KHFC is set to provide further Asian euro covered bond supply next week, having mandated a seven year social benchmark, after compatriot Kookmin debuted with a green bond on Wednesday and Japan’s SMTB yesterday (Thursday) made European inroads with its second covered bond.

Korea Housing Finance Corporation (KHFC) has mandated BNP Paribas, HSBC, ING, SG and Standard Chartered for the Reg S/144A issue, according to an announcement today (Friday), with investor calls starting on Monday.

KHFC’s last euro benchmark was a €1bn five year priced at 18bp over mid-swaps in June, while Kookmin Bank on Wednesday sold a €500m five year debut green covered bond at 14bp over on the back of more than €1bn of demand.

Following a mandate announcement on Tuesday and investor calls, Sumitomo Mitsui Trust Bank (SMTB) leads Goldman Sachs, BNP Paribas, Crédit Agricole, Barclays, UBS and Daiwa yesterday morning went out with initial guidance of the mid-swaps plus 28bp area for a seven year euro benchmark, expected rating Aaa. Demand peaked at close to €1bn and a €750m issue was priced at 25bp, with the final order book some €885m.

“All things considered, it definitely went well,” said a syndicate banker at one of the leads.

The deal is SMTB’s second benchmark covered bond, following a €850m seven year in October 2020, and the banker said that the book compared favourably with the debut’s.

“First off, we saw repeat investors coming in and supporting the trade, showing their ongoing interest in the name,” he said, “and on top of that, we saw new investors coming in.

“Investors are increasingly familiar with Japanese contractual covered bonds – even if, as always, it’s not going to be a name for everyone, because of its structure, geography or what have you.”

Bankers at and away from the leads saw SMTB’s outstanding 2027s at 23bp over mid-swaps and put fair value around that level, which the lead banker said was a fair outcome.

He noted that SMTB still trades at a differential of around 5bp over compatriot Sumitomo Mitsui Banking Corporation (SMBC), which is the first and more established Japanese covered bond issuer, and said he was a little surprised that more investors had not been attracted by the pick-up.

“Considering the marketing work SMTB are doing across Europe, on both a deal and non-deal basis, hopefully the more we see of them in the European space, the narrower the differential between the two issuers will be,” he added. “In terms of credit quality and cover pool, they are next to identical.”

Danish Ship Finance (Danmarks Skibskredit) sold its third euro benchmark yesterday, a €500m (DKK3.72bn) June 2028 issue, while buying back €277.1m of its two previous benchmarks.

Following an announcement of the liability management exercise and new issue on Monday, yesterday morning leads Credit Suisse, Danske, DekaBank and SEB went out with initial guidance of the mid-swaps plus 37bp area for the €500m no-grow June 2028 issue, backed by ship mortgages and expected rating A (S&P). After around two hours, the guidance was revised to 35bp+/-1bp, will price in range, on the back of books above €700m, excluding joint lead manager interest, and the new issue was ultimately priced at 34bp on the back of around €750m of demand, excluding JLM interest.

The issuer had offered to buy back portions of its outstanding €500m September 2022 and March 2025 issues in an offer closing early yesterday afternoon, and ultimately €64.9m and €212.2m, respectively, was bought back.

A banker at one of the leads said the issuer had aimed to offer investors liquidity and the opportunity to switch into the new issue, while managing its liabilities in a manner similar to that in its domestic market.

“It’s a very good step forward for the issuer,” he said.

We will bring you more in-depth coverage of the Danish Ship Finance transactions next week.