The issuance of Additional Tier 1 (AT1) capital bonds has generated significant interest, following the exchange of the previous, more expensive AT1 bonds worth €220 million, with an interest rate of 12.50 per cent, issued in 2018, according to a report released on Tuesday by the Cyprus News Agency (CNA).
With this issuance, the agency reported, the Bank of Cyprus has become the first bank to issue AT1 bonds in euros after the cancellation of Credit Suisse’s capital bonds as part of its sale to UniCredit, which caused major fluctuations in bond markets.
The issuance took place after an invitation was extended to existing AT1 holders to purchase the bond at a price of 103 per cent of the nominal value of the capital bonds.
Moreover, according to information obtained by the Cyprus News Agency, the book closed a short while ago with offers reaching €2.7 billion, resulting in an oversubscription ratio (bid-to-cover ratio) of 12 times.
At the same time, the high demand led to a compression of the bond’s coupon rate, which decreased to 11.875 per cent compared to the 12.50 per cent of the 2018 issuance.
According to the same information, the coupon rate corresponds to Euribor plus 9.1 per cent, compared to Euribor plus 12.6 per cent in the 2018 issuance, indicating a reduction in the bank’s risk.
The agency also noted that the early redemption date was set for December 19, 2023.
However, the bank chose to take advantage of favourable market conditions following the recent update of targets for return on tangible equity (ROTE) at 17 per cent and Common Equity Tier 1 (CET1) capital at around 19 per cent.
