BPCE was the sole FIG issuer in Europe on Thursday, raising €1.25bn from a nine year non-call eight senior bond, whose outcome seemed to suggest that the red hot funding conditions may be cooling off.
The French bank printed the senior non-preferred deal at mid-swaps plus 145bp, having started marketing at plus 170bp. It had indicated an expected size of €1.25bn to €1.5bn.
“The deal ended well inside of where we thought we could price it but there has been a lot more price sensitivity than a couple of weeks ago,” said a banker familiar with the deal.
Investor feedback to sole lead Natixis was that the upper end of the size ambition would be “heavy”. This implied more substantial order drops from the peak book of €2.7bn. So, the issuer opted to print €1.25bn instead as it tightened the price by 25bp from initial guidance. The final book settled at around €2.3bn.
However, the deal also offered a new issue concession unlike most other recent deals from major European FIG issuers. Estimations of fair value varied: three were as low as 130bp, whereas the leads had it at 135bp, based on BPCE’s callable curve. A rival banker thought that was the top range of fair value.
BPCE’s previous non-preferred deal in euros this year, a €2bn dual trancher, contained a 4.25% 10 year non-call nine tranche that was bid at 141bp over mid-swaps on Wednesday after market trading.
If comparing BPCE’s new deal to compatriot BFCM’s bullets, the fair value estimate was a bit higher, said the banker close to the trade.
These different estimations meant the new issue premium was anywhere from under 10bp to as much as 15bp.
By comparison, UniCredit squeezed the pricing on its €1.25bn 4% 10 year senior preferred bullet, pricing it at mid-swaps plus 125bp, on Tuesday to land it at least 10bp inside fair value, according to bankers on and off the deal.
“It could be that in Europe we are cooling down a bit,” said one syndicate manager away from the deal. “It’s still a very hot market, but we have tightened so much. It could be more of a pausing rather than a reversing.”
The banker also pointed to slower bookbuilding in this week’s other unsecured euro FIG deals.
UniCredit’s deal also went through a big drop in orders: at €2.45bn, this was one of the largest book decreases from peak to final size, tracked across the FIG market by GlobalCapital’s Primary Market Monitor this year.
Another syndicate banker off the trade, however, thought UniCredit had a better reception than BPCE because of the maturity.
“The tenor could have been the reason,” why BPCE paid a higher premium than other major bank issuers in recent weeks, suggested the banker, adding that “there is more demand for 10 years and the nine year was may be not the most appealing to investors”.
But ING credit research had a different take, saying: “By issuing this new bond, [BPCE] is therefore diversifying its senior non-preferred supply which we view as constructive to the interest in the new deal.”
‘Relentless’ issuer
With a €8.5bn-equivalent of TLAC funding need for 2024, BPCE has also been one of the most prolific global FIG issuers this year. Having already raised half of this requirement — comprising €6.5bn of non-preferred debt and €2bn of tier two capital — two months into the new year, the continuous supply may have also played a role.
“They have been relentless in this market,” observed a syndicate banker away from the trade. “They have been over and above in every single currency and every format.”
Two days earlier, on February 27, BPCE raised tier two capital in a S$400m ($297.8m) 10 year non-call five deal targeting Asian accounts. Lead managers DBS, HSBC, Natixis, OCBC and Standard Chartered priced it at par with a 5% yield. This was equivalent to a spread of 198.5bp over SORA.
Final orders reached S$935m from 65 investors.
The lion’s share of the capital was sold in Singapore as local investors took 93%. Private banks took 47% of the paper, with 48% going to fund managers, life insurers and pensions funds, and the remaining 5% to banks and corporates.
The new senior non-preferred and the tier two deals will both count towards BPCE’s TLAC funding needs.