Berlin Hyp issued its first green bond in senior preferred format and eighth overall on Monday, a €500m no-grow 10 year deal that attracted more than €1.2bn of demand, and head of funding and IR Bodo Winkler said the issuer had reached the point where its issuance was almost “self-explanatory”.
After a mandate announcement on Friday, leads Crédit Agricole, DZ, HSBC, LBBW and UniCredit went out with initial price thoughts of the 65bp over mid-swaps area. They reported books above €600m within 40 minutes, according to a syndicate banker at one of the leads, and a little over an hour later set guidance at 50bp-55bp, will price in range, on the back of more than €1bn of orders. The new issue was ultimately priced at 50bp over, with more than €1.2bn of demand good at that level.
“Being more than twice covered was a really good outcome,” said the syndicate banker. “It just shows investors’ appreciation of the Berlin Hyp name, and obviously the green aspect also helped.
“The bonds are already trading better in the secondary market,” he added.
According to pre-announcement comparables circulated by the leads, Berlin Hyp August 2023 senior preferred paper was trading at 26bp and its February 2026s at 34bp. Its green senior non-preferred October 2027s and April 2028s were quoted at 40bp and 38bp, respectively. The lead banker said this spread matrix made calculating fair value difficult, but he put fair value in the context of the low 40s, implying a new issue premium of 6bp-7bp.
The movement from IPTs to re-offer was smaller than on some new bank issues and the new issue premium higher, but a syndicate banker at another of the leads noted that Berlin Hyp typically approaches the market with more realistic initial guidance than others.
“And they are never the ones to squeeze the last basis point out of the market,” he added. “They proved that once again by not being too greedy, not wanting to go through 50bp, but have a very nice trade for what is possibly their last trade of the year.”
He noted that some investors upped their orders when it was confirmed the spread would not be tightened below 50bp.
Bodo Winkler, head of funding and investor relations at Berlin Hyp, said the pricing was “a very attractive level for unsecured debt”.
“It went very smoothly,” he added.
Berlin Hyp announced its deal in advance to allow green-oriented investors time to review its framework and associated documents and to give its traditional investor base of German savings banks sufficient notice of the new issue.
“We’d also had quite a strong week,” said the lead banker, “and wanted to put down a marker ahead of there being potentially more deals coming to the market as banks exit blackout periods. And weekend and overnight risk are not as high as they were.
“On top of that, Berlin Hyp is Aa2/A+ and this was a €500m no-grow green senior preferred, something of a safe haven trade. So there was no problem in announcing on a Friday and giving ourselves a day and a half to make sure investors were ready.”
Winkler (pictured) also noted that – following an update to Berlin Hyp’s framework in April, which was followed by a €500m eight year Pfandbrief in July – the issuer did not have any changes to explain to investors.
“It is nice that we have reached a stage where it feels as if Berlin Hyp’s green bonds are almost self-explanatory,” he said. “We can issue them with more or less the same sort of preparation as a conventional bond.”
SRI investors accounted for 55% of the final order book, according to Berlin Hyp. Two-thirds of the issue was placed domestically in Germany, while French accounts were allocated 10%, Switzerland and Austria 6%, and Scandinavia 5%. Banks took 41%, funds 39%, savings banks and affiliated companies 23%, and insurance companies 12%.
“There were a lot of really green accounts in the book,” said Winker, “and at the same time we had good demand from the German savings banks who are interested whether it is green or not. Demand from these two different angles quickly produced a nice granular order book.”
The SRI participation in the new issue compares favourably with a low of 20% for Berlin Hyp on a €500m 10 year senior unsecured issue, the issuer’s last, in April 2018.
That transaction and Berlin Hyp’s other previous two green senior unsecured bonds were issued before the introduction of legislation in Germany whereby outstanding senior debt became senior non-preferred debt, meaning that Monday’s issue was Berlin Hyp’s first in senior preferred format. Winkler noted that the 10 year deal followed conventional senior preferred issues in the five and seven year maturities.
