Nordea Wins Top Spot in Bond Underwriting: Nordic Credit

Nordea Bank AB (NDA), Scandinavia’s biggest lender, surpassed SEB AB to reclaim its position as the region’s top debt underwriter as more companies opt for capital market funding over bank loans.

Nordea, based in Stockholm, helped companies sell $18.6 billion in bonds this year, 29 percent more than in the same period in 2011. SEB AB, last year’s biggest deal maker, came second with $14.6 billion of arranged issues, while Swedbank AB (SWEDA) jumped to third place from eighth after doubling the value of sales it helped facilitate to $14.2 billion.

Corporate debt sales across the U.S., Europe and Asia surged to a record $3.89 trillion this year as borrowing costs eased to their lowest ever, according to data compiled by Bloomberg. With stricter capital rules making bank credit scarcer, companies have stepped up efforts to shop around for funding. Nordea’s grip on Scandinavia’s top slot suggests big underwriters with established networks may fare best.

“Nordic corporates have carried out liability management exercises to reduce the cost of their debt and extend its duration,” Thomas Begley, Nordea’s Helsinki-based head of fixed income, said in an e-mailed response to questions. “This is an area that Nordea has been particularly successful in.”

Further Expansion

Bond deals in Sweden, Denmark, Finland and Norway increased 11 percent this year to $207 billion, excluding debt that banks sold to fund themselves.

“The still nascent high-yield market will expand and grow, driven by increased investor demand for higher yielding instruments,” Begley said. “In addition to corporate high yield issuers, we are expecting further expansion to be driven by the issuance of private equity-owned corporates.”

Investors seeking refuge from the crisis in southern Europe have poured into AAA rated Scandinavia’s debt markets. Though demand was initially centered on government bonds, investors have since embraced mortgage and corporate debt as they search for higher yields in regions they perceive as safe from default.

“Conditions in the bond market have been extremely attractive with credit and swap spreads at exceptionally low levels,” Begley said. “We have therefore seen significant growth in issuance as corporates have locked in extremely low financing costs.”

Special Resources

The extra yield that investors demand to own corporate bonds rather than government debt was at 223 basis points yesterday, narrowing from 351 at the end of last year, according to Bank of America Merrill Lynch’s Global Corporate & High Yield index.

Nordea had 10.2 percent of Scandinavia’s corporate underwriting market this quarter, up from 8.1 percent in the third quarter, with 66 completed deals. It was the only Nordic bank picked to manage a 2.625 percent 2024 bond sale for Telenor ASA (TEL), together with Goldman Sachs International, Morgan Stanley and ING Bank NV. The senior unsecured 600 million-euro bond was sold at a spread of 83 basis points over the mid-swap rate.

“The fourth quarter was exceptionally busy,” Begley said. “We expect the market backdrop to remain favorable in the new year and we do expect that issuance will continue to be strong across the Nordic region.”

Swedbank was the sole lead manager on a 1.5 billion-krone ($268 million) mortgage-backed 2019 covered bond issued by Terra Boligkreditt AS. The lender has prioritized building up resources in its debt capital markets business, including hiring staff, forming a frequent issuers group and boosting credit research, said Per-Aake Nyberg.

Providing research has helped it win business from unrated companies seeking to tap debt markets, Nyberg said.

“We have more special resources now to advise issuing clients,” Nyberg, who was appointed Dec. 4 to head the new euro syndicate function at Swedbank’s office in Stockholm, said by phone yesterday. “We don’t have to push a product.”

To contact the reporter on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net

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