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Banking 03 Apr 2017

High investor demand for BBVA's second senior debt issue of 2017

BBVA on April 3 announced the successful placement of €1.5 billion five-year preferred senior debt with a floating coupon rate. High demand, about €3.25 billion, allowed the price to be cut to very competitive levels, without an issue premium. The order book closed in just two hours, drawing 260 international investors

BBVA has completed the issue of a senior unsecured preferred 5-year debt with floating coupon rate totaling €1.5 billion. Demand was high and reached €3.25 billion from a total of 260 international investors. The order book closed in just two hours.

BBVA hit the right note with the so-called floating coupon rate. This rate is set to be updated over time – every three months, in this case. This characteristic allows investors benefit from eventual interest rate increases in Europe.

Also, there was clearly an appetite for this type  of instrument. Since the arrival of this new type of non-preferred debt with the capacity to absorb losses, most issuers have been selling this type of debt, significantly reducing the number of preferred senior bond issues in the market. Also, favorable market conditions, after S&P upgraded the Spanish sovereign bond past Friday, helped fuel the excellent response that the transaction garnered.

The final issue came out at 3-month euribor + 60 basis points (versus an initial price of 3-month euribor + 75 basis points). The coupon will be 0.27% in the first payment and will be revised every three months, with rates referenced to the euribor.

“The extraordinary level of demand allowed us to issue without paying a premium, something truly unusual for this type of transactions,” said Ignacio Echevarría, Head of Capital Management and Wholesale Funding at BBVA.

The order book closed with 154 orders from investors from Iberia (42%), Germany and Austria (18%), France (13%), Italy (10%),  Belgium and Luxembourg (6%), the United Kingdom and Ireland (6%) among other countries. The range of investors that participated in the issue included fund managers (65%), banks (20%), insurance companies and pension funds (14%).

Bookrunner banks included BAML, Crédit Agricole CIB, Commerzbank, HSBC and Unicredit.

This operation is framed within BBVA’s annual bond issue plan, which seeks to fund the bank’s balance sheet structure capitalizing on the windows of opportunity that appear in the market.

This is BBVA’s third public issue in 2017 (so far this year it has already issued a total of €3.5 billion) and the first floating issue since 2011. In January, it launched a similar operation – a €1 billion five-year senior debt bond, with which it achieved the lowest coupon for this type of product in history (0.625%), for this maturity, by a Spanish issuer. In early February, BBVA issued a €1 billion Tier-2 subordinate bond with a 10-year maturity term and 3.5% coupon rate.