Global Covered Bond News Roundup - Week Ending June 18

Covered bond issues from Denmark, France, Germany, the Netherlands, New Zealand, Norway and the UK ... more Australian-owned banks expected to follow BNZ's example ... Korea's second CB on the horizon ... a panel on covered bonds' future ... and more

Some items of covered bond news do not rate their own story in this publication — often because they relate to geographic areas outside our focus, North America.  Even so, readers who want to keep up with covered bond news in general might find them interesting.

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DENMARK

Danske Bank AS (June 16) priced a twelve-year, €1 billion covered bond at 75 basis points over mid-swaps.

EUROPE (in general)

Structured Finance News (June 17) covered a panel discussion on the future of covered bonds at the Global ABS 2010 conference in London.

FRANCE

• Compagnie de Financement Foncier (CFF) (June 15) priced a 15-year, €600 million covered bond at 75 basis points over mid-swaps.

• Crédit Agricole SA (June 15) priced a five-year, €1 billion covered bond at 45 basis points over mid-swaps.

IRELAND

Passage of Ireland's Asset Covered Securities Amendment Act in 2007 helped fuel the "folly" of Irish banks as lenders for land and property investment, according to a column by Kathleen Barrington in The Sunday Business Post (June 13).

GERMANY

• Landesbank Baden-Wüerttemberg (LBBW) priced a six-year, €1 billion covered bond at 10 basis points over mid-swaps.

• Deutsche Telekom AG (June 17) priced a covered bond in the amount of 400 million Swiss Francs with a six-year maturity.

GREECE

• "Moody's downgrade of Greece to junk might seem largely irrelevant," but it could (among other things) "feed through to corporate borrowers, banks, special-purpose vehicles and covered bond pools," Richard Barley wrote in the Wall Street Journal (June 15).

• Moody's Investors Service (June 15) announced downgrades of various Greek mortgage covered bonds issued by Alpha Bank S.A, EFG Eurobank Ergasias and National Bank of Greece (NBG).

KOREA

Korea Housing Finance Corp. (KHFC) (June 17) stated without further comment that it "is preparing to sell covered bonds," according to Bloomberg.  On June 19, Moody's Investors Service assigned a provisional long-term rating of (P)Aa3 to the covered bonds to be issued by KHFC.  According to Moody's, the mortgages in the cover pool are "Bogeumjari" loans developed by KHFC to promote the welfare of moderate and low-income households.  HFHC is described on the institution's website as a quasi-governmental organization whose mission is "increasing the supply of reliable, long-term housing finance."

NETHERLANDS

ABN AMRO Bank NV (June 14) priced a ten-year, €1.5 billion covered bond at 83 basis points over mid-swaps.  Bloomberg characterized this as part of a rush among financial institutions "to sell covered bonds before the European Central Bank's 60 billion-euro purchase program aimed at freeing up lenders' balance sheets ends this month."

NEW ZEALAND

• After weeks of anticipation, Bank of New Zealand (BNZ) (June 14) priced the nation's first covered bond in two tranches totaling NZ$425: a NZ$175 with a five-year maturity and NZ$250 million maturing in seven years.  Domestic investor support was characterized as strong, and a BNZ executive said he was "very surprised at the number of enquiries and the level of interest."  However, Banking Day characterized pricing on the five-year tranche — at 98 basis points (bps) over swap— as "well outside the expected range of 68 bps to 80 bps, based on five-year pricing for the major banks last seen in March," which "provides further evidence of the credit spread widening that has occurred in recent weeks." Although New Zealand government regulators now allow a bank to issue covered bonds up to 5% of its total assets, BNZ has stated that it will cap its own issuance at 1%.

• Banking Day noted (June 15) that Westpac New Zealand "wants to issue up to NZ$5 billion of covered bonds both domestically and internationally." Bloomberg (June 16) quoted a bank spokesperson as stating that "Westpac New Zealand is currently working on developing a covered bond programme with the aim of issuing pre Christmas."

• Writing from Wellington, Lucy Craymer reported for Dow Jones Newswires (June 16) that Bank of New Zealand's covered bond issue "will likely be followed by a flood of similar offerings from other Australian-owned banks looking to secure long-term funding in a new market recently opened up to domestic issuers by the central bank."  In the same vein, Sarah McDonald wrote for Bloomberg that "Bank of New Zealand's sale of the country's first covered bonds is spurring others to follow as Australian banks seek to cut borrowing costs through local units with securities forbidden by their own regulator [in Australia]."

NORWAY

• Sparebanken 1 Boligkreditt AS priced a five-year, €1 billion covered bond at 45 basis points over midswaps.

• Moody's Investors Service (June 17) affirmed that the changes to the prospectus for the €45 billion Covered Bond Program of DnB NOR Boligkreditt, in and of themselves, do not result in a reduction or withdrawal of the current Aaa rating of the Residential Mortgage Covered Bonds issued by DnB NOR Boligkreditt.

SWEDEN

Moody's Investors Service (June 14) affirmed that the changes to the prospectus for the €4 billion Medium Term Covered Note Program of Länsförsäkringar Hypotek AB, in and of themselves, do not at this time result in a reduction or withdrawal of the current Aaa rating of the covered bonds issued by Länsförsäkringar Hypotek AB under the program.

UNITED KINGDOM

• Lloyds TSB Bank (June 16) priced an eight-year, €700 million UK-regulated covered bond at 145 basis points over mid-swaps.

• In a report on Royal Bank of Scotland's (RBS) new management team for European investment-grade debt, Financial News observed (June 14) that RBS was "concentrating resources on the covered bond market a week after it raised new funds using this kind of debt for the first time."
  

• Final terms of the 1.25 billion covered bond issue from Royal Bank of Scotland (RBS) were released June 15.  For a PDF download from the website of the London Stock Exchange (for educational purposes only — not intended for sale in the U.S.), click here.

• Mark Brown of Dow Jones wrote (June 15) that "U.K. lenders are increasingly turning to covered bonds to finance their lending activities, but some market participants caution that the instruments cannot fill the gap left by the collapse of the market for securities backed by residential mortgages."

• Tracy Alloway wrote in Financial Times' FT Alphaville (June 14) about the "own-name," phantom securities that haunt the Bank of England, including floating-rate covered bonds.

• Fitch Ratings commented (June 14) that the implementation of UK deposit protection later this year for eligible bank deposits on a gross, rather than the current net basis, will mitigate deposit set-off exposure in UK structured finance transactions and covered bond programs.  The rating agency stated that as a result, when the broader protection takes effect on 31 December 2010, Fitch will no longer consider eligible bank deposits, up to the £50,000 cap, in its analysis for affected transactions and programs.

Information from rating agencies in the entries above is typically adapted from those agencies' media releases.  Rating news items should not be relied upon as a substitute for the full text of rating action announcements.