Santander returns to US with $1.5bn T2

Banco Santander launched its first subordinated transaction in eight months on 12 November, a $1.5bn (Eu1.38bn) 10 year bullet that represented a return to the US dollar Tier 2 market for the Spanish national champion.

Santander’s last visit to the subordinated debt market had been in March, when it sold a Eu1.5bn Tier 2 transaction.

“Our issuance plans for 2015 called for two benchmark Tier 2 transactions, as we are gradually building our 2% Tier 2 buffer,” said Antonio Torío, head of funding at Santander. “We had successfully accessed the market in the first quarter of the year with a euro 10 year bullet and felt the market was receptive for a new transaction.

“In this context, Banco Santander had not been present in the US Tier 2 space for a few years, and felt a US dollar transaction was a good complement to the euro trade. It added diversification and broadened the investor base.”

Given the strategic nature of the transaction, the issuer conducted investor meetings on the US East Coast on the Tuesday before launch and received encouraging feedback.

After a public holiday in the US on the Wednesday and a global investors call on Thursday morning EST, leads BAML, Crédit Agricole CIB, Morgan Stanley and Santander went out with initial price thoughts of Treasuries plus the high 200s.

Orders approached $2bn within two hours and after guidance was set at Treasuries plus 285bp the deal was ultimately priced at that level with a $1.5bn size on the back of a $2.6bn book comprising some 170 investors.

“The transaction went very smoothly and its price and volume were within our expectations,” said Torío.

US investors were allocated 85% of the SEC-registered deal, Europe 7% and Canada 5%. Asset managers took 79% and insurance companies and pension funds 13%.