Lead managers ABN Amro, Barclays and Skandinaviska Enskilda Banken circulated initial price thoughts of mid-swaps plus low 60bp area for the €500m six year green bonds, before setting the final spread at 52bp by late morning in London.
ABN Amro's outstanding June 2020 green notes were trading at 26bp before Monday’s announcement, which bankers said implied ABN Amro had paid a high single digit premium to print the new six year bonds.
But much of the debate around the asset class has centred on whether green bonds offer financial institutions a pricing advantage over their senior curves.
By that measure, one rival syndicate banker used the Dutch lender’s March 2022s — which were trading at 52bp on Monday — to argue the Dutch bank had priced its new green bonds with no pickup to its ordinary senior curve.
“These bonds seem to be held very well,” said the banker. “Especially in ABN Amro’s case. ING, for example, trades a little more in line with its conventional curve. Either way this new transaction looks to have gone extremely well.”
Similar to ABN Amro’s previous green senior bond, the new notes will be used to finance sustainable property developments under the terms of the bank’s green bond framework.
When GlobalCapital spoke to the lead managers earlier in the week, they suggested the issuer was less focused on pricing, and more on diversifying its funding base by reaching out to new investors.
Bankers said demand has far outstripped supply in the asset class, but the growth of FIG green issuance has remained slow as banks research potential sustainable funding options and look into laying the groundwork for their own programmes.
The bonds had not yet been allocated by midday in London, but demand for ABN Amro’s €500m no-grow issue had surpassed €2bn when the final spread was set, reinforcing the idea that market participants are keenly interested in the asset class.
“Green bonds continue to garner attention from new issuers,” said one FIG syndicate banker away from the trade. “But individually it depends on the shape of the business. Investors want to know exactly how the funds are being put to use, so it is a lengthy process to find the right projects and put together all the detailed information needed to set up one of these programmes.”
ABN Amro’s transaction is the first FIG green bond to have been priced in 2016, though Deutsche Kreditbank hired ABN Amro, BayernLB, Crédit Agricole DZ Bank and SEB for its own euro-denominated issue last week.
Investor meetings for the German lender’s debut green issue will finish on Thursday, after which it is expected to launch a new bond.