Maturity: February 5, 2008
Issue/re-offer price: 99.991
Coupon: three month Libor plus 12.5bp
Spread at full fees: Libor plus 16bp
Call option: at par from 05/02/07
Launched: Tuesday January 14
Joint leads: Dresdner Kleinwort Wasserstein, HSBC
Dresdner - The all-in was 16bp over and the selling level was 15bp-16bp over. The issuer is the second largest UK building society and the investor base for building societies in sterling is now mostly in the UK. That is where we sold most of our bonds.
There have been some recent deals from the Coventry and Portman building societies with the same structure. They were trading at around 17.5bp-16.5bp. Those names each have the single Moody's rating - A2 - whereas Britannia is A2/A/A+, which helps a bit.
The five year non-call four structure is becoming more common from building societies, for internal reasons.
HSBC - The five year non-call four structure is proving to be successful with issuers. They do them in the belief that in the fourth year it will be easier to do one year funding.
We price it to the fourth year call date because it is discounted in the market due to the high probability of it being called.
This was a retention deal. We did £200m along with Dresdner Kleinwort Wasserstein and sold it just inside all-in. All of our pot has been sold.
Britannia is a successful name with UK investors and we found good demand.
"...while the euro market has been flooded with FRNs, the sterling market has only seen one issue this year and that is for Britannia. This is because borrowers, which six to 12 months ago could achieve a considerably tighter pricing in sterling, are no longer able to do so.
The traditional buyers of sterling floaters, like the big UK building societies and the ex-builders that are now banks and the UK clearers have begun to branch out into the euro market with their assets and are no longer so focused on sterling, but will look at similarly rated euro issues. As a result, sterling deals have to rely on the smaller and intermediate buyers and they have underperformed.
An issuer like Britannia was able to fund in sterling at a 3bp-4bp advantage versus euros but this is no longer the case. It has also issued a three year euro FRN this week at 14bp over while the sterling bond, a five non-call four year, came at 16bp over - a year ago, Britannia would never have paid more in sterling than in euros."