Crédit Mutuel Arkéa completed its intended tier two funding for the year on Tuesday, with a €500m callable bond after it postponed a bullet deal in early January.
The new €500m no-grow 11 year non-call six note was priced at mid-swaps plus 190bp. Lead managers Crédit Agricole, Akréa, ING, LBBW, Santander and TD started marketing at plus 220bp and revised the guidance to the final spread after they announced initial demand of €1bn.
The final price resulted in a premium of 0bp-5bp, according to one of the lead managers. A banker away from the deal thought it could have been 5bp or even 10bp, depending on how the bond compared to the issuer’s larger French peers.
“It’s a sensible deal now after they had to pull a trade in January,” said the rival banker, adding that the trade’s initial guidance started “at the right place”.
Misfired bullet
In January, amid a busy primary market, Arkéa aimed to print a €500m no-grow trade as a 12 year bullet.
The issuer launched the offer at mid-swaps plus 225bp. Then it tightened the price to a final spread of 215bp before pulling it.
The market has improved since then and spreads have tightened. Although the cost of a call option is around 10bp for an issuer on a tier two bond, Arkéa’s new deal comes with a slightly shorter maturity than the earlier one, said another rival banker.
The banker said that if Arkéa had gone out with a guidance revision before releasing the final guidance it could have saved another 5bp “by working the spread more thoroughly”.
The new deal’s price appeared to suggest the issuer took “a more cautious approach on spread” as it has a smaller investor base compared to its larger French banking compatriots, bankers off the trade said.
One of the bankers underlined that issuers need to offer a new issue premium in this market, even if they have the market to themselves.
Arkéa does not have to refinance its tier two capital until later in 2024 at the earliest, but it could wait until next year when it has to redeem a bullet tier two.
The bank has a call coming due on its €500m 1.875% 12 year callable tier two in October. That bond, issued in 2017, has a reset spread of 145bp over mid-swaps if not redeemed.