Nationwide plans to issue the first covered bond by a UK building society next week.

The company plans to raise €2bn of mortgage-backed covered bonds with a 2015 maturity. The management team started the marketing roadshow for the issue on Monday and will travel through Europe until Friday. The bookbuilding and pricing is expected to follow next week.

Covered bonds are backed by the future income stream from assets such as mortgages or public sector loans. Unlike with mortgage-backed securitisations, the assets remain on the issuer’s balance sheet. This gives investors added protection in case of default because they also have access to the borrower’s other assets.

Nationwide’s issue is backed by more than 12,600 loans that have a total value of more than £1bn, according to Fitch Ratings.

Nationwide aims to access continental investors, where a market has existed in Germany for more than a century. The deal is being lead-managed from the Frankfurt offices of Barclays Capital, Dresdner Kleinwort Wasserstein and Deutsche Bank.

The absence of specific covered bonds legislation in the UK meant the first issue took place in 2003, supported by contractual agreements that provide a similar credit protection to the continental legislation.

Nationwide will be the first building society and the fifth UK mortgage lender to access the market since the inaugural deal was done by HBOS in 2003.

Abbey National, Bradford & Bingley and Northern Rock also have issued covered bonds.

The bonds will be rated AAA by all three major rating agencies.

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