Sweden’s SEK Sells Its Biggest Structured Note in Three Years

Svensk Exportkredit AB, the Sweden-owned lender to foreigners, sold $101.3 million of U.S. structured notes tied to the Euro Stoxx 50 Index, its largest offering in three years.

The securities issued Feb. 27 pay three times the benchmark’s gains with a cap of 14.7 percent, according to a prospectus filed with the U.S. Securities and Exchange Commission. If the index has fallen at maturity, investors will lose a proportionate amount of capital, with all principal at risk.

The offering is the sixth-largest among more than 1,500 deals in the U.S. market this year, according to data compiled by Bloomberg. Fewer investors are asking about SEK’s creditworthiness, which was put into question in 2011 when Eksportfinans ASA, its Scandinavian counterpart and another U.S. structured note issuer, was downgraded seven levels to junk by Moody’s Investors Service, said Erik Haden, head of the company’s treasury.

“It seems like we’re not affected by that at all right now,” he said in a telephone interview from his office in Stockholm.

Structured notes are securities that package debt with derivatives to customize bets for investors. The issuers that sell them earn fees and raise money. Derivatives are contracts with values derived from assets like stocks or commodities, or events like changes in interest rates or the weather.

Moody’s Downgrade

Banks use SEK to sell notes because its credit ratings have historically been better. The agency has the second-highest credit grade from both Moody’s Investors Service and Standard & Poor’s. Banks, which often underwrite sales of their own structured notes, work with third-party issuers partly to diversify credit risk for investors.

Investors started questioning whether SEK would face similar circumstances to Eksportfinans around November 2011, Haden said. That was when Norway, which owned 15 percent of the agency, started withdrawing funds from the lender, spurring the downgrade by Moody’s.

SEK sold $405.5 million of U.S. structured notes last year, 77 percent less than in 2011, Bloomberg data show.

The lender issued $185.8 million of one-year notes tied to Ford Motor Co. on March 10, 2011, the most recent offering that was larger, Bloomberg data show.

The securities sold last month were distributed by Bank of America Corp. for a 2 percent fee, according to the prospectus.

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