UPDATE 1-Santander Totta plans bond market return

Mon Mar 24, 2014 9:08am EDT

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By Helene Durand

LONDON, March 24 (IFR) - The list of Portuguese banks yet to regain access to the wholesale funding market shrank on Monday when Banco Santander Totta announced plans for a three-year covered bond.

The Portuguese lender, part of the Santander group, unveiled Bank of America Merrill Lynch, BNP Paribas, CA CIB, Santander and UniCredit for the potential deal, which would see it follow in the footsteps of the Banco Espirito Santo, Caixa Geral de Depositos and Banco Comercial Portuguese.

Investor appetite for peripheral bank bonds has been strong in 2014. A 500m three-year issue from Greek lender Piraeus was six-times subscribed last week, while a 500m three-year senior for Banco Comercial Portuguese in February had a book over 3bn from nearly 300 accounts.

"Peripheral bonds from banks attract a large number of buyers as investors like the fact that they can buy performance with these bonds," said a lead manager.

The Obrigações Hipotecárias transaction is expected to be rated Baa3/BBB by Moody's and Fitch, and is expected to surface as early as Tuesday March 25th.

Banco Santander Totta has one outstanding covered bond, which launched in October 2009 according to Tradeweb. The issuer's last visit to the senior market was also back in 2009, a now matured 1bn June 2012 bond.

Caixa Geral de Depositos's 500m five-year issue priced in January at 188bp over mid-swaps will be one of the key reference points. The deal was bid at 132bp over, according to Tradeweb. There are also Totta's parent Santander's three-year covered bonds, quoted at 47bp over mid-swaps.

According to a lead, Portugal's government bonds will also act as reference point, with the October 2016 and October 2017 quoted at 103bp and 155bp respectively. (Reporting by Helene Durand; editing by Alex Chambers)

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