BBVA becomes first European issuer of new generation of bonds

BBVA reported it sold an offering of $1.5 billion of a new type of perpetual debt that can eventually be converted into equity, becoming the first European financial institution to strengthen its Tier I capital position through the new securities. The bond offering takes place only weeks after the approval of new capital regulation in Europe.

“Given the growing importance of the total capital position of financial institutions, BBVA has decided to lead the market with an issuance of a new instrument,” the Spanish bank said in a press release. It will compute as Additional Tier I under CRD-IV (BIS III), as Capital Principal for the Bank of Spain and as Buffer Convertible Capital Securities for the European Banking Authority.

The instruments are perpetual, with a fully discretionary and non-cumulative coupon and are loss-absorbing through conversion into equity upon trigger events. The coupon was set at 9%, down 50 basis points from the initial guidance thanks to the strong demand. The issue was placed with qualified foreign investors, with an order book that exceeded $9 billion and with the participation of more than 400 investors. Between Monday and Tuesday, BBVA marketed the product to potential investors in Singapore, Hong Kong, London and Zurich.

“We have substantially strengthened our capital base and we have led the market,” said Manuel González Cid, chief financial officer of BBVA. “Once again, BBVA has had overwhelming support from international investors.”

With this issuance BBVA reinforced its capital position and adequacy, benefitting its shareholders and clients. Following the issue, BBVA’s core capital ratio on a pro forma basis would stand at 11.5%, compared to 11.2% in March, with Tier I reaching 11.6%.

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