Guarantor: National Bank of Greece SA
Rating: Baa1/BBB-
Amount: £375m tier one capital
Maturity: perpetual
Issue/re-offer price: 100.00
Coupon: 6.2889% until 8 November 2016; three month Libor plus 208bp thereafter
Call option: at par from 8 November 2016
Spread at re-offer: 143bp over the 4.75% September 2015 Gilt
Launch date: Tuesday 24 October
Payment date: 8 November
Joint books: Barclays Capital, JP Morgan, Merrill Lynch
Bookrunners' comment:
This is National Bank of Greece's inaugural sterling denominated tier one offering and the first ever hybrid tier one transaction by a Greek financial institution in the sterling markets. In fact, this is the first sterling trade from a financial institution altogether.
NBG is the largest bank in Greece and has around Eu56bn of assets and a 30% market share of deposits. It is the dominant bank in its jurisdiction and is 22% state owned. It carries an A2/BBB+ rating at the senior level.
The transaction totalled £375m and was rated Baa1/BBB- at the securities level. It was priced at Gilts plus 143bp, equivalent to 108bp over mid-swaps. This transaction represents a significant 10bp to 15bp arbitrage to where a theoretical euro denominated NBG innovative tier one offering would have been priced on swaps basis.
As an indication, the EFG Eurobank euro innovative tier one 2015, rated Baa1/BBB, is trading at a spread of around +123bp.
Price guidance of Gilts plus 145-bp150bp was released at 10.45am on Monday morning, following a three day roadshow last week (Tuesday, Wednesday and Thursday) consisting of two days in London and one day in Scotland.
The market was performing well during the roadshow, liquidity was high, and the pipeline has receded quite a lot too. Commerzbank's 2018 paper and Macquarie's 2020 bonds which were trading at 140bp and 138bp respectively before we started the process were trading in the low 130s this week. They were the main comparables.
Investors were keen to get involved, and liked the credit very much. The original price guidance allowed us to capture good momentum right at the beginning of the process.
A transaction size of between £300m and £400m was indicated. The offering received tremendous momentum from the market with an order book comprising in excess of 115 accounts for a total of around £2.25bn in orders after only a few hours.
Given the magnitude of the market's response, the books were closed on the same day at 3.30 pm and price guidance revised to Gilts plus 143bp with marginal consequences on the overall quality of the order book. Despite the massive oversubscription, the transaction size was capped at £375m because of regulatory capacity constraints.
The final order book was a very high quality one with in excess of 75% of buy-and-hold accounts making this offering a strong sterling benchmark tier one for future NBG hybrid capital transactions. Insurance companies, pension funds and asset managers were the main buyers. Asset managers bought over 50% of the deal.
The success of the transaction was based on a well attended UK roadshow and efficient credit branding with UK investors. Sterling investors in general showed a strong appetite for the diversification play offered by the NBG credit.
This deal further emphasises one of the strong themes seen in the sterling market this year — a greater appreciation of international credits by investors. The fact that some UK investors have recently entered NBG's capital through its flotation was another helping factor. Since pricing, the transaction has tightened and is bid at 139bp, which is in line with the market performance which continues to tighten.
The transaction will receive C-basket treatment from Moody's (50% equity credit) and it is NBG's intention to enhance Moody's equity credit further to D-basket treatment (75% equity credit) by putting in place a replacement capital covenant in the near future (subject to NBG board approval and Moody's sign-off on the final terms of the replacement capital covenant).
Market appraisal:
"...a great trade, carried by great market conditions. The transaction hit the market at the right time. The great execution was further emphasised by the cost saving they made.
The deal came 10bp-15bp through where the euro would come, so hats off, a great result."
"...this is an interesting credit in Europe. The structure was a traditional tier one including a step up but carried a bit of spread. That spread was more akin to a higher risk transaction and the rating was lower than the transactions that we usually get involved in.
The market is bullish, there is little supply coming or in the pipeline, all of this which is coinciding with massive redemptions. This is a decent credit launched in an aggressive market, so we got involved in the trade."
"...this deal went well and has performed well in the secondary market — a good result for a first time issuer in the sterling market."
