Reuters: Bankruptcy News: ABN blazes Asian retail trail for European Tier 2

Reuters: Bankruptcy News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

ABN blazes Asian retail trail for European Tier 2 Sep 7th 2012, 14:29 By Helene Durand Fri Sep 7, 2012 10:29am EDT LONDON, Sept 7 (IFR) - ABN Amro successfully opened the Asian retail market for European bank Tier 2 debt this week, taking advantage of the deep liquidity available from private bank networks in the region and blazing the trail for other borrowers looking to diversify their investor bases. The Dutch lender priced a heavily oversubscribed USD1.5bn 10-year non-call five transaction via Bank of America Merrill Lynch, Citi, HSBC and UBS, and Danske Bank and Raiffeisen Bank International are looking to follow in its footsteps. European banks have traditionally relied on the Asian market to sell their more esoteric and difficult structures, as private banks and retail investors tend to be more focused on absolute yields rather than on the intricacies of bond structures. Meanwhile, being able to tap into Asian liquidity to sell Tier 2 is good news for issuers, given that European institutional investors, while warming to Tier 2, have dragged their feet in recent months, wary of upcoming resolution regimes and the additional risk they might be taking on. "Historically, Asia was a market that you saved for Tier 1 but given the regulatory uncertainty and the fact that we are still waiting for the European Bank Authority and various tax authorities to give the final word on hybrid Tier 1, issuers might as well use that market for Tier 2," said a syndicate banker on the trade. The response from investors was certainly encouraging as the deal attracted over USD6bn of orders, 88% of which came from private banks. "The response we got was a lot better than expected and was a result of doing a Renminbi trade the previous week which helped raise ABN's profile in the region as well as improved market sentiment," said Erik Bosmans, group treasurer at ABN AMRO. "With this deal, we showed that the Asian market is open for European bank Tier 2." Meanwhile, Simon McGeary, head of new products group at Citigroup, said that with up to EUR250bn of Tier 2 to be refinanced in the next few years, issuers needed all markets to work in order to absorb the supply. Bosmans added that the dialogue with investors had been completely different from the time of a EUR1bn Tier 2 deal sold in July. "We got a lot of questions about ABN itself and our credit this time around whereas in July, questions centred around the structure of the deal," he said. "This dollar deal was entirely focused on Asian retail an private banking as opposed to the July deal which was solely focused on the institutional market." Just like the July issue, the new dollar trade included reference to upcoming statutory resolution regime in the terms and conditions of the transaction rather than in the risk factors, something that investors have asked to be paid extra for. COMPETITIVE TERMS However, Bosmans said the pricing at 545bp over mid-swaps, taking into account the further tightening of the markets and a favourable cross-currency swap, was almost 100bp better than on the July trade that came at 525bp over. This pricing dynamic could further increase the appeal for other issuers to go to that market. The transaction priced at 6.25%, inside initial price thoughts of mid to high 6% and at the tight end of revised guidance of 6.5% area. This was well inside the 7.125% paid by ABN on its 10-year bullet deal priced in July. However, it still looked attractive for investors compared to the 4% coupon level on Standard Chartered's USD1.25bn 10NC5 issue that priced at the beginning of July. The trade has a one-time call at the five-year point, and if not called, the coupon resets to the then prevailing mid-swap rate plus the initial spread. This makes the deal much more efficient from a regulatory perspective as it starts losing capital treatment after five-years. This is also another potential draw for European banks which, with the exception of a few, have been forced to issue bullet structures over recent years because of investor concern over issuers not calling deals. (Reporting by Helene Durand, Editing by Julian Baker) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions