2 year benchmark
Kommunalbanken Norway (KBN), rated Aaa / AAA (stable / stable) by Moody’s / S&P, priced a new 2-year benchmark on Wednesday 30th August. The new US$ 1bn KBN bond, due 9th September 2019 pays a semiannual coupon of 1.5% and was priced at a spread of 4bps over mid-swaps implying a reoffer yield of 1.588%. The placement was carried out through a syndicate comprising 3 lead managers: BMO Capital Markets, Citigroup and Mizuho International.
This is KBN’s third US$ benchmark of 2017, having issued in both 5-year and 3-year earlier in the year. Despite the increased headline risk and more volatile markets post-summer KBN demonstrated their safehaven status by attracting a strong flight-to-quality bid from a broad range of accounts and some new
funds to the KBN name despite their long history of issuing in the US$ benchmark market
The transaction priced inside IPTs which has proven difficult for issuers in recent comparable US$ supply and despite the recent swap spread tightening.
The mandate was announced on Tuesday 29th August at 1pm London time with IPTs at MS+5bp area for a US$1bn (no grow) 2-year benchmark. Demand grew strongly over the course of the afternoon and overnight in the US and Asian sessions. Books were officially opened on the following day in the London morning with IoIs in excess of US$1bn and guidance at MS+5bp area.
Within less than an hour, and as the high quality orderbook continued to grow, the spread was set at MS+4bp – 1bp inside guidance and representing zero concession to the outstanding KBN curve. Final books were in excess of US$1.43bn.
Summary of distribution
The orderbook was dominated by top quality accounts, highlighting KBN’s appeal to the global investor base. With just under 50 orders the issuer also achieved granular distribution for a US$1bn trade.
This transaction enjoyed one of the highest distributions into the Central Bank / Official Institution accounts of recent KBN trades which demonstrates the ongoing and expanding focus from this core investor group.
KBN finances lending to the Norwegian local government sector through borrowing in the international capital markets. Through a diversified funding base covering many regions and diverse investor categories, the local government sector is provided stable, low cost and long term funding.
KBN is targeting a borrowing programme of US$ 13-14 billion for 2017 and has completed approximately 12bn plus year-to-date, including this transaction.
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