Berlin Hyp reopens bond market after summer break as green mortgage Pfandbrief attracts €5.8b of investor demand

Berlin Hyp, the German real estate finance company owned by LBBW, has ensured summer ends with a bang.

In a repeat of its strategy for the last three years, the bank waited until the third week of August to tap pent up demand among investors by offering a green mortgage Pfandbrief in jumbo format.

Orders cascaded in worth over €5.8 bn – its largest order book ever.

The bond with a volume of €1 bn carries a coupon of 1.25% and is rated Aaa by Moody’s, and the yield at reoffer was 1.359%.

In a striking chronology of demand, Berlin Hyp explained that on Tuesday morning at around 8.40am, syndicate banks assigned to the offering - Commerzbank, CA-CIB, DZ Bank, LBBW and UBS – opened their order books for the bond, with Hauck Aufhäuser Lampe Privatbank as co-lead manager.

By 9.05am, orders worth more than €2 bn were booked, after which more orders poured in, reaching over €3.5bn, enabling the issuer to set the bond volume at €1 bn.

By 10am when the order books were finally closed, orders had swelled to over €5.8 bn, and that is excluding orders from the syndicate banks. The final reoffer spread was fixed at mid-swap -4 basis points.

The final tally saw more than 180 investors participate. Some 45% of the bond was placed to international investors – such as those from the UK and Nordic countries which accounted for 15% and 9% respectively.

According to a breakdown by Berlin Hyp, asset managers accounted for 42% and banks 40%. Another 14% went to central banks and official institutions. Savings banks and affiliated companies accounted for a total of 17%.

Explaining the demand and its biggest covered bond order book for more than two years, Berlin Hyp told PropertyEU it enjoyed the success partly because it had built up a strong ESG track record over recent years, marking it out as a ‘pioneer’.

So far already this year, it has issued no fewer than 5 green bonds.

The latest covered bond appealed to investors given a ‘high level of security’, as well as its green background, and the maturity of 3 years, which seemed to meet the current investor interest very well, it said.

There is also a lack of short-dated Aaa-rated offers in the market currently. Furthermore, it seemed to offer an attractive relative value compared to German federal bonds.

The market has been relatively quiet since July, said Berlin Hyp. ‘We sensed that many investors are waiting for new issuances. Berlin Hyp has re-opened the market after the summer break in the last 3 years, always in the third week of August.’

Maria Teresa Dreo Tempsch, who is responsible for capital market business on the board of management, noted: ‘Back in May, we already saw record demand for a Berlin Hyp bond with the debut issuance of our Social Pfandbrief. We never expected that we’d be able to almost double this with our Green Pfandbrief issuance after the summer break. We are very proud that our ESG bonds meet with such great interest among investors. This clearly confirms us in our way to integrate sustainability into our daily business.'


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