Amount: Eu1.5bn lower tier two capital
Maturity: December 17, 2012
Issue/re-offer price: 99.657
Spread at re-offer: 65bp over mid-swaps
Launched: Thursday December 5
Lead mgr: BNP Paribas
The financial market has burst into life.
We announced plans to do some subordinated funding last week and did some calls to update investors on BNP Paribas. We went to the market yesterday (Wednesday) with Eu500m in the 65bp area and grew the order book aggressively for 36 hours.
We closed with an order book of over Eu2bn, having been in the market with price guidance for just a day and a half, so it was a swift execution.
We believe, and investors have told us, that this will be then benchmark euro subordinated credit in the banking market. It is the largest subordinated bank deal yet, at launch.
As you would expect, France was crucial. French accounts took 34%. The UK took 17%. Holland and Germany took 8%-10% each. The bonds were very well distributed and tightened 2bp after pricing.
SG also tightened a couple of basis points and HSBC tightened 5bp-10bp. We priced 10bp tighter than HSBC Holding at the re-offer and we are one notch better rated, as well as being the dominant euro zone bank.
If HSBC and SG had not come we would probably not have come wider than 60bp. But how many times this year has one been able to take this kind of size out of the market at a decent price?
We are pleased to have got this deal done at this time of the year. A lot of the supply we are seeing is coming from issuers getting their balance sheets sorted out before the end of the year.
Around the third quarter there was a very difficult period in which there was virtually no supply. Investors had nothing to invest in. What you are seeing now is well-rated European banks offering good spread - it is the perfect mix.
What stands out is the very speedy execution and having in excess of Eu2bn in orders within 36 hours to build the largest subordinated bank deal yet launched in one go. And we did things in an orderly fashion.
"...the market is extremely receptive to European bank borrowers offering benchmark size lower tier two issues. The transaction was very well supported."
"...not cheap, not expensive. BNP Paribas initially marketed Eu500m, then Eu1bn, then Eu1.5bn. We have seen some flows in secondary."
"...this deal made absolute sense for them and it was a great opportunity for those accounts that have been too defensively positioned in the fund landscape to get subordinated position.
The spread of plus 65bp was more than fair from a trading or a fundamental perspective. The total value of the books increased very fast.
Even if the merger with Crédit Lyonnais occurs - which is a realistic possibility - the rating is likely to remain the same.
We have had a positive experience with BNPP in the challenging environment of 2002, and we were happy to get involved in this deal."