By Aimee Donnellan
LONDON, Nov 5 (IFR) - Barclays Bank is embarking on a global
roadshow to present its contingent capital (CoCo) structure to
investors in what could be the first issue of its kind from a UK
Barclays will meet investors in the U.S. over the course of
three days, with bankers on the deal hopeful that institutional
investors there will drive momentum.
Barclays will also meet accounts in Switzerland and Hong
Kong as well as throughout Europe.
If Barclays is successful, bankers expect that the door will
open quickly to allow other banks to bolster their balance
sheets with a form of debt capital that can be quickly converted
into equity when the bank comes under stress.
Global regulators have said CoCos would not count as core
capital and failed to lay out clear standards for them, leaving
it up to national regulators to determine how far banks could
Swiss banks were specifically asked by their regulator to
raise contingent capital, and have made much of the running in
Credit Suisse targeted mainly retail investors and private
banks, and received a strong reception for a USD2bn 30-year
non-call 5.5 Tier 2 transaction in February 2011 that was more
than 10 times subscribed and priced at 7.875%.
More recently, UBS went a step further and sold the first
bank capital instrument with permanent write-down features to US
The USD2bn 10 non-call Tier 2 offering priced at 7.625% or
598bp over US Treasuries, and tightened by nearly 150bp in the
secondary market, according to Tradeweb.
"The fact that UBS managed to sell more than half of the
deal to US institutional accounts is testament to the product
and has paved the way for other issuers like Barclays," said a
The roadshow will commence Tuesday, November 6, with
Citigroup, Credit Suisse, Deutsche Bank and Morgan Stanley
acting as joint bookrunners and Barclays' investment banking arm
acting as global co-ordinating bookrunner and structuring
Barclays will be the first clear test for CoCos out of the
UK because Lloyds' deal, when it swapped GBP7.5bn of existing
subordinated bonds for new CoCos in 2009, was part of its
Because of regulatory uncertainty, most European banks have
focused on raising subordinated debt rather than try to break
new ground, but last month the UK financial industry regulator
seemed to pave the way for CoCo supply from the country's banks.
And Barclays' finance director Chris Lucas hinted last week
that a transaction was coming when he said in a conference call
on Wednesday that the bank had made considerable progress with
the FSA regarding the capital value attributed to contingent
"Now that we have greater clarity we will be engaging with
investors in the next few weeks to solicit their views," he said
Lucas said the deal would not count as Core Tier 1 but would
be a Tier 2 until it converts. "We have spent considerable time
with regulators developing an instrument that would work."
UK banks will have to hold large amount of loss-absorbing
debt under proposals made by the Independent Commission on
Banking and an October Financial Services draft.
On top of the minimum Core Tier 1 requirements and capital
conservation buffer, they will need added layers of bail-inable
debt in order to prevent tax-payers from having to inject money.