Danske Sells 1 Billion-Euro Bond in Replacement After S&P Spat

Danske Bank A/S (DANSKE) said it will sell a new 1 billion-euro ($1.35 billion) bond as Denmark’s biggest lender replaces a 2037 note it called last week after a spat with Standard & Poor’s.

The Tier 2 debt will be due 2023 with a coupon of 3.875 percent for the first five years, the Copenhagen-based bank said late yesterday in a statement. In 2018, the coupon will be reset and Danske then has the option of prepaying the bond at par.

Danske said Sept. 18 it will redeem the $1 billion 7.125 percent 2037 bond at above par after a rule change at S&P wiped out the note’s equity content. Steen Blaafalk, Danske’s treasurer, said Sept. 23 the bank had started talks with investors to gauge their interest in a replacement and to decide the yield, which would be “substantially lower” than the 2037 bond’s coupon.

“The bond loan forms part of Danske Bank’s ongoing adjustment of its capital structure to future capital requirements for European banks,” Danske said in today’s statement. The new bond will be listed on the Irish Stock Exchange.

Danske is working on its capital structure as older, subordinated debt comes due and as the bank tries to reach a capital target of 17 percent of risk-weighted assets. The bank has said it intends to meet 4 percentage points of that target with a combination of Tier 1 and Tier 2 instruments. The lender also faces a 2014 deadline to retire 24 billion kroner ($4.3 billion) in state-held hybrid debt.

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net

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