“The NIPs for these kind of trades have
gone up. We saw that with the Belgian
sovereign, Portugal, and KfW. The regions
and Laender are also offering premiums
RANGINGûFROMûBPûTOûBPûANDûSOMETIMESû
even higher,” the banker away said.
Books edged up further and were last seen
ATûõBNûPLUS ûCOMFORTABLYûCOVERINGûTHEû
õBNûPRINT
The banker away from the transaction
said the issuer had reached its size target
but reckoned the spread was on the wide
side. He said pricing was probably
impacted by the fact that markets looked
better earlier in the week, when Belgium
and Wallonia came, than on Friday.
h4HIRTY
lVEûOVERûSOUNDSûMAYBEûAûBITû
cheap, which is good for investors, of
course. In the end, you have a differential
BETWEENû7ALLONIAûANDû&LEMISHûOFûBP û
where you would expect maybe typically to
have slightly more than that considering
the difference in rating,” he said.
Wallonia is rated A2 by Moody’s and the
Flemish community AA by Fitch. Wallonia
came in line with talk at 45bp over OLOs
and has since tightened 2bp or 3bp.
4HEûLEADûSAIDûSOMEû32)
FOCUSEDûACCOUNTSû
were involved but that the sustainable
element was not a focal point.
The banker away from the deal said the
INmUENCEûOFûTHEû32)ûLABELûWASûHARDERûTOû
pinpoint.
“It was easier to detect a small help from
the sustainable element in terms of book
size and pricing when we had a normal
secondary market.”
The Flemish community is looking at
some long-dated social housing funding for
later this year, the lead said.
"ELlUS û#REDITû!GRICOLE û+"# û,""7ûand Societe
Generale ran the trade.
Also in the market on Friday, LAND BERLIN
TAPPEDûITSûû*ANûû,3!ûATûSWAPSûPLUSû
20bp through "AYERN,", taking the deal up to
õBNMECVOR DRAWS BUMPER DEMAND
WITH FIRST LSA IN SIX YEARSThe STATE OF MECKLENBURG-WESTERN POMERANIA
-EC6OR ûBROUGHTûITSûlRSTûPUBLICûBENCHMARKû
INûSIXûYEARSûONû4UESDAYûASûTHEûmURRYûOFû
issuance from Germany showed no signs of
slowing, spurred by the coronavirus-related
lSCALûSTIMULUSûPROGRAMMES
4HEûõMûSEVEN
YEARû,3!ûDREWûMOREû
than €2.5bn of demand, enabling the leads
to move the pricing level by 3bp to 20bp
over mid-swaps.
A bookrunner said MecVor picked a
SEVEN
YEARûTENORûlRSTLYûBECAUSEûTHEûISSUERû
liked to long trades but not in huge sizes
and because seven-year swaps looked okay
on Tuesday morning.“In the old days when the spreads were in
negative territory, you were happy when
YOUûHADûõBNûINûTHEûBOOKûFORûAûTHREE
quarters of a billion deal,” a banker away
from the transaction said.
The deal’s execution followed a similar
pattern to recent issuance from its country
PEERSû,ANDû.27 ûONEûOFûTHEûCOMPARABLESû
FORûTHEûTRADE ûPRICEDûAûõBNûSEVEN
YEARû,3!û
on March 25 that attracted €2.3bn in orders
ANDûWASûQUOTEDûBPûTIGHTER ûATûMID
SWAPSû
plus 26bp, on Tradeweb.
“Mid-swaps plus 23bp area was a good
starting point. I was personally expecting it
at plus 22bp area, since secondaries were
trading a bit tighter yesterday,” the banker
away from the deal said.
!ûBOOKRUNNERûSAIDûITûWASûSTILLûDIFlCULTûTOû
evaluate new issue concessions given the
lingering uncertainty in secondary market
quotes. He added that though Laender bonds
appeared a bit tighter on screens, the bid/
ask spreads were so big that they were in his
opinion a sign that there was not that much
mOW
3TILL ûWHILEûITûMIGHTûBEûDIFlCULTûTOû
establish what concessions there are,
investors clearly see value in the new issues.
3IMILARûTOûTHEû(AMBURGûSIX
YEARû,3!ûTHATû
SAWûBOOKSûSURGEûFROMûõBNûTOûõBNûAFTERû
THEûSPREADûWASûlXED ûDEMANDûSOAREDûFORû
MecVor after the level was set.“Investors usually wait to see two things:
is it working and is the spread good? I
think the former was key in the past,
whereas the more important factor now is
the latter. Once it is set, investors come in
like crazy,” said the bookrunner.
The rarity of MecVor’s name also helped
with the demand, especially with that
coming from German investors. The
bookrunner said he expected 70%–80% of
the notes to go to domestic investors and
80% to bank treasuries.
“We also had a couple of pension funds
and insurances as well, that was good to
see,” he added.AND AGAIN
3TAYINGûINûTHEû,AENDERûUNIVERSE ûTHEûFREE
STATE OF BAVARIA privately placed a €500m
YEARû,3! ûJUSTûFRESHûFROMûPRINTINGûAû
€3bn three-year the week prior.
The state began marketing with
GUIDANCEûOFûMID
SWAPSûPLUSûBPûTHEû
number) for a trade with a minimum size
of €250m.
h)ûTHOUGHTûBPûFORû
YEARSûWASûTOOû
tight, considering Pomerania started at
plus 23bp for a seven-year. I was really
angry and thought they were going to
break the market here but they proved
to be right,” a banker away from the
transaction said.34 International Financing Review April 4 2020Portugal grabs record as
coronavirus push steps up
SSAR Sovereign places largest single-tranche bondPublic sector names stepped up their push for
coronavirus funding as the REPUBLIC OF PORTUGAL
became the fourth sovereign in quick succession
to turn to international capital markets, while
Germany’s KFW got away its second benchmark
in a week.
After Austria, Belgium and its neighbour
Spain all drew books of €30bn or more for
new syndications – Belgium achieving a sector
record of more than €57bn for non-EM SSAs –
Portugal’s €5bn offering tapped into the same
rich seam of demand.
Although the weakest credit of the four –
rated Baa3/BBB/BBB (Moody’s/S&P/Fitch – all
Positive) it attracted interest of some €27bn
(excluding JLMs) for its October 2027 bond. This
enabled it to set its largest single-tranche bond,
though it had previously issued a €5.5bn dual-
trancher.
The oversubscription enabled the lead
managers, Barclays, BBVA, CaixaBI, Credit
Agricole, JP Morgan and Morgan Stanley, totighten the jumbo deal 4bp to mid-swaps plus
86bp.
The deal’s success came despite weaker equity
markets on Wednesday morning, a lead manager
emphasised.
“That sends quite an important message for
the market – that this kind of credit could see its
order book keep growing and even achieve its
biggest bond against that backdrop. Investors
are now distinguishing between asset classes in a
way that they weren’t quite recently.”
Moreover, Portugal pushed its new issue
concession down to a single-digit number. At the
deal’s launch fair value was around 74bp over
mid-swaps, versus guidance at the 90bp area.
But with references cheapening and the new
issue spread tightened repeatedly, the premium
halved to 8bp. “That’s fairly comparable to
Belgium yesterday,” the lead said.
“Are new issue premiums coming down
because deals are coming tighter or is there an
element of curves finally widening out and being6 IFR Bonds 2327 p 25 - 65 .indd 34 03 / 04 / 2020 20 : 28 : 58