Banco Caminos and subsidiary Bancofar have each issued retained covered bonds off a new programme with a dual structure whereby Bancofar’s are guaranteed by its parent, with efficiency furthered by a first cédulas listing on an alternative market, according to its arranger.

Banco Caminos, which has historically focused on the civil engineering sector, is the main entity of the Spanish Caminos group, while Bancofar, which specialises in banking for the pharmaceuticals sector, is an 82.6% subsidiary of Banco Caminos.

On Wednesday, the two completed their first new issues off a new programme, Caminos issuing €200m and Bancofar €150m of seven year cédulas hipotecarias paying six month Euribor plus 55bp.

Whereas Caminos’s issuance is in line with typical cédulas hipotecarias, its subsidiary’s benefits not only from dual recourse to Bancofar and the cover assets, but is also guaranteed by its parent.

According to Santiago Comin, managing director at arranger InterMoney Titulización, there were a couple of motivations for the novel programme – for which there is a single prospectus allowing for €300m from each entity.

Caminos is rated by Moody’s – although not publicly – whereas Bancofar is not, with the specialised nature of the lender potentially making a rating process difficult, said Comin. Caminos guaranteeing Bancofar’s issuance overcomes this issue, and allows Caminos to essentially issue in two ways, once against its own collateral as issuer, and then indirectly against the collateral on Bancofar’s balance sheet as guarantor.

“It enables the parent to go to market with one programme, but two flavours,” added Comin.

He said the programme offered cost and time savings for Caminos, with the single prospectus not only doing away with duplication but also providing for a more thorough overall picture of the group.

However, Comin noted the guarantee required some development.

“As this was a novel feature, it took us a little bit longer than we expected, because there was not a precedent,” he said. “We borrowed some concepts from UK covered bonds, where in essence you have the SPV guaranteeing the issuer.

“This was the opposite, the issuer is where the assets are sitting and then the guarantor does not have the assets itself, but at the end of the day the idea has elements in common with UK covered bond structures.”

Moody’s assigned provisional ratings of Aa1 to both issuances, citing the credit strength of Caminos as guarantor as key in the rating of Bancofar’s cédulas.

José de Leon, senior vice president and manager in Moody’s covered bond group, said the rating agency effectively treats the issuance by the two entities as separate programmes, due to the different cover pools, even if everything is enshrined in the same prospectus.

“This type of guarantee at the end of the day facilitates our analysis, as we don’t have to rely on an assessment of the subsidiary’s credit strength,” he said. “But they are separate covered bonds, from two separate legal entities with two different cover pools, which the different covered bondholders will have recourse to in case of issuer insolvency.

“We don’t often see these explicit guarantees, from one entity to the payments of another’s covered bond programme,” he added, “but it’s not the first time we have seen that, with the old Banco Popular group, for example, having done something similar.”

The group’s issuance is the first cédulas to be listed on Spanish alternative fixed income market MARF, after the European Central Bank in May accepted it as an eligible non-regulated market, and Comin said this offered further efficiencies for Caminos.

“The intention from the beginning was for it to be used as collateral for ECB repo,” he said, “so in that sense it is very useful that we can have an alternative market, as in other jurisdictions, where costs are lower and the procedure is more streamlined, since this market was originally intended only for qualified or professional investors.

“This was something we have been seeking for years and the market, through discussions with the ECB, finally got its licence. Potentially, in the case of these retained issuances, we are going to see more activity in this market, and maybe in the longer term, if investors are comfortable with the kind of supervision this market has, etc, we might see also public placements.”

Banco Caminos had previously issued €50m of cédulas that are outstanding as part of a PITCH multi-cédulas.