Size no obstacle as ‘fun’ Jyske euro AT1 first sells out

Jyske Bank issued its first euro Additional Tier 1 (AT1) on 14 September, a EUR150m (DKK1.12bn) perpetual non-call 10 issue that attracted EUR775m of orders and was priced with the lowest coupon for a euro AT1 from the Nordic region, with its sub-benchmark size no hindrance, according to the issuer.

The Danish bank had previously issued AT1 only in Nordic markets, selling DKK500m and SEK1.25bn (DKK974m, EUR131m) issues, both perpetual non-call 5s, in 2016. In March, it sold a Eu300m 12 year non-call seven Tier 2 issue.

Merete Poller Novak, head of debt investor relations and capital markets funding at Jyske, said that following these trades, the bank had a need for duration. Whereas the preference in the Swedish krona market is for trades with a five year call date, the euro market has better depth at the longer end, she said, although even in euros such issuance is relatively rare.

“The beauty of doing a euro trade from our perspective is the diversification provided,” she added, “as it should appeal to a broader variety of investors than a Danish krone or Swedish krona trade, and further underpin our capital market access for the long run — while also giving those that already know us and have lines in place the chance to buy Jyske in a product with a bit more ‘fun factor’.”

The mandate for a euro sub-benchmark perpetual non-call 10 AT1 was announced on 13 September, and the deal launched at 9:30 CET the following day with initial price thoughts of the 5.125% area. The book closed at over EUR800m and the deal was ultimately priced at 4.75%.

The coupon is the lowest for a euro-denominated AT1 from the Nordic region, and the same coupon as a perpetual non-call 12 AT1 for HSBC in June 2017. Novak added that there was no “small size discrimination” in terms of the price Jyske was able to achieve.

The final order book stood at EUR775m, including 130 investors.

The EUR150m transaction fills Jyske Bank’s current Pillar 1 and Pillar 2 AT1 allowance, and Novak said further euro-denominated capital transactions should not be expected from Jyske in the short to medium term.

Jyske went on to issue, on 23 November, what could well be its last senior unsecured benchmark, a EUR500m five year FRN. The deal came after the Danish FSA in October clarified its implementation of MREL, with senior debt issued before 1 January 2018 grandfathered as MREL-eligible until the end of 2021. Jyske now expects to begin replacing its old senior unsecured bonds with MREL-compliant senior non-preferred (SNP), most likely during the second half of next year.

“During 2019-2021 we expect to issue one euro benchmark SNP bond a year until all our MREL requirements have been fulfilled with SNP,” said Novak, with Jyske’s needs estimated at EUR2bn-EUR2.5bn.