(Recasts, adds background)
By Aimee Donnellan
LONDON, Oct 18 (IFR) - Second-tier Spanish bank Bankinter
shrugged off earnings woes on Thursday, closing books for a
EUR500m three-year Cedulas Hipotecarias some five-times covered.
Lead managers Bankinter, JP Morgan, Natixis and Nomura
initially marketed the deal at mid-swaps plus 355bp area, but
later fixed guidance tighter at plus 335bp as EUR2.5bn of orders
came flooding in.
The deal is expected to be rated A3/A by Moody's and S&P,
both negative outlook.
Risk appetite for Spanish bonds has been buoyant in the
aftermath of Moody's affirming Spain at Baa3 on Tuesday. Earlier
on Thursday, the Tesoro successfully tapped three-, four- and
10-year Bonos with evidence of decent interest from end
At 335bp over mid-swaps, the Bankinter deal equates to a
yield of around 4.195%, which in turn offers a 60bp pick-up to
the underlying 3.75% October 2015 Bono.
Demand for peripheral bank paper has been on the rise this
week, as evidenced by UniCredit's EUR250m tap of a January 2018
covered bond deal that attracted a EUR1.4bn book.
Bankinter's deal follows news earlier on Thursday that its
nine-month earnings halved, which is setting the tone for a
sector still suffering the impact of a government-forced
clean-up of toxic real estate assets.
However, Bankinter is among seven banks that passed an
independent stress test on the country's banking system in
September. The audit, a condition of receiving European aid,
estimated a capital shortfall of EUR59bn across the sector in a
severe economic downturn.
Spain's banks are gearing up for the first funds from a
EUR100bn European credit line, agreed in June to prop up banks
that were on the brink of collapse by a property crash,
compounded by rising loan defaults in a recession.
This is Bankinter's second visit to the covered bond sector
in 2012, having sold a EUR1bn five-year deal in March. That
issue priced at mid-swaps plus 268bp, but has since widened out
to 370bp bid, according to Tradeweb.
(Reporting by Aimee Donnellan; Editing by Alex Chambers, Helene
Durand, Natalie Harrison and Julian Baker)