UPDATE 1-Societe Generale preps BBVA Tier 1 follow-up
(Recasts and adds background detail on structure)
LONDON, Aug 19 (IFR) - Societe Generale is poised to become the second European bank to sell Additional Tier 1 capital that complies with the Capital Requirements Directive (CRD IV), a move that could pave the way for a slew of similar deals from other European banks.
The French bank, rated A2/A/A, is preparing to meet with investors next week to discuss structure and pricing on the new Reg S bond that will help the bank meet requirements on leverage ratios, according to a market source.
The deal is likely to have a low trigger, according to the banker, who said that the French regulator has given Societe Generale the go-ahead to issue such an instrument.
European banks are seeking to raise Tier 1 debt to meet the minimum 3% leverage ratio requirement set out by the Basel committee.
BNP Paribas is the only eurozone bank to surpass that minimum requirement, according to Barclays research released earlier this year, although RBS and UK-headquartered HSBC have both exceeded the target.
Societe Generale's potential bond sale will provide a much needed follow-up to BBVA's groundbreaking Additional Tier 1 bond sold earlier this year. The offering was the first of its kind to comply with CRD IV and is likely to provide a useful benchmark for pricing.
The USD1.5bn perpetual deal priced at 9% in late April and was trading at a yield of 9.6% on Monday, according to a senior syndicate banker.
European banks have abstained from issuing Tier 1 capital this year as talk of QE tapering sparked a global sell-off, causing spreads to widen and yields to rise. Banks have also struggled with a lack of clarity on the tax treatment of Additional Tier 1 instruments.
Societe Generale will act as the global coordinator and structuring adviser for the deal, while Citigroup, Credit Suisse, Deutsche Bank and HSBC are to arrange the fixed income investor meetings in Europe and Asia in the week beginning 26th August. (Reporting by Aimee Donnellan, editing by Julian Baker)
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