Rating: Aa3/A+ (Moody?s/Fitch)
Amount: Eu750m Inhaberschuldverschreibung series 73H
Maturity: July 26, 2007
Issue/re-offer price: 100.00
Coupon: three month Euribor plus 10bp
Launched: Friday July 16
Joint books: Calyon, DZ Bank, Natexis Banques Populaires
Bookrunners? comments:
Calyon ? We were happy with the strong participation and welcome reception IKB received. The transaction was completed on a retention basis, so we ran our own book.
We had orders in excess of the amount needed, accounting for the increase in deal size from Eu500m to Eu750m. The issuer was particularly happy with the strength of demand from French investors, which can be quite unusual for a transaction like this.
In fact, French investors took 46% of the bonds, Germany took 36% and the UK, 11%. Spain, Luxembourg and Scandinavian took a small percentage.
Bank investors (55%) drove the demand and money market funds (35%), who like the three year maturity.
This was a clearly a success ? bonds were sold out on re-offer at 10bp over. This reflects good performance and fair pricing. The bonds are now trading at 9.5, 9.0, which is exactly where IKB?s March 2007 issue is trading.
There is a lack of supply of these names ? strong, single-A borrowers with a good credit story. IKB used to issue frequently, but don?t do so as much now. So this has some rarity value.
The performance of the bonds, having tightened slightly since launch, confirms IKB?s success. We marketed the deal at 10bp-11bp over, built up a strong book, and were able to price at the tight end of that guidance.
DZ Bank ? This transaction was executed on a retention basis. We had strong demand out of the co-operative sector as well as good appetite from institutional France and regional banking interest.
During the book building process we had huge demand, so we closed the book at Eu400m and had to cut allocations back.
We saw cooperative banking sector interest, and, having opened the books in the morning, we closed them that afternoon and priced the deal on Friday.
About 90% of interest was from Germany, with the rest of Europe taking about 10% altogether. Co-ops took 40% of the bonds and institutional investors and regional banks in Germany took 60%.
IKB is good name and a solid credit, well known in Germany with fair pricing and rarity value. The bond?s performance is stable now, having tightened to 9.5bp after being bought at 10bp at the re-offer. We saw good demand and no flow back.
Natexis ? The original mandate was for a Eu500m transaction, but when we began the marketing process it because clear that demand was huge, so after two hours we increased the deal size to Eu750m.
After going out with initial price guidance of 10bp-11bp we priced at the tight end, 10bp over, having got a total book of Eu1.2bn. This was clearly a success.
We had large orders from Germany, with interest from Italy, UK, Belgium, Cyprus, Spain, France, Denmark and Sweden. We were happy with the widespread distribution of bonds and with the accounts in the book, a mixture of banks and asset managers with a small ticket for insurance companies.
After being reoffered at par this traded in to 101-103, a good performance in our view, and this has now stabilised.
The IKB credit is well known, strong and has solid results and performance, with good activity and visibility. The spread is fair, and the market does not see many issues rated this well with this maturity in this format so it met a lot of cash rich investors? needs.
We were happy to have a Eu1.2bn order book in just under two days of book building.
Market appraisal:
?...we got involved, switching from a shorter dated in the name into the three year. We are comfortable with the credit, our analyst met IKB a few months ago and was happy with the way they manage the business.
Although 10bp over is fairly tight, there is little volatility in the name.?
