Monday, 16 July 2018

​Attractive pricing lures Helaba to public market

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Competitive funding levels lured Landesbank Hessen-Thueringen to print its first senior public benchmark in years, a €1bn two-year FRN that attracted €1.1bn of demand.

While Helaba is no stranger to the senior market – it will raise €7.5bn in the format this year, down from 2014’s €8.9bn – it focuses mostly on the domestic arena.

“We tend to get our proceeds directly from our savings banks or through their retail network via the sale of structured products,” an official at the borrower said.

Helaba’s ownership is dominated by the savings banks sector, at 88%. According to an investor presentation, the institutional part of the savings banks network makes up 41% of its investor base, and the retail part another 17%.

“However, we saw an opportunity in the market and the pricing was attractive, so we decided to target a different investor base,” the official said.

The short maturity and floating format meant that asset managers and money market funds were the primary audience. Leads BNP Paribas, Commerzbank and Helaba announced guidance at 27bp area over three-month Euribor on Tuesday morning for an expected €300m transaction.

However, at the next update, the trade size had grown to a much more substantial €1bn. Guidance was consequently revised to a final 24bp over.

The coupon was set much higher than the discount margin, at 45bp over Euribor, with a resulting above-par 100.43 reoffer price.

“It’s not that unusual and we have seen several trades with similar features,” the official said. “The problem is that there is an intrinsic floor on bearer bonds issued out of Germany and the coupon can’t go below zero. By pricing the deal this way, it provides a cushion for investors against that risk.”

He added that some investors were restricted by a 100.50 price, which is why the trade printed just below that.

A large portion of the paper was sold to domestic investors, at 64%, with the rest sold across Europe.

“It’s a very positive result for them; they haven’t been in the senior public market for ages, as they don’t have real funding needs,” a banker said. “However, it’s a strong name that’s Single A rated and has quality as well as scarcity value. It’s a strong German Landesbank and investors clearly had no concerns putting extra liquidity to work in a two-year FRN.”

Helaba is rated A1/A/A+ at the senior level and does not have public senior bonds outstanding, according to Tradeweb. It is much more frequent in the covered market, where it raised €6.3bn in 2014 and is planning to sell €4.5bn this year. The official did not rule out another covered benchmark before the end of the year.    



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