Rating: A3/A- (Moody's/Fitch)
Amount: Eu250m
Maturity: 1 April 2011
Issue/Re-offer price: 100.00
Coupon: three month Euribor plus 20bp
Call option: at par on 1 April 2010
Launch date: Thursday 17 March
Payment date: 1 April
Joint books: Danske Bank, JP Morgan
Bookrunner's comment:
Danske — The borrower is one of the larger banks in Norway, and is one of the savings banks or Sparebanken. It has been successful and dominates one of the most prosperous regions of Norway — the west.
Sparebanken Vest's last public deal was a couple of years ago. It did a three year Eu175m floater in June 2003. But this is a bank that is relatively prolific in its domestic market, where it has made good use of its following. But it has been considering its funding needs and wanted to look outside its domestic market.
Norwegian banks have to satisfy certain specific requirements of the Norwegian regulator, such as the relationship of its long term funding and its asset base.
Once funding rolls down to one year, it is counted as short term, so it does not help that ratio, instead it becomes excess liquidity that needs to be refinanced.
In the current market there is appetite for new names.
The structure is a six year non-call five. It has certainly been seen before in the sterling market where UK issuers have made good use of it to smooth the balance of short term and long term liquidity. It is a useful transaction to bring to market.
We had first to make sure that investors were familiar with the Sparebanken credit and that there were lines in place. We therefore used a two pronged strategy. First we announced that the borrower was coming to market and made sure that our research and the public data concerning the issuer was available.
The second was an investor call on Tuesday morning.
On Tuesday afternoon, we went out with a Eu250m sized deal with a six year non-call five structure at 20bp over. We were pleased to see an immediate good response. This was a name that investors liked to buy.
And the kind of investors that readily respond to this type of name might also have prior exposure to this kind of structure through the syndicated loan market.
The books grew quickly but we kept them open for another day to give some investors that had expressed interest time to put lines in place.
We closed the book this (Thursday) morning, comfortably oversubscribed and to our satisfaction, and the issuer's, we had a good geographical split of accounts.
Nordic countries took 25% of the deal, but of the four Nordic countries, Norway was the smallest. The largest country overall was Germany, which took 22%. Luxembourg took 16% and Austria 14%.
The UK and Ireland were not as prolific as we have seen in other deals, but those are the same investors that might have wanted to see a larger transaction. It is what it is though, and we were not looking for accounts that had the ability to trade. We were not concerned about the lower than usual take-up from the UK and Ireland.
Bank treasuries took about 75%. The rest went to asset managers, agencies and regional intermediaries.
Imitation is the sincerest form of flattery and DnB NOR has come out with a four year non-call three deal that will be priced this afternoon.
We are happy with the deal and felt that the pricing left something for the borrower as well as something for investors too.
SpareBank Midt-Norge came earlier this year with a five year straight priced at 20bp over. That is now around 18bp over bid, with no offer. This deal offered probably 1bp-2bp extra for the year after the call, which is good value.
We were pleased to see that the structure was accepted across countries.
Market appraisal:
"...this is a good idea for Norwegian bank issuers and although there are no really direct comparables outstanding for Sparebanken, Landsbanki is quite close. It has a 2010 deal at 19bp over.
That implies that Sparebanken got better pricing than DnB NOR. The spread to the call date seems more in line with where they would have priced a five year."