Mediobanca received an exuberant welcome to the green bond market on Tuesday as it sold a €500m senior preferred debut, allowing it to price the deal inside its conventional secondary curve.
The deal inaugurates Mediobanca's new Green and Sustainable Bond Framework, which it introduced to investors in a series of calls last week.
Leads BBVA, Mediobanca, NatWest Markets, Santander and UniCredit opened books for the €500m no-grow seven-year deal with IPTs of mid-swaps plus 165bp area.
Guidance was set at 140bp area, before the spread was fixed at 135bp on more than €3.5bn of orders.
Bankers said the deal was priced up to 10bp inside fair value, based on Mediobanca's senior preferred curve.
That was in contrast to most senior benchmarks priced by banks last week, bankers noted.
"It's obviously a reflection of where the market is right now," said a banker at one of the leads. "The market is very strong and issuers are able to price aggressively."
"But it also reflects the willingness of ESG investors to withstand negative new issue premiums. There were a few investors that did push back, that did drop out, but overall the order book was quite stable."
The lead banker added that many investors that had not previously bought Mediobanca's debt participated in the new issue.
Besides the deal's green element, bankers also attributed the strong demand for Mediobanca's deal to the triple-digit spread on offer.
Italian senior paper offers greater potential for performance if spreads compress as expected over the coming weeks, in contrast to the already tight levels seen in core European senior paper, bankers said.
"Thirty basis points tightening and €3.5bn of demand is a great result ... but then again there is still some spread to be found on this," said a syndicate banker away from the leads.
Proceeds of the green bond will be used to finance loans to projects including renewable energy, electric vehicle battery research and development, the purchase and modernisation of electric trains, and green housing.
Mediobanca's pool of eligible projects amounts to €528m, 79% of which were originated in Italy and 21% in Germany.
The bank said double-digit growth in its green and sustainable retail loans and a material corporate green growth trend should further increase and diversify its green and sustainable loans portfolio going forward.