White & Case Advises on Arion Bank’s Innovative Debut Offering of €300 Million Covered Bonds

Global law firm White & Case LLP has advised Barclays, as Sole Structuring Advisor, and Barclays, Deutsche Bank and UBS as Joint Lead Managers, on Arion Bank HF’s inaugural offering of €300 million covered bonds.

"White & Case has advised on a milestone covered bond transaction that demonstrates our market leading ability to break new ground in the international capital markets," said White & Case partner Richard Pogrel, who co-led the Firm’s deal team.

The covered bonds represent the first ever euro covered bond issuance by an Icelandic bank under Iceland’s covered bond legal framework, which was passed in 2008. They are secured on Icelandic krona-denominated residential mortgage assets. As there is no day one cross currency swap to hedge foreign exchange risk, there is a requirement for Arion Bank to post collateral into a ring-fenced reserve account, which is adjusted weekly and amounts standing to the credit of the account will be used to enter into a cross currency swap if Arion Bank’s unsecured rating falls below BBB-. The structure of the transaction resulted in a rating uplift and S&P rated the covered bonds A-.

"The innovative structure has opened the door for other Icelandic banks to follow the same path," said White & Case partner Ingrid York, who co-led the deal team. "It also has potential applicability to issuers in other jurisdictions who are unable to put, or face difficulties in putting, the day one swap in place."
 
The White & Case team in London that advised on the transaction was led by partners Richard Pogrel and Ingrid York and included associates Neha Saran and Eduardo Barrachina. 

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