(Bloomberg) -- A strong recovery in the Nordic bond market throughout the summer is paving the way for renewed sales in the riskiest type of debt.
Nordea's head of syndication, Povl Bak-Jensen, says debt capital markets are now looking “very receptive” toward borrowers and cites last week's hybrid offering from Finland's national carrier Finnair Oyj as a case in point.
“We are seeing broad-based support for new issues, and issuers are taking advantage of that,” Bak-Jensen said in an interview.
While Finnair was forced to pay up to refinance its existing notes by offering investors a 10.25% coupon, spread premiums have continued to narrow from the levels seen at the start of the Covid-19 crisis.
Read More: Covid Crisis Almost Over for Once Blighted Swedish Credit Market
That trend is enabling borrowers from across the credit spectrum to once again raise financing. In Norway and Sweden, for example, a spate of higher yielding deals have emerged in recent days.
On Wednesday, shipping company Wallenius Wilhelmsen ASA upsized its offering to 2 billion kroner ($227 million) before pricing at the tight end of initial price talk. Elsewhere, Kistefos AS announced a series of investor calls and Sbanken ASA sold Additional Tier 1 notes, the riskiest form of bank debt.
In the Swedish krona market, Svea Ekonomi AB has mandated banks for a possible Tier 2 offering and last week saw Arwidsro Fastighets AB sell green bonds at 500 basis points over Stibor.
Nordea's Bak-Jensen expects the credit spreads that borrowers have to pay to grind even tighter from here. But for investors such as Sampo Oyj's Ville Talasmaki the market continues to offer attractive returns.
Spreads are at a “healthier level than during the beginning of the year,” meaning “there should still be some decent investment opportunities,” said Talasmaki, who helps manage about $16.3 billion of credit investments for the Finnish financial group.
“The coming months will show how that plays out when new issuance kicks in,” Talasmaki said.
But corporate borrowers haven't been left unscathed by the Covid-19 crisis, with Nordic economies seen contracting by about 4% to 6% this year, according to forecasts by some of the biggest banks in the region.
That ongoing crisis means many bond buyers remain wary of riskier deals. “Investors want to understand the impact of Covid-19 and borrowers' liquidity position in detail,” Bak-Jensen said.
For Sampo's Talasmaki, current conditions also mean a return to the basics of “bottom-up fundamental analysis on a name-by-name basis.”
“A key is to understand whether you have any downside protection if things don't get back to ‘normal' by next spring, whatever normal means,” the investor said.
Read More: Nordic Bankers Gird for Junk Bond Sales Rush After Lull
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