Nykredit Realkredit issued the second and largest green Danish covered bond yet last week, a SEK4.1bn (EUR383m, DKK2.87bn) three year FRN that achieved a 3bp saving versus the issuer’s conventional issuance which will be passed on to its borrowers.
The Danish mortgage credit institution – Europe’s largest mortgage covered bond issuer – announced its framework in April, with plans to issue green bonds in Danish kroner and Swedish kronor, the proceeds earmarked for financing green commercial mortgages in Denmark and Sweden.
Its move came after Danske subsidiary Realkredit Danmark (RD) in March announced plans for green covered bond issuance under a Danske group framework. RD then issued the first green Danish covered bonds, DKK30m (EUR4m) of a three year FRN with green Danish commercial mortgages as the use of proceeds.
Ahead of its first issue, Nykredit head of investor relations Morten Bækmand Nielsen told Sustainabonds that “the Swedes are leading the pack” when it comes to green bond activity, and the issuer’s first, SEK4.1bn green bond both dwarfs RD’s initial issuance and precedes its own Danish krone debut.
The green October 2022 FRN, with a coupon of three month Stibor plus 75bp, was launched on Monday of last week (27 May) in parallel with a conventional April 2023 FRN. Bookrunners Danske, Nordea, Nykredit Bank and Swedbank were able to price both tranches at the tight end of guidance on the back of a combined order book of some SEK15bn at final pricing. The green bond was priced at 9bp over conventional benchmark covered bonds of Svenska Handelsbanken subsidiary Stadshypotek, following guidance of 9bp-12bp – Nykredit’s covered bonds typically trade with a pick-up over domestic Swedish benchmarks in the krona market. The SEK5.2bn conventional issue was priced at 12bp.
According to the leads, the pricing of the green bond was around 3bp inside Nykredit’s conventional curve, based on the simultaneous new issue and adjusting for the difference in maturity.
Under the balance principle of Denmark’s mortgage finance system, mortgage rates are directly linked to the costs of mortgage credit institutions’ covered bond issuance, meaning that the 3bp “greenium” is passed directly on to borrowers.
“We are very happy with particularly the green transaction and the feedback we received from the investors,” said Nielsen. “To us, the Swedish green bond market is by far one of the most advanced markets in the world.
“Having success in such a market is to us a recognition of Nykredit as a green bond issuer and a good sign for our upcoming green issuance in Danish kroner.”
Nykredit hopes to issue its first green bonds in Danish kroner in the coming weeks.
The issuer has committed to increasing the Swedish krona bond to at least SEK5.4bn in the coming months, to take it to a EUR500m-equivalent size. The bond already qualifies for LCR Level 1.
With its debut green bond, Nykredit became the first Danish issuer to list a sustainable bond on Nasdaq Copenhagen’s green bond segment.