Nationwide £2bn euro, sterling buyback a tender high
Nationwide Building Society is buying back some £2bn (€2.2bn) of its benchmark covered bonds in a tender offer involving around £10.2bn-equivalent of 11 euro and sterling benchmarks that ended yesterday (Thursday), with its result at the upper end of similar exercises this year.
The UK issuer announced the tender on Thursday of last week (10 September), saying it would buy back an unspecified amount of the six euro and five sterling benchmarks.
Although the outstandings encompassed by the tender totalled around £10.2bn-equivalent of issuance, Nationwide – like other issuers taking LCR and index eligibility into account when buying back bonds – said it would not allow the issue sizes to fall below €500m-equivalent (£460m), implying a maximum buyback amount of around £5.4bn-equivalent.
Nationwide this (Friday) morning announced an indicative maximum acceptance amount of £2,041,171,056.89-equivalent. Interest in the tender was skewed towards the euro benchmarks, with the €1.584bn (£1.444bn) accepted representing more than half of the maximum buyback amount (€3bn). In the sterling part, £597m was accepted out of a potential £2.7bn. Three of the five sterling benchmarks elicited no interest, whereas only one of the six euro benchmark experienced such an outcome.
On only one line did Nationwide announce an indicative pro-ration factor (85.66%) and this was for the smallest euro benchmark, a €750m March 2027, which hence had the lowest potential buyback amount, €250m. The highest acceptance amount was €709m for the largest bond in the buyback, a €1.25bn June 2024 issue.
The participation rate of investors is at the upper end of those achieved on tenders before the summer break, such as those of compatriot Lloyds and German issuers. The absolute amount bought back is also the highest yet this year, exceeding Lloyds’ buyback of around £1.8bn.
ISIN Nominal Amount Outstanding Maturity Date Indicative Series Acceptance Amount (Denomination Currency) Indicative Series Acceptance Amount (Sterling Equivalent) Spread (over mid-swaps unless specified) or Price
Euro Bonds
XS1130066175 EUR1,000m 29-Oct-21 EUR128.453m GBP117.116m -1bp
XS1308693867 EUR1,000m 26-Oct-22 EUR0 GBP0 +3bp
XS1569896498 EUR1,000m 23-Feb-24 EUR341.378m GBP311.249m -6bp
XS2004366287 EUR1,250m 03-Jun-24 EUR709.138m GBP646.551m -3bp
XS1207683522 EUR750m 25-Mar-27 EUR250m GBP227.935m -3bp
XS1638816089 EUR1,000m 29-Jun-32 EUR154.626m GBP140.979m +9bp
Sterling Bonds
XS2035642102 GBP1,000m 02-Aug-22 GBP0 GBP0 100.64%
XS1806359714 GBP1,000m 12-Apr-23 GBP207.057m GBP207.057m 100.85%
XS1933035286 GBP1,000m 10-Jan-24 GBP0 GBP0 101.92%
XS2100384853 GBP1,000m 10-Jan-25 GBP390.282m GBP390.282m 101.60%
XS0584363724 GBP750m 28-Jan-26 GBP0 GBP0 54bp over the Gilt
Source: Nationwide, The Covered Bond Report
Nationwide’s offer had been deemed attractive by analysts, given that the buyback levels were well inside prevailing prices, with the longest-dated bond included in the offer, a €1bn June 2032, tightening as much as 14bp in the wake of the tender announcement, and its euro curve tightening on average 7bp, according to Maureen Schuller, head of financials research at ING.
Analysts variously cited as reasons for potentially greater investor interest: increased risks to UK spreads given negative Brexit developments; the lack of tightening potential in the asset class in general; and the availability of alternative covered bond and SSA opportunities.
Nationwide said upon announcing the offer that the rationale was to provide liquidity to the holders of the covered bonds while optimising its funding and liquidity position.
NatWest and UBS are joint dealer managers and Lucid Issuer Services tender agent for the offer.
The issuer also announced that it was interested in buying back privately placed covered bonds in currencies such as Norwegian kroner and Swiss francs.