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Debt issuance 14 Feb 2019

BBVA issues €750 million of subordinated tier-2 debt, oversubscribed by more than five times

BBVA has issued a €750 million 10-year Tier-2 subordinated bond.  A high demand of €4.25 billion – with 260 orders – exceeded by more than five times the bond value, making it possible to reduce the mid swap price +245 basis points, 30 basis points below the initial price. The order book closed in only three hours. The issue achieved the lowest ‘spread’ of a subordinated issue for BBVA since 2007.

For the first time, BBVA has issued subordinated debt under Spanish legislation via its GMTN (Global Mid Term Note) program. The issue’s maturity date is February 22, 2029, with a call option after five years, on February 22, 2024. The underwriting banks were BBVA, Crédit Agricole, Deutsche Bank, Goldman Sachs, Natwest and Nomura.

Up to 70 percent of investors have been asset managers; 25 percent, insurers and pension funds; 3 percent, private banks and banks, and the remaining 2 percent other types of investors. By geography, 33 percent of investors come from France; 14 percent, Benelux; 12 percent, from Germany and Austria; 11 percent, from the United Kingdom and Ireland; 8 percent, from Nordic countries; 7 percent, from Spain; 6 percent, from Switzerland; 5 percent, from Italy; 3 percent, from Asia, and 1 percent, from Portugal.

The aim of the transaction is to strengthen the bank’s Tier-2 capital and provide the issuer with greater flexibility in evaluating upcoming early repayment options.

BBVA’s 2019 financing plan seeks a dual objective: to keep their additional Tier-1 (AT1) and Tier-2 instruments covered and ensure compliance with MREL requirements. The bank intends to issue both hybrid AT1  (bonds that can be converted into shares known as CoCos) and Tier-2 instruments, depending on their maturity and possible early repayments. The bank will also issue between 2.5 and 3.5 billion euros of non-preferred senior debt (depending on market conditions).

Last year, BBVA issued four different tranches of securities: two issues of non-preferred senior debt, one for €1.5 billion (in March 2018) and the other for €1 billion (in May 2018); an issue of Tier-2 subordinated debt for $300 million (in May 2018); and a €1 billion issue of CoCos in September 2018.

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