A EUR300m inaugural euro covered bond for mBank Hipoteczny has allowed the Polish issuer to reach new investors and a price unattainable in its domestic market, its head of treasury told The CBR, with the issuer planning regular issuance and looking to an eventual euro benchmark debut as its business grows.

mBank Hipoteczny established its international covered bond programme in July 2017, but was unable to issue internationally due to a dispute over Poland’s withholding tax. The publication of a general interpretation clarifying the situation earlier this month cleared the way for mBank to launch its first syndicated, sub-benchmark euro covered bond.

“Certainly, we are very pleased to have been able to access the European market as soon as this final issue had been cleared,” said Krzysztof Dubejko, head of treasury at mBank Hipoteczny.

Leads Commerzbank, Erste, JP Morgan, LBBW and SG launched the EUR300m (PLN1.27bn) no-grow deal on Thursday of last week (19 April) with initial price thoughts of the high 40s over mid-swaps for the March 2025 deal and subsequently tightened to guidance of the 45bp area, plus or minus 3bp, after having attracted EUR850m of demand. The deal was then re-offered at 42bp over on the back of books over EUR900m, excluding joint lead manager interest.

Banks were allocated 50% of the deal, asset managers 26%, insurance companies and pension funds 16%, central banks and official institutions 7%, and others 1%. Accounts in Germany took 60%, Austria 15%, the Nordics 9%, France and the Benelux 6%, Switzerland 5%, and others 4%.

“Our inaugural issue has been oversubscribed to a very meaningful extent, which resulted in a diversified and granular investor base of over 60 institutions,” said Dubejko. “Many of them were buying our covered bonds for the first time due to their investment policies aimed at larger tranches only.”

The issuer is also very satisfied with the funding cost secured by the deal, Dubejko said, especially given the “substantial” margin compression during the bookbuilding process, from the high 40s to 42bp.

“These levels would not be possible to achieve in domestic market and in particular not for a deal of this size,” he added.

mBank Hipoteczny has been active in its domestic covered bond market since 2000, issuing zloty-denominated covered bonds from a separate programme. Dubejko said that having a regular presence in the covered bond market is at the heart of mBank’s strategy.

“We expect to be able to address both domestic and European investors on a regular basis,” he said. “We will also seek to satisfy the preference of some investors for a full benchmark issue as the size of our business grows.”