Yesterday, NLB published a report stating that it has decided to issue notes in the aggregate nominal amount of EUR 500m, with the issuance taking place on 29 May 2024. The maturity date is 29 May 2030, with the early redemption on 29 May 2029. Furthermore, the interest rate amounts to 4.5% per annum, and the issue price with be equal to 99.759% of the notes’ nominal amount.

The announcement was first made on 21 May 2024, when NLB said it plans to issue notes that will count towards the minimum requirement for own funds and eligible liabilities (MREL). Since this requirement changes as the risk-weighted assets grow, so does the requirement for NLB to supplement its equity and deposits. As NLB is also actively pursuing a policy (at least thus far) of early redemption of previous notes, it was and still is expected that the Group will continue issuing new notes to compensate for those redemptions.

For this issuance, NLB issued an aggregate nominal amount of EUR 500m of Senior Preferred Notes. The interest rate on the principal will be 4.5% per annum, and the issue price will be equal to 99.759% of their nominal amount. The notes are expected to be issued on 29 May 2024, with the maturity date on 29 May 2030, and the issuer will have the option for early redemption on 29 May 2029.

NLB also announced that the transaction was very well received with an order book of EUR 1.4bn, strongly above the issue amount. The orders came from reputable fund managers, international financial institutions, banks, insurance companies, and other investors.

According to the latest mid-swap data for banks, it stood at 2.908%. NLB’s interest rate on this bond was using this mid-swap as the basis, on top of that a spread was added. This spread refers to the market’s perception of NLB’s riskiness, and as such is different for each bank. According to the 4.5% interest rate, NLB’s spread was at 165 bps. On the last issuance which was a subordinated note (January 2024, 10y bond), the interest rate was 6.875% per annum. The current spread on this note since January decreased by app. 45 bps. This would mean that overall, NLB’s credit rating improved.

The issuance also demonstrates the improving conditions on the market, as previous bonds were issued at rates between 6 and 11%. However, it should be noted that this included both subordinated as well as senior preferred notes.