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NatWest launches its first SONIA linked benchmark issuance

This week, National Westminster Bank Plc (NatWest) launched and priced the first SONIA-linked benchmark issuance for the bank, issuing a £750m 4yr Covered Bond at SONIA + 60bps.

This follows the introduction of reformed SONIA by the Bank of England in April 2018, paving the way for SONIA-linked debt capital markets transactions as an alternative to the traditional LIBOR risk-free reference rate, which is due to be phased out from 2021.

Robert Begbie, RBS Group Treasurer and Executive Sponsor for the RBS Group LIBOR Programme, advised that “by adopting SONIA as a reference rate in our Sterling covered bond debt programme and issuing a benchmark in this format, we have demonstrated both our support for this initiative and provided an investment opportunity for the growing number of investors looking to participate in SONIA-linked debt issuance.”

The transaction was announced into a receptive market with initial guidance of SONIA+65bps area. It successfully attracted investor interest with an orderbook peaking at £2.1bn – the largest orderbook for a SONIA-linked covered bond to date. This enabled NatWest to move pricing to SONIA+60bps and issue £750mm which was at the upper end of its target range.

The transaction was very well received, with several first-time SONIA investors participating from across the international institutional investor community. An impressive number of accounts with more than 80 investors reflects continued strong support for NatWest’s credit after a two year absence from the covered bond market. The intra-day execution of a debut SONIA issuance, a first, further indicates the normalisation and growing acceptance of this product class.

Additionally, the success underscores the merits and the effectiveness of marketing efforts to bring investors up to speed with the group structure and ensure investors had appropriate lines for the relevant issuing entities. NatWest Markets once again demonstrated its growing SONIA linked franchise by acting as a joint bookrunner on the transaction.


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