“It’s a leap of faith coming in mid-August,” said a syndicate banker on one of the deals. “You get the window to yourself but there aren’t always as many people around. However, our sales team reassured us that the US, Lat Am and Asia were all decently active. The short end dollar market is certainly active, although I wouldn't want to be coming with euros just now."
IADB announced the deal on Wednesday. Lead managers BMO Capital Markets, Bank of America and Scotiabank set initial price thoughts of 5bp area over mid-swaps and a minimum deal size of C$300m.
A banker at one of the leads said that the issuer was able to offer a spread of 15bp-16bp over the Canada Housing Corporation’s 2.35% June 2027 line and around 50bp over the Canadian sovereign.
The book was opened on Thursday morning with more than C$350m of orders. The leads elected to set the spread straightaway at 5bp, in line with initial price thoughts.
The book grew to C$565m, including C$25m from joint leads. This allowed the issuer to up the minimum size to C$500m, at which size the deal was launched.
The deal marks only the third time that IADB has accessed the Canadian dollar market since the 2008 financial crisis, according to Dealogic. The borrower sold deals in October 2019 and October 2014, but before that had not issued since 2007, when it sold six deals.
The trade shared the market with a December 2022 deal from Kommuninvest targeting $1bn. Barclays, BNP Paribas, Citi and Nordea were lead managers, offering initial price thoughts of 10bp area over mid-swaps.
With indications of interest of $2.4bn, books were opened with guidance of mid-swaps plus 8bp area.
Even at the tighter spread, demand was strong and with more than $3.1bn of orders, leads were able to pull another 1bp off the spread — fixing it at 7bp, 1bp inside its pre-announcement curve — said a banker at one of the leads looking at its September and October 2022s
He added that the quality of the book was excellent. “The issuer could have gone for $2bn or $2.25bn if it hadn’t been capped at $1.25bn,” he said. “We could have allocated 100% to official institutions if we’d wanted to.”
Kommuninvest typically raises much of its cash in Swedish krona, but has not accessed that market since May. “Over the summer, there has been less local cash available,” said the banker. “This was a good opportunity to get some funding in ahead of the wave that’s coming in a couple of weeks.”
Deal statistics were not available at press time.
One small deal did make it through the euro market this week. The City of Hamburg sold a €250m no-grow tap of a June 2028 line on Thursday. The coupon is 0.01% and the tap was priced at 2bp through mid-swaps, yielding 0.289%. Barclays, Deutsche Bank, Helaba, JP Morgan and RBI ran the books. The final book was more than €550m, of which €135m came from the leads.
