Austria’s Bawag Resumes Subordinated Bond Sale as Yields DeclineKatie Linsell
Bawag PSK Bank AG, the private equity-owned Austrian lender, resumed a sale of subordinated notes that it canceled last month as yields on junior notes fell to the lowest in five months.
The Vienna-based bank, owned by Cerberus Capital Management and GoldenTree Asset Management, plans to raise 300 million euros ($413 million) from 10-year Tier 2 notes yielding 8.25 percent, according to a person familiar with the matter. The average yield investors demand to hold junior bank debt dropped to 3.49 percent, Bank of America Merrill Lynch’s Euro Subordinated Financial Index data show.
Bawag is following Italy’s UniCredit SpA and London-based Standard Chartered Plc in raising Tier 2 capital as they seek to comply with new rules designed to insulate taxpayers against losses should an issuer collapse. It called off the original transaction at a time when credit investors were concerned the Federal Reserve was planning to taper its bond buying program.
“Bawag was talking about a Tier 2 at the start of September, just as the market panic about the Fed taper was reaching its most intense, so markets were volatile and investor appetite was weak,” said Roger Francis, a credit analyst at Mizuho International Plc in London. “Today, worries about tighter monetary policy are falling down the agenda and the reach for yield is back on, so a long-dated Tier 2 issue will be much more welcome.”