MTNWeek's awards are 18 days away and one of the hardest fought battles is happening in the category of Best new Euro-MTN borrower. Between November 1 2000 and December 31 2001, the period during which potential award winners must have signed, 182 new programmes were brought to the market and 117 of these now have outstandings of $100 million or more. Thirty-three of these new issuers have outstandings of over $1 billion, and many of them are corporate names that compete to offer attractive rates. MTNWeek profiles three of the market's top 10 new issuers selected for the Best new Euro-MTN borrower award. Munchener Hypothekenbank (Munchener) has been one of the most consistent issuers of recent times. Although it has access to a range of domestic funding sources, the German mortgage bank has 28 trades outstanding worth $1.99 billion, and is top of the private placement league table by over $500 million. It has issued 39 notes since signing in December 2000 and is one of the top six busiest new borrowers. Richard-Peter Leib, head of treasury at Munchener, says: "Our ability to reach new investors such as those in Spain was very good, and was purely the result of us joining the Euro-MTN market. Our prices have been very pleasing too. If you have a good set of banks working for you this is no problem, but the increased access we had to foreign investors, who were not able to use our existing domestic German instruments, was definitely a big help." The euro10 billion ($8.85 million) Euro-MTN facility was used to tap 25% of Munchener's euro8.3 billion total debt last year, and Leib wants the programme to be used to a similar degree in 2002. He says: "Our funding needs this year will be around euro8 billion, and around 20% of this will come from the Euro-MTN market. We will also look at jumbo Pfandbrief a little more though, so we will have to be flexible." The majority of Munchener's trades have been floating rate notes linked to 3m Euribor levels on or very close to flat. Munchener has also issued step-up notes and callable trades, but most issuance has been vanilla. Leib wants to expand however, and will push Munchener's programme out to investors this year. He says: "Explaining the documentation to your investors is very important. Although we did a roadshow last spring for our jumbo Pfandbrief product, where we also talked about the MTN facility, we are considering another one again this year." Munchener is rated Aa3 by Moody's, and it has already raised $414.02 million in MTNs so far in 2002. Leib says: "Ratings these days are a must. If we didn't have such a good rating we would have to go to other spreads to place paper, and that is not something I would be too happy with." Pfandbriefstelle der Osterreichischen Landes-Hypothekenbanken (Pfandbriefstelle) is another issuer that values its rating. The triple-A borrower is the result of an innovative collection of eight Austrian landes-hypothekenbanken, and it has focused on the yen market since signing its euro7.5 billion debt issuance programme in December 2000. Hannes Leitgeb, the treasurer of Vorarlberger Landes-und Hypothekenbank, one of the named issuers, is also in charge of Pfandbriefstelle's funding. He and his team, which has recently been restructured to allow four people to concentrate on the MTN funding, have worked hard to make the Austrian region, and this distinctive programme, a credible investment. Leitgeb says: "We are very pleased to see the hard work paying off. The positive response from dealers and investors is showing us that our way of approaching the capital markets is the right one." Pfandbriefstelle has issued 42 notes and now has $2.68 outstanding. It launched with a euro600 million inaugural trade, and quickly followed with a ¥125 billion ($950.64 million) 10-year deal that became the market's benchmark. Although it has outstandings in euro and Swiss franc, the plan was always to tap the Japanese market and 35 of its notes have been denominated in yen. Leitgeb says: "We are a natural taker of yen. The demand for yen-denominated loans and mortgages in Austria is still growing, plus Japan is the only market where we have marketed our name so far." But the issuer is willing to look elsewhere. On March 19 this year it launched a euro750 million 10-year benchmark bond, and because much of the funding requirements of the Hypobanks have been reached, it will start to look at more exotic currencies too. Leitgeb says: "We are still pushing Pfandbriefstelle to gain deeper market-penetration and new investors. We try to combine the need of the Hypobanks for liquidity with the need of the investors for quality." The rating issues surrounding the German landesbanks have allowed Pfandbriefstelle to capitalize on its flexibility, and one dealer says: "The volumes achieved relative to the original size of the borrowing entity are formidable. Levels have been clearly presented and the feedback has been consistent, with no surprises to cause difficult moments at or after trading." Severn Trent has already been noted as a high quality issuer, having won International Financing Review's Best Euro-MTN Programme award at the end of last year. The fact that it has not issued a note since September last year is proof of the programme's success, according to Tom Jack, group treasurer at Severn Trent. It raised $1.1 billion off 39 trades in just eight months, quickly reaching its funding requirement for the year. Although most of its notes were floating rate notes, with 3m Libor plus spreads at around eight basis points, structured deals were not uncommon. Retail price index-linked trades, limited price index-linked trades, swap rate-linked trades and equity-linked trades were all used while the programme was active. Last year the Euro-MTN programme accounted for 25% of Severn Trent's £
March 22, 2002
