Societe Generale Plans Second Capital Bond Sale in DollarsJohn Glover
Societe Generale SA is planning its second sale of junior bonds that meet new bank capital rules a week after investors bought similar securities from Barclays Plc and Credit Suisse Group AG.
The second-largest French bank is meeting investors in New York starting today to market low-trigger additional Tier 1 notes in dollars, a person familiar with the matter said. The contingent convertible bonds, or CoCos, are written off or convert to equity if a lender’s core capital falls below 5.125 percent of risk-weighted assets, according to the European Union’s Capital Requirements Directive.
European banks have issued about $10 billion of additional Tier 1 securities since Banco Bilbao Vizcaya Argentaria SA first sold the debt in April. They’re taking advantage of investor demand for higher-yielding securities to comply with new rules requiring banks to bolster equity capital with debt securities that can absorb losses.
“There are signs that investors who shunned CoCos in the past are now willing to buy this type of bond,” said Simon Adamson, an analyst at CreditSights Inc. in London. They are “no doubt attracted by the 7 percent-plus yields,” he said.
The average coupon offered on Tier 1 bonds sold by European banks is 8.66 percent, according to data compiled by Bloomberg.
Societe Generale sold $1.25 billion of additional Tier 1 bonds in August to yield 8.25 percent. The securities fell 1.25 cents today to 104.5 cents on the dollar and now yield 7.2 percent, according to prices on Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The 1 billion euros ($1.37 billion) of 8 percent undated capital notes issued by Barclays last week have gained 2.48 cents on the euro and yield 7.76 percent, Bloomberg prices show. Underwriters received 12 billion euros of orders for the securities from 550 accounts, according to Adamson.