Metro’s funding costs remain much
higher than its rivals. The £350m 9.5%
October 2024 senior notes were bid at a
yield of 7.73% on Wednesday.
For comparison, a £275m 3% 2025 non-
call 2024 SNP note from Yorkshire
Building Society was bid at 1.82%.
Analysts at CreditSights calculate that
the £500m extra debt could cost the bank
another £40m in annual interest payments
at present levels.
Metro cited last year’s MREL-eligible
debt issuance as one of the reasons behind
a 30bp drop in its net interest margin in
2019, to 151bp from 181bp
While posting a loss before tax of
£130.8m, Metro acknowledged 2019 was a
“a very challenging year” for the lender.
“External headwinds, internal
challenges and actions we took to put the
BUSINESSûONûAûMOREûPOSITIVEûTRAJECTORYûAREû
REmECTEDûINûTHEûRESULTS vûSAIDûNEWûCHIEFû
executive Dan Frumkin.
The bank hopes that a change of
strategy will turn it around. It has reined in
its expansion plans and now aims to
become “the UK’s best community bank”,
it said.
“We’ve fully evaluated our strategy, and
have a clear plan, which will return the
bank to sustainable growth built around a
community banking model,” said
Frumkin.
“An enhanced focus on costs, improved
productivity, and investment in our
infrastructure will enable our deposit-led
FRANCHISEûTOûDELIVERûPROlTABLEûGROWTHûOVERû
the medium term.”
But the CreditSights analysts said it is
increasingly questionable whether Metro
has a future as an independent bank.
“Given the uncertainty over its future
and the viability of its business model, plus
THEûDIFlCULTIESûITûWILLûHAVEûRETURNINGûTOû
PROlTABILITY ûWEûEXPECTûITSûDEBTûANDûSHAREû
prices to remain weak and volatile, and we
would continue to avoid its Tier 2 and SNP
issues despite the high yields on offer,”
they said.NON-CORE CURRENCIES
NAB CAPITAL NOTES 4 NETS A$1.95bnNATIONAL AUSTRALIA BANK (Aa3/AA–/AA–) has
set the margin at the lower end of three-
month BBSW plus 295bp–315bp guidance
for its perpetual non-call 7.5-year
(September 17 2027) Additional Tier One
retail note offer, NAB CAPITAL NOTES 4.
The size of the note issue has been
increased from the indicative A$750m to at
least A$1.95bn following a successful
bookbuild.The deal includes a reinvestment offer for
holders of NAB Capital Notes issued on
March 23 2015 that will be repurchased on
March 23 this year.
The offer opened last Tuesday and is
expected to close on March 17. S&P has
assigned a BBB– rating to the subordinated
notes.
NABûISûARRANGERûOFûTHEûOFFERûANDûJOINTûLEADû
manager with Morgan Stanley, Morgans, Ord
Minnett, UBS and Westpac.
NAB paid a three-month BBSW plus 400bp
margin for the perpetual non-call 7.5-year
NAB Capital Notes 3 offer a year ago, which
raised A$1.65bn after the bookbuild and
ultimately around A$1.874bn.KIWIBANK MARKETS SECOND KANGAROOKIWIBANK (A1/A/AA–) has mandated ANZ and
UBS to arrange investor meetings and calls
in Australia and Asia this week for a
POTENTIALûlVE
YEARû!USTRALIANûDOLLARû
Kangaroo bond offering.
Kiwibank made a belated bow in the
Kangaroo market in October 2017 with a
A$150m (US$118m) 4.25% 10-year debut.
This came seven months after a previous
attempt was pulled the day before
settlement, when regulators warned that
some of the bank’s capital convertible
capital notes might be ineligible for capital
adequacy purposes.
The Reserve Bank of New Zealand
SUBSEQUENTLYûDROPPEDûITSûOBJECTIONûTOûTHEû
notes, allowing Kiwibank to return to the
capital markets.
Kiwibank is a subsidiary of state-owned
New Zealand Post, the New Zealand
Superannuation Fund and Accident
Compensation Corp.
It has the same A1 and AA– ratings from
Moody’s and Fitch as New Zealand’s four
MAJORûBANKS ûTHOUGHû30ûRATESûITûTWOû
NOTCHESûBELOWûTHEûMAJORSû!!nûRATINGSHIGH-YIELD
UNITED STATES
SPIRIT AEROSYSTEMS EASES BOEING
BURDEN WITH LOOSER COVENANTSAerospace manufacturer SPIRIT AEROSYSTEMS
has struck deals with Boeing and its secured
lenders that will ease immediate cash
pressures and help Spirit avoid a breach of
ITSûlNANCIALûCOVENANTS
Spirit has been scrambling to cut costs
after the grounding of Boeing’s 737 MAX
aircraft last year, which accounts for aroundHALFûOFû3PIRITSûREVENUESûANDûTHEûMAJORITYûOFû
ITSûEARNINGSûANDûCASHmOW
Boeing has agreed to pay Spirit
!ERO3YSTEMSû53MûINûTHEûlRSTûQUARTERûOFû- This comprises US$70m to support
suppliers, of which only US$10m has to be
repaid, and US$155m of pre-payments for
deliveries over the next two years, according
to a report from S&P.
Spirit has also taken out a new US$375m
senior unsecured delayed draw term loan
with Bank of America as administrative
agent, which is available until August 15
2020, which carries a rate of 3.625% over
Libor.
In addition, the company has amended its
US$1.26bn 2018 credit agreement with
lenders to give it greater room on its
lNANCIALûCOVENANTS
“Given the production suspension and
2020 production rate for the B737 MAX,
absent a waiver or an amendment of the
2018 credit agreement, the company was
expected to breach the total leverage ratio
BEGINNINGûWITHûTHEûlRSTûlSCALûQUARTERûOFû
2020 and continuing into 2021,” it said in
THEûlLING
!SûPARTûOFûTHEûAGREEMENT ûTHEûlRMSû
US$300m senior unsecured 3.85% 2026
notes are now to be secured on the same
basis as the credit agreement lenders.
That prompted S&P to upgrade the 2026
notes to an investment-grade BBB– level, up
from BB. The existing BB unsecured rating
was unchanged.
The 2026 notes traded at 100.50 on
Tuesday afternoon, broadly in line with
Monday’s 100.80 level, according to
MarketAxess. The notes were up to 101 on
Wednesday but around 100.375 by
Thursday.
The company’s 4.6% 2028 unsecured notes
were up by 70bp to 104.70 on Tuesday but
were trading around 102.50 on Thursday.
S&P still has a negative outlook on Spirit.
h4HEREûISûSTILLûSIGNIlCANTûUNCERTAINTYûWHENû
THEûû-!8ûWILLûBEûCERTIlED vûTHEûANALYSTSû
wrote.
ENERGY BONDS SUFFER ON FALLING OIL
AND GAS PRICESEnergy bonds took a beating last week as the
price of US crude oil fell below US$50.
Average energy spreads were the hardest
hit in a broad market drop on Wednesday,
widening 27bp to 878bp over Treasuries,
more than double the average spread on the
broader high-yield market.
This followed a slump in US West Texas
Intermediate crude oil prices to US$46 a
barrel on Thursday, having touched US$60
in January.
Energy is being hit hardest by the
coronavirus-driven sell-off because it is one34 International Financing Review February 29 20206 IFR Bonds 2322 p 25 - 43 .indd 34 28 / 02 / 2020 19 : 15 : 32