Pfandbriefstelle gets a name

Things do not always come easily for borrowers planning deals. Overly-aggressive funding levels can be the cause of difficulties, but not always. In the case of Pfandbriefstelle der österreichischen Landes-Hypothekenbanken, it has more to do with the name.

Although a well-established name in the Swiss, franc and yen markets, Pfandbriefstelle remains a rarity in euros. Furthermore, it suffers the inconvenience of having a name resembling that of a covered bond issuer, yet it does not issue pfandbriefe.

Pfandbriefstelle is the Austrian funding vehicle for the eight Austrian landesbanks. It benefits from a unique, explicit, statutory, and joint guarantee from its eight member banks, of which seven are explicitly supported by a deficiency guarantee from their majority owners, the Austrian states. Buying the paper is equivalent to buying Austrian sovereign risk.

Pfandbriefstelle had only made one previous visit to the euro market before last week´s € 750m 10-year transaction through CSFB and UBS Warburg. The transaction was originally pencilled in for a few weeks ago. However, Pfandbriefstelle was keen to wait for the right time. Thus, a couple of weeks ago, group treasurer Hannes Leitgeb told IFR (issue 1422) that Pfandbriefstelle was in no rush to launch its deal.

According to the leads, last week was the right time. According to a spokesman at UBSW, the whole transaction was sold at the 14bp over mid-swaps launch spread, adding that the delay on the transaction had helped.

"The delay gave some accounts the opportunity to do the credit work on the name and therefore not class the name as a pfandbriefe (bank)." Demand, as expected, came from Germany, Austria and Switzerland, which contain the traditional pockets of demand for this name. However, French accounts also showed interest.

Co-leads also reported good demand and agreed that for accounts not used to the name, extra work had to be done. Pfandbriefstelle benefits from a unique guarantee structure that is not easy to explain to Investors who want plan vanilla bonds, a co-lead explained. Most compared the credit to the German landesbanks. The German?speaking part find it easier to handle the name, another co-lead added.

All agreed that the pricing was exactly what it should have been for the name. The closest comparables are the German landesbanks. Helaba, which launched a € 1 bn 10-year issue two weeks ago, priced its deal at 13bp over mid-swaps.