At €750m Volta II is the biggest Portuguese securitization since the crisis, taking the mantle from the €450m Volta I priced in May last year, and is a further boost for a periphery jurisdiction that has seen its funding costs scream inwards in the last 12 months.
“ABS supply is limited this year versus redemptions and that is driving investors to look at new asset classes, but the demand for these securitizations is not momentum driven,” said Paulo Gray, principal and managing director at StormHarbour Securities.
“The demand is driven by a fundamental analysis of the credit and investors feeling very comfortable with the legal framework and the sustainability of the electricity market in Portugal.”
Like its predecessor, Volta II is backed by payments from the distribution grid operators to recover the difference between Energias de Portugal’s power generation costs and the tariff levels set by the national electricity regulator.
Arranger StormHarbour and joint lead managers Santander and JP Morgan put out initial price thoughts of 3% yield area for the senior notes of Volta II, which are rated BBB high/BBB/Baa3 and have a weighted average life of two years.
A minimum €500m size target was surpassed by demand at that price level, and a €750m transaction was printed at 3% on Wednesday. Volta I’s senior bonds were trading just inside 3% on the secondary market before the new deal was announced, having been priced at 4.25% last May.
Volta II bonds were placed with 33 investors, compared to 29 buyers for Volta I.
“Investors expressed a desire to have full allocation, and based on the demand we had for the transaction and the quality of the order book there was a very strong case for a €750m deal,” said Gray. “The book was a mix of investors that bought Volta I, investors who had bought Volta I on the secondary market and investors looking at this asset class for the first time.”
UK investors led the bid with 44%, followed Dutch accounts with 16%, Nordics 11%, Portugal 11%, France 9%, Germany 5% and Spain 4%. Fund managers took 91% of the paper, banks 6% and insurers 3%.