Issuer | LHV Pank |
Credit rating | Aa1/— |
Format | Mortgage covered bond |
Issue | €250m 3% October 2028 |
Reoffer | Mid-swaps plus 67bp |
Lead managers | Citi, Erste, LBBW, Nordea |
ISIN | XS2921553793 |
Updates
Time (UK) | Pricing | Order book | Deal size |
07:49 | Mid-swaps plus 67bp-70bp (WPIR) | N/A | €250m no-grow |
09:41 | Mid-swaps plus 67bp | > €420m (incl. €73m JLMs) |
|
11:18 |
| > €535m (incl. €73m JLMs) |
|
Popular print
Rare sub-benchmark issuer LHV Pank’s latest covered bond proved popular on Thursday as the Estonian issuer closed its book at over two times covered.
The Estonian lender operates “in a higher spread context” than the broader European covered bond market, but recent successful CEE covered trades gave the lead managers the confidence that such a trade could work, said one banker close to the sale.
Tatra Bank sold the last CEE covered trade on October 2, pricing a €500m October 2028 bond at 62bp over mid-swaps. “We felt that this was a trade that we could build upon,” the lead manager said.
During the three day marketing period earlier this week, investors pointed towards a deal in the high 60s to 70bp area, leading the bank to open books with a spread range that was already set.
“Going out with 67bp-70bp, will price in range, is a bit of a sensitive approach, but as we knew the price sensitivity of investors already from the flagged interest, and we thought this would be an appropriate approach,” the lead manager said. “I think it paid off.”
The lead manager added that the syndicate “had all the investors in the book that they had expected at the final terms”.
In fact, the book grew a further €115m after the spread was fixed, settling at over two times covered.
“This is a strong result for an issuer that’s not known for being that active and is quite a small name within the CEE region,” said the lead manager.
As LHV Pank is a relatively rare issuer — its last covered deal came in November 2023, according to Dealogic — from a relatively rare jurisdiction, it is tricky to derive a fair value from its curve or from other Baltic comparables.
The lead manager said that a “very vague” fair value in the low 60s area could be taken from the secondary spread of last week’s Tatra trade, which he spotted at 59bp-60bp, and then adding a pick up to account for the sub-benchmark size.