Yankee Bond: Nordea’s US$800m AT1
Virtue of patience Additional Tier 1 trades were all the rage in 2024 as yield-hungry investors bought up the riskiest bank paper. Amid this deluge of supply, Nordea eyed the market with patience in anticipation of selling its first AT1 offering in three years.
So when the Federal Reserve delivered a 50bp interest rate cut on September 18 – its first in four years – the Nordic bank snatched at the opportunity to print a US$800m 6.30% perpetual non-call March 2032 offering the following day.
Its offering could easily have been lost in the crowd of AT1 supply that month as European banks raised billions of dollars of capital. September recorded €13bn of such issuance in US dollars, euros and sterling.
Instead, the transaction shone. Not only did Nordea achieve the lowest coupon for a US dollar AT1 transaction by a European bank since early 2022, it also secured one of the tightest reset spreads by such borrowers in the Yankee market.
The trade’s execution metrics dazzled even its own bookrunners, said Petra Mellor, head of bank debt at Nordea.
The bank’s timing was impeccable. Nordea printed its trade with rate-cut expectations at their peak and the 10-year Treasury yield near its lows of the year. Afterwards, the benchmark bond rate climbed sharply as the US economy’s resilience deflated expectations of aggressive Fed easing.
The ability to move in such an opportunistic fashion reflected the bank’s strong credit. Nordea had the enviable luxury of deciding when to come to market because of its well-capitalised position.
Nordea looked to maximise interest with a global marketing exercise that started in the afternoon in Asia, with the bank generating around US$6bn of demand by the time the US session began.
“In Asia, we know investors have been a bit careful after Silicon Valley Bank and Credit Suisse; they have been cautious on the capital side, but they were very much back in the game,” said Mellor.
The book continued to grow, reaching a peak of more than US$11.5bn and more than 500 lines. Leads slashed pricing from initial price thoughts in the 7.125% area to the eventual level of 6.30%, equivalent to a back-end spread of 266bp. The final coupon was much lower than what the bank had hoped to achieve before launch.
“We managed to push so much more because of the very large order book we had,” said Mellor.
Despite the significant tightening, final demand still came in at US$6.8bn. Bookrunners were Bank of America, Barclays, HSBC, Morgan Stanley, Nordea and UBS.
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