mBank Hipoteczny has issued Pln500m (Eu119m) in its largest and longest dated domestic covered bond fundraising exercise to date, having had to split the issuance into two deals for administrative reasons after demand exceeded that for an initially targeted Pln200m issue, according to the bank’s head of treasury.

The fundraising comprised a Pln300m eight year issue, sold on 28 July, and a Pln200m eight-and-a-half year tranche, sold on 4 August. The transaction was lead managed by mBank, and each tranche was priced at 93bp over six month Wibor.

Karol Prazmo, head of treasury at mBank Hipoteczny, told The Covered Bond Report that the bank had initially sought to issue a Pln200m covered bond, but opted to raise a larger amount in the two part transaction after collecting more than Pln1bn of orders in total.

The issuance was split into two deals for administrative reasons, according to Prazmo.

“Early in the bookbuilding process we observed that the demand was very significant and we were able to amend the documentation to upsize to Pln300m,” he said. “However, it was too late to upsize the transaction once we had the final tally of orders in the bookbuilding process because of a lengthy administrative process for issuing a covered bond in Poland. Therefore, we needed to close the additional interest via a follow-on transaction.”

The transaction represented an achievement for the Polish market in terms of size, pricing, and maturity, according to Prazmo.

“This is the best result for us in the domestic market in the last five years,” he said. “With this deal we have achieved the largest, tightest, longest dated PLN-denominated covered bond for mBank Hipoteczny.”

A market participant said the pricing of the covered bond compared favourably with that for a Pln475m three year senior unsecured issue for Bank Zachodni WBK, part of the Santander group, which was priced at 100bp over six month Wibor on 17 July.

mBank Hipoteczny’s previous largest covered bond had been for Pln300m, according to Prazmo, and its previous longest zloty-denominated covered bond a seven year, which matured in 2009. The mortgage bank has, however, sold three 15 year covered bonds in euros this year.

He said that the covered bond was purchased entirely by Polish investors, including asset managers, pension funds, banks and insurance companies.

Including the Pln500m issuance, the bank has issued Pln700m in covered bonds this year, he added.

“At the start of the year, the target was Pln1bn in covered bond issuance,” he said. “This remains the target, and we expect to issue a further Pln300m equivalent before the year is out. We would like to execute a meaningful part of this via euro-denominated transactions and remain focused on the five to 10 year maturity range.”

The deal was issued under Poland’s existing covered bond legislation, although this is in the process of being revised, with market participants hoping that the changes will lead to a rise in issuance.