In brief: NordLB in dollars, plus Tier 2 returns

Europe

NordLB issues US dollar T2 notes: On 3 April – after a roadshow taking in London, Singapore, Hong Kong and Switzerland – Norddeutsche Landesbank issued a US dollar 10 year bullet Reg S-only Tier 2 transaction. The $500m 2024 notes were priced at 6.25%, from IPTs of the low to mid 6%.

BBVA prices EUR T2 bond: On 2 April, BBVA ended a seven year hiatus from the Tier 2 market and issued a Eu1.5bn 3.5% 10NC5 Tier 2 bond. The final order book reached Eu8bn with 450 investors participating, allowing the second largest Spanish bank to price the notes at mid-swaps plus 255bp, from revised guidance of mid-swaps plus 255bp-260bp.

RBS prices first euro T2 since 2008: On 20 March, Royal Bank of Scotland issued its first euro-denominated Tier 2 transaction since 2008. The Eu1bn 3.625% Reg S 10NC5 deal came out with official guidance of mid-swaps plus 270bp and was priced at mid-swaps plus 265bp.

Aareal Bank issues euro Tier 2: German lender Aareal Bank issued a new Eu300m 2026NC2021 Tier 2 on 11 March, after a series of investor meetings across Europe. The transaction attracted demand of Eu2.8bn across 250 accounts. The transaction was priced at 290bp over mid-swaps, for a coupon of 4.25%.

 ING Eu1.5bn 12NC7 Tier 2: ING returned to the sub market with a 12NC7 euro-denominated Tier 2. The deal was priced at 225bp over mid-swaps, down from IPTs of the 235bp area, on the back of a Eu5bn book.

 RBI brings euro Tier 2 to the market: On 13 February, Raiffeisen Bank International priced a Eu500m 11NC6 Reg S Tier 2 transaction at a re-offer yield of 4.517%. IPTs were 350bp over mid-swaps and the book reached Eu3.5bn, allowing the issuer to tighten the final spread to 330bp over mid-swaps.

Asia Ex-Japan: CITIC in AT1 dollar first, plus Basel III-compliant debuts

CITIC $300m 7.25% perpNC5 AT1: On 10 April, after a roadshow in Singapore, Hong Kong and London, China CITIC Bank International (pictured) printed the first US dollar AT1 bond out of Asia. The $300m perpNC5 Reg S deal was priced at 7.25%, at the tight end of final guidance of 7.375% plus or minus 12.5bp, and 50bp inside initial guidance of the 7.75% area. The books drew $5.7bn of interest from 260 accounts. 80% of the bonds were sold in Asia and 20% in Europe. Asset managers took 52%, private banks 19%, insurance companies 17%, banks 8%, and corporates 4%.

OCBC completes roadshow: Overseas-Chinese Banking Corporation completed a roadshow in mid-April for a potential $1bn 10.5NC5.5 144a/Reg S Basel III-compliant Tier 2 deal. A transaction was due to follow, subject to market conditions.
The same week, Standard Chartered priced a $2bn 5.7% Reg S/144a 30 year Tier 2 at 210bp over US Treasuries, after announcing IPTs of the Treasuries plus 230bp-235bp area.

ANZ prints first Australian US dollar Basel III-compliant T2: On 12 March, ANZ priced a $800m 144a 10 year bullet Tier 2 transaction and became the first Australian bank to print an offshore Basel III-compliant bond. The order book closed at $1.7bn, with 120 accounts, and the deal was priced at US Treasuries plus 180bp, from initial guidance of the Treasuries plus 185bp area. US investors accounted for around 60% of the demand, followed by Asian and European accounts, with 25% and 16%, respectively. The bond’s loss absorption feature will be triggered if the Australian Prudential Regulation Authority (APRA) deems that ANZ would no longer be viable without a write down. In such an event, the bonds will be converted into 100% common equity, subject to a floor at 20% and based on the volume-weighted share price five days before pricing.

UOB issues US dollar Basel III-compliant T2: On 11 March, UOB launched a $800m 10.5NC5.5 Reg S Basel III-compliant Tier 2 bond. The deal was priced at US Treasuries plus 225bp, from initial guidance of the Treasuries plus 250bp area. US offshore accounts took 79%, Asia 21%. Asset managers were allocated 64%, insurers 15%, banks 12%, and private banks 9%.

DBS Bank to use regulatory call option on outstanding 4.7% perpNC2020 Tier 1: Singapore-based DBS Bank announced its intention to use a regulatory par call on the outstanding SGD895m 4.7% perpNC2020 legacy Tier 1, issued in 2010. The bond was previously targeted in an exchange offer in November 2013, in which bondholders could switch into new Basel III-compliant securities.

Insurance: Aegon adds to Dutch supply after NN hybrid

Aegon prices 30NC10 T2: On 17 April, Dutch insurance company Aegon issued a Eu700m 4.0% 30NC10 bond, following a two day roadshow across Europe. The Reg S transaction was announced with initial price thoughts (IPTs) of mid-swaps plus 240bp-250bp, later revised to mid-swaps plus 235bp. The books closed in excess of Eu5bn, allowing the issuer to price at mid-swaps plus 235bp (DBR 1.75 2/24 plus 257.9bp). Aegon is the fifth insurer to have sold insurance capital this year in Europe.

NN Group issues euro-denominated hybrid transaction: On 1 April, ING’s insurance entity issued a Eu1bn 30NC10 hybrid bond. The transaction was priced at mid-swaps plus 295bp (DBR 1.75% 2024 plus 316.9bp) and a coupon of 4.625%. More than 375 investors placed orders and the books reached Eu7bn. The Dutch insurer completed a roadshow the week beforehand, testing interest for the 30NC10 bond at the mid-swaps plus 312.5bp area, later revised to the mid-swaps plus 300bp area. UK investors accounted for half of the deal (47%), followed by Germany (11%) and the Benelux (10%). Asset managers constituted the bulk of demand, with 70%.

Coface prints EUR 10 year bullet T2: On 19 March, the French credit insurance group issued a Eu380m 4.125% 10 year bullet Tier 2 transaction, after a series of investor meetings in Europe. Momentum was strong as the book reached Eu3.7bn of orders from more than 290 accounts. The deal was priced at mid-swaps plus 235bp (259.2bp over the DBR 1.75% 2/2024).

Japan: Mizuho in Japanese first

Mizuho issues first Japanese Basel-III compliant offering: On 20 March, Mizuho issued a $1.5bn 4.6% Reg S/144a 10 year bullet bond, the first ever Basel III-compliant offering by a Japanese bank. The deal was announced with official guidance of US Treasuries plus the 187.5bp area (plus or minus 2.5bp) and strong investor demand allowed the issuer to ultimately price the deal at Treasuries plus 185bp. Mizuho’s note is subject to a full and permanent write-down if the bank is deemed to have reached the PONV, based on Japan’s Deposit Insurance Law.

Sumitomo issues US dollar-denominated T2: On 25 March, Sumitomo Mitsui Financial Group held a series of investor calls across Asia, Europe, and the US regarding a new Reg S/144a US dollar 10 year bullet Tier 2 issue. The following day, the Japanese bank priced a $1.75bn 4.436% April 2024 Tier 2 bond at US Treasuries plus 175bp, from initial guidance of Treasuries plus 175bp-180bp. The notes bear a contractual permanent write-down mechanism.

Liability management: Credit Suisse, Citi buybacks

Credit Suisse LME on Claudius Tier 1 in conjunction with regulatory call: Credit Suisse announced on February 14 a buyback on the outstanding $1.5bn perpetual Tier 1 issued by Claudius Limited, at 103% (purchase price plus early tender premium). In conjunction with the announcement, Credit Suisse also issued a notice of the exercise of the regulatory par call on the bond, which is expected to be redeemed after the settlement of the buyback. According to the official announcement, the offer “is consistent with the Offeror’s pro-active approach to capital management and commitment to simplify its capital structure”. The offer expired on March 14 and attracted a 93.4% success rate (Eu1.4bn).

Citi announces results of subs LME: On 12 February, Citigroup communicated the results of a tender offer launched on 3 February on outstanding Eu1.25bn 4.25% 2030 and £500m 4.5% 2031 subordinated notes. The pricing was determined pursuant to a Modified Dutch Auction procedure. The bank accepted for purchase all sterling bonds tendered at the maximum purchase spread of 135bp and none of the euro notes, resulting in an aggregate US dollar equivalent nominal amount repurchased of approximately $296.9m, increasing accordingly the maximum acceptance amount.

Russia: Sberbank incorporates new rules

Sberbank $1bn 10NC5 T2: Russian lender Sberbank issued a new $1bn 2024NC2019 Reg S/144A Tier 2 on 18 February, attracting demand of $2.2bn. The transaction was priced at 402.3bp over the benchmark, for a yield of 5.5%.

It is the first Russian Tier 2 to incorporate the amendments to Regulation 395-P with regard to the point of non-viability and activation of the capital ratio trigger, which were released by the Central Bank of Russia in autumn 2013.