Strong demand for new bond issue
This was KBN's first 5-year USD benchmark transaction since January 2017, and one of the first of this type of issue by a comparable institution in 2018. KBN's target was to raise between USD 1 billion and USD 1.5 billion, depending on the level of interest in the market.
"We announced IPTs (initial price talks) of 3 month Libor +22 basis points on Wednesday afternoon, and saw a steady increase in interest from Europe and the USA over the course of the afternoon and evening, as well as from Asian investors overnight. By the time the orderbook officially opened on Thursday morning we already had indicative orders totalling USD 1.5 billion, and the orderbook grew to USD 2.3 billion over the next hour and a half. The spread was then set at 3 month LIBOR +20 basis points, representing a lower interest cost than we had initially anticipated", explains Thomas Møller, Head of Funding & IR at KBN.
One of our most successful funding transactions
In order to avoid complicating the allocation process, the decision was taken to close the order book half an hour after setting the spread. At that point, the order book had reached USD 2.6 billion, with a very high quality range of investors.
"This is one of the most successful funding transactions we have ever carried out, with demand at the highest level we have seen for one of our benchmark issues for over five years. In addition the quality of the order book was excellent, dominated by central banks and institutional investors from around the world", adds Thomas Møller.
In terms of investor type, central banks and official institutions purchased 46% of the issue and banks accounted for 35%. The geographical distribution was 40% to USA/Canada, 39% to Europe and 21% to Asia. The issue has a coupon rate of 2.5%.
The transaction was carried out in collaboration with Bank of America Merill Lynch (BoAML), J. P. Morgan, Nomura and RBC Capital Markets