LONDON, Oct 11 (IFR) - DNB Bank found over US$4bn for a
US$750m Additional Tier 1 bond on Tuesday, pushing aside
concerns that the bid for US dollar Reg S bonds might be running
out of steam after a spate of recent issues failed to perform.
The perpetual non-call March 2022 bond is the first
Additional Tier 1 trade from a European bank in euros or US
dollars for almost a month, with the Norwegian lender sticking
to the Reg S format that has proved popular with financial
issuers in 2016.
European banks and insurance companies have raised US$11.4bn
in the format this year. However, the depth of the bid for
subordinated paper had recently been questioned after a flurry
of transactions led to indigestion and poor secondary
Barclays sold the last Reg S US dollar European AT1, a
US$1.5bn 7.875% note callable in March 2022 that has slipped to
98 since pricing at 99.996, though a recent UBS US$1bn 7.125%
AT1 has fared better and was bid at 101.70 on Tuesday. A slew of
fixed-for-life insurance deals have also put in a mixed
"There is some read-across, but this is best-in-class and
it's an investment-grade transaction," said Chris Agathangelou,
head of EMEA FIG syndicate at Nomura.
"They've been looking and monitoring the market, and given
the moves we saw yesterday and the fairly stable market
following the debate, they thought they could
take advantage of that."
The US$4bn-plus book was much lower than the US$15bn-plus
garnered by Barclays for its AT1, despite the fact that DNB's
trade is expected to be rated BBB by S&P, a rare
investment-grade rating for the riskiest type of bond that banks
Leads opened books on the trade at 6am London time to give
Asian accounts the chance to place orders. The issuer met
investors in Asia for a credit update in September. That work
"will hopefully show in the breakdown of the book", Nomura's
Agathangelou said. Some 12% of DNB's last deal was sold into the
DNB's outstanding US$750m 5.75% PNC5s issued in March last
year on books around US$2bn were bid around 6.24% on Tuesday
morning, according to Thomson Reuters.
The bonds sold off earlier this year, spiking to 10.50% as
investors' concerns mounted around the impact of low oil prices
on the bank and the size of its capital cushion, aggravated by a
broader savage sell-off in the sector.
The AT1 carries a 5.125% transitional Common Equity Tier 1
(CET1) trigger at DNB Group, DNB Bank Group and DNB Bank ASA,
and will be written down temporarily if that trigger is
breached. DNB Group's CET1 ratio was 15% at June 30 2016.
Goldman Sachs International is structuring advisor. It is
also joint lead manager alongside Bank of America Merrill Lynch,
DNB Markets, Nomura and UBS.
(Reporting by Alice Gledhill, Editing by Helene Durand, Philip