Skipton Building Society returned to five year Sonia-linked funding for £500m today (Thursday) and attracted over £700m of orders, with demand supported by a tender offer for up to £300m of an outstanding sterling floating rate note due next year.

The new issue was announced yesterday (Wednesday) in conjunction with the cash tender offer for Skipton’s £600m February 2024 FRN, with the UK financial institution targeting up to £300m at a purchase price of 100.21.

“The offeror is making the offer in order to provide liquidity to the holders of the covered bonds while optimising its funding and liquidity position,” read the tender announcement.

Holders tendering the outstanding bonds were also offered the prospect of priority allocation in the new issue, should they place orders in time and hence ahead of the tender offer’s close at 4pm UK time next Wednesday (25 October).

This morning, Leads Barclays, BBVA, BMO, HSBC and NatWest (all also dealer managers for the tender offer) opened books with guidance of the Sonia plus 60bp area for the £500m (€576m) no-grow October 2028 UK Regulated Covered Bond, expected ratings triple-A. The deal was priced at Sonia plus 58bp of the back of books above £700m.

“They set themselves up very well with by capping the size and with the tender, which absolutely helped to give the transaction momentum from the outset,” said a banker at one of the leads. “The book built relatively briskly so that after a couple of hours we could give an update of books above £650m.

“They were then able to take the £500m at 58bp, which we saw as a new issue premium in the context of 8bp. Overall, a very pleasing result.”

The £500m five year sterling FRN is Skipton’s second of the year, with the building society already having raised such funding in June. Its inaugural covered bond, a £400m five year Libor-based FRN issued in 2018, matured in May, and its debut euro benchmark covered bond matured on 2 October, while it repaid £300m of TFSME funding during the first half of the year and sold a £350m senior non-preferred note in April.