RBS takes aim at senior in new liability management trade
LONDON, Sept 5 (IFR) - Royal Bank of Scotland launched a jumbo senior buy-back exercise on GBP16.6bn equivalent of euro, sterling and dollar debt on Wednesday as it seeks to better manage its liabilities.
The UK lender follows in the steps of Lloyds TSB Bank which bought back GBP4.6bn out of a GBP13.7bn equivalent notional worth of senior debt in July this year.
RBS is targeting 19 senior deals that were issued at the bank level and said it would also look to issue a potential senior dollar trade at the group level in the near future.
"Through tender offers for certain euro, sterling and U.S. dollar denominated senior unsecured securities, the offeror intends to manage its wholesale funding level and future interest expense with reference to the overall reduction in its balance sheet, while maintaining a prudent approach to liquidity," the bank said in an RNS statement today.
The bank also said that as a result of the offer, it expects to see lower net interest costs which will help generate capital in the medium term.
Lloyds in July said its large scale senior buy-back would help improve funding costs and make the most of accumulated excess liquidity.
The bank had accumulated a substantial cash pile ahead of a potential downgrade by Moody's which turned out to be less aggressive than initially thought [ID: nL6E8IC7CP].
The US dollar part of the exercise is an any-and-all tender with nine securities with an aggregate face amount of USD13.25bn. The bank is offering between 70bp and 200bp over the applicable US Treasury benchmarks.
The euro/sterling tender is capped at GBP2bn equivalent, and targets five sterling issues with an aggregate amount of GBP3.86bn and five euros with an aggregate amount of EUR5.56bn.
The purchase price on the euro and sterling deals will be determined via a Modified Dutch Auction with the minimum purchase price set at EUR1,007 per EUR1000 on a EUR1bn deal due 2013 and at EUR1,020 per EUR1,000 for a EUR316.927m 3.625% note due 2013. The bank has set a maximum offer spread on the remaining securities between 105bp and 300bp over mid-swaps.
An official at the bank said the terms offered by RBS reflected the bank's targets and took into account the fact that most of the securities are trading at or above par.
RBS is sole global arranger and lead dealer manager. Morgan Stanley and Societe Generale are joint dealer managers, while ABN Amro, Banca IMI and BBVA are co-dealer managers.
Timeline on the dollar tender is as follows: September 14 for price determination, September 17 for the results and September 18 for the settlement.
On the non-US tender, the offer expires on September 14, prices will be determined on September 17 and the results will be announced as soon as practicable after the price determination time. Settlement is on September 19.
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