In the dollar market L-Bank chose to delay a deal due to what it described as “competing supply”, after awarding a mandate on Monday for a five year benchmark before fellow issuer Cades hit screens later in the day for a deal in the same currency and tenor.
L-Bank’s mandate — for Barclays, Deutsche Bank, JP Morgan and RBC Capital Markets — had hit screens earlier on Monday afternoon than Cades’s, which also included JP Morgan, as well as BNP Paribas, Citi and Royal Bank of Scotland.
However on Tuesday morning, while Cades opened books with guidance of mid-swaps plus 62bp area — having posted initial price thoughts of low 60s on Monday — L-Bank released a note announcing the postponement of its deal.
“L-Bank always tries to right size its transactions and provide a liquid benchmark sized offering at fair terms and conditions for all parties involved,” said the note.
“The issuer views the [dollar] and [euro] markets as core strategic markets and, as such, wants to maintain a well-defined liquid yield curve in each currency.
“Given competing supply today, L-Bank was not of the opinion that these objectives could be achieved in the current market environment. As a result, L-Bank has decided to delay the transaction and would like to thank investors for their interest and support.”
Some bankers on the L-Bank deal said that the competing supply was, specifically, Cades.
“I wouldn’t read too much into this other than we got gazumped,” said one. “It’s nothing to do with market tone. There’s a lot of supply going through. And it’s nothing about L-Bank as a credit. It’s just the investors with a limited amount of cash this week went for the slightly cheaper deal.”
L-Bank had posted initial price thoughts of mid 50s over swaps on Monday, several basis points tighter than the price thoughts Cades came out with later that day.
“The cheaper trade wins,” said a head of SSA syndicate away from both deals.
Away from the Cades/L-Bank debacle, The Federal Open Market Committee is meeting on Tuesday-Wednesday, with information relating to the meeting expected to be released on Wednesday afternoon [GMT].
A head of SSA syndicate away from this week’s deals said that many of the issuers that wanted to print in dollars had taken their opportunity to act last week, when a total of six benchmark deals hit the market.
“I would expect this week to be a bit quiet for dollars by comparison,” he said.
“Last week there was a crazy number of deals as investors wanted to get in before the European Central Bank’s policy meeting, this week’s FOMC meeting and Easter. After a very busy start to the month I am expecting to see things slow down.”
Muni Fin debuts
Meanwhile, Finnish agency Municipality Finance printed its first euro benchmark on Tuesday.
The Finish agency priced its no-grow €1bn deal on Tuesday at minus 1bp via leads Barclays, Danske Bank, JP Morgan and Société Générale, on the tight side of guidance of mid-swaps flat area. The total book size came to over €1.6bn.
A bookrunner on the deal noted that it followed the encouraging atmosphere for SSAs that has been present since a European Central Bank meeting on March 10.
“In the immediate aftermath of the ECB there was a positive tone for the SSA market,” said the SSA syndicate official.
“I don’t think it necessarily changed the directionality of where Muni Fin came on the curve, but the positive tone helped the broader market. To say the ECB impacted directly on the trade is too far a stretch. But SSAs were well bid immediately after the ECB and the last couple of days have been more balanced.”
Muni Fin's deal followed a downgrade in the Finnish sovereign's credit rating by Fitch on March 11, cutting from AAA to AA+. Fitch cited a number of factors for its decision, including a projected increase in Finland's debt-to-GDP ratio from 62.6% to 67.5% in 2020.
Meanwhile, Standard & Poor's is to review its AA+ rating (with negative outlook) of Finland on Friday. Moody’s is scheduled to examine it in June, and is the only one of the three major credit ratings agencies to still rate the country triple-A.
A bookrunner on Muni Fin's deal said that the Fitch downgrade had had a limited impact on MuniFin.
“Even though there’s no explicit link some investors might look at MuniFin as a comparable to Finland,” he said.
“We mentioned it [the scheduled S&P review of Finland’s rating] when marketing as a courtesy to make sure investors were aware. Fitch downgraded Finland last week, but there was minimal reaction in its curve. That suggested the move was either expected or priced in.”
A fellow bookrunner expressed a similar sentiment.
“While Finland has some considerable problems it is still a top-rated name in core Europe and I think that there are European countries out there that are a lot worse,” he said.
“Investors relished the chance to invest in a Nordic name with a solid reputation, something which was reflected in the book of €1.6bn.”
Meanwhile, KommuneKredit was set to print a seven year euro benchmark on Wednesday, after leads BNP Paribas, Citi, Danske Bank and JP Morgan circulated initial price thoughts of 3bp over mid-swaps area on Tuesday for a €1bn no-grow seven year euro benchmark.
Craig McGlashan, SSA, MTN and CP editor +44 20 7779 7299
Benjamin Jaglom, deputy SSA editor +44 20 7779 7365
Lewis McLellan, MTN and CP reporter +44 20 7779 7350
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