DNB Bank drew praise for its approach to a difficult market environment as it landed an assured €750m six-year non-call five green senior non-preferred transaction on Tuesday, with the deal almost thrice subscribed.
Against a backdrop of rates volatility and falling equity markets, led by bank stocks, some issuers and their lead managers found encouragement in what is now the rare sight of tightening credit indices on Tuesday morning and seized their chance to launch senior unsecured and covered bond transactions.
Euro-denominated bank senior bonds from large, national champion European banks have been in particularly short supply in recent weeks, with DNB's deal only the third of the month to fit that bill and the first since Ireland's AIB Group sold a €750m green holdco senior on October 16.
"There has been a lot of volatility in the market since then and so a lot of discussion on this and other [prospective] trades about what the right starting and landing points are and how much concession investors need in this market," said a banker at one of the leads.
"It is not quite unprecedented, but it is towards the upper end in terms of the disagreement between where various banks see everything from fair value to landing to the start point, making it very difficult for issuers to have a strong view on whether or not to do a transaction.
"We are hearing from a number of issuers that the ... range of the indications they're getting is upwards of 30bp. That is the biggest problem for issuers right now."
The lead banker said the strategy that the syndicate and the Norwegian issuer's funding team ultimately adopted was vindicated.
"DNB is a Rolls-Royce credit," he said. "If anyone can reopen the market and have a fantastic trade, it would be them."
The deal, which is expected to be rated A2/A (Moody's/S&P), was marketed with initial price thoughts of mid-swaps plus 155bp area via Barclays, Citigroup, Deutsche Bank, DNB and Goldman Sachs.
Without any intermediate guidance stage, the leads went on to set the spread at 130bp and the size at €750m on more than €2.1bn of demand. The final book stood above €2.2bn.
The new issue premium was in the high single digits at most, bankers said, estimating that fair value was in the low-to-mid 120s.
"That's a good result in the end and no more than we had seen in recent deals," said a banker away from the leads.
Bankers on the outside praised the deal's execution, saying the issuer had taken the right approach for the current market conditions by moving straight to final terms, being transparent in its aims and not printing a larger size. Although a cap on size was not mentioned in written updates, sources said the issuer and its leads had verbally communicated that they would not print a larger transaction.
"The market appreciated the clinical execution," said a second banker away from the deal.
DNB's approach offered a blueprint for other issuers to follow, bankers said, although blackout periods and an imminent European Central Bank meeting on Thursday will constrain supply in the near term.
The lead banker added that the green label further de-risked the trade. The deal is DNB's second euro-denominated green SNP bond of the year, following a €1bn five-year non-call four issue in July. That 4.5% July 2028 non-call 2027 note was bid at 106bp on Tuesday, according to Tradeweb figures.
All of DNB's euro senior issuance has been in green format this year. The bank also raised €2bn of green senior preferred paper across two deals in February and March.
In the covered bond market, meanwhile, SpareBank 1 Boligkreditt and Landesbank Hessen-Thueringen navigated the turbulence in rates by tapping sub-five-year points on the curve.
SpaBol's €1bn 4.75-year (July 2028) offering was marketed with initial guidance of mid-swaps plus 40bp area.
Leads Credit Agricole, DZ Bank, Natixis and Santander ultimately set the spread at 36bp, with books closing above €1.5bn.
Helaba meanwhile landed a €750m long three-year public sector covered bond. The August 2027 note was marketed with initial thoughts of mid-swaps plus 18bp area via ABN AMRO, DZ Bank, Erste Group, Helaba, Santander and Scotiabank. With books excluding JLM orders topping €1bn at guidance of 16bp (+/-1bp), the spread was set at 15bp and the size at €750m.