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Tuesday, 24 October 2017

Double A Svenska Samurai nails 1bp swap spread

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Sweden’s Svenska Handelsbanken has priced three-tranche Samurai bonds to raise ¥66.8bn (US$556m), despite turbulence in the market during bookbuilding.

A ¥59.2bn five-year fixed-rate note was priced at par, with a coupon of 0.292% to yield 1bp over yen offer side swaps, having been marketed on Monday at 1bp–2bp over.

The spread was tighter than ANZ’s Samurai that priced at 2bp over swaps in July, underlining the issuer’s ability to move aggressively in a weak market. Both banks are rated Aa2/AA–/AA–.

“Obviously some were cautious under-current market conditions, but Svenska is a really strong credit,” said a banker on the deal. “It has a high market share in Sweden, it has high capital ratios and a large portion of its operations is in retail banking.”

These factors supported its ability to narrow its spread to the 1bp territory, a level which has been sought after by issuers but also met with strong resistance from Japanese investors. The last Samurai to issue at the 1bp swap was in January, when Aa2/AA–/NR rated NAB priced a ¥107.8bn five-year at 1bp.

The final pricing on the five-year bonds was around 4bp wider than the bank’s secondary euro curve. Svenska’s outstanding August 2020s were spotted around euro MS+40bp. The premium over those bonds was considered slightly smaller than the usual 5bp–10bp extra.

But the narrow spread was more challenging to sell in a shaky market that was rocked by tumbling global equities.

“With the low yen swap spread, not many accounts can find value to buy this kind of high-grade name,” said the banker.

Participants came in with smaller allocations than usual, but the banker added that Svenska attracted most investors who play in Double A Samurais.

Two other tranches were added following reverse enquiries. A ¥4.6bn 10-year fixed-rate piece was priced at par, with a coupon of 0.734% to yield 12bp over YOS, from 10bp–15bp guidance. A ¥3.0bn five-year floater was priced at par to yield 5bp over three-month yen Libor, versus guidance of 5bp–6bp.

The bonds are expected to be rated Aa2/AA–/AA–. Settlement is on September 3.

Bank of America Merrill Lynch, Mitsubishi UFJ Morgan Stanley, Nomura and SMBC Nikko were joint bookrunners.

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