Banca Carige and Banco Popolare di Verona e Novara (BPVN) had investors' and bankers' full attention in what was an otherwise subdued week in the European financial institution bond market.
The issuers, which have similar credit ratings — A2/A/A+ for BPVN and A2/A-/A for Carige — went out almost simultaneously with benchmark transactions.
Both wanted to raise lower tier two capital, Carige via Banca IMI, Ixis, UBS and WestLB and BPVN via Deutsche Bank, JP Morgan and Société Générale.
Still, the slight difference in ratings meant Carige was always going to have to bring its deal at a more attractive level than Verona. And indeed, it released guidance in the mid-40s over Euribor while Verona was trying to tempt investors with guidance in the low to mid-40s.
Despite initial reservations from market participants that the deals would clash and one would fail, the final result was that both transactions managed to reach oversubscription and were priced in line with guidance.
The favourable reception for the deals was helped by the fact that they were aimed at different investor bases.
Carige relied heavily on the domestic bid, and placed the majority of its paper in Italy. Verona capitalised on its roadshow efforts and sold 70% of the issue outside Italy, mainly in France, the UK and Iberia.
Carige ended up doing Eu500m at 45bp over Euribor, backed by a Eu550m order book, while BPVN priced Eu400m of paper at 43bp over, with more than Eu500m of bids.
"Had the deals come two or three weeks ago, they would have been a riot," another syndicate manager away from the deals said. "It will be interesting to see where the next lower tier two from a major bank prices and whether it gets penalised by the repricing of the market we have seen by these two issues."
Still, while the levels looked more generous than they might have been two or three weeks ago, they were still compelling. Last June Capitalia priced a lower tier two transaction at 54bp over Euribor.
Volatile market conditions claimed their first kill this week in the European bank bond market, when Landesbank Baden-Württemberg pulled its Eu300m 10 year bullet lower tier two deal.
The transaction was widely expected to surface this week via Citigroup and LBBW but failed to do so.
Market participants thought the level at which the leads were going to bring the transaction (low to mid-30s) was wider than the one approved by the LBBW board.
However, the leads were adamant that the deal had not been pulled. "We did not announce an official launch for this week. Given the volatile market conditions, we decided that it would be wise to wait to see how the market evolves and reassess," an official at one of the leads said.
"There is a new issue and size premium in the market at the moment," said a rival syndicate manager.
Italian insurance company Generali will certainly be hoping that is the case. It will complete roadshows today (Friday) for its tier one financing.
Generali started its marketing on Tuesday via HSBC, JP Morgan and Mediobanca and wants to raise Eu2.8bn equivalent in euros and sterling in a step-up format.
The securities will be rated A3/A/A+, and will have mandatory deferral triggers to earn basket 'D' treatment from Moody's.
While launch could come as early as next week, Generali might put off the transaction until the markets settle, say market participants.
According to RBS research, Generali could issue two tranches — one in sterling to balance its maturity profile and one in euros. The research says that, using Allianz, Aviva, Swiss Re and Axa as comparables, and considering the need to pay for size and market nervousness, 100bp-105bp over mid-swaps for the euro tranche and 115bp for the sterling are possible pricing levels. n