Novo Banco tenders for senior debt
Novo Banco has announced a tender offer for senior bonds maturing in 2019 and 2022 at a minimum cash price ranging from 63.00 to 73.00, roughly 2-4pt above yesterday’s closing level. The maximum buyback consideration will be €500mn and the amount of each ISIN that will be bought back will be determined via an unmodified Dutch auction. The offer is said to be one of the measures included in Novo Banco’s business plan and is intended to benefit both the bank’s capital position and future interest expense. The tender offer expires on 29 June 2016.
Positive development for Novo, which is looking to take advantage of the low cash price of its bonds to generate capital gains and reduce funding costs. The amount of bonds to be bought back is €700-750mn in face value terms, out of €2.4bn included in the offer. The tender is a positive signal for the bank: it has been launched with the consent of the European authorities, who have agreed to reduce the amount of bail-inable securities outstanding. The timing of the offer is also interesting, in our view, as it coincides with the recapitalization process of Caixa Geral, which the former Portuguese finance minister said yesterday could involve a combination with Novo Banco.
