"One year into the most severe crisis ever, MUNHYP managed to fund at swaps minus 1bp when other covered bonds were already in high double-digit spread regions," enthused one market participant. "Furthermore, the timing was brilliant as the capital markets closed down three weeks later (Lehman).
"Call it skill, feeling, or pure luck: they did what they did."And, after hundreds of votes were cast in The Covers deal of the decade poll in December, Münchener Hypothekenbank pulled off another coup, coming top ahead of some impressive runners-up: the first and only 50 year benchmark covered bond, from Compagnie de Financement Foncier; the first structured covered bond, from HBOS Treasury Services; and the first US covered bond, from Washington Mutual.
While the three runners-up won many accolades when they launched, opening up new directions for the covered bond market, and gathered many votes, the innovation that marked them out is perhaps no longer regarded as the touchstone it once was.
"The times have changed dramatically," suggests Louis Hagen, member of the board of management, Münchener Hypothekenbank, in Munich. "One of the effects of the financial crisis has been a return to old and good values, traditions, and reliable systems and structures, with people no longer giving benefit to complicated structures, since these proved disappointing in many cases."
Even at the time of its launch before the markets had yet plumbed the depths they were to reach after the collapse of Lehman Brothers the pricing of 1bp through mid-swaps achieved by Münchener Hypothekenbank showed how highly its Pfandbriefe were valued, with Hagen describing the deal as "a perfect fit for the market at the time".
The pricing not only looks impressive from the vantage point of early 2010; it did so when the deal was launched. At the end of the previous week, Bayerische Landesbank had priced a deal of identical size, maturity and collateral type 2bp wider.
"They had priced their issue at 1bp over mid-swaps," says Rafael Galuszkiewicz, head of capital markets at Münchener Hypothekenbank, in Munich, "and when I saw that, I thought that they were just playing it safe, but the book did not confirm this.
"I therefore thought that maybe 1bp through would be a little ambitious, and the leads were also slightly cautious about achieving a sub-Libor spread."
However, at the guidance of mid-swaps flat leads BNP Paribas, Commerzbank, DZ Bank and UniCredit were oversubscribed in 34 minutes and after 90 minutes had a Eu1.5bn book comprising more than 100 accounts. Ultimately, orders totalled Eu1.8bn and came from 130 investors, and pricing at 1bp through was achieved.
"Even if the deal was not as oversubscribed as some others, I was very happy to see the commitment of our investors even 2bp inside BayernLB," says Galuszkiewicz. "We achieved 42% distribution to central banks and, bear in mind, we could allocate into 20 countries.
"Some people have said that the broad distribution was really achieved through support from the co-operative banking sector, but it accounted for only 10% of the book."
Galuszkiewicz says that the distribution of the jumbo was testament to an international investor relations drive the issuer had embarked upon in the preceding years, and Hagen is confident that the banks business model will continue to stand it in good stead in the covered bond market.
"Investors view Münchener Hypothekenbank as a very conservative issuer," he says. "We are one of the last Pfandbrief issuers that has a retail residential mortgage business.
"Investors like that, because it offers a very stable income, and because German residential property is one of the most stable asset classes you can imagine."
Hagen also cites the banks co-operative nature.
"Being part of the German co-operative sector gives us a large network for selling our products, but also for getting liquidity, and it has its guarantee schemes that we are a part of," he says. "And being a co-operative is seen as a value in itself."