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Debt issuance 19 Mar 2019

BBVA issues a €1 billion CoCo bond in a deal that is more than three times oversubscribed

BBVA has issued a €1 billion contingent convertible bond (CoCo), which saw a demand of more than  three times the initial offer and received more than 250 orders. The high demand for the issue made it possible to set the final coupon rate at 6 percent, 0.375 points below the initially indicated price (6.375 percent).

This is BBVA’s first CoCo issue of the year and the eighth since the inception of these capital instruments. This issue aims to provide the bank with increased flexibility in refinancing previous CoCos or “additional Tier 1” (AT1) as they are technically known. BBVA has already met its AT1 capital buffer requirement: 1.57 percent through December 2018, compared to the mandatory 1.5 percent requirement.

Although the issue of this CoCo has no fixed maturity – this class of instrument is perpetual – it is redeemable after five years, specifically on March 29, 2024. The issue was registered with Spain’s National Securities Market Commission (CNMV), consequently Spanish institutional investors were able to participate. The underwriters were BBVA, BNP, Crédit Agricole CIB, Citi, Deutsche Bank, and HSBC.

By type of investor, 88 percent are asset managers; 6 percent, banks and private banks;  4 percent hedfe funds, and 2%, insurers and pension funds. Geographically, 47 percent of the orders came from the USA and the United Kingdom; 20 percent, from France; 9 percent, from Switzerland; 6 percent, from Benelux; 5 percent, from Italy; 4 percent, from Asia, and 3 percent from Spain, among others.

This is BBVA’s eighth CoCo issue and its sixth in euros. In May 2013 it launched a CoCo for 1.5 billion USD, redeemed last May. In February of 2014 and 2015, it offered the market two euro-denominated issues, both for the same amount (€1.5 billion) The 2014 issue was redeemed last February. In April 2016, it issued €1 billion, with which it fully covered the 1.5 percent AT1 capital buffer requirement, calculated in accordance with regulatory standards. In May 2017, it placed a €500 million CoCo, with the best price reached by a Spanish issuer up to that date (a coupon rate of 5.875 percent); and, in November of the same year, it issued a $1 billion CoCo bond with the longest maturity (10 years) and lowest price for this currency from an issuer in southern Europe. Finally, in September of last year, the bank issued a €1 billion CoCo bond with a 5.875 percent coupon.

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