BBVA has issued €1.5 billion at 5 years, at fixed interest. It is its first issue of senior non-preferred debt, a new category of liability with the capacity to absorb losses, that allows financial institutions in the European Union to comply with MREL requirements. The issue has been a success, with demand of around €5 billion, allowing it to close with the lowest price in Europe at this maturity, 70 basis points above the mid-swap rate, and a coupon of 0.75%.
As a result of the favorable market conditions and investor interest in this new debt instrument, the operation has closed at the lowest price in Europe for this maturity. The bookrunners are Barclays, Natixis, UBS, Citi and BBVA. This operation will be used to refinance the wholesale debt instruments that are not eligible under the new European legislation.
The book includes orders from investors in Spain and Portugal (21%), France (19%), Germany and Austria (18%), the United Kingdom and Ireland (17%), Belgium, the Netherlands and Luxembourg (7%), the Nordic countries (7%), Switzerland (5%), Italy (4%) and other countries (2%). By type, investors included asset managers (73%), banks (13%) and insurance companies and pension funds (12%).
Senior non-preferred debt is eligible for purposes of compliance with the requirements of the MREL regulation. It is a new category of debt instrument with a greater legal capacity to absorb losses than traditional senior debt. It is therefore targeted solely at qualified investors.
As the CFO Jaime Sáenz de Tejada explained in July, BBVA has decided to issue this new debt instrument in the second half of the year, now that it is supported by a legal framework in Spain that follows the guidelines of what will be the new Bank Recovery and Resolution Directive (BRRD).