National Bank of Greece has announced plans for a euro covered benchmark, the first Greek bank bond in the public market since 2014 and a crucial step in normalising its funding after years of costly central bank support.
The three-year trade, in conditional pass-through format and likely 500m in size, will follow a series of European investor meetings starting on October 4.
Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, HSBC, NatWest Markets and UBS (programme arranger) are organising the roadshow. Commerzbank will be a co-lead manager.
The market has been on the lookout for Greek bank issuance ever since the sovereign sold its first euro benchmark in three years, a 3bn 4.375% Aug 2022 at a 4.625% yield, in late July.
The country’s banking sector is desperate to wean itself off the costly emergency liquidity assistance on which it has been dependent since 2015.
NBG listed a “return to modest primary capital markets activity” among its strategic objectives in a corporate update earlier this year. It is on track to eliminate ELA funding in the short term, having reduced exposure to 2.6bn from a high of 17.6bn in the second quarter of 2015.
NBG confirmed to IFR last month that it was contemplating a covered deal. The mandate emerged just days after Piraeus Bank said it would place a 500m five-year note with three international financial organisations, including the European Investment Bank.
“The market is strong, it seems like an opportune moment,” said a lead banker on the NBG deal.
“We had a bit of a wobble in the sovereign last week around the stress tests, but those fears have abated and the sovereign has raced tighter over the last four or five days.”
Reuters reported last week that the ECB may bring forward its Greek bank stress tests to ensure there is time to remedy any shortfalls before Greece is due to exit its 86bn three-year international bailout in August 2018.
The Aug 2022 government bond sold off to 4.82% from 4.45%, according to Tradeweb prices. It is now bid at 4.64%.
IMF European Department director Poul Thomsen said last week that he sees “no financial stability concerns at all in Greece”. The priority is to have a strategy in place to deal with Greece’s exceptionally high level of non-performing loans over the medium term, he said.
NBG’s bonds are expected to be rated B3 by Moody’s and B by Fitch, the lowest in the covered bond universe. They are however eligible for the ECB’s covered purchase programme, a lead said, up to a 30% limit.
Given those ratings, the notes are expected to appeal to a range of credit and traditional covered bond buyers.
The roadshow will continue until Monday, with execution as early as Tuesday.
Source: Reuters (Reporting by Alice Gledhill, editing by Alex Chambers, Julian Baker)