MMB SCF concluded a debut, EUR500m no-grow seven year covered bond issue today (Wednesday) on the back of a modestly oversubscribed book, some four weeks later and several basis points wider than when it pulled a first attempt on the back of a shortfall in demand.

The French covered bond issuer of My Money Bank (MMB) first approached the market on 27 September with a EUR500m seven year issue, at guidance of the mid-swaps plus 15bp area, but pulled the trade after a final book update of EUR400m, excluding joint lead manager and issuer interest, saying investors needed more time to prepare for the debut.

That attempt came in a week when market conditions were challenging, and a cut in Eurosystem orders from 30% to 10% of eligible new issue sizes emerged. A lack of familiarity with an issuer that has a unique credit story was also cited by market participants.

The issuer returned today after having done further work with investors, including German accounts, while NordLB was added to the original line-up of ABN Amro, BNP Paribas, Crédit Agricole and SG.

They went out with guidance of the 20bp-22bp over mid-swaps area and after around an hour and 20 minutes gave an update that the book was above EUR500m, excluding joint lead manager interest. The books were above EUR550m, excluding JLM interest, at the last update shortly before books were closed after around two and a half hours of bookbuilding, with the spread fixed in the middle of guidance, at 21bp over.

A syndicate banker said that the whole process “was not a walk in the park”, but noted that the issuer had taken feedback on board and worked further to establish its profile. He said that the new, higher spread did not reflect pushback on the credit so much as investor concern about market conditions, notably spreads drifting wider as QE is wound down. However, he acknowledged that a certain price has to be paid for newcomers that lack established funding franchises.

The lead syndicate banker suggested the deal now has the potential to outperform in the secondary market, with the investors ultimately involved in the trade committed to the name and given the “strong” relative value versus other French names, as well as French and German government bonds – the deal offered a spread of 80.9bp versus Bunds at re-offer.