LONDON, Jan 24 (IFR) - Dutch banking and insurance group SNS
Reaal's subordinated bonds have widened sharply on concerns
that a possible nationalisation of the group will force
bondholders to bear losses.
The bank's 11.25% perpetual bond, callable in November 2019,
is 73bp wider on the day, having widened 200bp on the week,
while its 6.258% perpetual issue callable in July 2017 is 85bp
wider on the day and 232bp wider on the week, according to
The bonds are trading on a cash price basis, bid at 45.5 and
34.6 respectively, around 10 points lower than on Wednesday
morning when a report in De Telegraaf said nationalisation was a
The issuer's senior bonds have also widened by up to 30bp,
although bankers said that senior bondholders were unlikely to
"The Dutch government is certainly not as cash strapped as
some others, so it's difficult to see a situation where it would
not protect senior bondholders," said one banker.
"There's more chance that subordinated bondholders will bear
losses, but you would expect senior to be weaker while this
When Ireland needed a bailout because of its troubled
banking sector in 2010, the ECB insisted no senior bondholders
should suffer losses, against the wishes of the Dublin
government, because of concern about the market reaction.
So far, Spanish senior bondholders have also been protected
for the same reason.
Another banker highlighted a bail-in regime in Denmark,
which resulted in a sharp spike in bank funding costs after
losses were imposed on senior bondholders. Following that market
reaction, the bail-in language was removed.
"The Netherlands is quite advanced in its resolution
framework, but it would not be helpful for issuers to impose
losses on senior bondholders," he said.
SNS Reaal, which received EUR750m of state aid in 2008 at
the height of the financial crisis, is widely expected to
require a second state bailout because of problems at its
property unit, and is due to come up with a restructuring plan
next month when it reports earnings.
SNS Reaal's property finance exposure, including commercial
real estate loans to small and medium-sized companies, stood at
EUR9.8bn at the end of September, of which EUR2.3bn was
It has booked more than EUR1.3bn of net losses on its
property loans since 2009.
Measures may be taken within the next few days to rescue SNS
Reaal, the country's fourth-largest bank and which is suffering
property losses, the paper said on Wednesday, citing unnamed
political and financial sources.
An SNS Reaal spokesman said: "We are looking at several
scenarios with several stakeholders, and no decision has been
The first banker also pointed out that there is value in
different parts of the group, which was another positive for
SNS Reaal's banking operations would remain in state hands
for the time being if there were a nationalisation, while its
insurance operations could be sold now or in the future, the
Dutch paper said.
(Reporting by Natalie Harrison, IFR Markets; Editing by Alex
Chambers and Julian Baker)