LONDON, Nov 30 (IFR) - A government-guaranteed subordinated
Tier 2 bond for Austrian Hypo Alpe-Adria Bank, which will be the
first of its kind, will surface as soon as the European
Commission signs off on the guarantee, bankers said this week.
The issuer, which mandated Citigroup, Commerzbank, Deutsche
Bank and Morgan Stanley last week for a EUR1bn 10-year
subordinated deal, finishes its roadshow today for the trade,
which has received preliminary Aaa/AA+/AAA ratings from the
three major agencies, in line with the sovereign.
"We are waiting for the EC approval of the guarantee, which
is expected in the second half of next week, so it's likely the
deal will follow the week after," said a banker mandated on the
The expected rating of the notes is sensitive to changes in
Austria's sovereign ratings: an Austrian downgrade would lead to
a downgrade of the subordinated notes.
The leads said they will look at the sovereign, as well as
explicitly government-guaranteed Austrian agencies OeBB and
Asfinag, to calculate relative value.
OeBB's 4.875% June 2022 issue was bid at mid-swaps plus
24bp, according to Tradeweb data on Friday at 12.30GMT, while an
interpolation of Asfinag's 3.375% July 2019s and September 2025s
showed that a hypothetical November 2022 issue would trade
around plus 19bp on the bid side.
Comparing these levels with Austria's 3.4% November 2022s,
trading at a mid-asset swap level of 9.4bp on Tradeweb, shows
that an Austrian agency would have to pay a premium of around
10bp-15bp to the sovereign to issue a new 10-year.
A banker on the deal said it makes sense to look at the
aforementioned reference points but that it would be necessary
to add an additional concession for a rare and lesser known
issuer like HAA.
"Ultimately, investors should see this as the cheapest way
to buy Austrian government-guaranteed risk and view it as a
one-time event," said the banker.
"But beyond that, it is difficult to go into specifics at
Although 100% state-owned banks have raised Tier 2 debt in
the market before, it is the first time that a government will
explicitly guarantee a new subordinated debt issue from a wholly
"The roadshow went pretty well and we are now just
collecting data," said a banker.
"During the course of investor meetings, a number of people
were keen to understand how the government guarantee will work
but were positive about the prospects of a deal of this kind."
Under the terms of the issue, even if the bank were to go
bust in five years and the bonds were written down to zero,
Austria would continue to pay interest and principal.
Bankers said this was a way for the government to avoid
using up liquidity in order to inject capital into the
Austrian regulators have given the bank until the end of the
year to come up with EUR1.5bn of extra capital and until the end
of March 2013 to raise another EUR700m.
As well as the Tier 2, which will be sold to private
investors, the state will directly inject cash into the bank.
Domestic accounts are expected to provide the bulk of demand for
the Hypo Alpe-Adria deal, said another lead manager.
(Reporting by Aimee Donnellan; additional reporting John
Geddie; editing by Helene Durand & Philip Wright)