Danske the new darling as national champs find favour
Danske Bank is set to follow Santander into the benchmark covered bond market, having begun taking indications of interest on a new five year issue. Bankers away from the deal were optimistic about its outcome, with investors said to be embracing top tier names.
Having finished a marketing initiative related to a new cover pool yesterday (Monday), the Danish bank announced today that it has mandated Barclays Capital, Commerzbank, Credit Suisse, Danske and Natixis for a five year benchmark.
The leads have begun taking indications of interest on the new issue at the low to mid-50s over mid-swaps, and the new issue could be priced tomorrow.
The deal comes after Santander priced a highly successful Eu2bn four year benchmark at 180bp over mid-swaps yesterday (Monday).
“It’s clearly a theme that large national champions are the darlings of the market at the moment,” said one syndicate official “You get a lot of investors interested who don’t care for second tier names at all.”
With this in mind, he suggested that a new issue for Danske would go down well.
“A Danske benchmark would be a very nice name to have,” he said.
Danske’s new cover pool “C”, for “combined”, includes a mix of Swedish residential and commercial mortgage loans.
A presentation from Danske’s roadshow can be found here:
An outstanding July 2016 issue backed by Danske’s “I” pool was trading at 40bp-42bp over, according to one of the leads on the new issue.
According to Danske Bank’s website, the “I”, or “international”, pool comprised 49.3% Swedish and 50.7% Norwegian assets as at 10 February, and 74.4% owner-occupied properties and 25.6% housing co-operatives. The new “C” pool was wholly made up of Swedish assets, comprising: 20.8% agriculture, forestry and horticulture; 25.4% industrial; 6.2% co-operative housing; 21.1% rental housing; 24.4% retail; and 2.1% other.
Citi, Crédit Agricole, Deutsche and Santander wrapped up the Spanish bank’s Eu2bn four year deal yesterday afternoon, after Santander took advantage of benign conditions and a clear market, with no other benchmark covered bond issuance, in the morning.
“We decided to proceed first thing in the morning,” said a syndicate official at one of the leads. “We had a look at the market and saw that conditions were right to bring a deal.”
He said that the 185bp area guidance was based on comparable issues and Santander’s secondary curve.
“We figured that we wanted to show a slight premium,” he said, “but within reason.”
The price guidance attracted heavy demand and the new issue was ultimately priced at 180bp over mid-swaps. The deal was some 5bp-10bp tighter this morning, the syndicate official added.
“It performed right from the outset,” he said, “which you would expect given the size and make-up of the order book.”
The order book totalled Eu4.3bn and comprised around 200 accounts. The syndicate official said that there was little inflation in the book, particularly with many small accounts placing orders.
Funds were allocated 48% of the paper, banks 26%, insurance companies and pension funds 12%, hedge funds 8%, official institutions 5%, and others 1%.
Germany, Austria and Switzerland took a combined 32%, the UK and Ireland 22%, Spain 14%, France 10%, Italy 9%, US offshore 4%, Asia 3%, the Benelux 2%, the Nordic region 1%, and others 3%.
The syndicate official described the low share accounted for by Spanish investors as remarkable.
