Rabobank green SNP debut impresses on price, claims GBS first

Rabobank sold its first green senior non-preferred bond last week, a €750m seven year priced some 3bp through fair value, with the deal’s impressive outcome attributed largely to its green nature. The Dutch cooperative has also sought to make its transaction the first aligned with the latest draft of the EU Green Bond Standard.

On Tuesday of last week (22 October), leads Crédit Agricole, HSBC, Rabobank, SEB and UBS went out with initial price thoughts of the mid-swaps plus 65bp-70bp area for Rabobank’s senior non-preferred (SNP) seven year green bond. After around an hour and 20 minutes, books were over €1.5bn, and after around two and a half hours, guidance was revised to mid-swaps plus 45bp-50bp, will price in range, on the back of over €2.3bn of orders, and the size was set at €500m-€750m. Books closed in excess of €1.8bn, pre-reconciliation, and the deal was ultimately sized at €750m and priced at plus 45bp, with €1.4bn of orders good at re-offer.

Rabobank said the transaction was received enthusiastically, in particular by responsible investors, which constituted two-thirds of the order book.

“The new issue concession was negative 3bp-4bp, with a final order book of €1.8bn, and represented the tightest seven year senior non-preferred euro transaction of the year,” said Ken Fontijn, funding manager, Rabobank.

A syndicate banker at one of the leads said he saw fair value at 48bp-49bp, based on the issuers’ 2024 SNP paper trading at 43bp and its 2031s at 53bp. The negative new issue premium was better than prevailing levels and he said this pricing achievement was largely attributable to the green element.

“They capitalized on what we’ve been seeing for some time, namely a fairly significant supply/demand imbalance,” he said. “The green and SRI angle has increased traction across the investor community, with more and more green funds being created, and it’s evident that there is a dire lack of these sort of assets.

“Also, Rabo have traditionally taken out €1bn to €1.5bn tranches in the senior preferred space,” he added, “and limiting the size to €750m gave investors some reassurance of this deal working and performing in secondary as well. Combine that with the fact that this is Rabobank, probably the best bank capital-wise when it comes to looking at senior non-preferred, that all laid the foundations for a very solid trade and eventually got us to landing inside fair value.”

He said Rabobank had also been presented with a “decent window”, with many European banks in blackouts and a series of geopolitical developments having until the Tuesday limited supply, but then proved stable on the day, providing a relatively benign backdrop.

“Due to all political developments throughout the weeks, it was a challenge to find the right moment,” said Fontijn. “The final launch at a re-offer of mid-swaps plus 45bp indicates that our patience was rewarded.”

Asset managers were allocated 67% of the new issue, banks and private banks 18%, central banks and official institutions 9%, pension funds and insurance companies 4%, and others 2%. Austria and Germany took 34%, France 26%, the UK and Ireland 15%, the Nordics 10%, southern Europe 6%, the Benelux 3%, and other 6%.

Rabobank said that the issue is the first green bond to be aligned with the current draft EU Green Bond Standard (GBS), as well as the Green Bond Principles, following updates to its framework in July.

“We are extremely happy to be the first green bond issuer to do this,” said Fotijn. “This represents a huge step forward for the market.”

Its green bond framework makes reference to elements of the draft GBS, such as the contributions it makes to EU environmental objectives, the “do no significant harm” principle, and taking into account minimum social safeguards. A banker away from the deal said this goes further than other issuers who have declared that their frameworks will be kept aligned with the GBS, although another noted that key elements of the proposed standard – including the EU taxonomy – remain undefined.

Maarten Biermans, head of sustainable markets, Rabobank, said that its initiative fits the cooperative bank’s profile as the highest ranked commercial bank globally in Sustainalytics’ ESG ratings.

“We believe the EU is doing work of paramount importance by rolling out this masterplan that will spur the urgent allocation from private capital to sustainable investments,” he said.

“Following this, we gladly show our support by being the first bank to embrace the EU Green Bond Standard.”

ABN AMRO