The order book for Aareal Bank Group's debut Jumbo Pfandbrief issue was closed on Monday, with the issue being three times oversubscribed after just two hours. "The issue generated an order book totalling some €3 billion within a very short period of time", said Christof M. Schörnig, member of the Members of the Management Board of Aareal Bank, whose responsibilities include the bank's Treasury and refinancing activities.
Thanks to the significant oversubscription, the 5-year, 1 billion, 3.25% bond was priced at the lower end of the indicated range.Orders were almost exclusively placed on a re-offer basis straight from the opening of the book, allowing for today's pricing at a mid-swaps flat level. "This is clear evidence of investor confidence in Aareal Bank Group and its capital market presence", Schörnig added.
He points out that "Aareal Bank Group already managed to significantly expand its investor base with its first Jumbo Pfandbrief issue". Strong demand by international investors allowed for an allocation of more than 55% outside Germany, with the UK and Ireland together accounting for 16%, the Nordic region for 13%, the Benelux countries for 11%, Austria and Switzerland together for 5%, other European countries for 5% and Asia for 5%." The broad regional diversification of investors is in line with the structure of our property finance business. This is evidence of the progress made by Aareal Bank in broadening the international scope of its capital market presence," commented Schörnig, adding that the Jumbo Pfandbrief was also placed in Asia and the US. During a two-week European roadshow Aareal Bank had approached a broad range of different investors. "Key investors have honoured this intensive marketing effort, as can be seen by the strong order book", Schörnig added. The investors' allocation is as follows: banks 46%, investment funds 25%, central banks 15%, insurance companies and pension funds each with 11% as well as corporates 3%.
According to Schörnig, the successful Jumbo debut supports Aareal Bank Group's strategy of becoming a regular issuer of Jumbo Pfandbriefe: the bank envisages placing one or two Jumbo issues per year, with a view towards raising the share of covered bond issuance in the funding mix for its property lending business, from currently around 10% to a level between 40 and 60% in the medium term.
Source: Aareal Bank