CaixaBank shrugs off Popular woes to score AT1 debut

A EUR1bn debut Additional Tier 1 issue for CaixaBank on 1 June showed the AT1 market to be in rude health, attracting more than EUR3.3bn of demand despite coming a day after fears about compatriot Banco Popular Español mounted.

CaixaBank web

On 31 May, Reuters reported that Single Resolution Board chair Elke König had flagged concerns about Banco Popular being unable to find a buyer and being wound down, resulting in a renewed sell-off in the bank’s securities. (See separate article.)

However, given an otherwise strong market backdrop — in which other peripheral names had enjoyed AT1 success (see separate article) — CaixaBank was undeterred and the following day entered the market with a planned EUR750m perpetual non-call seven AT1, rated BB- by S&P.

After going out with initial price thoughts of the 7% area, CaixaBank was able to tighten pricing 25bp and achieve a coupon of 6.75%, as well increasing the size to EUR1bn on the back of a EUR3.3bn-plus book comprising some 200 institutional investors.

“CaixaBank took advantage of good market conditions to complete the issue, with investors demonstrating their confidence in the group’s strengths,” said the bank, noting that it was the first Spanish issuer to debut with a call beyond five years.

“The AT1 market is in solid shape and the recent CaixaBank deal is a remarkable sign of strength and commitment to the asset class,” said Viet Le, financial institutions syndicate manager at Crédit Agricole CIB.

“Spreads are at absolute tights, headline risk has increased, and yet investors continue to engage and differentiate perceived troubled banks from the broader market.”

The market had indeed been unfazed by Banco Popular’s difficulties from the outset — even if the bank’s securities themselves had fallen to record lows. Although Banco Popular AT1 were trading in the 60s in the week of CaixaBank’s debut, being down some 30 points on the year, Spanish credits such as BBVA were trading close to all-time highs.

CaixaBank’s inaugural AT1 lifted the bank’s Tier 1 ratio to 12.6% and Total Capital to 16.1% in phased-in terms, it stated, also expanding its “solid” liquidity position.

The bank also noted that the deal was its fourth institutional debt issue of 2017 and made it the only Spanish issuer to have raised finance in all formats year-to-date, with a 10 year covered bond, seven year senior unsecured deal and 10 year Tier 2 transaction completing its full house.