UniCredit today launched a new issue of covered bonds (OBG). These are fixed-rate bonds for 1 billion euro with a 10-year maturity under the Conditional Pass Through Program guaranteed by UniCredit OBG.
Strong demand
The covered bond, specifies the Unicredit press release, "received strong interest from investors, with an overall final order book more than 2 billion and the participation of more than 90 institutional investors”. The yield, initially announced at around 25 basis points and subsequently revised to 20 basis points, was set at 18 basis points above the equivalent maturity swap rate, well below initial guidance. "This level - underlines Unicredit - represents the lowest spread ever paid by an Italian issuer for covered bank bonds".
Performance
The bond will pay a coupon equal to 0,75%a issue price of 99,118% and a yield approximately 53 basis points lower than that of BTPs of equivalent duration at the time of launch.
The securities were distributed to various categories of institutional investors such as central banks and public institutions (52%), banks (25%), funds (18%) and insurance companies (5%). Demand came mainly from Italy (42%), Germany/Austria (18%), Asia and the Middle East (15%), UK/Ireland and BeNeLux (both 6%). AA rating is expected for the stock + from Fitch.
The program
Today's operation is part of a 25 billion Euro Program established in 2012 in the Soft Bullet format and restructured at the end of 2014 in the Conditional Pass Through format. The securities issued pursuant to this Program are guaranteed by a portfolio made up of approximately 80% by residential mortgages granted to private individuals and 20% by commercial mortgages intended for small and medium-sized enterprises.
The guarantees
For the benefit of the holders of covered bonds (including this issue, the CPT covered bonds program includes €10,1 billion of outstanding securities), as of 31 December 2014 approximately €12 billion of residential mortgages and €3 billion of Euros of commercial mortgages originated by UniCredit SpA. Overall, at the end of December 2014, the portfolio includes approximately 180.000 mortgages and is extremely granular (average residual debt of approximately EUR 81.000); it is also characterized by an average loan-to-value of approximately 47% and by a geographical concentration mainly in Northern and Central Italy, for 52% and 26% respectively.
