Tranche 2: £350m tier one capital
Issue price: 100.00
Coupon: 5.556% until 31/12/19; six month Libor plus 100bp thereafter
Call option: at par from 31/12/19
Spread at launch: 78bp over the 8% June 2021 Gilt
Joint books: Barclays Capital, Merrill Lynch, Rabobank
Merrill ? Rabobank's dollar tranche is the largest of the three at $1.5bn. We had a book of over $6bn at pricing. We priced it at 122bp over Treasuries, having gone out at 125bp over. That equates to 57bp over dollar Libor for a perpetual non-call 12 year step-up deal.
Rabobank's outstanding non-call 2013 tier one is bid at 57bp over mid-swaps, so we priced flat to the outstanding deal for a security that is three years longer, and there was therefore no maturity extension premium nor any new issue premium. That demonstrates the exceptional reception as well as the very strong market technicals.
This is the highest rated Yankee tier one and it sets the record for the tightest ever pricing.
One third of the book were international investors and two thirds were traditional US-based tier one buyers.
The sterling tranche was a perpetual non-call 15 year. We increased it to £350m and priced it at 78bp over Gilts. We had gone out with price guidance of 80bp-85bp over, but yesterday (Wednesday) we revised the price talk to 78bp. We had generated a book of £1.6bn.
The pricing equates to 46bp over sterling Libor and sets a record as the tightest sterling tier one and the highest rated. We increased it from £250m to £350m, which was the most that Rabobank had appetite for.
The roadshow for the third, Australian dollar tranche starts on Monday.
Barclays ? We were mandated to lead manage the sterling tranche of the three tier one transactions. The intention was to dovetail the dollar and sterling tranches ahead of the Australian dollar tranche.
The target investor base was high quality UK asset managers, insurance companies and pension fund money, and those were exactly the types of accounts that did buy it.
We organised a three day roadshow, visiting Scotland and London, from Monday to Wednesday of this week. That was alongside the dollar marketing, which was planned from Tuesday to Thursday.
For UK investors, the sterling tranche represented an excellent opportunity to diversify into the subordinated debt of an extremely high quality and well-liked name.
Given the concentration in the sterling market of UK issuers, investors are particularly attracted to non-UK names and it was clear from the outset that this was destined to be a successful transaction.
The feedback from the roadshow was good, as expected. There were few questions regarding the credit and most investors were looking at the relative value versus outstanding sterling deals.
We went out with price guidance on Wednesday morning, just before the conclusion of the roadshow, for a £350m perpetual non-call 2019 deal at 80bp-85bp over Gilts.
The book built swiftly during Wednesday and yesterday (Thursday) morning and we closed the books at 10am with around £1.7bn in orders.
The investor reaction and the momentum in the book allowed us to tighten the spread to 78bp over Gilts, and only about £300m in orders dropped out of the order book at that stage.
That left us well oversubscribed for the intended transaction.
The comparables included 2015 deals from Lloyds TSB and HSBC, which were around 89bp over Gilts, and HBOS which had 2016 and 2017 deals at around 90bp and 92bp over respectively.
?...The order book was for about $6bn. It was a tier one perpetual non-call 12. Given Rabobank is one of the few triple-A banks in the world, this was something international investors were very excited about.
There was a good European order book, but it was mostly sold into the US.
The deal was priced at the same time as a sterling tranche.
We went out with 125bp area guidance, priced at 122bp and given where outstandings were, it was flat to secondaries ? that is flat to its outstanding bond with a 2013 call date, even though this has a 2016 call-date.
This deal offered investors a great mix of high quality and yield and that's a magic combination.?
?...Rabobank had a fantastically successful deal, but, without wanting to knock it, one suspects that the execution was a doddle.
Getting the mandate is the hard part. And then it's working out the allocations.?