Slovakia’s Tatra banka followed its larger peers into the international markets yesterday (Monday), albeit with a smaller, EUR250m seven year transaction that marks its first issue under new legislation, with the premium over a compatriot’s benchmark deemed modest.

Since a new covered bond law came into effect at the beginning of last year, Slovak issuers have updated their programmes and begun issuing internationally, with VÙB having sold the first euro benchmark from the Slovak Republic on 19 March, a EUR500m five year. followed with a EUR500m seven year on 5 June and VÙB returned on 13 June with a 10 year.

Tatra, the third largest institution in the Slovakian banking market behind Slovenská sporiteľňa and VÙB, has now become the third Slovak issuer to sell a public euro deal internationally.

It is 79% owned by Austria’s Raiffeisen Bank International (RBI), which led the new issue together with its group member. The bank has a mortgage market share of 16%, putting it third in Slovakia, with some EUR4bn of retail housing loans on its balance sheet last year, according to an investor presentation.

Tatra issued domestically as far back as 2011 under the old Slovak legislation, said a lead banker, but was now, like its peers, keen to issue a widely distributed public deal. Ahead of the new issue, it had EUR574m of covered bonds outstanding, all issued before the change in legislation, while its programme is for EUR3bn.

“Compared to the big issuers, their pool is relatively small,” said the lead banker, explaining the sub-benchmark size.

Following a roadshow, the EUR250m no-grow seven year deal was launched yesterday morning with initial price thoughts of the 27bp over mid-swaps area, with guidance then set at the 22bp area, plus or minus 2bp, and the new issue ultimately priced at 20bp over on the back of a EUR540m book. The lead banker said the deal tightened on the break and was quoted at 18bp/17bp.

Slovenská sporiteľňa’s EUR500m seven year, which was issued at 21bp over, was trading at 16bp-17bp over, according to the lead banker, meaning Tatra paid a premium of 3bp-4bp for the sub-benchmark nature of its debut, reflecting the lower liquidity and more limited investor base.

“We are pleased with the final pricing, which incorporates an appropriate differential,” he said.

He noted that, like Erste subsidiary Slovenská sporiteľňa, Tatra enjoys a triple-A rating for its covered bonds, while Intesa Sanpaolo-owned VÙB’s covered bonds are rated Aa2, with the new issuer committing to minimum overcollateralisation of 33% required by Moody’s to maintain the top rating.

Banks were allocated 71%, fund managers 21%, official institutions 12%, and insurance companies and pension funds 5%. Slovak accounts took 51%, Germany and Austria 34%, the UK 10%, and others 5%.