‘Sensible’ Westpac NZ Eu750m impresses with slim NIP
Westpac NZ attracted around Eu1.6bn of orders for a Eu750m five year covered bond today (Tuesday), and bankers were impressed by the demand given the deal’s ineligibility for ECB repo, and by a final spread that offered only a slim premium compared with previous New Zealand supply.
Westpac New Zealand’s new issue is only the second international benchmark covered bond from the country this year, following a Eu500m five year issue for ASB Finance on 5 April.
Following a European roadshow that concluded in London yesterday (Monday), Westpac NZ announced a mandate yesterday afternoon for a euro-denominated benchmark five year issue.
Westpac NZ leads JP Morgan, UBS and Westpac launched the deal this morning with initial price thoughts of the low 20s over mid-swaps, before revising guidance to the 18bp-20bp area, will price within range, on the back of around Eu1.6bn of orders. The size was then fixed at Eu750m and the deal re-offered at 18bp, with the book closing at around 12:50 CET.
“It has gone along the same lines as Australian and New Zealand euro deals in the past – with the book relatively slow to develop, at least compared with the more frequent markets,” said a banker away from the leads. “But Eu1.6bn is a decent result, especially given that the deal is not repo eligible, which limits the range of buyers.
“Overall, this seems a sensible, fairly marketed issue.”
Bankers away from the deal suggested the deal benefitted both from the lack of New Zealand supply and from limited benchmark covered bond supply overall in May, and said demand was likely boosted by the preceding roadshow.
Syndicate officials said the deal offered a new issue premium of around 2bp, seeing Westpac NZ’s September 2020s at around 12bp, bid, and ASB’s April 2021s at around 22bp, bid.
They said this premium also compared favourably to the premium offered by ASB’s deal in April, which was seen as offering a premium of around 7bp.
“It’s a good result for an issuer like this,” said one.
The spread of 18bp over mid-swaps is believed to be the tightest ever for a New Zealand euro benchmark.
BNZ International Funding is also on the road ahead of a potential euro-denominated benchmark issue, with the New Zealand issuer set to conclude a series of European investor meetings on Thursday. The deal will be BNZ’s first euro benchmark covered bond since 2012.
Syndicate officials said a variety of issuers are monitoring the market and considering launching new issues, including some Nordic and Austrian names in particular, but added that these issuers might yet decide to launch their deals after the summer period.
