NLB makes it stick at six
Nova Ljubljanska banka clinched its €300m three-year non-call two senior preferred on Tuesday, offering even more juice than regional peer OTP Bank as it priced the trade at 6%.
The Slovenian bank set the coupon in line with opening guidance, which itself corresponded to investor feedback. The bond landed wide of OTP's similar green €400m senior preferred, which priced at 5.5% the previous week, after also failing to move from the opening levels.
"Obviously, the spreads and yields are quite high but the issuers are tapping a dysfunctional market," said a lead. "You have to come with generous levels otherwise it's just not working. NLB and OTP have the same rating, NLB has a smaller balance sheet and so investors wanted some pick-up there, and pricing was anchored around that feedback."
Kasparas Subacius, fund manager at CEE investment firm INVL Asset Management, said that NLB (BBB, S&P) has a few factors in its favour compared to the Hungarian lender (BBB/BBB+, S&P/Scope). Slovenia has a more EU-friendly stance over Russia compared to Hungary, for example, and then there is OTP's own Russian exposure. He also thought a smaller deal size would help NLB's trade.
"Hungary is Triple B rated and the sovereign's 2025 issue trades at around 2.5% in euros, resulting in [OTP's] spread to the sovereign being roughly 3% at issuance," said Subacius.
"Slovenia's 2025 bond, on the other hand, trades at around 0.5% in euros, meaning that the spread to the sovereign in NLB's case is nearly 5.5% – keeping in mind that the Single A rated Slovenian government also holds a 25%+1 share in the bank – which is supportive for the credit."
The lead said Slovenia's curve trades artificially tight due to the ECB's PSPP programme, which helped make the pick-up over the sovereign look particularly large.
NLB's books finished around €390m. OTP attracted orders of €440m-plus.
OTP and others that have beaten a path to the primary market from CEEMEA in recent weeks have relied to a large extent on local support.
"It was maybe a bit less about the locals for NLB than for OTP, but you still need them," said the lead. "Market access is expensive, which is why so many issuers are sidelined, and I think there is a big backlog of supply in credit of issuers who want to do something. But NLB got a trade done at the terms which we outlined to them."
Just like OTP, NLB had announced a Tier 2 trade in January that never materialised. Tuesday's senior preferred bond will help it meet its MREL requirements.
Bank of America, Citigroup, Erste Group and Nova Ljubljanska banka were bookrunners.