Rating: Aa3/A+/A+
Amount: Eu1bn lower tier two capital (increased from Eu750m)
Maturity: March 15, 2019
Issue/re-offer price: 99.53
Coupon: 4.625% until 15/03/14; three month Euribor plus 144bp thereafter
Call option: at par on 15/03/14
Spread at re-offer: 44bp over mid-swaps; 57.7bp over the 4.25% January 2014 Bund
Launched: Wednesday March 3
Joint leads: ING (books), HSBC
Bookrunner's comment:
ING ? We started bookbuilding at the beginning of the week for a benchmark transaction and went out with initial price guidance of 44bp area over mid-swaps. So we spent Monday and Tuesday building the book and found good demand from different clients in different areas of Europe.
On Wednesday morning, we were going to launch a Eu750m deal with a book of about Eu800m. We were pleased with the response and just before the books were closed in the afternoon, there was some last minute momentum, which drove the books to Eu1.25bn.
With this we increased the deal from Eu750m to Eu1bn and stopped there ? we did not want to tighten the spread as investors were happy with the level. The order book was good quality, to a level I've not seen before.
In total about 90% of the bonds went to real money accounts and about 10% to banks. Investor type varied from asset managers (57%) and pension funds (16%), to insurance companies (15%) on the real money side. This is proof of a good order book. Bonds went to Benelux (40%), Germany and Austria, France, UK and Scandinavia.
The deal was launched at 57.7bp over Bunds and is trading at that level ? we expect the trade to perform well in coming days, as there has been continued demand, with some tightening.
ING usually does lower tier two subordinated debt in a fixed rate format and this 15 non-core 10 format is new to ING as a borrower. This format was chosen because there is appetite in the market for longer deals ? Barclays, SG, Bank of Ireland and Citigroup have all launched 15 non-call 10 bonds in the last couple of months. Also the structure is better for the borrower, because it can use capital on a subordinated basis for a full 10 years.
Market appraisal:
HSBC ? We announced the mandate last Thursday and released price guidance of 44bp over mid-swaps area on Monday.
This was the first time that the issuer has done a 15 non-call 10 bond as all its issues in the past have been straight 10 year bullets.
ING has established curves and for comparables, we looked at its 5.5% January 2012 trading at 34bp over mid-swaps, and the 5.25% January 2013 at 36.5bp over mid-swaps.
There was steady book building among a quiet secondary market and we had a book of over Eu1.5bn.
The issuer decided to do a larger trade at 44bp over rather than paying less with a smaller one, so we did a Eu1bn deal.
This bond had a top quality order book ? 57% of the paper was distributed to asset managers, 16% pension funds, 15% insurance companies and the rest was taken up by bank investment accounts.
"...the deal was priced fairly to a couple of points generous. ING's bullet 10 year 2013 bond was Libor plus 40bp on bid, so it paid a smaller premium between the 10 year bullet and the 15 non-call 10 than Barclays two weeks ago.
ING is a top quality name and investors were happy with the deal."
"...this looks like a good deal. ING has always issued self-led bonds and it has a history of doing a good job on it."
"...this deal offered a fair concession to the secondary market, enabling them to print the size required."
"...ING is such a great name and it is rare in terms of lower tier two issuance. The spread was also fair and the market is very bullish for this type of product ? it was bound to go well."