January 3, 2017 / 5:13 PM / 8 months ago

Intesa lines up year's first AT1 issue

LONDON, Jan 3 (IFR) - Intesa Sanpaolo is preparing to issue the year's first Additional Tier 1 transaction, the riskiest bond a bank can sell, brushing off the crisis elsewhere in the Italian banking sector to tackle a 4bn issuance target for 2017.

The bank announced on Tuesday that it had mandated Banca IMI, Barclays, BNP Paribas, Credit Suisse, Goldman Sachs and HSBC as joint lead managers for a euro-denominated perpetual non-call 10-year trade.

The Italian banking sector has barely left the spotlight in recent months, after a rescue plan for the country's third largest lender, Banca Monte dei Paschi di Siena, failed to lift off, forcing the government to step in.

But outstanding debt from Intesa, among the country's strongest lenders, has proved largely resilient to the volatility. Its 1.25bn 7% non-call January 2021 AT1 bond widened to around 9.25% in the run-up to the Italian constitutional referendum in early December, but has since tightened to 7.34%.

Intesa is not the only Italian bank to mull AT1 issuance in recent weeks. UniCredit took the market by surprise last month when its sold its first AT1 since 2014, but opted for a club deal over a broadly syndicated one.

The 500m non-call June 2022 bond priced with an eye-watering 9.25% coupon just a day after the bank unveiled a 13bn rights issue to plug a 12.2bn hole primarily created by bad loan provisions. It has since rallied hard to 105.80 from its par issue price, according to Eikon prices.

Intesa's mandate comes almost exactly a year after it priced the perpetual non-call January 2021, also the first AT1 of the year and just weeks before Europe's subordinated bond market suffered a heavy sell-off, derailing further AT1 issuance until March.

It plans to price 4bn in AT1 by the end of 2017 to optimise its capital efficiency, it said in a statement on Tuesday.

The bonds will be written down temporarily if the bank's Common Equity Tier 1 ratio drops below 5.125%. (Reporting by Alice Gledhill; Editing by Helene Durand, Philip Wright)

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