Bank of Cyprus on Monday announced that it has successfully launched and priced an issue of €300 million unsecured and subordinated Tier 2 Capital Notes under its Euro Medium-Term Note (EMTN) Programme – the maximum amount possible under the rules for this kind of issuance.
The bond issue was four times oversubscribed, attracting interest from more than 140 institutional investors, with the final pricing 37.5 basis points tighter than the initial pricing indication, and this accounted for a significant cost reduction of several million for Bank of Cyprus.
A number of major institutional investors participated in the offering for the first time, and the total bidding reached €1.15 billion. The investors participated in the offering were large funds with a long-term horizon, which do not engage in rapid “resale” for profit. These are bluechip funds that engage for a substantial period of time.
This is not surprising given the bank’s solid credit rating at ‘B-‘ by Fitch and ‘B3 by Moody’s. Bank of Cyprus has strongly improved its credit standing in the financial markets as it has reduced non-performing loans in its portfolio to 16 per cent, from 63 per cent initially.
The prospect of the bank reaching the single-digit ratio of NPLs to total lending within the year is also convincing.
What’s more, the bank expects repayment of about 95 per cent of loans that are currently holding instalments because of the government’s moratoria.
The bank’s EMTN programme calls for regular issuance over five years, and previous market calls, on May 17, 2018 and November 19, 2020 were equally successful.
The Notes were priced at par with a fixed coupon of 6.625 per cent per annum, payable annually. The maturity date for the Notes is 23 October 2031. The Notes will be listed on the Luxembourg Stock Exchange’s Euro MTF market.
The issuance of the Notes further optimises the Group’s capital structure and is expected to increase the Group’s Total Capital ratio by c.100 basis points to 19.7 per cent.
The transaction has also enhanced the diversification of the Group’s investor base, and the pricing outcome evidences market recognition of the significant progress made in evolving its financial profile. Goldman Sachs International and HSBC acted as Global Coordinators and Dealer Managers, and together with BNP Paribas, Bank of America and JP Morgan acted as Joint Lead Managers.