Smooth sailing for Danish Ship Finance in covered bond regatta
Danish Ship Finance brought its delayed €500m six-year ship covered bond to fruition on Tuesday amid a flurry of triumphant euro covered trades, drawing almost threefold demand for its first capital markets foray since October 2023.
The trade had been announced on March 3, but faced with volatility in rates, the issuer opted to bide its time. Building on the success of several euro covereds in the previous sessions, Tuesday proved to be the right window.
"The market window is there, we are extremely undersupplied, we don't have the amount of [euro covereds] that we had in previous years, and all the trades are small,” said a banker away from the trade. “So, if you like, you can issue and you have the possibilities to [tap] all maturities."
Leads Barclays, BBVA, Danske Bank, DekaBank and NordLB initiated price talk at mid-swaps plus 85bp area for the no-grow trade. Market participants deemed fair value to be in the low 70s.
A second banker, away from the trade, said the starting level was surprisingly generous. “I was thinking that they would start somewhere in the low 80s camp. Probably, the strategy was to start very generous and then get those basis points back once the book is there.”
The deal was tightened significantly, however. Orders peaked at €1.55bn, enabling leads to execute an 8bp tightening and land the trade at 77bp. The final book tally stood at €1.35bn – including €40m of lead interest.
"It was a good approach,” the lead banker said. "We were convinced that starting at 85bp was the right point, and the books proved us right. [Danish Ship Finance] is obviously a special animal, but having a book of least €1.35bn is a huge outcome, so the 8bp tightening is the correct step here."
Staying in the Nordics, Sweden’s Lansforsakringar Hypotek sold a €500m five-year covered that was three times subscribed.
DekaBank, Erste Group, NatWest, Nordea, TD Securities and UBS started with guidance of mid-swaps plus 40bp area for the no-grow trade and ultimately landed it at 33bp, having garnered peak orders above €1.9bn. The book closed above €1.5bn – including €265m of lead interest.
The second banker said the issuer conceded zero new issue premium, in his view. He also said the price looked tight versus SSAs. “Yesterday, there was a German Laender transaction printing five-years at plus 29bp,” he said. “So this is just a 4bp delta to the SSA space, essentially.”
Elsewhere, New Zealand's ASB Bank ended an almost four-year absence from the euro covered market with a €500m five-year bond. The transaction is also the first euro covered bond from New Zealand since July 2023.
Bookrunners CBA, Deutsche Bank, LBBW, Natixis and UBS opened books at mid-swaps plus 53bp area and tightened to 46bp after orders surpassed €2bn. The book closed north of €2.15bn – including €85m of lead participation.
The trade exceeded expectations, leads said. They put fair value in the mid-40s and said their base case scenario was a 47bp landing.
And finally, Sparkasse Dortmund received sixfold demand for a €250m 10-year mortgage Pfandbrief, its second publicly issued euro covered.
DekaBank, Erste Group and Helaba marketed the no-grow trade at mid-swaps plus 60bp area and set the spread at 53bp, having collected over €1.5bn in orders, including €110m of lead interest.
“The outcome is great,” said a lead banker, who saw fair value in the high 40s. “This was like the other deals, starting with a NIP of 10bp, up to 12bp. So we tightened 7bp, leaving 3bp–5bp on the table for the investors.”
What the market wants
Meanwhile, several tranches of senior unsecured debt also cleared the euro market.
ANZ New Zealand benefited from the quieter backdrop to land a thrice-subscribed €500m three-year senior unsecured that was its first euro bond since January 2024.
Bookrunners ANZ, Barclays, BNP Paribas and HSBC marketed the no-grow deal with IPTs of mid-swaps plus 85bp–90bp, before fixing the spread at 62bp on more than €1.9bn of demand.
"It's low beta, short duration, which is what the market wants after last week's volatility, and it is benefiting from the relatively quiet market," said a lead banker.
Bankers saw the bond's fair value at around 60bp. Nevertheless, attrition was modest, with the final book standing above €1.5bn.
Elsewhere, Santander UK made a rare foray into the euro senior unsecured market, sealing a €1.75bn opco senior deal that comprised a three-year floating-rate note and a five-year fixed-rate note.
The FRN was marketed with initial price thoughts of three-month Euribor plus 80bp area before being launched at 60bp on the back of more than €1.5bn of demand. The size was subsequently set at €750m on a book above €1.2bn.
The fixed-rate note, meanwhile, was offered with IPTs of mid-swaps plus 110bp area before being launched at 85bp, with demand topping €2.1bn. The size was set at €1bn, with demand topping €1.85bn.
The FRN was led by Barclays, Deutsche Bank, Lloyds and Santander, while the fixed note was led by Barclays, Deutsche Bank, Santander and Societe Generale.
The last UK bank to issue a euro opco senior deal was NatWest, which sold a €1bn five-year at 83bp on January 7. That 3.125% January 2030 bond was trading at 78bp on Tuesday, according to Tradeweb figures.