On Tuesday, BBVA entered the markets with a €1.5 billion issue of Senior Non-Preferred Debt (SNP) with a five-year term and a Floating Rate Note format. Thanks to strong investor demand, the issue closed with a coupon of three-month Euribor plus 52 basis points. The operation was the lowest-priced issue of senior non-preferred debt by a Spanish issuer.
The issue was launched with an initial price of three-month Euribor plus a spread in the high 60s. In just one hour, the orders totaled more than €1 billion and reached €3.4 billion during the course of the operation. The good reception by investors brought the price down to three-month Euribor + 52 basis points and put the amount of the issue at €1.5 billion.
The majority of the investor orders came from Germany and Austria (35%), Spain (24%), France (14%), Italy (8%), the United Kingdom and Ireland (6%), Portugal (4%) and other countries (5%). Taken by investor type, the orders were placed by fund managers (77%), banks (13%), insurance companies and pension funds(9%), among others.
This is the second public issue of senior non-preferred debt by BBVA. The first was launched in August 2017, when the bank placed €1.5 billion at the best price obtained in Europe up to that time (midswap plus 70 basis points, with a coupon of 0.75% and a five-year term).
These instruments are eligible for the new requirement of liabilities that can absorb losses, computable for the effect of regulations such as MREL (Minimum Requirement for own funds and Liabilities) or TLAC (Total Loss Absorption Capacity). BBVA is one of the few European banks that has completely covered its hybrid capital requirements (both AT1 and Tier 2), so that now it can focus on strengthening the cushion of liabilities that can potentially absorb losses, such as senior non-preferred debt.
During 2018, BBVA hopes to issue between €2.5 billion and €3.5 billion of these securities, a figure that will vary as a function of market conditions. In addition, the bank seeks to continue taking advantage of the good market conditions, acting as strategically as possible regarding the format, the time it enters the market, and the term.