July 10, 2014 / 11:28 AM / 3 years ago

UPDATE 1-Spain's BPE pulls CoCo bond deal

(Adds market comment and background information)

By Aimee Donnellan

LONDON, July 10 (IFR) - Banco Popular Espanol has pulled a contingent convertible deal citing poor market conditions, according to a lead manager.

“Due to the heightened volatility in secondary markets, the issuer has decided that conditions are not conducive for primary issuance and subsequent secondary stability at this time,” said the lead managers in a statement on Thursday.

“We have postponed the issue due to the unfavourable market conditions, but investors’ feedback during the roadshow had been very good. It’s not a cancellation, just a postponement, although there is no new date for the issue,” a spokesman for BPE said.

Earlier on Thursday, leads began marketing a perpetual non-call five Additional Tier 1 at 7%-7.25%. The deal would have strengthened BPE’s balance sheet ahead of the upcoming ECB stress tests.

Market observers slammed the decision to attempt the sale in a market that was being weighed down by concerns about BES, Portugal’s largest listed bank.

“This was the wrong day and the wrong transaction,” said a banker away from the deal.

“I would have held off from even trying to market a deal like this when BES and Portugal Telecom are causing so much havoc.”

Another banker shared that view: “It doesn’t surprise me to hear that they are pulling it.”

“The pricing was wrong even on a good day, particularly as their outstanding bond which was the main comparable had sold off by a half a point in the past day.”

BPE was heard to be targeting as much as 750m of AT1 capital. The deal would have converted into equity if the bank’s Common Equity Tier 1 ratio fell below 7%.

Together with a 500m low-trigger CoCo issued in October, a 750m sale on Thursday would have filled the bank’s 1.5% capital requirements bucket in the context of around 84.5bn of risk-weighted assets, according to CreditSights. (Reporting by Aimee Donnellan, additing reporting by Jesus Aguado, editing by Julian Baker)

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