Maturity: June 30, 2010
Issue/re-offer price: 99.104
Spread at re-offer: 1bp over mid-swaps; 6.5bp over the 5.25% July 2010 Bund; 17bp over the 5.375% January 2010 Bund
Launched: Tuesday June 17
Joint books: HypoVereinsbank, Morgan Stanley, WestLB
HypoVereinsbank - We are happy with this transaction. We were able to build a book of Eu2.7bn and price the deal in the middle of the range. Having gone out with spread guidance of flat to 2bp over mid-swaps, the deal was re-offered at 1bp over. It is now (Wednesday afternoon) bid just inside 1bp over.
That compared to 2bp over for the borrower's outstanding 2009 benchmark and 2.5bp over for its 2011. However, those are not particularly useful comparables as they are trading in the 110 price range, so the coupon effect is quite strong.
Unlike some Länder issues, this was priced to clear. We used the pot system and all the bonds were sold at re-offer. Nordrhein Westfalen has built up a reputation for a market-friendly issuance approach and continued that with this transaction.
The borrower held a roadshow in the two weeks ahead of launch, visiting Ireland, the UK, the Netherlands, Switzerland and Austria. That followed up the visits that the borrower made last year and a lot of new investors were met.
While 59% was sold to Germany, international participation was high. Switzerland took 7% of the paper, Austria 7%, the UK 6%, the Netherlands 4%, Luxembourg 2%, Belgium 1%, the Middle East 2%, Iberia 1%, Japan 4%, non-Japan Asia 2.5%, France 2.5%, and the remainder was spread in small tickets to several other countries. Banks and funds were the main takers.
WestLB - This was a splendid transaction. The borrower went out with a Eu2bn transaction and was able to achieve that amount comfortably.
Some borrowers have gone out with smaller sizes and subsequently increased them, but investors prefer to know from the start how large an issue is going to be.
In the flat to 2bp over mid-swaps pricing range the order book totalled Eu2.7bn and Eu2.2bn of that was either placed at re-offer or at 1bp over. That, again, meant that we did not have to disappoint investors by generating strong oversubscription and then cutting allocations.
Just over 40% was sold to international accounts, in 20 different countries, while 60% was placed in Germany. While about one-third of distribution was to European accounts, about 6% went to Asia, 1.5% to the Middle East and just 0.25% to the US.
As usual, banks and funds were the main takers, with about one-half and one-third, respectively. Insurance companies took just over 10%, central banks 6.5% and, corporates and others bought 3%.
The order book developed smoothly over the marketing period and we were able to keep to our time schedule. We never expected to have to delay anything, but it was important to get the deal priced by today (Wednesday) because of the holiday tomorrow (Thursday) in Germany.
We opened the book at 9am on Monday and had orders totalling Eu1.5bn by that evening. On Tuesday things slowed down a little as the market fell, but at the higher yield levels we had this morning, we saw quite a few more orders being placed.
"...the pricing was right at plus 1bp - neither generous nor aggressive, but in line with secondaries. They were right to avoid the supply that is coming in 10 years and overall took a sensible approach to the market."
"...the borrower applied its usual objective of achieved placement outside Germany and priced the deal, as expected, at mid-swaps plus 1bp, which was in line with the borrower's curve. The guidance had been flat to plus 2bp.
The leads are claiming an order book of Eu2.5bn."
"...a well handled transaction. The book built well in the middle of the price talk. NRW continues to build its yield curve in euros and this issue was fairly priced.
As with all NRW transactions, they went out with suitably wide guidance of flat to plus 2bp but it always felt like a plus 1bp trade - flat would have been far too optimistic.
The issuer catered to the current need to put on extension trades by targeting the seven year maturity, which provided customers with something new in the Land sector."