SEB received four-fold final demand for a €500m five-year green senior non-preferred bond on Monday, even while pricing the deal with no new issue premium. Market participants said the outcome exceeded expectations and was aligned with recent successful senior supply, confirming of the resilience of the senior space against the current market backdrop.
“At the moment, the market wants to sit on its hands. It wants to see Bank of Japan, the Fed, Bank of England, the jobs data and the nonfarm number, but if you’ve got national champion quality and a bit of scarcity, it definitely helps,” a lead banker said.
Joint bookrunners Goldman Sachs, HSBC, JP Morgan, Natixis and SEB began marketing the no-grow trade at mid-swaps plus 140bp area.
“You look at a deal and you think from the start: it looks fair, that should work,“ a banker away from the trade said. “This one surprised a bit on the upside, whether you look at the book or the price travel. It proves that there are some names for which investors will certainly come out and play.”
The leads were able to refine pricing to 110bp after orders peaked at €2.5bn, the green label helping.
“We probably surpassed our base case landing by a few [basis points]. … Whichever way you cut it, it’s a zero new issue premium, maybe even negative, depending on how you value the ESG component," the lead banker said, adding that being alone in the euro market was also helpful for SEB.
The book experienced some attrition after spread was set at the tighter level and closed above €2.1bn.
“Another stellar trade following last week’s DNB and Rabo trades and frankly the market is so open for it,” said a third banker, away from the trade. “It’s been working quite well for quite some time, you see some good demand in the overall market for unsecured. There was only a bit of a risk-off tone ahead of the earning season, but then with DNB, Rabo and now SEB, it makes sense from an issuer's perspective to consider pre-funding when looking at current prices.”
SEB seized one the few windows the week will have to offer, given looming holidays across Europe and the busy data calendar. The success of its trade may prompt further established names to forge ahead in the next available window.
“It’s a window market for sure, we’ve seen many good transactions on the senior side and the secondary market is also okay – DNB, Nationwide and Rabo have all tightened in the secondary – so there will probably be more supply,” said a fourth banker, away from the trade.
“If you need to do something, it is a good window to do it now. If you wait, there’s too much geopolitical uncertainty, [plus] it’s November and we’re heading towards Christmas time.”