NIBC Bank has mandated ABN Amro, DZ Bank, LBBW, TD Securities and UniCredit for its debut soft bullet deal, which will be a €500m five year.
The choice of maturity is widely considered to attract the broadest investor base, critically including bank treasuries and central banks and this should stand the issuer in good stead. Buyers should also be comforted by the issuer’s decision to limit the deal size to €500m.
A near 30bp jump in five year euro swap yields from last week’s low to 1.72% on Tuesday afternoon is also likely to be considered as a boon for many real money investors, such as asset managers, insurers and pension funds.
Until now, NIBC only ever issued conditional pass-through covered bonds. However it recently followed the lead of other smaller Dutch banks, registering a new €10bn soft bullet programme with the Dutch central bank on May 30.
The soft bullet programme is expected to be rated AAA by Standard & Poor’s. Over-collateralisation is expected to rise from around 2.5% in the issuer’s CPT programme to almost 30% in the newly structured soft bullet programme.
For price comparison purposes, leads will take into account Achmea Bank’s €500m May 2029 which was launched on May 17 and was the last Dutch covered bond to be issued. Before that, NN Bank issued a €500m May 2032 on May 10.
These two deals were respectively spotted by lead managers at 11bp and 8bp over mid-swaps on Tuesday before NIBC’s deal was announced. Although the shorter five year maturity should ensure tighter pricing, NIBC has historically traded 1bp-2bp wider than NN Bank and Achmea Bank in the secondary market.
At the same time, NIBC’s outstanding €500m conditional pass-through 0% March 2027 was indicated on a mid of 9bp. Soft bullet deals are typically priced inside CPT transactions from the same issuer.
However, rival bankers questioned the CPT spread, noting that real bids for older low coupon transactions were often 2bp wider than those indicated on electronic trading platforms.