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Íslandsbanki: Two new covered bond issues on NASDAQ OMX Iceland

Íslandsbanki has sold two new covered bonds issuances on NASDAQ OMX Iceland hf. This follows on the back of Íslandsbanki’s successful covered bond issue in 2011, the first securities listed in the Icelandic stock exchange after the financial crisis in 2008.

The two issues, which are both CPI-linked, are on the one hand a 7 year issuance, ISLA CBI 19, for an amount of ISK 1,830,000,000 at a real yield of 2.84%, and on the other hand a 12 year issuance, ISLA CBI 24, for an amount of ISK 1,500,000,000 at a real yield of 3.45%. The bonds will commence trading on Wednesday 7 March 2012.

Sold to a broad group of institutional investors, total appetite amounted to ISK 4,950,000,000 but only 67% of offers were accepted, or for ISK 3,330,000,000. No offers were accepted for the non-indexed linked 3 year issue. Market making for all of Íslandsbanki’s covered bond issues is in the hands of MP banki.

Covered bonds are considered more secure for investors than conventional bonds. The bonds are issued under Act 11/ 2008 on Covered Bonds which obliges the issuer to fulfil strict requirements, whereby the underlying cover pool must withstand a weekly stress test with regards to interest rates and exchange rates. The issue is regulated by the Icelandic Financial Supervisory Authority which additionally appoints an independent inspector to monitor the issue.

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