Maturity: May 15, 2007
Issue/re-offer price: 99.769
Coupon: three month Euribor plus 15bp
Spread at re-offer: Euribor plus 20bp
Launched: Tuesday April 30
Joint books: ABN Amro, JP Morgan
ABN Amro - We were delighted to be awarded the mandate for this benchmark funding for Erste. The name is widely known and well received throughout Europe. It is perceived as a borrower that prices transactions correctly. This is the first floating rate note it has issued this year and follows a successful 10 year fixed rate deal last year.
We ran the issue as a pot, with full transparency between ourselves, JP Morgan and Erste. We began premarketing a Eu50m five year at 20bp over. The order book built extremely quickly and we had over Eu600m in demand by the end of the first morning.
When we closed the books, they were around Eu1bn, with virtually all the orders at 20bp. We decided on a Eu750m issue at 20bp over, which ensured that the deal was correctly priced and would perform in the secondary market. Erste has a March 2006 deal that was trading at 18bp/16bp over, and a July 2006 that was at 18.5bp/17.5bp.
Placement was predominantly into the UK and Germany, with sizable orders from France, Ireland and the Benelux, and selective interest from Austria, Finland, Italy and Spain.
We were particularly pleased to see several asset managers involved in the deal, coupled with traditional bank buyers.
The deal is now slightly tighter, at 99.78-99.80, which equates to 19.5bp over.
JP Morgan - Erste was absolutely brilliant. It is an issuer we have done quite a bit of business with in the past. We need to be quite sharp on pricing, because obviously it is quite a competitive market in senior funding. But on the other hand, it is a borrower that is reaping the benefits of an articulated approach to funding.
We did a 10 year fixed rate deal for Erste last year and re-opened it this year, so it is now up to Eu1bn. That deal was roadshowed in full. It is a pro active borrower, and plans its issuance. This is its first floater since early last year, so it does not do them that often.
We were very pleased with the market reaction. There is a high level of familiarity, and investors were making decisions based on fair value. The 20bp level was a fair compensation.
The order book was just over Eu1bn and there were 57 accounts involved. It was effectively a 24-36 hour bookbuilding process. We launched the deal on Monday morning and priced it at about one o'clock on Tuesday.
There was interest at 21bp-22bp. People were coming in with cheeky bids, because they thought this would be the same as all the other deals, but no one got any bonds back from 20bp.
So it was very rewarding in that sense - to see one of these deals go well. One can be a bit cynical about the senior FRN market, but we believe the issuer did not sacrifice best execution and investors were happy. So it was a pleasure.
"...this came at a good level against secondary Erste paper and the size was nice and liquid, too. It was re-offered at Euribor plus 20bp and soon after launch it was bid at 99.80, equivalent to Euribor plus 19bp - a 1bp tightening for a floater is a rare event indeed.
There is good demand for 20% risk weighted floating product at the moment. This might be because people think that rates will rise again and don't want to be in fixed rate product."
"...this was a success. We have seen good demand from France for the paper at the re-offer level. Erste is an attractive credit and they have done a nice deal. It was quickly bid at the re-offer and then even a touch tighter."