The Banker’s ‘Deal of the Year 2014’ award

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This week, NIBC won another prestigious award for its innovative pass through covered bond it launched last year. It was awarded The Banker’s Deal of the Year 2014 award in the category ‘FIG Capital Raising’, another major recognition for NIBC’s groundbreaking innovation.

This is what The Banker said about the bond:

“The world’s biggest banks have spent much of the past five years trying to comply with new regulations. Many of them have had to come up with innovative ways of raising funding that allows them to meet new rules and also satisfy the changed demands of investors following the global financial crisis.

Most of those efforts have centred on the unsecured funding markets. But Dutch financial group NIBC, whose owners include JC Flowers, the US private equity firm, brought innovation to the centuries-old European covered bond market in October last year when it did a deal with a new type of structure.

NIBC’s conditional pass-through covered bond was a complex instrument. But it essentially differed from conventional covered bonds, which are backed by pools of high-quality mortgages and are deemed to be among the safest types of fixed-income instruments, in terms of what happens in the unlikely event that the borrower defaults. In that scenario, NIBC’s bond can be extended by as many as 32 years, giving investors a longer time to be paid and increasing the likelihood of them getting their money back.

The advantage to NIBC was that while its normal covered bonds have A+ ratings, its pass-through one got a top level AAA rating, allowing it to pay a lower coupon.

NIBC’s innovation proved highly popular with the market. Within two hours of the five-year deal being launched, €1.3bn of orders had been placed. This enabled the bookrunners – Credit Suisse, LBBW, NIBC and Royal Bank of Scotland – to price a €500m note at mid-swaps plus 50 basis points (bps), which was 10bps to 15bps tighter than where a new conventional covered bond would have been issued.

Such was its success that NIBC sold a second conditional pass-through covered bond in April this year. It was similarly well received by covered bond investors, many of which hope other borrowers follow NIBC’s lead and also opt for this structure.”


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