The Swiss regulator determined that more than $17 billion worth of Credit Suisse's AT1 bonds will be written down to zero, even as shareholders, who sit below bonds on the priority ladder for repayment in a bankruptcy process, will receive over $3 billion. The resultant tumult cast doubts on whether SMFG would move ahead with its planned AT1 offer, and led to Japan's biggest bank, Mitsubishi UFJ Financial Group Inc , putting on hold its issuance until at least mid-May. In a note on April 17, analysts at Morgan Stanley estimated European banks would need to issue more than 400 billion euros of debt over the next three years.
Lenders most likely to issue AT1s over 2023 to help meet this requirement include BNP Paribas , UniCredit , Santander and Standard Chartered , the note added. SMFG sold its bonds in two tranches, in 89 billion yen ($662.50 million) five-year notes, and 51 billion yen 10-year bonds. The 89 billion yen issuance carries a coupon rate of 1.879% for the initial five years and two-month period, a regulatory filing showed. That compared with an initial 1.534% coupon on similar bonds issued by the bank in December.
The 51 billion yen one has a coupon of 2.180% for the first
10 years and two months, compared with 1.750% on the 10-year
bonds sold in December.
The terms were attractive for investors, some analysts said.
"In Japan, where spreads over corporate bonds are thin, the
terms for these AT1 bonds were reasonably good, provided that
the banking sector is credible," said Pictet's Otsuki.
Japanese banks' AT1 bonds had been configured in a way the
value is secured even if the government is involved in
restructuring, and SMFG's new issues are seen to have the same
features, she said.
($1 = 134.3400 yen)
(Additional reporting by Kaori Kaneko and Sinead Cruise in
London; Editing by Muralikumar Anantharaman, Kirsten Donovan)
