In January of this year, Jyske Realkredit issued its first Euro covered bond (CBD) with VP Securities. In this article, Anders Lund Hansen, Head of Mortgage ALM at Jyske Bank, talks about the decision to issue this bond through VP, and the benefits of using one CSD for all bond issuances.
Jyske Realkredit issued their first mortgage bonds in Euros back in 2016. Since that time, they’ve been active in the international mortgage bond market and, as Anders Lund Hansen explains, they believed the time had come to gather all of their bond issuance activities under one roof. “We’re now an established presence on the international market, and we believed the time was right to handle Euro bond issuance from our own market, using the same resources and processes that we use when we issue bonds in Danish kroner.”
Advantages of issuing through the local CSD
The fact that the VP follows the same issuance process for both Euros and Danish kroner made for a smooth transition process. “Everything was incredibly easy and problem-free,” Anders Lund Hansen says. “We clearly felt that VP was with us every step of the way, which helped us to feel secure with the entire process.”
Issuing Euro-based bonds through a Danish CSD offers a number of benefits. For example, issuers are able to issue based on Danish legislation. “We’re already bond issuers under Danish legislation and under the Danish mortgage system, so the more we can capitalise on that expertise, the better,” Anders Lund Hansen points out. “That makes the entire issuance process smoother and cheaper.” Bringing issuance closer to home makes the process easier to manage as well. “Everything you need is in-house, and when you have the team close to you, it gives you a greater feeling of control – you’re on your home turf, so to speak.”
‘Business as usual’ for European investors
One of the major unknowns was how international investors would react to a Euro-based bond being issued through a Danish CSD. “We have 83 active investors in our issuance, and we haven’t received a single question about the DK ISIN. This shows that this is a fully accepted solution seen from the European markets’ standpoint,” comments Anders Lund Hansen. Jyske Realkredit didn’t address the shift to VP in the prospectus documentation, so Anders Hansen and his team expected to get some queries concerning why they had chosen to go a different route with this issuance. Yet, even on that front, investors were silent. “No one asked why we chose to do things differently or asked for any explanation. It was truly ‘business as usual’, both for us as issuers, but apparently also for investors as well.”
Investor reach proceeded according to plan as well.
When I look in my order book, there’s no difference between this issuance and our previous ones,” Anders Lund Hansen says. “We have the same investors, both large and small, as we would expect to see. If anything, we have a few more investors than usual, which is most likely due to the favourable market conditions we’re seeing at the moment.
Anders Lund Hansen
Subscription period exceeds expectations
As of publication, Jyske Realkredit’s bond is oversubscribed three times (3.6), a fact which Anders Lund Hansen says reflects current market conditions. “It shows that there is a lot of money in the European market at the moment. We got into a positive feedback loop: investors could see that it was going well, and so more investors wanted to come on board. It’s also a testimony to the fact that the process worked well, and there were no difficulties in the investment process due to either Jyske Realkredit or VP.”
According to Anders Lund Hansen, we’re only seeing the beginning of issuing Euro-based bonds under Danish legislation. “I definitely believe that having a complete issuance process under Danish legislation is the way forward. And that’s only possible because VP has created a clear path for us to the European investment market.”
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