MUSI: SNS - high risk for subdebtholders, 2013-01-31 09:22:52.560 GMT
SNS – situation remains one of high risk for subdebtholders
· Yesterday Dutch RTL reported that SNS had agreed with
ING, ABN and Rabobank that the latter will invest EUR400m in SNS
Group. That injection would represent a share of the EUR1.9bn
the TV channel said SNS group would require, and the remainder
of the capital would be injected by private investors. The
article did not clarify if an EU approval would be forthcoming -
the agreements between ING, ABN and EU, respectively, do not
allow the banking groups to make acquisitions (although we
understand ABN has permission for very small acquisitions).
· Involvement by ABN, ING and Rabobank could be beneficial
for senior bondholders in particular, as we believe a default
would be very damaging also for the other Dutch banking groups
(we do not believe a senior default is likely however). However,
if it is confirmed that SNS bank indeed would require a capital
increase of EUR1.9bn we have concerns that the government will
have to inject capital alongside potential private investors.
This as the group currently only has EUR255m market
capitalisation, hence even a sizeable rights issue would
struggle if it is larger than EUR500m (even that seems high
given the last few years of trading at substantial discount to
market value). A tier 1 buyback, coercive or not, would not
generate more than EUR270m if close to current market prices.
Hence, in our view, unless SNS Reaal discusses a disposal of the
insurance business, we believe SNS Reaal is at high risk of
receiving government capital should the group need capital in
the region of EUR1.9bn, as suggested yesterday by RTL.
· Therefore, for subdebtholders of bank or holdco
instruments, the situation remains fluid at this point with high
risk. The insurance company LT2 is of less risk, in our view,
with interest deferrals a key risk (deferred interest is
cumulative and attracts high interest-on-interest, however).
non fa' scherzi... perche' ti facciamo na causa mostruosa....
