Allen & Overy (A&O) has continued its domination of the covered bond market after advising on the first issue by a UK building society.
Nationwide Building Society priced and launched its first covered bond earlier this month, a €2bn (£1.34bn) 10-year note, paying 3.5 per cent from its newly signed €14bn (£9.4bn) covered bond programme. Barclays Capital and Deutsche Bank acted as lead managers.
The programme launch required Nationwide to set up a new company under a limited-liability partnership (LLP) to act as a guarantor to the notes. The mortgages backing the notes were then transferred to Nationwide Covered Bonds LLP in a True Sale transaction.
Such a transfer gives the LLP vehicle a better credit rating than the building society, thereby guaranteeing the triple-A rating for the note that typifies covered bond issues. The lawyers involved worked closely with the ratings agencies to ensure they were complying with their criteria to achieve the highest possible rating.
The Nationwide covered bond also provided an extra challenge for the lawyers because of its mutual status.
A&O has played a part in every covered bond issue in the UK since they started in 2003 with HBOS.
Capital markets partner Salim Nathoo led the A&O team advising the lead managers, along with partners Richard Slynn, Mark Brailsford and Richard Tredgett. Clifford Chance represented Nationwide, led by structured finance specialist Debashis Dey along with tax partner Chris Davies. Dundas & Wilson advised on Scottish law and Cleaver Fulton Rankin on Northern Irish law.