"This is the best deal that Hypo Tirol has issued in its history, in terms of the scale of demand, the breadth of distribution and the spread," said Susanne Endl, head of treasury at Hypo Tirol.
After mandating leads on Wednesday, Hypo Tirol opened order books on Thursday for a €500m 0.01% March 2031 rated Aa1 by Moody's with initial guidance of 9bp area over mid-swaps.
After one hour, demand exceeded €1bn, and after 90 minutes and with €1.3bn of orders, the spread was revised to 5bp area, plus or minus 1bp. A short while later a €500m deal was announced at 4bp with reoffer demand of €1.25bn.
Joint leads on the deal were ABN Amro, Dekabank, Erste Group, LBBW and UniCredit.
The issuer’s €500m 0.01% October 2026 was indicated at 2bp over mid-swaps before the deal’s launch, and assuming 2bp for the five year curve extension, fair value was seen at 4bp according to one lead manager. This equated to 36.4bp over 10 year Bunds and provided a reoffer yield of 0.045%.
The transaction was notable for being the issuer’s first under its social bond framework.
“We have very pressing need for social housing in Tyrol, Austria," explained Michael Blenke, Hypo's head of banking book management. "Due to the mountainous topography, space to build is very limited. That means real estate prices are high, which makes it very difficult for low income people to find affordable housing."
Hypo Tirol worked closely with the not-for-profit Austrian housing sector, which is relatively well developed in Tyrol, to provide financing for high quality, low energy housing that is, according to Blenke, about 30% cheaper than what’s available in the private market.
Apart from the issuer’s ESG credentials, “Wednesday's positive yield move was helpful,” said a lead manager, referring to the 6bp rise in in 10 year yields. “I would not have been concerned if it had been a negative yield, but being positive helps.”
He said the deal attracted a good mix of investors, including banks, asset managers and official institutions, especially from those with responsible investment mandates.
The environmental, social and governance aspect of the deal ensured a broader geographic distribution than might have typically been expected from Austrian Pfandbrief deals.
Socially aligned framework
Tirol's social bond framework is in alignment with the International Capital Market Association's Social Bond Principles 2020, whereby proceeds will be allocated to affordable housing projects under the United Nation’s Sustainable Development Goals 10.4, 11.1 and 11.3.
This includes non-profit housing, subsidised housing, refurbished housing "with social and family policy related objectives", and affordable high quality housing for local communities.
The framework has a second-party independent opinion from ISS ESG, which is a provider of corporate governance and responsible investment solutions. The framework has a prime ‘C’ rating and a ‘High’ level of transparency.