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Big demand for Bank of Ireland green debut

By Frank Jackman
04 Mar 2021

Bank of Ireland’s inaugural green bond attracted the largest financial senior book in euros this week, peaking at €2.5bn, as it offered investors a chance to pick up labelled paper at a shorter tenor and with plenty of spread.

“The higher-beta bank names have seen strong demand as investors hunt for spread,” said one bank credit analyst.

Bank of Ireland (Baa2/BBB-/BBB) on Wednesday sold a May 2027 non-call May 2026 green deal at a holding company level — its first green labelled deal.

JP Morgan was the sole green bond structuring agent, with BNP Paribas, HSBC, NatWest Markets and Société Générale rounding out the rest of the syndicate, starting out with initial thoughts in the mid-swaps plus 100bp area.

As soon as the book hit €2.4bn, the leads set the size of the deal at €750m and guided the market towards a tighter spread in the 80bp area, plus or minus 3bp.

Bank of Ireland launched the bond just after midday at 77bp over mid-swaps. Demand was last spotted north of €2.5bn at guidance.

The deal offered a pickup to other names at the in-demand five year point of the curve, the analyst said.

At the end of 2020, the Irish lender boasted a 24.6% minimum requirements for own funds and eligible liabilities (MREL) ratio, up from 23.8% a year earlier.

It expects to have an MREL ratio of 24.95% by January 2022, rising to 27.78% by January 2024.

As a result, Bank of Ireland will focus primarily on issuing MREL eligible senior debt over the next few years, targeting €1bn-€2bn of eligible paper each year.

Muted MunHyp

A longer dated deal from Münchener Hypothekenbank (MunHyp) was not met by the same volume of demand, with the book on its €500m green non-preferred deal peaking at only €900m.

On Wednesday morning, BayernLB, Crédit Agricole, DZ Bank, NatWest Markets and UniCredit kicked off the pricing process for the March 2029 deal with initial thoughts in the mid-swaps plus 75bp area, for which it attracted demand of €650m.

“A lot of investors were also looking at Italy’s green BTP deal this morning, so the ESG community took a little longer to relay their indicative orders into the book,” said a banker on the deal.

Once the order book reached €900m, the leads were able to steer investors towards a guidance level of 60bp area, plus or minus 3bp, later launching it at 57bp.

The deal marks the first time MunHyp sold its first benchmark deal and first euro green bond. “There was a strong will to print the inaugural euro green deal in a benchmark format,” said a banker at one of MunHyp’s leads.

Fair value was spotted in the mid-50bp area, the banker said. “MunHyp was able to price through where its less liquid non-benchmark deals were quoted."

The pair were then followed by Crédit Mutuel Arkéa, which issued a non-preferred social bond on Thursday.

The French firm sold €500m of March 2023 debt at 80bp over mid-swaps, backed by a final book in excess of €1.1bn.

ABN Amro, Crédit Agricole, Crédit Mutuel, Santander and UniCredit had started the pricing process with initial thoughts in the 100bp area over mid-swaps.

By Frank Jackman
04 Mar 2021