Axa Bank Europe SCF launched a Eu1bn five year deal yesterday (Tuesday), with investor work on its RMBS pool and execution in a quiet week paying off, according to an official at the issuer, who said Axa will “remain loyal” to its French issuer despite Belgian legislation approaching.

Lead managers Barclays Capital, BNP Paribas, Credit Agricole, Natixis, HSBC and Société Générale priced the deal at 70bp over mid-swaps after guidance of 70bp-75bp over. The deal was announced on Monday afternoon with initial price thoughts of the 75bp over area.

Axa, Brussels

Jean-Charles Moulaert, long term funding team at Axa Bank Europe, told The Covered Bond Report that the deal had gone very well, and that the RMBS collateral in Axa’s cover pool did not affect demand for the transaction or its pricing.

“We did a lot of in-depth work with investors to explain that the RMBS was just a vehicle for transferring the mortgages,” he said. “I think investors have accepted the RMBS as our collateral.

“We certainly have received no negative feedback, and I don’t think it has affected pricing,” he said.

Axa sells obligations foncières backed by triple-A rated senior notes of “Royal Street” residential mortgage backed securitisations, with the issuer stressing that the RMBS structure was created solely to transfer legal title on mortgages to the SCF.

A syndicate official away from the leads noted Axa paid only a slight premium over a Crédit Agricole Eu1.5bn five year deal that was priced at 63bp over on Thursday, despite being less well known than other French issuers and having a cover pool consisting of the Belgian RMBS, albeit with 21% overcollateralisation.

“Axa printed a very nice trade for itself,” he said.

The leads built a book of Eu1.25bn with 100 investors.

A syndicate official at one of the leads noted that the deal was the biggest print for the issuer, noting that the transaction showed the prevailing strong demand for core supply, “even in a short, volatile week”, with an ECB Governing Council meeting and Friday a public holiday in Europe.

Axa made its covered bond debut in November 2010, selling a Eu750m 10 year issue, and in April last year priced a Eu500m five year deal, at 63bp over.

Axa decided on the five year maturity for its latest issue because it understood this was most desirable to investors, according to Moulaert.

He said the issuer had chosen to access the market yesterday because “we were almost certain we would be the only ones this week”, and that this strategy had paid off.

“The pricing was very fair, particularly by comparison to our April 2016,” he said.

A syndicate official at one of the leads said the interpolated secondary level was 68bp over based on the issuer’s 2016 and 2020 outstandings when the IoI process started on Monday, and that a re-offer spread of 70bp represented a new issue concession of only 2bp. Initial price thoughts of the 75bp over area included a new issue premium of around 7bp, he added.

The obligations foncières issue came 5bp inside five year Belgian government bonds, he said.

The lead syndicate official said French and German accounts drove the transaction.

Belgian covered bond legislation recently entered the country’s political process, but Moulaert played down the impact this could have on Axa’s covered bond activities.

“If and when Belgian legislation arrives, Axa would remain loyal to the SCF structure,” he said. “We prefer to concentrate on our existing programme and though, of course, we will be looking at the Belgian covered bond legislation, investors will need time to become familiar with the new framework.

“Even if the Belgian legislation arrives in the next few months, there will not be an active Belgian covered bond market before the start of next year.”

France took 43%, Germany and Austria 25%, Italy 5.5%, Spain and Portugal 0.5%, Switzerland 5%, the UK and Ireland 8%, and others 7%. Banks were allocated 22%, central banks 9%, funds and asset managers 62%, and insurance companies and pension funds 7%.