October 12, 2017 / 4:10 PM / 11 days ago

REFILE-EIB breaks records

(Refiles to add lead managers on EIB trade)

By Melissa Song Loong

LONDON, Oct 12 (IFR) - The European Investment Bank broke records this week, attracting the largest orderbook for a sovereign, supranational and agency US dollar deal seen so far this year.

Orders for the 2% US$3bn no-grow five-year reached US$7.8bn, as the issuer took advantage of a dearth of supply in the market - with many bankers and investors in the US for the IMF event.

Lee Cumbes, head of public sector debt EMEA at Barclays which led the deal with JP Morgan and TD, put the demand down to “dwindling supply...and a cheapening in rates” after the 10-year Treasury hit 2% last month.

“There was nothing around last week and investors are hungry for dollars,” said another banker.

The 17bp over US Treasuries spread was the tightest spread that EIB had ever achieved.

Cumbes added that, following holidays in the US and Asia last week, EIB reopened the sector with minimal price discovery and a narrow new issue premium.

Despite the narrow new issue premium, the deal went on to tighten in secondary and was quoted at 3.3bp over mid-swaps.

The Development Bank of Japan also did well, bringing a tightly priced 2.5% US$1bn five-year at 48bp over mid-swaps. Orders were in excess of US$3.6bn.

“It’s slightly better than what they were targeting, it’s spot on fair value,” said a lead. Credit Agricole, Citigroup, Daiwa and JP Morgan were bookrunners on the deal.

NOT ALL ONE-WAY

The German State of North Rhine-Westphalia, on the other hand, struggled to fill its order book. It got US$950m for a 1.875% US$1bn deal led by Barclays, Deutsche Bank, NatWest Markets and Scotiabank.

The issuer appeared to put pricing first, printing at a spread of 7bp over mid-swaps. The fact that it was a Reg S deal also meant that demand and spreads had to be precise, according to bankers.

“There was nothing wrong with the pricing, but I guess with the EIB coming out the focus wasn’t on this completely,” said a banker away from the deal. “Maybe they should’ve started out at a wider level, although they could’ve gone earlier.”

RETURN AFTER DEBUT

HSH Portfoliomanagement is the latest name looking to tap the dollar market.

The German bad bank mandated Citigroup, HSBC and JP Morgan for a US$500m no grow two-year Reg S benchmark transaction. The deal follows its debut last month - a US$500m maturing in September 2020.

The latest transaction is expected to surface next week.

Its previous deal was easily covered, but was by no means a blowout – books reached just over US$870m.

“It’s something for specialists,” said a banker away from the deal. “If you have problems with the name and have to count it on the credit lines, it’s something different from if you count the guarantee. It’s about the credit policy in your company.”

The entity, which is jointly owned and guaranteed by the states of Hamburg and Schleswig-Holstein, was set up in 2015 with the sole purpose of buying non-performing loans from lender HSH Nordbank, which was bailed out by the two states in 2009.

Bankers said at the time of the first trade that the issuer planned to bring two more US dollar deals before the end of the year. (Reporting by Melissa Song Loong; Editing by Helene Durand, Gareth Gore)

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