Berlin Hyp issued the post-summer reopening euro benchmark covered bond for a fifth consecutive year on Wednesday, and Bodo Winkler, head of funding and investor relations at the issuer, told Sustainabonds that interest in social bonds now appears to be almost on a par with green.
The new €500m no-grow five year social mortgage Pfandbrief is Berlin Hyp’s fifth euro benchmark covered bond of 2023, for an aggregate €3bn. Only one of these was not a green or social bond, meaning that ESG trades makes up a higher proportion of the issuer’s deals than ever before.
“During execution and also just after we announced the deal, we received a lot of feedback from investors saying that they were more interested in this issue because it has a social label,” said Winkler-Viti. “I found that very positive, because while there was additional interest in green bonds, including green covered bonds, I previously had the feeling that social bonds were not yet as popular.
“That seems to have changed, with investors now appreciating the social sector almost equally with green bonds.”
After inaugurating its social bond framework in May 2022 with a €750m issue, and including a €500m three year social tranche in a dual-tranche trade in January alongside a €500mn green seven year, Berlin Hyp has now sold €1.75bn of social bonds. The eligible asset portfolio has meanwhile increased from €2.2bn to more than €2.8bn.
“So even without any further growth, there is potential for more,” said Winker-Viti.
The market-reopening deal makes it a fifth consecutive year in which Berlin Hyp has brought the summer break to a close.
“In the last years, they all went extremely well,” said Winkler-Viti, “as did this one.
“The big advantage on Wednesday was that we had the full attention of the market – there was no-one else – while in the first half of the year it was always extremely busy. It was hard to find any slots where you could get the full attention of investors – you always had to share it with somebody.”
After announcing the mandate on Tuesday, leads Commerzbank, HSBC, LBBW, SG and UniCredit opened books for the €500m no-grow August 2028 mortgage Pfandbrief, expected rating Aaa, with guidance of the mid-swaps plus 10bp area. After around 50 minutes, they reported books above €1bn, excluding joint lead manager interest, and after around an hour and 40 minutes, guidance was revised to plus 7bp+/-1bp, will price in range, on the back of books above €1.4bn. The spread was ultimately set at 6bp on the back of books above €1.8bn, excluding JLM interest and pre-reconciliation, with the final book around €1.6bn and including 88 investors.
“The process was super-smooth,” said Winkler Viti. “We were able to generate a very solid order book in relatively short order.”
The only complicating factor, according to syndicate bankers, had been calculating fair value. According to pre-announcement comparables circulated by the leads, Berlin Hyp 3.375% March 2028s were quoted at minus 1bp, mid, green 0.01% July 2028s at plus 2.5bp, and 0.625% February 2029s at plus 4.5bp. LBBW green 3.25% September 2027s were meanwhile seen at minus 1.5bp.
“It was indeed a little bit complicated saying where fair value was,” said Winkler-Viti, “because we have quite a few bonds outstanding with maturities in 2028-2029. After having calculated it at plus 2bp, the new issue premium was 4bp, which is a solid outcome.
“It allows some performance in the secondary market, and as the order book was very strong and the bond is well placed, I’m sure that it will perform.”
German investors were allocated 54% of the issue, the Benelux 17%, the Nordics 11%, the UK an Ireland 10%, France 3%, Switzerland 3%, Austria 1%, and southern Europe 1%. Banks and financial services took 41%, asset managers and fund managers 40%, insurance companies and pension funds 8%, governments and agencies 6%, and others 5%. Savings banks and affiliated companies accounted for 21% of the paper.
