Barcelona-based CaixaBank issues €1 billion in senior bonds attracting huge international demand
The operation has rocketed CaixaBank shares in the Spanish stock exchange market, which increased by 11.75% in just one day. The Catalan CaixaBank, which is the largest bank in Spain, successfully issued €1 billion in 3-year senior bonds. The operation has attracted more than 300 orders from institutional investors, representing around €5 billion, which has allowed the Barcelona-based bank to sell its bonds at a better price thanks to the significant oversubscription. 80% of the bonds issued were placed among international investors, confirming the positive recognition CaixaBank has in international financial markets. It was the first time their senior bonds have been issued on the international markets since 2010.
Barcelona (ACN).- The Catalan CaixaBank, Spain’s largest retail bank mostly owned by La Caixa and based in Barcelona, successfully issued €1 billion in 3-year senior bonds on Wednesday, attracting many international investors. In fact, the demand for the CaixaBank bonds was five times bigger than the number available, with more than 300 orders from institutional investors representing around €5 billion. Furthermore, 80% of the bonds issued were placed among international investors, confirming the positive recognition CaixaBank has in international financial markets. This excess of demand has enabled the Catalan bank to put all its bonds at a better price than initially expected. The final price for the bonds issued was 285 bp (basis points) over the midswap rate, the benchmark index for this kind of bond, which was below the initial price (310 bp) as a result of strong demand. The coupon rate was 3.25%, while the issue cost means a spread of 25 basis points over Spanish 3-year government bonds. The positive effect of the financial operation was that the price of the CaixaBank shares trading on the Spanish stock exchange market rocketed, increasing by 11.75% in just one day. The Catalan bank has not been in the international financial markets to place senior bonds since 2010, before the restructuring process of the entire Spanish banking system, which has now been completed. According to a press release by the Barcelona-based company, the operation “will strengthen CaixaBank’s excellent liquidity levels”, which represented €48.76 billion at the end of 2012 third quarter.
CaixaBank has successfully placed €1 billion in 3-year senior bonds and at a better price than initially expected, showing the trust that the Barcelona-based bank generates in international investors. Last June the preliminary results of the stress tests made by international and independent audit companies to the entire Spanish banking system were released. According to Oliver Wyman and Roland Berger, CaixaBank was in good shape to resist the worst-case scenario without additional funds. Furthermore, in September, the detailed results were released and the independent audit, made in collaboration with KPGM, Deloitte, PwC and Ernst and Young, confirmed that CaixaBank would have a €9.42 billion reserve in the worst-case scenario, which was extremely unlikely to be reached according to the auditors. In any case, over the last two years, the bank has strengthened its core capital and restructured its business areas, to establish a clear separation between banking, industrial and real estate activities.
Wednesday’s bond issue comes as part of the 2013 financial plan to reinforce CaixaBank’s liquidity position, “a key feature of the bank’s strategy of financial prudence”, stated the press release. As per the 30th of September 2012, CaixaBank’s liquidity stood at €48,755 million, nearly all of which is immediately available, which represents 14.2% of their total assets. Furthermore, at the end of the third quarter the bank’s solvency stood at 10.8% of their core capital (Basel II).
International investors took up 80% of the placement
80% of the bonds issued were placed among international investors, mainly from countries such as France, United Kingdom and Germany, with a strong showing from investment and pension fund managers, central banks, insurance companies and private banks. Take-up among Spanish investors stood at 20%. The underwriters, who sold the bonds, were Barclays, CaixaBank, JPMorgan, Banco Santander and UBS.
CaixaBank expects the senior bond issue to receive long-term credit ratings from Moody’s, Fitch and Standard & Poor’s of Baa3, BBB and BBB- respectively. The operation is considered to be a benchmark issue, meaning that the securities will be tradable on the leading global bond markets.