Aareal Bank AG
Aareal Bank
Earlier this month, Aareal Bank successfully placed a US$625m mortgage Pfandbrief. The benchmark bond was issued with a coupon of 1.875% and will be payable on maturity on 15 September 2020.
Fresh from the launch of its second US dollar Pfandbrief, Aareal Bank is eyeing further lending opportunities in the US, Alexander Kirsch, Director, Treasury – Capital Markets, at Aareal Bank, told REFIRE.
‘We definitely want to do more US funding, whether it takes the form of senior bonds or covered bonds, although covered bond are much cheaper for issuers,’ he said. ‘I think we will likely do more before the end of the year.’
Earlier this month, Aareal Bank successfully placed a US$625m mortgage Pfandbrief. The benchmark bond was issued with a coupon of 1.875% and will be payable on maturity on 15 September 2020. The issue price was 99.67%, reflecting a 1.99% yield. This corresponds to a markup of 38 basis points on the current reference price on the USD swap market. Due to strong interest, the order book volume exceeded $1b. The transaction was conducted by a consortium of Citi, Credit Suisse, Goldman Sachs, HSBC and Landesbank Baden-Württemberg.
‘Our latest Pfandbrief marks our second US dollar denominated Pfandbrief, following our first in March 2015,’ said Kirsch. ‘We are planning to issue more US dollar Pfandbriefe because around 25% of our € 27.2b loan book is in North America, so we have a lot of exposure to the market. In markets outside Europe, such as Asia, our loans are mostly US$ denominated, too. By generating funding in US dollars, we want to reduce our exposure to derivatives like cross currency swaps.’
German investors accounted for 34% of interest in the US dollar Pfandbrief, followed by Scandinavia (26%), France (14%), Asia (9%), Austria/Switzerland (7%), Belgium (6%), Italy (2%) and others (2%). Of these investors, 43% were central banks or SSAs, 29% were other banks, 26% were asset managers and 2% were insurance companies. However, not all investors were repeat investors, according to Kirsch.
‘Interestingly, 50% of investors this time round were new to us, they had never invested with us before. I think we attracted new investors off the back of our extensive marketing drive, not to mention the fact that US$ denominated and euro denominated investors are sometimes different. Some investors only invest in dollars and not in euros, for example.’
In addition to its US dollar Pfandbrief, Aareal launched a €500m mortgage Pfandbrief in January. It was issued with a coupon of 0.01 % and will be payable on maturity on 4 July 2022. The issue price was 99.68%, reflecting a yield of 0.069%, or a discount of eight basis points to the reference price on the swap market. Like its US counterpart, the order book volume exceeded €1b. The transaction was conducted by a consortium of Commerzbank, DekaBank, DZ Bank, LBBW and Unicredit and marked the first Pfandbrief issue for the lender following its Pfandbriefe being rated Aaa by Moody’s on 12 January 2017.
