Guarantor: MBNA America Bank NA
Maturity: June 26, 2008
Issue/re-offer price: 100.00
Coupon: three month Euribor plus 105bp
Launched: Thursday June 12
Lead mgr: WestLB
MBNA has not been in the euro market since last March but this is the borrower's third euro issue in succession led by WestLB, the others being fixed rate bonds.
In the interim, the market and the sector have been through some volatility but MBNA clearly recognised that the market was in good shape and that its spreads in the secondary market have come in a long way, providing a good issuing opportunity. The company's cash needs are such that it did not need to come back for a larger transaction and a Eu240m issue made sense.
Demand is strong for both fixed and floating rate product but MBNA elected to take advantage of floating rate demand, which also probably delivered slightly better execution than would have been achievable on the fixed rate side.
In addition, investors in the floating rate market are a little less concerned than some of the bigger institutions about secondary market liquidity.
It has been a successful transaction. We went out and built a book throughout the morning. It came together quickly and by lunchtime we were pretty much there. By early afternoon, the deal was slightly oversubscribed and we were able to allocate and announce the deal by late afternoon.
The deal was re-offered at Euribor plus 105bp and is currently (Thursday afternoon) bid at 103bp. At 105bp, it was flat to the MBNA curve and investors saw it as an attractive proposition - at the end of the day, what other opportunities are there of buying a triple-digit floating rate piece of paper?
The US economy and consumer finance has been on a downward trend but MBNA has gone through the cycle and demonstrated that it has an extremely robust business. The rating agencies are happy that MBNA's performance has been rock solid and investors are generally comfortable with the credit.
Accounts are looking for yield and spread product, and this deal offered a chance to get a five year floater paying a triple-digit coupon - it was just what the market wanted.
Distribution was around 30% each to Germany and the UK, 10% offshore US, 8% Switzerland and the rest other Europe, and the book was pretty evenly split between funds and bank investors.