SEB fills bucket, Danske wraps up with 12NC7 T2s

SEB priced a Eu1bn (Skr9bn) 12 year non-call seven Tier 2 issue on 22 May that an official at the issuer noted was the first Swedish deal this year to feature a 12NC7 structure, while Danske Bank had on 16 May issued a Eu500m 12NC7 deal that wrapped up planned adjustments to its Tier 2 levels.

SEB’s issue was launched to meet regulatory requirements for Tier 2 capital of 2% of risk-weighted assets and to cover additional Pillar 2 requirements for Tier 2 capital, said John Arne Wang, head of treasury management at SEB. Before the transaction the bank had Tier 2 capital of 1.1%.

The deal was the fourth Nordic Tier 2 transaction of the year, and the first from Sweden to feature a 12NC7 structure, with Svenska Handelsbanken and Swedbank having done 10NC5 deals. Wang said that the structure was chosen because investors showed a preference for it over 10NC5 and it was a better fit for SEB’s maturity profile.

“With a 12NC7, you can offer investors additional yield from the swap curve without having to pay up much for it,” he said.

Leads Deutsche, Goldman Sachs, Morgan Stanley, RBS and SEB priced the Eu1bn issue at 145bp over mid-swaps, after guidance of 145bp-147bp over and IPTs of the 150bp over area. More than Eu1.5bn of demand was registered for the issue, with Wang emphasising the quality of the order book.

“There was no inflation in the order book, and all of the demand was pure end-user interest,” he said. “That is probably a function of less momentum in the market than what was experienced two to three weeks ago, when a lot of order books were inflated due to investors jumping on the bandwagon.”

Dankse had tapped into that busier market with its Eu500m (Dkr3.73bn) no-grow 12NC7 Tier 2 issue. The deal marked a return to a market in which Danske Bank had been active last year while it awaited clarity on tax issues in order to be able to sell an AT1, which it did in March.

“The investor community knew that we had plans to make some adjustments to our Tier 2, so it was then just a question of timing,” said Peter Holm, senior vice president, group treasury, Danske Bank. “Our capital management will respond to new developments, of course, but for now we have completed our plans.”

The deal came after the issuer on 11 April redeemed Dkr24bn of government hybrid Tier 1, a move that had been high on the bank’s agenda and was behind Tier 2 issuance in 2013 and its AT1, and also followed an upgrade by Standard & Poor’s on 29 April ahead of the bank reporting its first quarter results on 1 May.

Leads BNP Paribas, Danske, RBS and Société Générale began marketing the Eu500m maximum 12NC7 at the 165bp over mid-swaps area and then set guidance of 155bp-160bp after taking IOIs of Eu2bn. The deal was priced at 152bp over on the back of some Eu4.7bn of orders from 310 investors.

Holm that the new deal came at a much tighter spread than a 10NC5 Tier 2 deal in September despite having a longer maturity.

“The spread was very encouraging,” he said.