US investors are ready to embrace more challenging bank names from the eurozone, according to bankers, after seeing the impressive size of order books for deals by National Australia Bank and ING Bank this week. Investors deluged NAB with $6.75bn in orders for a $2.5bn deal and ING with $4.5bn for a $2bn offering in a week when Yankees and US banks raised more than $12bn in debt.
NAB is highly rated and has not been hurt by the European story. But its book size along with ING's, followed on Friday by strong demand for a $750m tap by HSBC, has bolstered confidence that a French or Spanish bank could now tap the Yankee market.
"Clearly receptivity for European banks has grown from what started out to be just limited access for top names, to where we now have seen several examples of successful offerings from other European institutions," said Dan Mead, head of FIG syndicate at Bank of America Merrill Lynch, bookrunner on the ING and NAB deals.
"I think this will give many issuers who were reluctant to consider the US dollar market more conviction that they may get a successful deal done in dollars," he said.
Banks will still face challenges, "but more in the sense of getting a good cost of funding versus euros than in terms of getting acceptance from the US investor base," said Mead.
ING waited for the LTRO results before coming out with 312.5 basis point whispered talk on an initially targeted $1-$1.5bn offering of five-year notes, led by BAML, Deutsche Bank, Goldman Sachs and ING.
That implied a 35bp-40bp new issue concession to initial thoughts. It then ratcheted in spread to a final level of 300bp at pricing and increased the five year deal to a final $2bn 3.75% five year. At 300bp the deal came about 25-29bp inside the 325-315bp trading level on ABN Amro's recent 4.25% 2017s, priced on January 30 at 355bp.
The strong reception Yankee banks get in the US dollar market these days was dramatically demonstrated on Friday when HSBC ended up getting a 155bp launch spread on a $750m reopening of its $1.5bn 2.375% of 2/13/15s, issued on February 8 at a spread of 190bp.
NAB's huge order book left no doubt that US investors are ready for the Australian banks. NAB became the first of the four major Australian banks to tap the Yankee market this year, with a $2.5bn offering of three- and five-year notes.
The deal, led by BAML, DB, JPM and NAB, attracted more than $6.75bn in demand.
"They and the other big Aussie commercial banks have been notably absent from the market and as a result there's a fair number of investors out there that have NAB paper that's rolling down the curve," said one syndicate manager away from the deal. "That's made it possible to do a deal right on the screws."
At 160bp on its $1.5bn 2.00% three-year and 190bp on a $1bn five-year, NAB's pricing was basically flat to secondaries and about 10bp back from outstandings, making it one of the tightest priced Yankee banks this year. Official guidance on the two tranches was 165bp and 195bp, which built a $3.5bn book for the three-year and $3.25bn for the five-year.
Australian banks have stayed out of the US dollar market, until financing a large chunk of their yearly needs in other currencies. Australian spreads have widened out about 70bp versus Canadian comparables in the past year, largely because of the negative impact their large funding needs have had on their attraction to investors. Although that spread differential is still 60bp-70bp, the spread tightening in dollars this year has been enough to make the US dollar market comparable to other currencies, if not to the better pricing they still get in Australian dollars.
A Samurai done by Westpac last Friday swapped to levels on top of the Libor equivalent of where the NAB dollar deal was done, said one banker. NAB's 3.00% of 2016s, done in the summer last year, were trading around 166bp /156bp on the day of pricing its new deal, about 40-50bp tighter than where they were at the beginning of this year. Expectations are that the other three will follow tradition and also tap the US dollar market in coming weeks, now that they've seen what NAB has achieved.
Yankee banks also tapped the US dollar covered bond market with Canada's Caisse Centrale Desjardins du Qubec pricing a US $1.5 billion five-year at mid-swaps plus 51bp on Tuesday, followed by Credit Suisse with a US $2 billion three year covered bond at MS+105bp. TD bank from Canada was also rumoured to be lining up a three- or five-year deal.
The big US commercial banks, meanwhile, privately issued five-year floaters to what is understood to be one of the largest banks in the Asian region.
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