Senior showdown: Investors baulk at Bank Austria and Popolare
By Aimee Donnellan
LONDON, Oct 9 (IFR) - Two European banks yanked their senior bond deals from the market before pricing on Monday afternoon as investors proved wary of weaker peripheral names and remain unconvinced by Austrian unsecured debt.
UniCredit Bank Austria (A3/A) and Banco Popolare (Baa3/BBB-/BBB) struggled to find demand for their respective five- and long three-year deals, despite impressive order books built by rivals Intesa Sanpaolo (Baa2/BBB+/A-), Italy's largest retail bank, and Dutch F Van Lanschot (A-/A-) the same day.
"What we are seeing in the market is that not everyone has access and there are boundaries that prevent certain deals from getting done," said a FIG banker involved in one of the pulled transactions.
Some syndicate bankers say that investors are still shying away from anything other than national champions, while pricing, maturity and timing are also key to a transaction's success.
One banker considered the pricing on the Popolare deal to be too tight, for example, while others said competing supply hampered both pulled transactions.
Bank Austria opened books on its five-year deal, which would have been its inaugural senior unsecured bond, at mid-swaps plus 150bp via Bayern LB, DZ Bank, Erste, HSBC and UniCredit.
After pulling the deal, the lead managers said they will now work with investors over the coming days with a view to printing a transaction in the near future.
One lead explained that although investors were receptive during the roadshow, they had became more hesitant during the bookbuilding process, partly due to competing supply, and had asked for more time to analyse the credit.
Bankers are confident that UniCredit can make a comeback. One said that the decision to pull the deal was a surprise, but said the issuer's association with UniCredit Italy may have tipped investors' preference towards Intesa.
"Although pulling a transaction is not ideal, it's not the end of the world either. It's better to get the maturity and price right and meet with investors to ensure a more successful outing next time," said one of the bankers.
NOT SO POPOLARE A resurrection for Popolare may be tougher, bankers said.
Popolare was also forced to pull its deal as the long three-year maturity and guidance of mid-swaps plus 390bp area failed to convince international investors to buy the bond.
Although the issuer had enough demand to price a sub-500m deal, it decided not to do so, one banker said. Another observer said that there was heard to be enough demand to do a EUR300m deal.
"Given the demand on the Enel and Intesa trades, we thought that we would be able to pick up some of the residual demand for a shorter dated deal at a more attractive spread," one of the bankers said.
Investment-grade Italian utility Enel attracted a book in excess of EUR12bn for a dual-tranche EUR2bn bond on Monday, while Intesa's seven-year bond - the first unsecured deal from a peripheral issuer in that maturity for 18 months - notched up a EUR4.7bn book from more than 350 accounts.
"I think they did the right thing by pulling the trade and not trying to jam it into the market," one of the bankers said, referring to the Popolare trade.
Observers said a shorter maturity for Popolare's deal would have appealed more to investors that remain nervous about the long-term health of the banking sector.
"Like MPS that came before it, Popolare is a difficult credit that needs careful execution," said another banker.
Banca Monte dei Paschi di Siena (MPS) found lacklustre demand for its EUR500m two-year senior unsecured deal that priced at mid-swaps plus 450bp in September.
That MPS deal was trading around mid-swaps plus 440bp, so observers said an additional 15bp-20bp on the Popolare guidance might have made all the difference.
Intesa's and Dutch F Van Lanschot's deals could not have stood in sharper contrast as inflated order books proved investors needed little convincing of their credit quality.
Intesa's seven-year priced at mid-swaps plus 315bp from initial guidance of plus 330bp, and carried a 4.375% coupon for yield-hungry investors that are looking to deploy cash in relatively longer-dated safe credits.
Intesa followed up Mediobanca that sold a EUR500m three-year deal last Friday, which attracted a EUR2.8bn order book as the issuer took advantage of a squeeze in bank cash bonds.
Bankers are also more optimistic that there is now an established market for Intesa and Mediobanca.
Meanwhile, F Van Lanschot attracted a book of around EUR1.4bn for a EUR500m no-grow four-year unsecured bond at mid-swaps plus 225bp.
"There is clearly appetite for a broad spectrum of credits," said one of the lead managers that included ING, JP Morgan, LBBW and Rabobank.
(Reporting by Aimee Donnellan; Editing by Natalie Harrison)
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Keywords: BANK BONDS/PULLED