Rating: Aa3/A+
Amount: Eu750m lower tier two capital
Maturity: October 30, 2019
Issue/re-offer price: 99.984
Coupon: 4.375% until 30/10/14; three month Euribor plus 138bp thereafter
Spread at re-offer: 38bp over mid-swaps; 49.7bp over the 4.25% July 2014 Bund
Call option: at par from 30/10/14
Launched: Friday October 15
Joint books: BNP Paribas, Citigroup, Lehman Brothers
Bookrunners' comments:
BNPP ? HBOS was quite a nice deal overall and we thankfully got it to market before it turned around.
We had been talking to the issuer about options for issuing for some time and, after all the volatility, we recommended a 15 year non-call 10. We thought a lot about the price guidance because if you get things wrong at the moment, you can find that the deal has stalled before you have started. We went out at 38bp-40bp over, which was the right level.
The initial plan was to do Eu500m and we ended up pricing Eu750m at the tight end.
The quality of the book was high and we had in excess of 70 accounts. The UK was the largest participant, taking around 30%. France took 23%, and the rest was spread with Italy and Spain taking a decent amount.
By type, the buyers were mainly insurance companies, pension funds and asset managers.
The bonds have traded at re-offer for most of this week. The spreads are wider today, but the secondary market is about 5bp wider.
The issuer was, as always, very reasonable, very succinct ? we all knew what we had to do and did it.
Lehman ? HBOS does a lot of investor work globally and the European investor base felt well informed so a roadshow was not necessary.
We started bookbuilding a fixed rate euro benchmark 15 year non-call 10 at 38bp-40bp guidance on Wednesday.
HBOS had been evaluating the markets over the previous week or two and decided to bring a fixed rate euro benchmark. Although euro spreads widened modestly from the low point in September, the market stabilised last week and it was this period of stability that HBOS issued into.
After opening books on Wednesday, we built the book over Thursday and priced the bond on Friday. We printed Eu750m, which was the upper end of the size HBOS could issue, at 38bp over ? the tight end of the guidance.
Comparables included the RBS 17 year non-call 12, which was at mid-swaps plus 39bp when we went out with the HBOS trade, the ING 5.625% 2014 was at 37bp over and the recent trade from BBVA was at 36bp over.
The order book reached over Eu1bn and it is notable that at current levels there is little leveraged money participation and the book was made up of real money accounts.
There were 72 accounts in the book, the UK and Ireland took 35%, France took 35%, Scandinavia 11%, Germany and Austria 11%, southern Europe 10%, Switzerland 4% and other regions 4%.
By investor type, insurance companies took 34%, asset managers 33%, banks 7%, pension funds 6%, official institutions 3% and 17% special investment vehicles and others.
The bonds were re-offer bid on Friday. Since then the market has widened but fortunately HBOS has outperformed by 2bp. The market is around 5bp wider and HBOS is around 3bp wider.
