LONDON, Dec 6 (IFR) - UniCredit quietly opened the Czech covered bond market on Friday, selling the euro-denominated deal to a select investor base that is expected to pave the road for a broader offering in 2014.
In a self-led deal, with NordLB and HSH Nordbank acting as co-managers, the bank priced the EUR800m five-year offering at mid-swaps plus 80bp, using the UniCredit Bank Czech Republic and Slovakia subsidiary. Following the sale, bankers say they have received a lot of interest from European investors that are seeking a follow-up.
"This is really just a test before UniCredit brings a bigger deal next year. The issuer will probably hold a roadshow to give European investors the opportunity to buy this debt," said a syndicate banker.
UniCredit is likely to be opening the door to other banks operating in the Czech Republic, such as Raiffeisenbank, Hypotecni Banka (KBC group), Komercni Banka (Societe Generale group) and Ceska Sporitelna (Erste group) to tap the secured market for funding.
Raiffeisen received an A3 rating for its covered bond programme that was set up in 2012 to comply with revised legislation in the country that will encourage euro issuance.
The Czech Bond Act of 2004, which was amended at the beginning of August 2012, will now allow the country's banks to issue covered bonds under English law, a move that will open the market to foreign investors.
The amended act has changed the definition of mortgage-backed securities. The new definition means that Czech banks should be able to issue mortgage-backed securities, not only as Czech-law governed bonds but also as securities governed by foreign law.
The first Czech Republic covered bond couldn't have come at a better time as the country's mortgage market has been expanding as a result of zero interest rates and improving investor confidence.
According to the Prague Daily Monitor that sites estimates from Hypotecni banka, the market grew by over 15 percent in the first six months of the year compared with the same period in 2012. (Reporting by Aimee Donnellan; Editing by Alex Chambers and Sudip Roy)