dealer manager.

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