CRN Eu500m sustainable cédulas debut ‘decent’ after BBVA

Caja Rural de Navarra sold a Eu500m seven year debut sustainable cédulas today (Wednesday) that, although priced in the middle of guidance with a book below Eu600m, was deemed a relative success in navigating difficult conditions at the same time as reaching specialist investors.

Leads Banco Cooperativo Español, Barclays, BBVA, Crédit Agricole and DZ Bank launched the Eu500m no-grow seven year issue with guidance of the mid-swaps plus 27bp area at 10:40 CET. At 13:00 the spread was fixed at 27bp on the back of books “well over” Eu500m.

Bankers noted that the deal, which had been expected this morning after the issuer and its leads announced a mandate yesterday afternoon, emerged unusually late. A syndicate banker at one of the leads said they had waited in order to assess the strength of the market after the open, and decided to go ahead after conditions appeared relatively stable.

“If you put everything into context, with rates selling off once again and equities spiking, I think we can be quite pleased with how this deal went today,” said the lead syndicate banker. “If you look at recent deals, it is good just to get a deal subscribed and to hit the issuer’s size targets, which we were able to do with a concession in line with recent deals.”

The deal was seen as offering a new issue premium of 5bp-10bp. Some bankers cited Caja Rural de Navarra March 2022s at around 12bp, bid, pre-announcement, and saw fair value in the mid-teens. Others said the March 2022s had widened to 15bp this morning, in line with other peripheral spreads, and put fair value in the low 20s, estimating that the curve extension was worth 5-7bp.

Bankers away from the deal agreed that it had gone well, considering the challenging market environment. A Eu1bn 10 year cédulas for BBVA was deemed to have struggled on Monday after it was priced in line with initial price thoughts and barely subscribed. Bankers attributed its reception partly to the deal’s longer maturity, against a backdrop of volatile yields, but said risk-averse investors were also displaying a preference for lower beta names.

“BBVA’s isn’t the kind of deal that you necessarily want to follow,” said a banker away from the leads. “It looks like they did a decent job of it.”

Distribution statistics for the deal were not immediately available, but the lead syndicate banker said the book included some specialist sustainable or green-oriented investors that had not previously invested in the issuer.

“It is not necessarily a huge difference, because many of the big asset managers have specialist green funds, so it is just those funds coming in instead of their regular participation,” he said. “But we do have a few smaller accounts from specific green funds that we do not see in mainstream covered bonds.”

The proceeds of the sustainable cédulas hipotecarias will be allocated to projects focused on environmental sustainability and creating a social impact in local communities.

Caja Rural de Navarra has a commitment to ensure that its overall loan book will always contain sustainable loans in an amount at least as much as the amount of sustainable covered bonds outstanding. There is no such commitment in relation to the cover pool, however, unlike the three previous covered bond issues in the socially responsible investment (SRI) field.

Fellow Spaniard Kutxabank sold a Eu1bn September 2025 issue in September 2015 that was backed by social housing loans. MünchenerHyp issued the first such covered bond, a Eu300m inaugural ESG (environmental, social, governance) Pfandbrief, in September 2014, before Berlin Hyp sold a Eu500m Green Pfandbrief in April 2015.