UPDATE 1-Societe Generale AT1 bond order book exceeds USD8bn
(Adds background, context)
By Aimee Donnellan
LONDON, Dec 11 (IFR) - Societe Generale has attracted orders in excess of US$8bn for a contingent capital (CoCo) bond, in a key test of US investor demand for the riskiest form of French hybrid debt after the country's banks were shunned at the height of the eurozone crisis in 2011.
The deal has RegS/144a documentation, making this also the first time that onshore US investor demand for a write-down/write-up Additional Tier 1 will be tested.
Societe Generale is running the deal, alongside JP Morgan and Morgan Stanley as joint lead managers, and began marketing the perpetual non-call 10-year notes in the very low 8% area.
A banker said the offering was likely to be at least US$1bn in size and is likely to price later on Wednesday during US hours.
Societe Generale sold a US$1.25bn perpetual non-call five-year at the end of August, but that was to offshore investors using a Reg S format.
This second foray in the currency follows hot on the heels of Credit Suisse, which unearthed US$19bn of demand for a US$2.25bn issue.
Analysts at JP Morgan estimate that the 25 European banks most in need of capital will have to sell EUR31bn of AT1 bonds in 2014.
A number of bankers questioned the choice of currency after Barclays last week showed that the appetite in euros for equity-like securities is as deep as in US dollars.
However, the arbitrage for European banks going to the dollar market is attractive once proceeds are swapped back in euros, which one banker estimated to be worth around 100bp. This arbitrage is even more compelling further down the curve, according to the banker.
The market will be closely watching whether SG is able to revise the price guidance much tighter once the US opens.
Under European rules, SG is not allowed to use so-called dividend stoppers, which link hybrid coupons with equity distributions.
But Credit Suisse was able to include this feature for its deal, something that is highly valued by investors and helped it achieve a 7.5% coupon. (Reporting by Aimee Donellan, writing by Alex Chambers, editing by Julian Baker)
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