subordinated bonds for new group-level Tier
2, extending their regulatory value.
The UK bank’s any-and-all offer targets its
€750m 2030 non-call 2025 Tier 2 notes,
issued by HBOS plc in 2005, which are
grandfathered as Tier 2 capital until the end
of 2021 and held at the opco level.
)TûWILLûALSOûISSUEûAû
YEARûNON
CALLûlVEû
Tier 2 with a minimum size of €300m out of
Lloyds Banking Group.
A banker close to the deal said the
transfer of the notes to a new issue at the
holdco level would ensure that the securities
will comply with regulatory requirements
and be eligible as Tier 2 capital after the
grandfathering cut-off.
The Bank of England has made clear its
preference that all UK bank subordinated
debt be held at the holdco level, rather than
the opco, seeing the latter as an impediment
to resolution.
The new issue will match the features of
the old, while removing a step-up in the
coupon.
It will have the same 4.5% coupon and
match the old security’s maturity and call
schedule, and will thereby extend the
regulatory value of the bond for four
additional years.
“Notwithstanding this driver, the existing
notes will still represent relatively attractive
funding for the group and therefore we have
launched the offer on a voluntary basis,” the
banker said.
The offer will settle before March 18 “to
keep the transaction simple and maintain
the existing terms of call date/maturity
DATEûANDûMEETûTHEûlVE
YEARûMINIMUMû
requirement for Tier 2 as per CRR [Capital
2EQUIREMENTSû2EGULATION=v ûSAIDûTHEû
banker.
The deadline for the exchange offer is
March 10, with settlement expected on or
around March 16.
Goldman Sachs and Lloyds Bank Corporate
Markets are dealer managers. Lucid is the
exchange agent.SWISS FRANCS
VORHYP GETS GREEN LIGHT FOR SWISS
FRANC BONDHYPO VORARLBERG BANK brought Switzerland its
second green senior bond from a eurozone
bank, following MunHyp in mid-January.
Its green nature was described by one lead
as “crucial for success in this market
environment”, with investors focused
heavily on the wider virus-led shocks in the
system. He also said buyers required a
positive yield given it was a 10-year bank
bond.
Following a roadshow on Monday, books
opened for a minimum SFr100m (US$103m)
at mid-swaps plus 60bp-65bp, in line with
initial price thoughts. The size was then set
at SFr125m and spread at 60bp, which
equated to 88.2bp over government paper,
or a 0.06% yield.
VorHyp looked to have paid a new-issue
premium of around 10bp, although a lot of
secondary Swiss franc paper did not see a
REPRICINGûAFTERûTHEûSELL
OFF ûSOûTHATûlGUREû
may have been obscured by volatility.
An all-Swiss contingent of 48 investors
took part, for an average ticket size of just
over SFr2.5m. Asset managers took the
majority with 54%, followed by banks and
treasuries with 23.5%, pension funds with
18% and insurers and private banks taking
the residual 4.5%. Just over half were
dedicated green investors.
Proceeds will be used in line with Hypo
Vorarlberg Bank’s green bond framework to
lNANCEûORûRElNANCEûSELECTEDûELIGIBLEûLOANS û
investments and projects in categories
WHICHûHAVEûCLEARûENVIRONMENTALûBENElTS
ISS-ESG, which rates the issuer Prime, C,
will provide a second-party opinion.
VorHyp is rated A3 by Moody’s and A+ by
S&P at the senior level, and the bonds will
be rated A3 only.
Credit Suisse and ZKB were leads.YEN
AFLAC PRICES YEN BONDS IN
RECORD TIMEAFLAC took only a day and a half – or around
half the usual time – to market a ¥57bn
(US$538m) four-part Global yen bond issue
amid heightened market volatility linked to
the coronavirus epidemic.
To mitigate risk further, the US insurer
marketed the deal with coupon guidance for
all tranches, as opposed to the usual practice
of pricing over yen swaps. It announced
lNALûPRICINGûJUSTûHOURSûAFTERûCLOSINGûTHEû
books, rather than the next morning as is
normal practice.
!mAC ûRATEDû!!n! û-OODYS30*#2 û
had used coupon guidance for the 10-year
tranche of its four-part deal in December, as
have some other foreign issuers. French
bank Banque Federative du Credit Mutuel
and US conglomerate Berkshire Hathaway
also did so to market shorter-dated tranches
in recent deals. However, it is rare for a
foreign issuer to provide coupon guidance
for all tranches.
The four-part deal priced last Friday
consisted of ¥12.4bn of 0.3% 5.5-year,
¥13.3bn of 0.55% 10-year, ¥20.7bn of 0.75%
12-year, and ¥10.6bn of 0.83% 15-year bonds.
The respective initial ranges were 0.28%–
0.30%, 0.53%–0.55%, 0.73%–0.75%, and
0.83%–0.85%. A 20-year tranche was
marketed at 1.00%–1.02% but was later
dropped.
For the December deal, the coupons were
0.50% for a 10-year tranche, 0.84% for 12
years, 0.93% for 15 years, and 1.12% for 20
years.MARKET STILL OPEN
Coupon guidance has become common
practice in the Japanese domestic market for
about a year. Japanese bankers say this has
been an important factor in keeping the
market open when issuance slowed in the
US dollar and euro markets because of the
coronavirus epidemic.
According to DealWatch, IFR’s sister
publication, six Japanese private companies
priced ¥410bn of corporate bonds in the
lNALûWEEKûOFû&EBRUARY ûANDûûRAISEDû
¥467.2bn last week.
The issuers included blue-chips Fuji Film
Holdings, Honda Motor, Panasonic and
Hitachi. Almost all issuers used coupon
guidance as many investors, except asset
managers that mark to market against JGBs,
are happy with this method as it guarantees
them a minimum coupon, regardless of any
moves in the rates curve.
Spread guidance is still used, but mostly
for higher-yielding subordinated deals. Orix,International Financing Review March 7 2020 35BONDS FIGALL FINANCIAL INSTITUTION BONDS IN EUROS
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues €(m) (%)Including banks, insurance companies and finance companies. Excluding equity-related and covered bonds. Excluding publicly owned institutions.
Source: Refinitiv SDC code: N111 Credit Agricole 18 5,747.50 10.6
2 SG 13 4,607.78 8.5
3 Deutsche Bank 18 4,563.80 8.4
4 BNP Paribas 17 4,180.13 7.7
5 JP Morgan 16 3,731.90 6.9
6 Natixis 8 3,331.99 6.1
7 Barclays 16 2,372.42 4.4
8 Santander 14 2,231.09 4.1
9 HSBC 12 2,093.03 3.9
10 Credit Suisse 10 2,067.77 3.8
Total 73 54,209.61ALL SUBORDINATED FINANCIAL INSTITUTION
BONDS (ALL CURRENCIES)
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues US$(m) (%)Source: Refinitiv SDC code: J3a1 Citigroup 9 1,903.52 13.9
2 Credit Agricole 3 1,690.02 12.3
3 HSBC 6 1,117.15 8.1
4 Goldman Sachs 5 934.14 6.8
5 BofA 4 892.89 6.5
6 BNP Paribas 4 809.35 5.9
7 JP Morgan 4 773.59 5.6
8 Barclays 5 690.53 5.0
9 Morgan Stanley 4 651.08 4.7
10 UBS 3 508.46 3.7
Total 15 13,727.266 IFR Bonds 2323 p 25 - 53 .indd 35 06 / 03 / 2020 19 : 18 : 07