LF Bank in tight Skr1.2bn AT1 debut

Länsförsäkringar Bank (LF Bank) sold its inaugural Additional Tier 1 issue on 2 June, a Skr1.2bn (Eu128m) perpetual non-call five issue that achieved tight pricing relative to international markets and also LF’s Swedish peers in the domestic market.

LF Bank announced its deal the week before launch and with lead manager SEB then held investor meetings in Sweden the two days before execution, as well as an investor call for other Nordic accounts, before launching the transaction on the Tuesday.

LF was able to price the Skr1.2bn floating rate note —which, like most Swedish AT1, is structured with a temporary write-down mechanism — at 325bp over three month Stibor on the back of an almost twice oversubscribed order book. A syndicate banker away from the deal noted that this was the same level at which SBAB sold its first AT1 issue in March, although this has since tightened.

“For LF, this is a fairly tight print,” he said, “particularly given that they have a smaller buffer to trigger.”

Martin Rydin, head of treasury at LF Bank, said that the overall execution represented a strong result, noting that the market had not been in as good shape as when SBAB issued in March, and also that the pricing was just 10bp wider than where Nordea issued AT1 in Swedish kronor before SBAB.

“We can be very pleased with the result,” he said.

The deal was driven by Swedish demand, according to Rydin, although some other Nordic investors participated.

LF chose to issue in Swedish kronor, he said, because the size it required was more suited to the domestic market, and because the pricing available was equivalent to some 75bp inside where dollar AT1 paper from the larger Swedish banks has been trading.

“There is currently a big pricing advantage in the domestic market,” he said.

Rydin said that, like its peers, the issuer launched its inaugural AT1 issue to optimise its capital structure and to make sure it is able to meet requirements such as the leverage ratio with a good margin.

He said that the Skr1.2bn issue meets all the bank’s AT1 needs for the foreseeable future.

“We communicated to investors that this is their only chance to buy LF Bank AT1 in the next few years,” he said.