Deutsche Hypo sold a EUR500m green Pfandbrief issue last Monday, its second such benchmark, and officials at the issuer described the deal’s “dynamic” book as being a positive statement of green investor’s trust.
Deutsche Hypo issued entered the green bond market in November 2017 with a EUR500m six year Pfandbrief, inaugurating a green bond framework for financing energy efficient real estate.
Deutsche Hypo – a member of the NordLB group – announced on the Friday before the deal that it had mandated ABN AMRO, BayernLB, Natixis, NordLB and UniCredit to lead manage a EUR500m no-grow long six year green Pfandbrief.
The December 2024 deal was launched on the Monday (3 September) morning with guidance of the mid-swaps minus 6bp area. After around one hour, the leads announced that books were above EUR500m, excluding joint lead manager interest. Guidance was subsequently revised to the minus 7bp area, plus or minus 1bp will price in range, with books over EUR600m, including EUR45m JLM interest, before the spread was set at minus 8bp with books at EUR680m, including the EUR45m JLM interest, around two hours after launch.
The final book stood at EUR645m with over 30 accounts in, including the EUR45m JLM interest.
“Again, we are very pleased with the high demand for our Green Pfandbrief,” said Sabine Barthauer, member of the board of managing directors of Deutsche Hypo. “We see today’s success as a clear display of trust from ‘green’ investors, especially since many of these investors have already invested in our green Pfandbriefe for the second time.
“In addition, the new asset class has established itself in the market.”
Some 44% of the deal was allocated to sustainable investors. Accounts in Germany took 62%, the Nordics 35%, and other Europe 3%. Banks took 54%, central banks and official institutions 27%, and fund managers and institutional investors 19%.
“We are frankly very pleased, because in the book we have many of the usual suspects from Germany and Northern Europe who are considered to be sustainable investors,” Jürgen Klebe, senior director, funding and investor relations at Deutsche Hypothekenbank, told Sustainabonds. “The deal went very smoothly as far as the order book was concerned, and was very dynamic in the beginning with sizeable orders coming in early – not just the ECB but sustainable investors as well.
“It was another success for us.”
A syndicate banker at one of the leads suggested that if the deal had been a non-green, conventional Pfandbrief the book would probably have been closer to EUR500m-EUR600m and that the final spread may have been 1bp wider.
“It is clearly better than the non-green deals we have seen of similar quality,” he said.
However, Klebe said the green element of the deal was not the only differentiating factor from some of the conventional covered bonds that were deemed to have struggled since the euro market reopened the previous week, suggesting that some of those deals may have been too aggressively priced.
“The green aspect does make things a bit smoother, but I don’t think the difference is only due to the ‘colour’ of the bond,” he said.
Syndicate bankers said the deal paid a new issue premium of around 4bp, seeing Deutsche Hypo’s green November 2023s trading at minus 14bp, mid, and its conventional May 2024s at minus 13bp and June 2025s at minus 10bp.
The deal was backed by green commercial real estate loans and issued under Deutsche Hypo’s Green Bond Programme, which has a second party opinion from oekom.
Under Deutsche Hypo’s framework, all funds raised through green bond issuance will be used exclusively to finance energy efficient real estate. No substantial changes have been made to the green bond framework since the time of Deutsche Hypo’s first deal.
Under the framework, Deutsche Hypo is also able to issue green senior unsecured debt. It has issued private placements in senior unsecured, according to Klebe, but has not yet done so in benchmark format. He said it will issue a first senior unsecured benchmark sometime in the future, but the timing has not yet been decided.