(Updates to add background, comments)
By Helene Durand
LONDON, Aug 21 (IFR) - The first public senior unsecured bond issue from a Spanish bank in around six months is set to price later on Tuesday after Santander International Debt SA, guaranteed by Banco Santander, mandated CA CIB, Deutsche Bank, Natixis and Santander for a new offering.
The two-year deal, which is being marketed at 395bp area over mid-swaps, is the first Spanish senior issue since a EUR1bn five-year trade priced in March by the same issuer.
A dearth of supply and investors’ desperate search for yield have meant that riskier names that had not been able to come to market for months are now in favour again.
Last week, Italian lender UniCredit priced a EUR750m January 2018 covered issue, the first Italian covered bond in a year, which attracted some EUR2.2bn of orders from 113 accounts.
“What we are seeing is a natural progression with the best of breed like Svenska getting deals done, then covered bonds from challenging jurisdictions and now a senior,” said a FIG syndicate banker.
Spreads in financials have rallied over recent weeks to levels, in some cases, not seen in years. A EUR1bn 10-year transaction priced last week for Svenska Handelsbanken came at 80bp over mid-swaps, and was the tightest spread achieved in that maturity for a European bank since the end of 2010.
Meanwhile, Spanish banks’ senior credit default swaps have also tightened in recent weeks. Santander’s five-year CDS was quoted at 359bp on Tuesday morning, 131bp tighter than the high of 490bp reached on July 24. BBVA’s CDS has performed similarly, quoted at 388.5bp on Tuesday, over 120bp tighter than the peak hit in July.
“If there’s one issuer that can get away with a deal like this it’s Santander, but it does little to change the fact that Southern Europe is still under considerable pressure and the future will remain bleak for quite some time,” said a syndicate banker.
The deal is expected to be rated Baa2/A-/BBB+, and will be priced later today. (Reporting by Helene Durand, addtional reporting by Aimee Donnellan; Editing by Sudip Roy and Julian Baker)