Nova Ljubljanska Banka, Ceska Sporitelna, Nova Kreditna Banka Maribor…. Everybody’s doing it. The MREL bond placements are rolling on the Street and market doesn’t seem to get enough of them. Most of them performed great on grey, but some of them are still traded below the reoffer. Why are some doing better then the others? You’ll just have to read the full text of the article to find out.
The week behind us has been particularly heavy in new placements of bank debt, MREL-related paper in particular. On Tuesday Slovenian Nova Ljubljanska Banka (BBB/A3) opened the book for its senior preferred 4NC3 paper, proceeds intended to fund the green framework. Before the placement, NLB had a total 892mm EUR of outstanding bonds (300mm EUR senior preferred, 82mm EUR AT1 and 510mm EUR Tier 2) – meaning that it had only one SP placement, the thinly traded NOVALJ 6 07/19/2025€ (ISIN XS2498964209). With the 500mm EUR of new SP placement, the outstanding stock of MREL securities rose to 1.492mm EUR (800mm EUR in SP) and it’s likely that the bank might place more next year. But one step at a time.
Pre-placement IOIs we got from investors were mostly focused on 7.50% YTM point (roughly MS+400bps), which was a bit surprising because most SP comparables were thinly traded at MS+350bps to MS+390bps. IPTs came very wide and quite attractive at 7.875%, so it’s no surprise that the orderbook grew to 800mm EUR in the first hours after the book has opened. The bank indicated the possibility of 300mm-600mm EUR placement subject to pricing. In three rounds of tightening the final terms ended at 7.125% YTM (MS+360bps, lower end of comparables spectrum) and the orderbook exceeded 2.0bn EUR (versus 500mm EUR placement decided in the end). With allocations skewed towards asset managers, it’s no wonder that the following morning price gapped to 101.50 (6.81% YTM) – 102.00 (6.67% YTM) versus 100.00 reoffer price. This morning we have seen some buyers managing to purchase them at 101.60 (160 cents above the reoffer) on the back of yesterday’s hawkish central banks and today’s weak French and German PMIs.
On Wednesday issuance continued with Ceska Sporitelna AS (A1/A/A) placing a very similar paper – 4NC3 senior preferred with IPTs @ MS+275bps. In a manner similar to NLB, the spread tightened somewhat in several rounds of tightening and ended at MS+240bps (5.943% YTM), while the order book reached 1.4bn EUR (500mm EUR placement was penciled in). But here is where the main narrative departs from NLB – on the following day (June 22nd, a bank holiday in Croatia) the paper was traded some 20-40 cents below reoffer (100.00 rf).
So what happened with the mentioned paper, CESSPO 5.943 06/29/2027€? In our view, MREL placements from previous days changed investor behavior in two ways. First of all, real money accounts started giving slightly larger orders than desired in order to get better allocations. And second, the astounding grey market performance of BPIFR, NOVALJ and the like attracted speculators. The confluence of these factors spelled trouble for the grey market because most of the RM clients got 80%-100% allocations and consequently were reluctant to add to their positions. Subsequently, RMs who got over-allocated started selling, this was bundled with the few speculators that did get allocations and naturally, the price on the grey market went south.
Nevertheless, the story of yesterday’s Nova Kreditna Banka Maribor (A3/BBB-) placement resembles NLB – the 3NC2 placement that opened yesterday had IPTs @ 8%. With the second update coming right after noon the orderbook reached 1.1bn EUR and the yield dropped to 7.625%. Final terms meant that NKBM prudently decided to just slightly increase the issuance size to 400mm EUR (versus 1.4bn EUR book, implying 30% pro rata allocations) with yield set at 7.375%. To compare the placement with Nova Ljubljanska Banka even further, NLB contracted the yield by 75bps (from 7.875% to 7.125%), while NKBM did some 62.5bps of contraction from IPTs to final terms and both papers are traded above reoffer now. NOVAKR 7.375 06/29/2026€ was priced at 100.00 reoffer price (7.375% coupon) and this morning we see grey trading at 100.55-100.95.
In May 2023, the total number of tourist arrivals amounted to 1.71m, an increase of 32% YoY. On the other hand, the total number of tourist nights amounted to 6.3m, an increase of 29% YoY.
The Croatian Tourist Board has recently released its latest report on the progress of the tourism sector, encompassing the most recent data for May 2023. According to the report, there has been a significant increase in the total number of tourist arrivals, totaling 1.7m, representing a YoY growth of 32%. Foreign tourist arrivals accounted for the majority, reaching 1.45m, exhibiting a noteworthy YoY increase of 40%. Conversely, domestic tourist arrivals amounted to 260k, indicating a slight decline of 1% YoY.
In terms of tourist nights, May 2023 witnessed a total of 6.3m overnight stays, an increase of 29% YoY. Of this, foreign tourist nights accounted for 5.63m, reflecting an increase of 33% YoY. On the other hand, domestic tourist nights reached 670k, denoting a modest YoY growth of 3%. Consequently, the average duration of stay per person amounted to 3.7 nights, displaying a slight decrease of 2% YoY.
Total tourist arrivals and total tourist nights in Croatia (January 2019 – May 2023)
Source: Bloomberg, InterCapital Research
Analyzing the distribution of tourist nights by accommodation type, the majority of visitors opted for hotels, constituting 35.9% of the total. This was followed by stays in private real estate at 23.2%, camping accommodations at 22.3%, and other types of accommodations at 18.6%. Regarding the breakdown of tourist nights by country of origin, Germany held the largest share with 22.3% of the total, followed by Austria at 10.8% and the domestic market at 10.8%. In terms of overnight stays, Istria continues to hold the strongest position with 1.55m nights, followed by Splitsko-dalmatinska with 910k nights, Kvarner with 720k nights, and Dubrovačko-neretvanska with 530k nights.
Compared to 2019, total number of arrivals increased by 4% compared to 2019. For foreign tourists, the growth in arrivals amounts to 3%, while for domestic tourists, to 16% compared to 2019. In terms of tourist nights, the total number compared to 2019 is 13% higher, and foreign tourist nights increased by 13%, while domestic tourist nights by 10%. Finally, looking at the YTD data, in the first 5 months of 2023, the total number of arrivals amounted to 3.78m, an increase of 1% compared to 2019. Meanwhile, total YTD tourist nights amounted to 12.2m, an increase of 8% compared to 2019.
Taking all of this together, the current trend for Croatian tourism seems quite positive. This is in contrast to the expectations from the previous year that the summer season might not turn out to be that good, as high inflation rates, and thus reduced disposable incomes, combined with higher prices, might have deterred a higher number of tourist arrivals. Furthermore, recent reports indicate that rental accommodations are fully booked until the end of September, and forward-looking data, such as booking numbers from various online reservation platforms, provide further reassurance for businesses within the tourism sector. We expect that 2023 will surpass 2019 in terms of the number of tourist nights, and 2022 in terms of revenue. Finally, Croatia’s inclusion in the Schengen and Eurozone further supports this upward trend.
Here you can find the dates for the upcoming events of the regional companies.
| wdt_ID | Date | Ticker | Announcement | Country |
|---|---|---|---|---|
| 23 | 28.6.2023 | TLSG | Telekom Slovenije ex-date | Slovenia |
| 24 | 30.6.2023 | TTS | Transport Trade Services 2022 ESG Report | Romania |
Due to the nature of these events, they are subject to change (might be postponed or canceled).
*Ex-dates present here also include companies that haven’t yet held the GSM meeting, and thus the approvals haven’t been made yet.