Maturity: 27 October 2011
Issue/reoffer price: 99.807
Spread at re-offer: 48bp over mid-swaps; 150bp over the UKT
Launched: Thursday 21 May
Payment date: 4 June
Joint books: Barclays Capital, HSBC, RBC, Royal Bank of Scotland
This is the biggest non-UK government guaranteed deal to date and a real success. The market clearly has been undersupplied and sterling issuance, in particular from foreign issuers has been limited. SNS Bank was the last public deal in the market and that priced about a month ago.
What is interesting is while two/three months ago, investors could not see supply ending, now banks are looking to issue on their own and not use the guarantees and suddenly there is a real potential for diminishing supply.
Already spreads in sterling and dollars were very tight and trading through Libor and with the potential lack of supply, the tightening is expected to continue.
The fact that we had so many UK banks involved shows you how much times have changed given that, despite the lack of Bank of England eligibility, they were prepared to get involved.
We started sounding the deal on Wednesday afternoon and went out with a whisper of 50bp-55bp over. We felt that it would make sense to announce the deal then as it was a public holiday in Europe on Thursday and we wanted to catch some European orders.
We had some significant lead orders at this level and not much price sensitivity.
Given that we knew that we were limited in terms of size, we felt able to go out with guidance of 48bp-50bp which was a good level versus the euro market, around 10bp cheaper. Indeed, the issuer’s euro paper was trading around 60bp.
The book totalled £2.4bn and while there was a bit of price sensitivity, we did not lose many orders when we priced at the tight end.
However, what was key for the issuer was the diversification of funding element and before the deal we did a bit of investor work to explain how the guarantee worked.
Having started the process before the European holiday paid off and 30% of the deal was sold outside the UK. Banks took 57% of the deal while funds were the next biggest buyers at 37%.