2nd UPDATE: Bankinter Taps 2013 Covered Bond Tap For EUR400M

26th Jul 2010 16:57

(Adds pricing information) By Mark Brown Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Spain's Bankinter SA (BKT.MC) has added EUR400 million to its existing EUR1 billion April 2012, 2.625% covered bond, pricing the tap at 240 basis points over mid-swaps, bankers working on the deal said Monday. The new bonds had a re-offer price of 99.588 to give a yield of 3.991%, one banker said. Barclays PLC, Natixis, and Bankinter acted as joint-lead managers. The transaction was originally issued in March and was rated triple-A by both Moody's Investors Service Inc. and Fitch Ratings. Covered bonds are high-quality bonds issued by banks to refinance mortgages or public-sector loans. They were identified as a key source of bank liquidity when the European Central Bank announced a EUR60 billion purchase program to try to blunt the impact of the financial crisis on the euro-zone economy. The program, which was completed last month, boosted issuance, but covered-bond supply from southern European banks, including those in Spain, has been limited by the sovereign debt crisis in recent months. Last Monday, Banco Bilbao Vizcaya Argentaria SA (BBVA.MC) priced a EUR2 billion, three-year covered bond at 195 basis points over mid-swaps, in the first new Spanish deal since La Caixa sold a EUR1 billion, three-year deal at 72 basis points over mid-swaps April 20. JPMorgan Chase & Co. analysts said in a note Monday that the BBVA deal was "the widest spread benchmark primary issuance in covered bond history." The "most likely justification" for borrowing at this level was timing, JPMorgan said. "By stealing a march on what is thought to be a relatively heavy pipeline post-summer, BBVA may well have accessed the markets not only in significant size, but at what may well turn out to be relatively cheap levels." Unlike mortgage-backed securities, the loans backing covered bonds stay on the issuing bank's balance sheet, and issuers must maintain the credit quality of those loans in the cover pool. Bondholders have a dual claim, on the issuing bank as well as the underlying loans. Bankinter passed last week's stress tests, although according to Royal Bank of Canada, it was one of nine Spanish banks that would have failed if the minimum tier 1 ratio had been lifted to 7%. -By Mark Brown, Dow Jones Newswires; + 44 (0)207 842 9485; [email protected] (END) Dow Jones Newswires July 26, 2010 11:57 ET (15:57 GMT)