Nordea Vaults to Top Underwriter as Goldman Drops: Nordic Credit

Nordea Bank AB jumped to the top of the Nordic region’s bond underwriter rankings in the first quarter as the lender helped companies such as Telenor ASA sell cross-border deals.

The largest Nordic bank underwrote $6.3 billion in bonds, boosting its market share by 5 percentage points from a year earlier to 12.7 percent, according to data compiled by Bloomberg. SEB AB rose to second spot from fourth, grabbing 8 percent of the market through $3.9 billion in deals. The figures include corporate and financial issuance and exclude public-sector bonds and financing on their own behalf.

“We’ve seen increasing willingness by Nordic corporates to consider issuance in Nordic currencies other than their own,” Thomas Begley, Nordea’s head of fixed income in Helsinki, said in a phone interview last week.

Norwegian companies led the way in the period in selling bonds outside their home market, targeting Swedish investors hungry for yield. Cross-border deals helped Nordea withstand a broader decline in debt sales in the first quarter as issuance, which surged in 2012 and early last year, abates amid a pick-up in lending after banks built up buffers to meet stricter capital requirements.

Norwegian Kronor

Sweden’s central bank in December cut its main interest rates to 0.75 percent, while Norway’s central bank, whose benchmark is 1.5 percent, delayed a plan to raise borrowing costs by at least a year to the summer of 2015.

Norway’s Telenor, the region’s largest phone operator, sold 3.4 billion in Swedish kronor ($527 million) debt last month in deals arranged by Nordea and SEB. Seadrill Ltd., the oil-rig company controlled by billionaire John Fredriksen, also raised a 1.5 billion Swedish-krona note in March, handled by Swedbank AB, Nordea and Danske Bank A/S.

“This quarter we’ve seen a very good development in developing the cross-border business,” said Per-Aake Nyberg, Swedbank’s global head of debt capital markets and syndicate. “We’ve taken Norwegian issuers like Seadrill into the Swedish-krona market. Diversification plays into the game more and more. Issuers become more and more well known.”

Goldman Slides

Swedbank, which kept its third place with a 7.2 percent share of the market, helped about $3.5 billion in deals. Goldman Sachs Group Inc. slid from first to 12th, losing 7.3 percentage points of market share. The New York-based bank was at the top last year after arranging a $4 billion bond sale for Svenska Handelsbanken AB.

Sophie Ramsay, a spokeswoman at Goldman, said in an e-mail the bank had no comment on the underwriting.

Nordea’s Begley said it “was extremely encouraging to see Telenor tap the Swedish market” and that “diversification is extremely important for issuers even though they are generally not able to arbitrage markets and issue at cheaper levels.”

Anders Engstrand, head of debt capital markets at SEB, said the Stockholm-based bank is “positive” on an active market in 2014. The cross-border issuance is a “natural way for companies to start to diversify and increase the depth of the investor universe,” he said in an e-mail.

So far this year, Nordic bond sales are 11 percent lower than a year ago at $49.4 billion. They declined 4.6 percent in 2013, after jumping 17 percent in 2012, according to data compiled by Bloomberg.

Bank Lending

The slide can be attributed to a renewed willingness to lend, according to Begley.

“For the moment, Nordic banks are extremely keen to lend and bank financing costs are very competitive,” he said. “In the longer term, we will see continued growth in Nordic and European capital markets, greater use of the bond markets as a financing tool and less reliance on bank financing.”

The banks have been battling to meet stricter capital levels set by Swedish authorities and all surpassed proposed targets by the end of last year. Sweden’s four biggest banks reported a combined profit of about 70 billion kronor last year, up more than 3 percent from a year earlier.

Nordea, SEB and Swedbank do most of their business in the Nordic region, where Iceland is the only nation among five that doesn’t have a top credit rating. Bond financing complements bank loans, allowing companies to diversify funding and refinance existing debt at lower rates.

Nordic companies are also finding good demand across Europe, according to Nyberg whose bank was among a group of five lenders to arrange a 225 million-euro ($310 million) deal for Finland’s Metsae Board Oyj last month.

‘Feeding Frenzy’

The “deal could have been a completely Nordic transaction, but they wisely opted to have a wider distribution,” he said. “The order book was 10 times oversubscribed, which meant a lot of price tension with substantial price revisions and they had a deal placed with a high-quality European order book.”

According to Begley, a lack of trading in the secondary market is also raising demand for new issues.

“This has meant a feeding frenzy in some cases for the new supply in the primary market and as a result smaller allocations than investors have wanted,” he said.

While it hasn’t materialized yet, the underwriters also anticipate that a growing tide of mergers and acquisitions will help support corporate bond sales this year.

“There has been a pick-up in M&A activity in the Nordic region and as a result we expect bond financing to increasingly be a core component of debt financing packages,” Begley said.

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