Amount: Eu1bn tier one capital
Issue/re-offer price: 100.00
Coupon: 4.196% until 26 January 2015; three month Euribor plus 153bp thereafter
Call option: at par from 26 January 2015
Spread at re-offer: 53bp over mid-swaps
Launched: Wednesday 12 January
Payment date: 26 January
Joint leads: SG CIB (books), UniCredit Banca Mobiliare
SG CIB ? We found Eu2.6bn in demand inside the price talk and within half a day of starting book building. We opened the book at lunch time and closed it the next day at 9.00am with Eu2.6bn at 53bp-55bp. At 53bp over, there was still Eu2.3bn in demand, so we were able to price at the tight end of the range, and with the larger size.
The issuer is now fully done on hybrid tier one, but for this deal Société Générale still had room for an innovative trade. We suggested a CMS-linked or a Barclays type structure, but for various technical reasons it was not something the borrower wanted to contemplate.
There were more than 160 accounts in the book. Asset managers took over 40%, insurance companies were around 20% pension funds took 10% and banks another 10%. The rest went to retail and others.
The distribution was 30% to France, 19% to the UK, 13% to Germany, 13% as well to Belgium and Luxembourg. The Netherlands took 10% and we also sold bonds as far afield as Canada and Hong Kong.
There is a 5.419% deal callable in November 2013 that was trading at 50bp/48bp on an asset swap basis. This deal came out at 60bp over Bunds and is now trading at around 58.5bp over.
People in the market were talking about the deal coming in the high 50s, but we were confident that we could get it done at around 55bp over. Société Générale is an improving credit, but pricing it at 53bp over is aggressive. Nonetheless, it has tightened from there.
?...but the deal seemed to have been well handled. The initial price guidance was generous. They built a big book and then dragged the pricing in on the momentum.
They raised Eu1bn, which was more than they had wanted or needed, but when it is there on a plate it is hard to say ?non'?.
?...at 53bp over, SocGen looks tight, but compared to their other options this is actually generous.?
?...the tier one for SocGen was a cracking deal. I am very impressed. Retail targeted CMS format tier one is achieving 40bp-50bp levels over Euribor all-in for the steepeners.
There has been a dearth of institutional tier one and SocGen has been a prime beneficiary. This is just what people are looking for ? it is a core credit, and the structure is as low down the credit curve as you can go. The supply outlook for institutional tier one is so benign as well that it is hard to imagine the sector not performing very well this year.
Some issuers are not at their 15% issuance limits, but if you can get better economics in CMS-linked paper then most would tend to just do that.?