Rating: Aaa (Moody’s)
Tranche 1: Sfr335m
Maturity: 3 December 2010
Issue price: 100.28
Coupon: 2.75%
Tranche 2: Sfr265m
Maturity: 12 December 2012
Issue price: 100.351
Coupon: 2.875%
Tranche 3: Sfr205m
Maturity: 12 December 2018
Issue price: 100.918
Coupon: 3.25%
Launch date: Thursday 15 November
Payment date: 12 December
Sole books: Credit Suisse
Bookrunner’s comment:As far as I know this is the biggest chunk of Pfandbriefbank funding we have done in one go and we are extremely pleased about that.
The size of Sfr805m was sought for two reasons. First, there is a redemption of Sfr335m coming up on December 12 which normally dictates the size of any new issue.
But that means there is nearly Sfr500m of new money in this transaction.
That is down to the fact that financials are having such a tough time doing any funding. There’s still a lot of mistrust circulating around the intraday money and the Libor market.
Therefore one way to do some financing is through Pfandbriefbank, which is a covered bond entity, in one of the most regulated covered bond markets in the world. I would say this is the best credit issuers can buy other than government credit or municipalities.
When you look back over the last two months the normal size of deals has been Sfr100m to Sfr200m. Energie Beheer Nederland could do a Sfr400m deal, but otherwise there’s been very little that’s got close.
We knew that to achieve a size even close to Sfr860m, which is what the borrower’s aim was, we would need to address different pockets of demand.
We also had to consider the debt profile of Pfandbriefbank and where we could fit deals in. At the longer end, that question was easier to answer because it doesn’t have much outstanding there.
In the 2018 space, it only has Sfr500m to Sfr600m outstanding. At the short end, 2011 was very crowded so we went with a three year deal because the banking commission’s regulations won’t let the borrower issue anything smaller.
Then it was just a case of filling the space in between and December 2012 stood out as there was nothing outstanding.
We started premarketing the deal in the knowledge that Sfr205m in the 2018 space was fixed. The 2012 tranche started with a minimum requirement of Sfr91m and went up to Sfr265m while the 2010 tranche started at a minimum of Sfr150m but ended up being Sfr335m.
The shortest tranche was priced at 15bp through mid-swaps, while the other two were priced at 15bp through mid-swaps.
Comparables are usually obvious because the issuer has such a well developed curve and these were in line with where its outstanding bonds were.
The 11 year tranche was sold mainly to institutional investors. The shorter two went to asset managers, bank treasuries and private banks.
This deal was a real success because we got such a huge size, got very close to the maximum funding requirement and placed the deal fully.
Market appraisal:“...I heard that the shorter tranches of the deal went very well. This credit nearly always gets a good reception from investors.”
“..this is a domestic credit where there’s not been a lot of supply recently, so I’m sure that help. But I don’t think investors are as crazy about these deals anymore.”
