A$535m (US$342m) from a dual-tranche
MTN offering comprising A$435m of 10-year
and A$100m of 10.5-year notes.TRANSPOWER TO TAP 2025 RETAIL NOTESRegular issuer TRANSPOWER NEW ZEALAND, rated
Aa3/AA– (Moody’s/S&P), has mandated
Westpac for a tap of its NZ$125m (US$79m)
of 3.823% March 6 2025 retail notes.
Last August, the state-owned electricity
supplier issued NZ$150m of 1.735% six-year
notes priced at mid-swaps plus 73bp.FIG
STERLING
METRO SETS SIGHTS ON MORE MREL
DEBT AFTER BRUISING YEARMETRO BANK plans to raise up to £500m of
MREL-eligible debt in the next two years
after struggling to access the market and
ultimately paying a high price to issue loss-
absorbing senior debt last year.
Further issuance will add to the bank’s
onerous cost of funding as it seeks to turn
AROUNDûITSûlNANCIALûPERFORMANCE ûAFTERû
reporting a bigger than expected loss in
2019.
The UK challenger bank, which
announced its results last Wednesday,
succeeded in meeting an interim MREL
requirement by its January 1 deadline, but
at a price.
)TûlRSTûTRIEDûTOûISSUEûSENIORûNON
PREFERREDû
debt in September but was unable to
GENERATEûSUFlCIENTûDEMANDûDESPITEûOFFERINGû
a coupon of 7.5%.
-ETROûlNALLYûGOTûAûaMûDEALûDONEûINû
October at an eye-watering level of 9.5%, on
the same day its founder and chairman
Vernon Hill announced he would step
down.
The doubts over Metro’s market access
ADDEDûTOûAûLISTûOFûPROBLEMSûALREADYûAFmICTINGû
the bank, which began with an accounting
error in January 2019 that left a big hole in
its balance sheet and wiped more than
£1.5bn off its market capitalisation.
The bank warned in August that PRA and
FCA investigations into the loan book error
HADûBROADENEDûANDûCOULDûINCURûSIGNIlCANTû
expenses and lead to criminal and/or civil
liability for the bank or suspension of its
regulatory permissions.
Thanks to the costly SNP deal, Metro held
total capital and MREL-eligible resources
equivalent to 22.1% of its risk weighted
assets at the end of 2019.That surpassed its interim requirement of
21.5% (including regulatory buffers), after a
6.2bp year-on-year increase. The bank must
NOWûLOOKûTOûANûEXPECTEDûlNALûREQUIREMENTûof 22.5% by January 1 2022. It is therefore
guiding investors to expect up to £500m of
MREL-eligible issuance by the January 1
2022 deadline.International Financing Review February 29 2020 33BONDS FIGING AT1 revival frustrated in
tumbling market
BANK CAPITAL Comeback hamstrung amid sell-offING GROEP quickly revived a pulled Additional Tier
1 transaction but in a torrid market last Monday it
had to settle for a higher price, smaller size and
much diminished book compared with what was
within its grasp first time around.
But as the backdrop became increasingly dire
over the course of last week, some bankers said
the Dutch bank’s decision to press ahead was
vindicated.
The transaction was postponed in dramatic
circumstances on February 19, with the bank on
course to set a record-low US dollar AT1 coupon
for a European lender after receiving a US$11bn
order book. But the deal was pulled mid-
execution, later revealed to be because ING’s
chief executive, Ralph Hamers, is joining UBS.
Leads – Credit Suisse, Goldman Sachs, ING,
Morgan Stanley, TD and UniCredit – began
marketing the Reg S deal in Asia hours at the
same opening level as the original attempt, at
the low 5% area.
One difference was that this time the issuer
stated from the outset it was seeking a maximum
US$1bn. But with the market tone very different
to the previous week because of the spread of
the coronavirus, the trade proved a tougher sell.
Demand for the perpetual non-call November
2029 deal (Ba1/BBB– Moody’s/Fitch) was
US$3.5bn-plus after the European open,
compared with the more than US$7bn registered
at the same stage last time.
The coupon was subsequently set at 4.875%
with books in excess of US$4.5bn.
When the size was later fixed at US$750m, the
book closed at US$3bn.
The original attempt had guidance set at the
4.625% area with the deal on course to take the
record for the tightest European bank US dollar AT1
from BNP Paribas, which had priced a US$1.75bn
perp non-call 10 at 4.5% less than 24 hours earlier.
Market participants said the difference was
mainly due to the market backdrop, rather than
Hamers’ exit, although uncertainty over the
bank’s direction without a new CEO in place
could have been a marginal factor.
European equities were hit hard on Monday
morning as investors reacted to the global
spread of the coronavirus.
AT1 debt was also hit, with BNP Paribas’ new
issue bid at a cash price of around 98 on Monday.BAD LUCK?
Some bankers away from the deal said ING’s
timing looked poor, in hindsight.
“I’m surprised that they threw it out there
into what was clearly a weaker environment,”
said a DCM banker. “Even at 2am London time,
you could tell Asia was going to have a tricky
day, so I’m not surprised by the outcome.”
But observers said the bank and its leads
could not have known how big the European
sell-off would be and that returning to the
market as soon as possible made sense.
“Indications were obviously to the downside
but from a European perspective I don’t think
anyone expected stock indices to be off between
3% and 4%... If they’d known what you could see
now perhaps they wouldn’t have announced,”
said a second DCM banker away from the deal.
“It’s clearly bad luck for ING that they
couldn’t get the tighter price, but they weren’t
to know of the newsflow and I think they’ve
handled the situation as best as they possibly
could.”
Bankers stressed that ING was still able
to secure a historically attractive price and a
reasonable book, and said the decision to press
ahead may look wise if the market sees a more
sustained sell-off.
Indeed, the AT1 was the only benchmark bond
issued by a European financial institution last
week, as the flight to safety continued. AT1s
continued to suffer on the secondary market over
the course of the week (see separate article for
more).
“I would advocate that getting it done quickly
enables them to move on as a group and
demonstrate that they continue to have market
access despite not having a CEO in place, which
is probably an important thing for the bank
overall,” said a syndicate banker away from the
deal.
“To that end, whether you pay 4.5%, for
example, or 4.875% probably isn’t that big a
deal.”
Syndicate bankers’ saw fair value for the new
issue at 4.50%–4.625%. ING’s longest call date
is a US$1.5bn 5.75% perpetual redeemable in
November 2026, bid at a yield-to-call of 4.239%
at Monday’s open.
Tom Revell6 IFR Bonds 2322 p 25 - 43 .indd 33 28 / 02 / 2020 19 : 15 : 32