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CaixaBank precedes Bankia in acid test for Spanish subs
July 5, 2017 / 10:26 AM / 5 months ago

CaixaBank precedes Bankia in acid test for Spanish subs

* Lender sells first Spanish Tier 2 since Popular resolution

By Alice Gledhill

LONDON, July 5 (IFR) - CaixaBank is marketing the first Spanish Tier 2 since subordinated debt was wiped out at Banco Popular in June, and just a day before Bankia is expected to bring its inaugural Additional Tier 1.

Orders of over €2.75bn by the 11NC6’s second update implied that investors are willing to overlook the punitive treatment of Tier 2 debt at Popular, even for second tier lenders.

“It is a good credit and I’d expect it to go well, and the price looked fair,” said a banker off the deal.

Initial talk at mid-swaps plus 260bp area was slashed by 20bp to guidance of swaps plus 240bp area (+/-5bp wpir). A final reoffer spread of 235bp would be roughly flat to where a lead saw fair value, a sign CaixaBank is not being penalised by external events.

Deutsche Pfandbriefbank has sold a 10NC5 Tier 2 (BB+/BB) in the days since Popular was resolved, but that was only €300m.

Before that Tier 2 had been relatively untested in Europe, with second quarter supply in the format amounting to just €1.75bn, according to IFR figures.

Nonetheless, market reaction to Popular, and the collapse of two regional Italian lenders, has suggested investors are willing to look beyond those troubled spots.

“Popular was an isolated case and rather well flagged,” said Gildas Surry, partner at Axiom Alternative Investments.

“Caixabank is a very different position with a strong commercial franchise in Spain. The risk we see in such a transaction is more the headlines and potential risk around the potential referendum in Catalonia in the autumn.”

Tier 2 paper from small Spanish lenders Liberbank and Cajamar has failed to recoup losses suffered in the days after Popular - the former’s €300m 6.875% 10NC5 is still languishing at a 91.3 cash price, for example.

By contrast, CaixaBank’s €1bn 2027NC2022s initially widened around 13bp to swaps plus 240bp but have steadily tightened to swaps plus 223bp, according to Thomson Reuters data.

Bankers on and off Bankia’s AT1 mandate are confident that deal will also go well, particularly after the strong reception to reopening trades from HSBC and RBI last week.

“Every entity is different,” said a third banker.

“Bankia is clean, well-capitalised and still owned by the government, so there is no reason to see why that institution should be in a situation like Popular.”

The deal, managed by Barclays, BNP Paribas, CaixaBank, Credit Agricole and JP Morgan, is expected to be rated Ba2/BB+/BBB-/BBB. (Reporting by Alice Gledhill, editing by Helene Durand, Julian Baker)

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