Caisse de Refinancement de l‘Habitat launched a Eu750m six and half year deal that attracted strong international demand yesterday (Thursday), with the shorter maturity targeted partly to attract foreign central bank accounts, according to an official at the issuer.

Henry Raymond

Leads Crédit Agricole, DZ Bank, HSBC and LBBW collected Eu1.3bn of orders and priced the issue at 25bp over mid-swaps, tightening the spread from initial price thoughts in the mid to high 20s over mid-swaps and guidance of 27bp plus or minus 2bp.

At 25bp over, the issue was priced flat or slightly inside the CRH secondary curve, according to Henry Raymond, chairman and chief executive at CRH.

Some market participants said yesterday that the pricing seemed “aggressive”. Raymond said that the reaction of the market is the best way to judge if pricing is too tight.

“We collected more than Eu1.3bn of orders, and the issue tightened further in the secondary market, proving that the pricing was tight, but not too aggressive,” he said.

“We always aim to issue at the most convenient levels for our banks, but also we take into consideration investors, and think it best not to tighten the pricing too much,” he added.

According to a syndicate banker at one of the leads, CRH’s issue was trading at 24bp over mid-swaps this (Friday) morning.

He said orders for the issue had already reached Eu1bn when indications of interest were taken, but the order book contained some price sensitivity, with not all investors being willing to participate at 25bp over.

The lead syndicate banker added that the participation of French accounts was limited, below 5%, despite the issue offering a “decent” pick-up over French government bonds, as it was priced at 16bp over OAT.

“This clearly shows the strength of CRH,” said the syndicate banker. “Only a handful of issuers could obtain such a result without the support of domestic investors.”

Germany and Austria took the largest share, 48%, followed by Asia with 23%, the Benelux 10%, Nordics 10%, the UK 4%, and other 5%.

Yesterday’s transaction was capped at Eu750m and the books left open for only half an hour, according to Raymond. He said that French banks have reduced funding needs and CRH issuance amounts are set according to banks’ requests, which in this case were Eu750m.

With a six and half year tenor, the deal was one of CRH’s shortest dated issues, as it usually targets longer maturities, such as 10 or 12 years. Raymond said a shorter tenor was preferred for two reasons.

“First, French banks’ needs are more modest, and sometimes banks do require shorter dated funding,” he said. “Second, I travelled extensively last year and met central bank representatives around the world, who indicated that they would be interested in shorter dated issues by CRH.

“So the shorter maturity was targeted taking into consideration also the preference of this type of investors.”

Banks were allocated 41%, central banks and official institutions 36%, asset managers and funds 17%, and insurance companies 6%.

Raymond said the transaction was supported by good market conditions, but added that CRH benefits from persistent high levels of demand.

“Especially after the outbreak of the financial crisis, we have experienced extremely high level of demand,” said Raymond. “Investors have realised that is better to be exposed to the assets of several French banks, rather than to those of a single issuer, and that is what CRH offers them.

“With such a level of demand, if we did not have to take into consideration the needs of the French banks we raise funding for, we would issue much more than we do.”