LONDON, March 6 (IFR) - Bondholders who snubbed an aggressive tender offer from Santander last year have been rewarded, following a more generous and investor-friendly approach for the same bonds from the Spanish bank.
Santander on Wednesday launched an any-and-all buyback offer for a maximum of just over USD12bn in subordinated bonds as it seeks to boost its capital ratios.
"Bondholders that balked at Santander's unmodified Dutch auction liability are now being offered a more straightforward offer with a higher premium," said a banker.
The buyback prices for the euro and sterling bonds range from 60% to 103% of face value, while the bank is offering to pay 102% for the dollar issue.
Those prices reflect a 3-11% premium over what Santander offered in its now infamous approach that was launched last August.
The Spanish giant sent ripples through the bond market when it targeted the same subordinated bonds through an unmodified Dutch auction - just a day after it had priced the first senior unsecured issue from a Spanish bank in six months.
The announcement angered investors, who were upset Santander was disregarding their interests and asking for a lot of information but not giving much in return.
Unmodified Dutch auctions involve bondholders telling an issuer what bonds they own and where they want to sell those bonds back to the issuer, rather than the issuer itself setting a minimum buyback price.
Although not unusual in the asset-backed market, where securities can be difficult to locate and bid/offer spreads can be very wide, an unmodified Dutch auction had never been used for a bank capital tender and proved controversial.
Market observers say the current offer is far more generous than what Santander has offered in the past.
"The key difference between this offer and the previous one is that this one is much more focused on size, while the previous one was focused on price," said a liability management expert.
The bank said it was carrying out the buybacks to generate capital and better manage future interest payments on its debt, as well as to create liquidity for these bonds in the market.
Its current offer includes securities in dollars, sterling and euros and is an any-and-all offer with no cap and thus no need to pro-rate orders.
"Santander is looking to hoover up leftover bonds from previous LM exercises," said a banker.
Santander said it was offering to buy back up to EUR6.5bn of euro subordinated perpetual bonds and GBP2.2bn of similar sterling securities, with a deadline of March 13.
Santander also offered to buy back up to USD257m of dollar subordinated bonds.
Bank of America Merrill Lynch is the sole lead manager on the offer. (Reporting by Aimee Donnellan; additional reporting by Sarah White; editing by Alex Chambers and Julian Baker)