(Corrects Basel III capital ratio, size of stake in Bank of
East Asia, corrects Caixabank stake in Inbursa)
* Caixa raises 594 mln euros in Repsol exchangeable bond
* Offers rights to Repsol dividend to attract buyers-source
* Repsol shares fall sharply, Caixabank steady
By Jesús Aguado and Tracy Rucinski
MADRID, Nov 12 Spain's Caixabank has
raised 594 million euros ($796 million) from bonds that could be
exchanged into part of its stake in Repsol, striking a
costly deal to boost its capital position while keeping voting
rights in the oil group.
As well as an annual coupon of 4.5 percent on the 3-year
bonds, Spain's third-biggest bank is offering buyers the rights
to Repsol's dividend, a source familiar with the matter told
Reuters on Tuesday.
Repsol's dividend yield is currently 5 percent - giving
investors a total return of about 9.5 percent, well above the
rates at which other Spanish companies have been able to sell
debt recently, although below Banco Popular's 11.5
percent coupon on a convertible bond last month.
The deal will free up capital for Caixabank and help it
improve solvency ratios under stricter international Basel
rules, ahead of a Europe-wide review of banks' assets next year,
which is also pushing peers to shore up their finances.
It also gives the bank a hedge against swings in Repsol's
share price and retains its voting rights in the oil firm, whose
dividend gives it an important source of income and where it has
had sometimes tense relations with management.
"Caixabank is keeping political and economic rights over
this Repsol stake while granting bondholders the dividends," the
Caixabank has a 12-percent stake in Repsol and this could
fall by 2.5 percentage points if the bonds are converted into
Repsol shares when they mature on Nov. 22, 2016. However, the
bank has also retained the right to pay cash or a mixture of
cash and Repsol shares.
Any exchanged bonds will be offered in a price range of
18.25 euros to 22.81 euros, compared with Repsol's closing share
price of 18.93 euros on Monday. So if Repsol's shares are
trading above the range, Caixabank can offer bondholders cash
and make a profit, and if the shares are trading below it, the
bank can sell the stake at a guaranteed price.
Repsol's shares fell 3.35 percent to 18.295 euros in
afternoon trade as buyers of the bond shorted the stock in a
hedge operation that was part of the structure of the debt.
Caixabank shares were down 0.2 percent at 3.751 euros.
Citigroup and Morgan Stanley were bookrunners on the deal.
The dividend rights form part of a clause in the bond
prospectus, the details of which have not yet been made public,
the source said. Caixabank declined to comment.
The bank will lose out on 32 million euros in annual Repsol
dividends, according to Reuters estimates.
Dividends from equity investments have been an important
source of income for Caixabank in recent years, especially when
it faced steep writedowns on soured property investments which
pushed some Spanish rivals to need a bail-out.
Caixabank, whose profits fell nearly 80 percent in 2012, saw
revenues from its equity portfolio rise 23 percent to 809
million euros that year. Its other key Spanish investment is a
5.6 percent stake Telefonica, though the telecoms group
scrapped dividends in 2012.
But holding such stakes - especially ones of over 10 percent
in other financial institutions - will become more costly under
Basel III capital rules which start to come in as of January.
Earlier this year Caixabank cut its stake in Mexican
billionaire Carlos Slim's financial group Inbursa
to 9.01 percent.
BBVA, Spain's second-biggest bank, made a similar
disposal, shaving its holding in China's CITIC Bank Corp
to 9.9 percent in a loss-making deal. That turned
the spotlight on Caixabank's 16.5 percent stake in Hong
Kong-based Bank of East Asia Ltd, which it so far
insists it wants to keep.
Through the Repsol deal, Caixabank will not necessarily end
up handing over 2.5 percent of Repsol. But under so-called
'fully-loaded' Basel III capital criteria - a measure closely
watched by the market, which factors in changes that need to be
made by 2019 - the bond structure will improve solvency ratios.
Caixabank had a fully-loaded Basel III capital ratio of 8.3
percent of risk weighted assets at the end of September.
It said the Repsol deal would add 37 basis points to that
ratio, and it would end 2013 with a fully-loaded Basel III ratio
of above 9 percent - in line with the levels projected by bigger
rivals BBVA and Santander.
($1 = 0.7459 euros)
(Additional reporting by Sarah White and Carlos Ruano; Editing
by Fiona Ortiz and Mark Potter)