“New old name” CRH issued its first benchmark since June 2013 yesterday (Tuesday), a €1bn 10 year that attracted over €2.3bn of demand and was priced with a new issue premium of just a couple of basis points, which bankers and CRH’s Marc Nocart said reflected the enduring strength of its franchise.

After having been one of the biggest covered bond issuers, Caisse de Refinancement de l’Habitat (CRH) from 2013 faced regulatory hurdles that prevented it from issuing for several years. The last of these was resolved this May and on 9 September the issuer announced a roadshow ahead of a planned comeback trade.

After a post-roadshow update on Friday teeing up a seven or 10 year euro benchmark, leads Crédit Agricole, HSBC, LBBW, Natixis and SG today went out with guidance of the mid-swaps plus 10bp area for a 10 year just before 8am. After around 50 minutes, they reported books in excess of €1.5bn, and after around two hours guidance was revised to 7bp+/-1bp, will price in range, and the deal size was fixed at €1bn on the back of orders over €2.4bn. Just before 10.30, the spread was set at 6bp over on the back of books in excess of €2.5bn. At 14.00, the deal was ultimately priced at plus 6bp, to yield minus 0.053%, on the back of €2.3bn of orders good at re-offer.

A syndicate banker away from the leads said the transaction had succeeded in re-establishing the issuer in the market after its extended absence.

“It was a good outcome,” he said, “more than two times subscribed, a new issue premium of around 2bp and more than 80 investors. That’s a pretty good signal that there’s still a lot of acceptance out there for the name and that it still works.”

CRH chief executive Nocart (pictured) said he was very happy with the distribution.

“We ended up with something like 85 accounts and from a geographical standpoint it is highly diversified, with investors from all across Europe and Asia, too,” he said. “The quality of the response from investors is really interesting in the context of our six year absence.

“It was a bit like we had never left the market and was a really pleasant surprise to me,” added Nocart. “It shows that the franchise of CRH remains very strong.”

France was allocated 26%, Germany and Austria 21%, the Nordics 17%, the Benelux 20%, Switzerland 6%, the UK 5%, and others 5%. Banks took 51%, funds 32%, central banks and official institutions 14%, and insurance companies and pension funds 3%.

Nocart said investors understood well the reasons for CRH’s absence.

“It is fairly understandable that one-size-fits-all regulations cannot provide for every existing business in the EU and unfortunately we are the sole market platform of this type,” he said. “When our business model was threatened, we had to either adapt or wait, and it was very difficult because we did not know whether we would return and when or how. And it made no sense to talk to investors when we were not in control of the situation.

“The target of the roadshow was therefore to touch base with our investors after six years as I attach great importance to having close links to them.”

Feedback from investors suggested a seven or 10 year deal would be equally possible, according to Nocart, and he said the issuer’s preference was for the 10 year maturity given the nature of its assets. €1bn was the size being targeted, he said, with some investors expressing a preference for the larger size.

“Basically we have been trying to find the sweet-spot for everybody,” he said.

A banker away from the leads put fair value at around plus 3bp to 4bp, based on the issuer’s outstanding March 2024 and January 2025 paper, quoted at minus 2bp and minus 1bp, respectively, as well as comparables circulated by the leads such as Crédit Agricole January 2029s at plus 3bp, Société Générale July 2029s at plus 3.5bp, and Crédit Mutuel Arkéa’s July 2029s at plus 4bp.

“From a diversification perspective, it’s good to buy a name like CRH,” he added. “If you are able to buy French risk, but are fully packed with names like SG and Crédit Agricole, you should be more than happy to see a new old name coming back to the market to fill some of your French limit.”

A syndicate banker at one of the leads said calculating fair value was not straightforward, given the issuer’s absence and uniqueness, but put it at 4bp-5bp over mid-swaps, implying a new issue premium of 1bp-2bp, which he noted was one of the lowest in recent weeks.

“There was more than €2bn of demand,” he added, “and considering that all the 10 years of late have not raised anyway near as much, for a comeback deal, this bodes very well for the issuer.”

He said that although the issuer was prior to its hiatus one of the tightest names in the French covered bond space, and even though credit lines remained open for the name, CRH was not too ambitious with regard to pricing given the comeback nature of the trade.

“It’s a blended risk of the French mortgage market, so this will continue to, or eventually trade inside the rest of the French curve,” he added.

The €1bn deal is the first in what CRH had announced as a plan for €3bn-€4bn of issuance in the next 18 months, although Nocart said that this could rise should its shareholders seek more funding from it.

“We left quite abruptly in 2013 in a difficult context,” he added, “but the message here is to say, now we are back. This is the restart of an active programme and we will be a significant and repeat issuer.”