City advisers line up as banks tap covered bond market again

Slaughter and May and Allen & Overy (A&O) are advising on the issuance of €1.75bn (£1.58bn) worth of covered bonds for Abbey National.

The deal is part of a €25bn (£22.6bn) covered bond programme for Abbey National Treasury Services. Slaughters is advising longstanding client Abbey on the deal, with a team led by London banking and finance partner Guy O'Keefe.

O'Keefe set up the original programme for Abbey four years ago as a financing tool. The most recent issuance, which received triple-A ratings from Standard & Poor's, Moody's and Fitch, closed on 14 October.

A&O, fielding a team led by head of securitisation Salim Nathoo and derivatives partner Richard Tredgett, advised the underwriters Banco Santander, Barclays Capital, BNP Paribas and Deutsche Bank, which acted as lead arrangers on the deal.

Abbey launched the bond programme in June 2005, with the recent issuance marking the 11th covered bond since then. This month has seen a partial revival of covered bond deals in Europe, with A&O also acting on a €1.5bn (£1.35bn) bond by the National Bank of Greece.

London securities partner David Shearer led A&O's team on that deal, with Tredgett assisting. Clifford Chance and Ashurst also advised.

Covered bonds are seen as a litmus test for returning investor appetite for asset-backed debt given their status as one of the safest forms of debt instrument. Unlike most securitisation deals, the bonds remain on the issuer's balance sheet and include a recourse 'covering' the bonds if the originator becomes insolvent, which typically boosts its credit rating.

Slaughters' O'Keefe commented: "The covered market has ignited and there are high hopes for it to continue at this rate into next year."