Nord/LB has launched a €500 million ($614.38 million) seven-year German covered bond that is backed by aircraft finance assets.
The covered bond has a provisional rating of 'A2' by Moody’s Investors Service. Bank of America Merrill Lynch analysts noted in their latest weekly that the deal was well over subscribed with demand being from Germany taking up the lion's share at 95%. Banks represented 47% of the allocation. It priced at 55 basis points over mid-swaps.
"The new asset class offers a juicy spread pick up versus the traditional public sector or mortgage covered bonds, bearing in mind the different risk profile in a recovery scenario," BofA Merrill analysts said.
The deal is backed by aircraft finance assets that include direct loans to airlines, aircraft operating leases and aircraft finance leases, which are all backed by aircraft mortgages.