2nd UPDATE: RBS To Sell EUR1.25B Three-Year Covered Bond

9th Jun 2010 13:13

(Updates pricing information, adds detail.) By Mark Brown Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Royal Bank of Scotland Group PLC (RBS) has set the final terms on its inaugural covered bond issue, a banker involved in the transaction said Wednesday. The three-year deal will be EUR1.25 billion in size and will price at 125 basis points over mid-swaps, in line with initial guidance. RBS met investors to discuss the possibility of issuing covered bonds on a roadshow last month. Barclays PLC, Danske Bank A/S, RBS, Societe Generale SA and UniCredit SpA are joint-lead managers of the transaction. Covered bonds are high-quality bonds issued by banks to refinance mortgages or public-sector loans. Banks are required to maintain the credit quality loans, sometimes in accordance with specific legislation, and investors have a claim both on the issuing bank and the assets in the cover pool. Issuance has increased in June, after a lull in May prompted by the European sovereign debt crisis, but most of the new supply has come from German and French banks. A banker not involved in the transaction said it made sense for RBS to issue a three-year bond after several five-year deals in recent days. The U.K. covered-bond market is much smaller than the more established ones in continental Europe but it nonetheless offers an alternative source of funds for lenders as they seek to replace government support measures like the Special Liquidity Scheme and the Credit Guarantee Scheme. Barclays PLC (BCS) and Lloyds Banking Group PLC (LYG) have both issued covered bonds in 2010. -By Mark Brown, Dow Jones Newswires; + 44 (0)207 842 9485, [email protected] (END) Dow Jones Newswires June 09, 2010 08:13 ET (12:13 GMT)