Raiffeisen Zentralbank Privately Offering Junior Bonds

Raiffeisen Zentralbank Oesterreich AG, the parent of Raiffeisen Bank International AG, is seeking to sell as much as 500 million euros ($623 million) of subordinated debt to business partners and clients, according to two people with knowledge of the offering.

RZB, which is unlisted and owned by regional cooperative banks, is seeking buyers for Tier 2 bonds due in 10 years, which it can buy back after five years, according to a term sheet seen by Bloomberg News. The offering was made only to a small group of investors with close relationships with the bank, the people said. RZB declined to comment on the deal.

Raiffeisen expects to report a loss this year as it’s struggling to stem rising bad-loan charges in Ukraine, Hungary and other countries. The bank’s reliance on Russia as the biggest profit generator is increasingly undermined by the impact on Russia’s economy of the sanctions imposed by the U.S. and the European Union in response to President Vladimir Putin’s stance on Ukraine.

RZB, which owns 61 percent of Raiffeisen, provides banking and other services for the cooperative banks that own it. It is likely to miss out of Raiffeisen’s dividend payment for the year because of Raiffeisen’s expected loss.

Austria’s bank regulator Finanzmarktaufsicht told RZB in July to keep its own funds ratio, a broad capital measure that includes hybrid instruments such as Tier 2 debt, above 13.77 percent of risk-weighted assets, according to RZB’s debt issuance program posted on its website. The ratio stood at 14.7 percent at the end of June, according to RZB’s half-yearly financial report, the latest available.

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