April 14, 2014 / 12:21 PM / in 4 years

REFILE-UPDATE 1-Arion Banki plans Iceland's first bank euro senior since crisis

(Refiles to add Citigroup as joint-lead manager)

By Aimee Donnellan

LONDON, April 14 (IFR) - Arion Banki, formally known as Kaupthing Bank, has mandated Citigroup, Deutsche Bank and Nomura to lead manage the first Icelandic euro senior bond issue since the country’s banking system collapsed in 2008.

The issuer, rated BB+ by S&P, will begin a series of investor presentations on April 22 and a deal may follow thereafter, subject to market conditions.

Iceland’s financial system crashed in 2008 during the credit crunch that followed the collapse of Lehman Brothers, leading to the full-scale nationalisation of the country’s banks.

Outside Iceland, more than 500,000 retail depositors in Icelandic banks found their accounts frozen, which led to diplomatic disputes. Repayments on Icelandic bank debt were stopped - except on the outstanding covered bond issues of Glitnir and Kaupthing.

This kept all of the country’s lenders out of the public market, forcing them to rely on government funding for much of the crisis.

However, in the past two years, Arion has been edging its way back into the public market. The bank sold a NOK500m three-year senior unsecured bond in February last year that offered investors a coupon of three-month Nibor plus 500bp.

It also placed an ultra-long 30-year Icelandic covered bond with pension funds in the local market in 2012.

“Now is the perfect time for Arion to return to the euro market,” said a syndicate banker.

“The success of the Greek sovereign in the public market last week, as well as countless peripheral banks, shows that the market is fully functioning and is open to every type of credit.”

Arion’s BB+ rating from S&P means that bankers are likely to look to other peripheral credits with similar ratings for guidance on pricing.

Banco Popolare di Vicenza, rated BB/BB+ by S&P/Fitch, is one of the only other similarly rated peripheral banks to have issued unsecured debt this year. The Italian lender priced a EUR500m three-year bond at mid-swaps plus 300bp in January, which is now bid at 240bp over, according to Tradeweb. (Reporting by Aimee Donnellan; Editing by Philip Wright)

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