BBVA, Bank of Cyprus launch first AT1 euro bonds since Credit Suisse rescue (updated)

Credit Suisse AG

13/06/2023 11:33

(Adds details on the issue in paragraph 3 and 7-13, includes
Bank of Cyprus in paragraph 5)
       MADRID, June 13 (Reuters) - Spain's BBVA  BBVA.MC  and
Bank of Cyprus reopened the market with the issuance of the
first euro-denominated contingent convertible bonds (CoCo) since
the rescue of Credit Suisse in March, in what is seen as an
attempt to restore confidence in the banks' riskiest debt
instruments.
        The Spanish bank said it aimed to raise between 750
million euros ($810.08 million) and 1 billion euros with this
issuance.
    According to a lead manager memo seen by Reuters, the
issuance had already received orders worth over 3 billion euros.
    The market for Additional Tier 1 (AT1) bonds, which lenders
can use to beef up Tier 1 capital reserves, had been frozen
following U.S. banking failures and the rescue of Credit Suisse,
which wiped out its $17 billion AT1 bonds.
    Separately, Bank of Cyprus also started selling on Tuesday a
220 million euros AT1, according to a lead manager memo also
seen by Reuters. The debt -- which has attracted over 2.2
billion euros of orders from investors -- will pay a coupon of
11.875%, the memo added.
        Meanwhile, BBVA said on Tuesday its AT1 bond had a
redemption window of Dec. 21 2028. Its interest rate is guided
in the 8.75% area.
    The Spanish lender said the new issuance will provide
flexibility to meet the redemption options of previous AT1
issues, the earliest of which is a 1 billion euro CoCo with a
coupon of 5.875% that can be repaid on Sept. 24.
        ING said in a note on Tuesday that BBVA's new issuance
would make it "very likely" that the Spanish lender's 5.875%
bond will be called in September.
  
        The price of the 5.875% bond was up by over one cent on
the euro on Tuesday.
  
        BBVA declined to comment whether it will call the 1
billion euros CoCo in September.
  
        ING also said that if the existing AT1 is not repaid in
September, its coupon would be reset at +5.66% over the
five-year swap rate, not far off the levels where the interest
on the new bond is guided.
  
        Banks usually sell these perpetual bonds - known as AT1
bonds - with five years before an option to repay is triggered.
  
        BBVA's CoCo was underwritten by Barclays, BBVA, Bank of
America, Citi, Goldman Sachs and Natixis, the lender said, in
what would be the first perpetual bond issued by BBVA since July
2020.
    Its issue was part of the group's financing plan for this
year as this was its fifth debt issuance in 2023. 
        ($1 = 0.9258 euros)

 (Reporting by Jesús Aguado, Chiara Elisei and Yoruk Bahceli;
Editing by Louise Heavens and Ed Osmond)
 ((jesus.aguado@thomsonreuters.com; +34 91 835 68 32; Reuters
Messaging: Reuters Messaging:
jesus.aguado.reuters.com@reuters.net))