French trio in Tier 2, BPCE opts for sterling

France’s BPCE priced an inaugural sterling subordinated deal on 9 April, a £750m (Eu911m) 15 year Tier 2 transaction that came in between euro issues for BNP Paribas and La Banque Postale.

BPCE’s deal was also the French bank’s inaugural sterling benchmark and the largest sterling Tier 2 from a French financial institution. It came after Crédit Agricole CIB had earlier in the month priced a £500m perpetual non-call 12 deal alongside a euro issue in a dual-tranche AT1, while France’s Société Générale sold a euro AT1.

BPCE took advantage of strong liquidity in the sterling market and high demand for long end maturities in printing its deal, according to a syndicate official at one of the leads — HSBC, Lloyds, Natixis and RBS.

The 5.25% April 2029 Tier 2 securities were priced at 215bp over UK Treasuries, the middle of guidance of the 215bp over area that was revised from initial price thoughts of the 225bp over area, with nearly £2.5bn of orders placed, mainly by UK investors.

“Sterling investors are looking for yielding assets and duration,” said a lead syndicate banker. “They warmly welcomed this rare transaction, which gave them a good opportunity to invest in a 15 year subordinated deal from an infrequent issuer.”

The deal is BPCE’s fourth Tier 2 benchmark since July 2013, a $1.5bn (Eu1.08bn) 5.15% 10.5 year in January having been the most recent.

Other French issuers took to the euro market for their first subordinated transactions in several years, tapping a market that a syndicate banker said has been “extremely robust relative to the rest of the capital structure” and where spreads have performed the best.

BNP Paribas priced a Eu1.5bn 2.875% 12 non-call seven on 13 March, its first Tier 2 deal since 2007, while La Banque Postale sold a Eu750m 2.75% 12 non-call seven on 11 April, two days after BPCE’s transaction.

BNP Paribas’ deal was priced at165bp over mid-swaps, the tight end of guidance of 165bp-170bp over, with outstanding deals from a range of issuers, such as ING Bank and Swedbank, serving as reference points for what was a relatively straightforward price discovery process, according to a banker close to the deal.

Sole lead BNP Paribas gathered around Eu5bn of orders, benefitting from demand for a rare issuer in Tier 2 format. Nearly all of the notes were taken by real money accounts across a granular spread of jurisdictions. The transaction was at the time of writing said to be bid at 141bp over.

La Banque Postale priced its Eu750m 2.75% 12 non-call seven Tier 2 notes at 152bp over, after guidance of the 155bp over area, with nearly Eu3bn of orders placed, according to a syndicate official at one of the leads — Barclays, BNP Paribas, SG and UBS.

The deal marks the issuer’s return to the public subordinated market after an absence of three-and-a-half years and helps optimise the bank’s capital structure under CRD IV and offset the regulatory amortisation of legacy Tier 2 instruments from November 2015, according to the banker. French investors and asset managers took the majority of the securities by geography and investor type (55% and 80%, respectively).