Affordable housing, hospital themes for CFF social debut

CFF yesterday issued an inaugural issue of social obligations foncières supporting social housing and healthcare under the BPCE group’s sustainable development bond programme, a €500m long five year deal that bankers said “unblocked” the euro benchmark covered bond market.

The Compagnie de Financement Foncier (CFF) programme, for which fellow BPCE group member Natixis is sole structuring advisor and roadshow coordinator, has as its objective the promotion of social housing organisations and public hospitals.

As of end-July, there were €819m of eligible loans, split €486m to social housing and €333m to healthcare. CFF’s history of helping low income populations was flagged in an investor presentation for the planned debut.

BPCE SFH issued a €750m 10 year covered bond in June dedicated to green buildings, while BPCE SA has issued €500m senior preferred and Tier 2 transactions this year with themes of sport economy and healthcare, and local economic development.

In France, Caffil has issued obligations foncières supporting public hospitals, while Crédit Agricole and La Banque Postale have issued covered bonds dedicated to social housing. CFF is unique among French issuers in having both public assets and home loans in its cover pool.

Maureen Schuller, head of financials sector strategy at ING, noted that the new issue will lift 2023 social bond issuance from France, at €3bn, above green French covered bond issuance for the year of €2.75bn. Both are above 2022’s levels, while overall French supply is up more than €9bn, at €38.9bn.

The CFF social bond, alongside a deal for South Korea’s Kookmin Bank, was the first in the euro benchmark covered bond market since Slovakia’s Prima banka sold a €500m two year on Wednesday of last week (27 September).

Following CFF’s mandate announcement on Monday and marketing until Wednesday, leads ABN Amro, BayernLB, Natixis, Nordea, Scotiabank and UniCredit yesterday (Thursday) morning opened books for the €500m no-grow January 2029 deal, expected ratings triple-A, with initial guidance of the mid-swaps plus 40bp area. After around three-quarters of an hour, the leads reported books above €1.5bn, excluding joint lead manager interest, and after around an hour and 40 minutes, they revised guidance to 34bp+/-2bp, will price in range, on the back off books above €3.25bn. The €500m deal was ultimately priced at 32bp on the back of a book above €3.1bn at final terms.

Syndicate bankers at and away from the leads welcomed the success of the fresh supply.

“It was a positive sign,” said a banker away from the leads. “They did a virtual roadshow and got enough investors interested in such a trade, and then they put a very nice premium on it, which was what the market expected – we calculated it at 12bp versus the secondary market at the start – and that really made it work.

“It’s an issuer that everyone is familiar with,” he added, “a good name, a good product, and it was €500m no-grow – all these boxes were ticked, so a very nice trade in the end.”

Another said the deal confirmed hopes that appropriate trades are still feasible in spite of the difficult backdrop.

“It’s a very good trade for the market, because the market has been unblocked,” he said. “It confirms that the liquidity and the market depth is there – but honestly we didn’t really doubt this.”

However, the syndicate banker felt the 40bp initial guidance was unnecessarily generous and ultimately played into another remarking wider of triple-A products, which had already been hit by a modest response to a EFSF trade on Wednesday.

“When you combine both, French, German, Nordics are again 2bp-4bp wider,” he said.

Other bankers nevertheless agreed with the approach taken by the leads.

“They had to be successful,” said one. “And when you’re structuring a new social programme like this, you don’t want to end up with a book that is shy of €600m or something like that. That premium was necessary to ensure success.”

According to pre-announcement comparables circulated by the leads, CFF May 2029s issued in May this year were quoted at an I-spread of plus 30bp, mid, and September 2031s issued in March at plus 32bp, while older issues maturing from September 2028 to September 2030 were quoted at 24.5bp-26bp. BPCE March 2029s and October 2029s issued this year were seen at plus 28.5bp and 29.5bp, respectively.