NordLB Luxembourg attracted EUR1.4bn of demand from around 90 accounts to a EUR500m no-grow five year lettres de gage publiques issue today (Wednesday), overcoming the idiosyncrasies of the Luxembourg market and NordLB headlines to leave the issuer and its leads “all smiles”.

The issuer is the only active in euro benchmarks from the jurisdiction and the last euro benchmark from Luxembourg was a NordLB Luxembourg Covered Bond Bank EUR500m four and a half year in February 2017, while it sold a $650m (EUR523m) three year deal in February 2018. The NordLB group has meanwhile been under pressure to strengthen its capital, with headlines around it cited as a factor limiting demand for a EUR625m five year mortgage Pfandbrief from subsidiary Deutsche Hypo on Monday.

The mandate for NordLB Luxembourg’s deal was announced yesterday (Tuesday) and leads DZ, Goldman Sachs, ING, NordLB and UniCredit went out with guidance of the 29bp area for the EUR500m no-grow five year issue this morning. Guidance was revised to 26bp+/-1bp, WPIR, after an hour on the back of books above EUR1bn, and the pricing was set at 25bp around 20 minutes later with orders above EUR1.2bn.

According to comparables circulated by the leads, NordLB Luxembourg’s August 2023 paper was quoted at 14bp over, mid, pre-announcement, and the issuer’s June 2023s at 18bp, and a lead syndicate banker put fair value at 21bp-22bp.

“Currently we are living through a phase where everything is selling like hot cakes, but given that it is not the most self-explanatory sector and the fact it’s NordLB, we played double-safe with the initial pricing,” he said.

He added that a starting point of 30bp would have been over-cautious, but that going out with a starting level just 4bp-5bp over fair value would have “sent the wrong message”.

The ultimate order book of around EUR1.4bn, including up to 90 accounts, and final new issue premium of 2bp-3bp left the issuer and leads “all smiles”, according to the syndicate banker.

“For those who are happy with Luxembourg and NordLB, the idea of having a five year deal from core Europe at 25bp is an offer that not too many could resist,” he added.