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Multi-billion book for CaixaBank AT1 despite Popular crisis
June 1, 2017 / 1:45 PM / 6 months ago

Multi-billion book for CaixaBank AT1 despite Popular crisis

* Popular AT1 coupon risk leaves CaixaBank’s investors unperturbed

By Alice Gledhill

LONDON, June 1 (IFR) - The crisis at Banco Popular Espanol failed to derail subordinated issuance by other Spanish lenders this week, when a multi-billion book enabled CaixaBank to upsize an inaugural Additional Tier 1 trade from an expected €750m to €1bn.

CaixaBank will price the perpetual non-call seven (BB-) at 6.75% on the same day that AT1 securities from capital-stricken Popular hit new lows as the debate around its fate and ability to pay coupons intensifies. It drew €3.4bn in orders.

While the bank might have missed the top of the market, it is nonetheless encouraging that second tier lenders have retained market access - a contrast to early 2016, when concerns around Deutsche Bank’s AT1 coupon payments roiled the whole sector.

The deal emerged just a day after Cajamar sold a €300m 7.75% 10NC5 Tier 2 (B+), and following a Tier 2 mandate from UniCredit despite nerves around the prospect of an early Italian election and fears of bail-in at regional lenders Veneto and Vicenza.

“That Cajamar and the Italians have access to capital is great; it’s a sign of market maturity, especially against Popular backdrop,” said a banker. “Investors have really individualised these issues.”

CaixaBank’s roadshow must have provided the comfort to proceed despite the fresh headlines around Popular, a second banker said. Its €750m 8.25% 2020s tumbled more than seven points to 47.4 before pulling back to 51.3 by late morning.

Elke Koenig, chair of the European Single Resolution Board, recently issued an “early warning” that the bank may need to be wound down if it can’t find a buyer, Reuters reported on Wednesday.

CAREFULLY DOES IT

CaixaBank’s deal follows a strong run in primary for Spanish bank capital, where lenders have priced a combined €6.6bn year-to-date. Three hundred investors ploughed around €4.7bn of orders into Sabadell’s €750m 6.5% perp NC5 (B2) on May 5, for example, but it has since slipped back to 7.22%.

“The market has cooled off; they just missed the perfect window,” said a second banker.

“It should be pricing a touch back of the majors, and through Sabadell,” he continued. “This ticks that box, but it feels a bit cheap to Santander. Still, I think it will be a good transaction and they’ll be happy with the absolute level.”

A third banker said it looked decent value at 7% and is a sought-after name among AT1 investors - a market where few major lenders have yet to issue.

The bonds will convert into equity if the issuer or group CET1 ratio falls below 5.125%. It last reported a phased-in CET1 ratio of 12.4% at the issuer and 11.9% at the group level, representing respective buffers to trigger of around €10.2bn and €10.4bn.

Barclays, Societe Generale, CaixaBank, JP Morgan and Morgan Stanley are joint leads. (Reporting by Alice Gledhill, editing by Helene Durand, Julian Baker)

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