UBS Group sold US dollar-denominated Additional Tier 1 (AT1) notes just a day after setting out plans to sell billions more of the risky securities in the coming years.
The Swiss lender priced US$1 billion of securities callable in April 2031 to yield 7.75 per cent, according to a source with knowledge of the sale, who asked not to be identified because the information is private. It follows UBS’s return to the market in November when it pulled in US$36 billion of orders for US$3.5 billion of AT1s across two tranches – a deal that marked a recovery of the market in a tumultuous year.
Wednesday’s deal pulled in more than US$11.7 billion of investor orders, according to a separate source familiar with the matter.
The new offer comes shortly after the bank outlined its plans to raise as much as US$2 billion of the deeply subordinated debt this year and keep lifting a capital buffer by 2029 through the “gradual build of AT1”.
Other European banks are planning AT1 issuance of similar sizes this year. BNP Paribas is planning to issue 2.5 billion euros (S$3.6 billion) and Deutsche Bank plans one billion to two billion euros of AT1 and Tier 2.
Santander has planned four billion to five billion euros of hybrid issuance in 2024 having already raised 3.8 billion euros, including prefunding last year, according to various bank earnings and fixed income presentations seen by Bloomberg.
The market for new AT1s by European banks has been busy this week. Dutch lender ING Groep raised more than US$1 billion, while Swedbank and Jyske Bank sold new debt in US dollars and euros, respectively, based on data compiled by Bloomberg.
AT1s – or contingent convertible bonds – were introduced after the financial crisis to ensure bondholders take losses first when a bank is in trouble while taxpayers are off the hook. They suffered the worst day of trading in their history in March after US$17 billion of Credit Suisse notes were wiped out as part of the lender’s takeover by UBS.
The market has since recovered, with spreads on a multi-currency index by Bloomberg indicated near their lowest level since last February. BLOOMBERG
