Danish Ship Finance placed around half of a rare, debut ship-loan backed euro benchmark with non-domestic accounts today (Thursday), finding a berth for its EUR500m no-grow three and a half year issuance at 37bp over mid-swaps in the euro market.

The euro benchmark of Danish Ship Finance (Danmarks Skibskredit) is the first benchmark covered bond backed by shipping loans since HSH Nordbank sold a EUR500m three year Schiffspfandbrief in February 2015 and the first from outside Germany. The hard bullet deal is rated A by S&P, eligible for LCR Level 2A, and with a 20% risk weight.

Danish Ship Finance finished its roadshow on Tuesday and yesterday (Wednesday) confirmed plans to launch its EUR500m no-grow three and a half year debut in the near future. Leads ABN Amro, Danske, LBBW and UniCredit then went out with initial price thoughts of the mid-swaps plus 42bp area this morning.

The leads reported books above EUR500m, excluding joint lead manager interest, after around half an hour, and books above EUR1.2bn after around two and three-quarter hours, with some 55 accounts involved, when guidance was revised to the 40bp area. The pricing was then fixed at 38bp over on the back of EUR1.4bn of demand good at re-offer.

A syndicate banker at one of the leads said the debut could be regarded as “mission accomplished”, with Danish Ship Finance having attracted new investors and established a reference point in the euro market that it can now build on.

He said the deal was driven by Danish investors – with the euro benchmark offering a pick-up over Danish Ship Finance’s krone paper – but that although the book was skewed towards these accounts, decent demand from international investors meant the issuer looked set to achieve its result of allocating more than half the bonds to non-Danish accounts.

“It wasn’t for everyone,” he added. “We knew that from the very beginning.”

However, the lead banker noted that demand for the ship-backed deal was, for example, larger than that of for a conditional pass-through from the Netherlands’ NIBC on 12 March, with that EUR500m no-grow eight year attracting EUR1.1bn of orders at 21bp over mid-swaps.

He said some German banks with bad experiences of shipping investments had decided to pass on the Danish trade, even if they acknowledged the qualities of Danish Ship Finance and its offering.

The unique nature of the trade made price discovery challenging and the leads circulated various categories of comparables, including compatriot Jyske among Nordic names in the single-digits, and central and eastern European and southern European covered bonds, while APAC names were also cited, according to the lead banker. He said these pointed to a potential fair value level in the 25bp-30bp range, and the target was then to price the transaction inside 40bp, which Danish Ship Finance managed to do, with few drops in the final move from 40bp to 37bp.