By John Geddie
LONDON, Aug 29 (IFR) - The Swedish Export Credit Corporation (SEK) is hoping to issue a new Tier 2 bond in the next couple of weeks, after hiring a group of banks to organise fixed income investor meetings on Thursday.
The state-owned agency, rated Aa1/AA+ at the senior level, has picked Bank of America Merrill Lynch, Goldman Sachs and Nomura to organise the meetings due to take place in the US, Europe and Asia from the week commencing September 9.
If conditions allow, a Tier 2 transaction will follow, designed to replace around USD350m of perpetual subordinated bonds that SEK called on Wednesday, said a spokesperson for the agency. Those bonds, issued in 2003, have been called because they will no longer qualify as Tier 1 capital when new regulatory changes come in next year.
The early redemption will be settled on September 27 and has been approved by the Swedish Financial Supervisory Authority.
SEK’s decision to replace the outstanding Tier 1 debt with Tier 2 debt, was influenced by that fact that it will be less expensive to sell to investors, as Tier 2 debt is higher up the capital structure and therefore less likely to be haircut, said the spokesperson.
SEK and the Swedish regulator are also more focused on Common Equity Tier 1 Capital Adequacy Ratio, which does not include hybrid issues anyway.
SEK’s Common Equity Tier 1 Capital Adequacy Ratio was 19.9% at the end of June and will not be affected by the redemptions. Its Total Tier 1 Capital Adequacy Ratio, which was 23.2% as of June 30, should drop to around 19.9% after the redemption, all other things being equal.