ANZ New Zealand plays all the right notes in euro covered-bond return
With the second New Zealand-origin covered bond to print in the euro market in less than three weeks, ANZ New Zealand further demonstrated investor appetite for the asset class amid what deal sources say was an improving market tone. ANZ New Zealand achieved notable price tightening, supported by capped deal size and a significantly oversubscribed book.
The ANZ New Zealand deal priced on 5 July with volume of €500 million (US$544.5 million), three-year tenor and a margin of 33 basis points over mid-swap. ANZ, Barclays, BNP Paribas and UBS led. The transaction follows a €750 million long five-year covered bond from BNZ that priced on 28 June.
Leads say tone in the euro market has improved in the first days of the second half of the year. Paul Neumann, head of debt capital markets Australia at UBS in Sydney, notes successful transactions from Bayerische Landesbank and Credit Agricole reviving investor confidence following a postponed transaction in late June.
“The [ANZ New Zealand] transaction demonstrates there is substantial demand in euro covered format for issuers from jurisdictions, such as New Zealand, which deliver quality diversification,” Neumann concludes.
Duncan Beattie, Sydney-based managing director at Barclays, agrees that ANZ New Zealand’s deal found a sweet spot with multiple supporting factors. One was timing: market tone improved entering the second half and investors have cash to deploy. The three-year tenor also hit a deep pool in an investor base that, while constructive, is still favouring relatively defensive assets.
Penny Dell, Wellington-based treasurer at ANZ New Zealand, tells KangaNews issuing a three-year covered bond provided the best alignment of the issuer’s funding needs and investor demand. The use of the covered format reflected market conditions and ANZ New Zealand’s strategy of issuing periodically in each of its core markets to maintain access and investor engagement.
Capping deal size at €500 million also “created a sense of scarcity” in a market that has been very active but had no directly competing supply as ANZ New Zealand executed, Beattie continues. “These factors all contributed to a very strong outcome and an incredible orderbook. We were able to move the price point from the mid-40s basis points over swap area to 33 due to this robust demand.”
The 7 basis point price tightening is the biggest movement from guidance to pricing in the euro covered-bond market in more than a month, Beattie says – and Neumann adds that it is the most significant revision in an Australasian bank deal in euros since 2016. The deal book was diverse by geography and investor type (see charts 1 and 2).
Source: Barclays 6 June 2023
Source: Barclays 6 June 2023
Final pricing represents a minimal new-issue concession of just 3 basis points, Beattie continues. Nevertheless, the scale of demand meant the deal group could have tested pricing even further. Beattie reveals: “We were mindful of not being too aggressive and were conscious of secondaries – it is always a fine line of where to push it. Taking investor interests into consideration, we decided 33 basis points was the right number.”
A seven-times oversubscribed book delivered price tension, but ANZ was clear about its issuance goals. Dell tells KangaNews: “We were not tempted to take any more volume than the €500 million strategy we were targeting. Having considered the size of the orderbook, we were pleased to tighten pricing by 7 basis points – which was a great result.”
