Tue Sep 16, 2014 4:53am EDT
(Adds background and quotes)
By Aimee Donnellan
LONDON, Sept 16 (IFR) - Nordea has pulled the trigger on Sweden's first contingent capital bond as it seeks to meet new regulatory requirements and boost its capital ratio with an expected US$1.5bn trade.
The bank is looking to fill its entire Additional Tier 1 requirement in one transaction, emerging with a dual-tranche offering consisting of two perpetual bonds callable after five- and 10-years.
There have been signs of investor fatigue for repeat issuers like Santander, Credit Agricole and UniCredit, which have struggled to attract the same kind of demand as first timers in the market like HSBC.
"Nordea had a lot of positive feedback from investors during its roadshow last week where investors were keen to have both maturities," said a syndicate banker.
"It makes sense for the bank to sell all of its capital target in one go rather than coming back again."
Sweden is one of the last European jurisdictions to get the go-ahead to issue Additional Tier 1 bonds, also called CoCos.
One of the main sticking points between Swedish banks and the regulator has been how low a bank's common equity can fall before the loss absorption features in the CoCos are triggered.
Nordea's bonds will be temporarily written-down if the bank's Common Equity Tier 1 ratio falls below 8%. Although this is higher than any other jurisdiction, with the UK and Denmark next at 7%, Swedish banks are highly capitalized.
At its second quarter results, Nordea's Common Equity Tier 1 ratio was 15.2%.
CHOPPY WATERS
The Nordic lender is defying a volatile Additional Tier 1 market which has seen recent issues trade down. Santander's 1.5bn Additional Tier 1 transaction was quoted at 97.7 this morning, down from its par pricing level two weeks ago.
"The market was definitely weaker overnight but the main comparable HSBC is above par, which is what's important," said a banker.
Nordea follows in the footsteps of HSBC, which priced a US$5.6bn triple-tranche euro and dollar AT1 transaction last week.
The combined US$3.75bn dollar tranches - split into US$1.5bn of 5.625% perpetual non-call five-year notes and US$2.25bn of 6.375% perpetual non-call 10s - attracted almost US$22bn of demand.
The non-call five and the non-call 10-year were quoted at par and 101 respectively on Tuesday.
Nordea is going for the same maturities as HSBC's dollars, but is testing investor interest at the tight end of where HSBC started last week.
The bank has set initial price thoughts on the perpetual non-call five at 5.75% area and on the perpetual non-call 10 at 6.5% area.
An update on the order book size and price is expected at the US open.
Bank of America Merrill Lynch, Citigroup, Goldman Sachs and UBS are leading the transactions, which are expected to be rated BBB+/BBB. (Reporting by Aimee Donnellan, Editing by Helene Durand, Julian Baker)
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UPDATE 1-Nordea emerges with Sweden's first CoCo
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