Tag: reference rate

Merlin Raises Issues 12-Year Bonds Worth €300M

12 September 2017 – Expansión

Merlin Properties has returned to the capital market, taking the Socimi‘s visits so far this year to two. Yesterday, it managed to raise €300 million from the issue of 12-year bonds, in an operation for which it offered a coupon of 2.375%

To effectively manage the placement, Merlin engaged the services of Morgan Stanley. The issuance received robust demand, which allowed the firm to reduce the cost from 150 basis points above mid-swap (the reference rate for the placement of fixed income bonds in euros) considered initially, to 140 basis points above mid-swap.

This is the fifth issue that Merlin Properties has undertaken since its constitution. The first three, for a cumulative sum of €2,350 million, were carried out in 2016. This year, the Socimi has already raised €900 million.

According to the company, the funds raised will be used to early repay its mortgage debt, as well as for “general corporate purposes”. Merlin is the fourth non-financial company to resort to the debt market after Telefónica, Iberdrola and Cortefiel.

Original story: Expansión (by A. Stumpf)

Translation: Carmel Drake

Merlin Issues Debt Amounting To €600M, Redeemable In 2025

18 May 2017 – Expansión

Debt issues in Spain, which have been the focus of the financial sector in recent times, have now reached Merlin Properties. The Socimi has placed debt amounting to €600 million, with a term of eight years (maturing in May 2025) at a price of 99.417% of the nominal value and with an annual coupon of 1.75% (125 basis points above midswap). The subscription and disbursement of the issue will take place on 26 May 2017.

Merlin has received requests amounting to €1,200 million for the issue, i.e. double the amount that will be awarded. This level of demand has allowed it to lower the cost of the operation.

Initially, the Socimi proposed a price of 135 basis points above the reference index for fixed income or midswap issues. But, the strength of demand reduced that premium to 125 points.

To carry out the operation, Merlin has engaged the services of Crédit Agricole, Nabca IMI, Goldman Sachs, ING and JPMorgan.

At the Socimi’s General Shareholders’ Meeting three weeks ago, the CEO, Ismael Clemente (pictured above), confirmed plans to resort to the debt markets, although at the time he was unsure as to whether it would do so through convertible debt or senior debt issues, or by refinancing the bank debt.

The last few weeks have reinforced the truce in the debt market in Europe, after Emmanuel Macron secured victory over Marine Le Pen in the French elections.

Original story: Expansión

Translation: Carmel Drake

Bankinter Reduces Interest On Its 10-Year Fixed Rate Mortgage To 1.75%

19 April 2016 – Expansión

Bankinter has lowered the interest rate on its fixed rate mortgage to 1.75% over 10 years, the most competitive rate in the market, and to 2% over 15 years.

Euribor’s entry into negative territory and the continuous decrease of the index, which is the reference rate for most mortgages, has led the banks to step up their commitments to fixed rate mortgages in recent months. Bankinter, which was already offering the cheapest product in the market, has taken a new step in this commercial battle with an additional reduction in the rate of its fixed rate mortgages.

This reduction, which is the third in seven months, takes the interest rate on 10-year fixed rate mortgages to 1.75%, down from 1.8%. The entity chaired by María Dolores Dancausa has also decreased the rate on its 15-year fixed rate mortgage from 2.1% to 2% and on its 20-year mortgage from 2.5% to 2.4%. (…).

Other products

BBVA is the other entity that has strongly backed the fixed rate mortgage segment, which tend to have shorter repayment periods than their variable rate counterparts. The interest on its 15-year fixed rate mortgage is 1.9%, the lowest in the market over that term. (…).

Bankia…is also offering a 10-year fixed rate mortgage with an interest rate of 1.9%, as is Banco Cooperativo Español.

Translation: Expansión (by A. Roa)

Translation: Carmel Drake

Sareb Refinances Half Of Its Debt To Reduce Its Interest Payments

9 March 2016 – Expansión

Sareb has reduced its financial burden by refinancing half of its debt in just two months. The bad bank is taking advantage of the historically low interest rates to save itself €150 million in interest payments, a key reduction at a complex time for the entity. In addition, the entity chaired by Jaime Echegoyen is finalising the repayment of debt amounting to around €2,000 million, in line with its objectives.

On 18 December 2015, Sareb launched a debt issue amounting to €10,268 million, with a one year term, and a further €6,574 million with a three year term. And two weeks ago, it closed another two operations amounting to €4,084 million and €2,537 million, also with one- and three-year terms, respectively. In total, these sums account for €22,565 million of its debt balance, which currently amounts to almost €45,000 million.

As a result, Sareb is going to see a sharp reduction in its financing costs, which, according to financial sources, will amount to almost €150 million.

In this way, the company’s financing cost will decrease from €1,100 million in 2013 to its current figure of close to €550 million.

In addition, sources close to Sareb’s Board of Directors indicate that this reduction will allow the entity to continue repaying its debt, between €2,000 million and €2,500 million to be specific. They expect that the firm chaired by Jaime Echegoyen will publish its annual accounts for 2015 at the end of this month, which will reflect some of this reduction in costs. During the first half of 2015, the significant cut in interest rates, thanks to the measures implemented by the European Central Bank (ECB), pushed financing costs down to €360 million, i.e. €194 million less than a year earlier.

A balm

The decrease in Euribor has served as a balm for Sareb in the face of the (temporary) suspension in real estate sales in 2015 – due to the migration of its assets – and the impact of the new accounting circular, which is going to force it to exchange two thirds of the subordinated debt that its shareholders hold. Before this new accounting standard, Sareb had already accumulated losses of €850 million during the first three years of its life.

Sareb was created in 2012 with debt of more than €50,000 million, which was granted to the ceding entities as payment for the transfer of their assets. These issues were placed over terms of 1, 2 and 3 years, and were linked to 3-month Euribor plus a spread.

The company launched its first bond issue at the end of 2012. It placed €16,512.6 million at 3-month Euribor plus a spread of 256.2 basis points. For the issues completed in February, that margin had decreased to less than 30 basis points above the same reference rate. In addition, Euribor is now in negative territory, even on a 12-month term. The 3-month reference rate for issues by the company amounts to -0.21% Even if this reference rate continues to fall, negative interest rates will never be applied by Sareb. (…).

The cut in the financing cost would have been greater if it wasn’t for an interest rate hedging instrument that Sareb took out for a 9-year term to cover 80% of those senior debt issues. (…). .

Original story: Expansión (by D. Badía and J. Zuloaga)

Translation: Carmel Drake

BBVA Places €1,250M 7-Year Mortgage Bond Issue

9 March 2016 – Cinco Días

On Tuesday, BBVA launched a 7-year mortgage bond issue, amounting to €1,250 million, at a price of 52 basis points above the mid swap rate, the reference rate for this kind of placement.

The operation was well received, with demand amounting to €2,700 million, according to market sources. That drove down the price from 60 basis points first thing, to the aforementioned spread of 52 basis points above the reference rate. The figure represents the cheapest price at which any Spanish bank has placed debt so far this year.

By geography, 41% of the debt was placed with German and Austrian investors; 18% was placed with Spanish investors; 10% with Norwegian investors; 9% with investors from France and the Benelux countries (Belgium, the Netherlands and Luxembourg) and 8% with Italian investors.

In addition, another 4% of the debt was placed with investors in Europe; another 3% in the UK and Ireland; and another 2% in Switzerland. By type of investor, the main buyers were central banks and official bodies (37%); followed by fund managers (27%); insurance companies and pension funds (18%) and banks (17%).

The banks that acted as the underwriters of this debt issue were BBVA itself, as well as Citigroup, Crédit Agricole, Lloyds Bank and Sociètè Gènèrale.

BBVA already issued €1,000 million in 5-year mortgage bonds during the first few days of the year. This type of issue has been very popular in recent times. Also in January, Bankia issued €1,000 million in 5-year bonds; Santander placed €1,000 million in 10-year bonds; and the Spanish subsidiary of Deutsche Bank issued €500 million in 7-year bonds.

Meanwhile, CaixaBank issued another €1,500 million in 7-year bonds at the beginning of February and Banco Popular followed suit later that month with the issue of €1,500 million in 7-year bonds.

Original story: Cinco Días

Translation: Carmel Drake

CaixaBank Places €1,500M 7-Year Mortgage Bond Issue

2 February 2016 – Cinco Días

The bank chaired by Isidro Fainé…has placed a 7-year mortgage bond issue amounting to €1,500 million. The entity has been helped by Barclays, Goldman Sachs, Société Générale and UBS.

CaixaBank has placed the debt issue at a price of 78 basis points above the 7-year midswap rate (the risk free interest rate corresponding to that term), slightly below the reference rate of 80 basis points sought at the beginning of the placement. The coupon has therefore been left untouched at 1%.

Demand for the issue has amounted to more than €2,500 million, with more than 125 investors expressing interest in it, of which a significant number were foreigners. This has allowed the entity to reduce the price of the issue. CaixaBank’s last debt issue, which was placed on 4 November 2015, amounted to €1,000 million. It had a five-year term and a coupon of 0.625%. The entity is strengthening its surplus liquidity, which amounted to more than €54,000 million at the end of last year.

Spanish banks are rushing to raise funds on the capital markets. In January, BBVA placed a 5-year senior debt issue amounting to €1,000 million; meanwhile, Bankia placed mortgage debt amounting to €1,000 million; Santander issued 10-year bonds for the same value; and Deutsche Bank issued bonds amounting to €500 million with a 7-year term.

Santander achieved a price of 65 basis points over the midswap rate – the reference index for this kind of debt issue – on its placement. It will pay a coupon of 1.5%. Mediobanca, Natixis and Nomura accompanied the Santander group in the management of the operation.

Javier González, Head of Debt Issues by Financial Entities at BNP Paribas, which participated in the placements of BBVA, Bankia and the Treasury, confirmed that the money invested in these operations has been coming from end investors, such as investment and pension funds.

Banco Santander and Bankia have chosen to issue mortgage bonds because the volatile environment makes this type of asset very popular with conservative investors.

Original story: Cinco Días (by Pablo Martín Simón)

Translation: Carmel Drake

INE: Mortgage Lending Rose By Just 7.1% In October

22 December 2015 – Cinco Días

The signing of new mortgages to purchase homes increased by just 7.1% YoY in October, down from 20.2% a month earlier, with 19,195 new mortgage loans constituted in total.

According to data published yesterday by Spain’s National Institute of Statistics (INE), the signing of mortgages decreased by 19.4% compared with the month of September, which affected the YoY statistics.

The total amount of mortgages granted to purchase homes in October amounted to €2,144.2 million, up by 18.7% compared with the same month in 2014 and down by 18% compared with the previous month.

Moreover, in October, 28,989 mortgages were signed for all kinds of properties, including both rural and urban buildings, up by almost 5% compared with a year earlier, but down by 19.5% compared with the previous month.

The amount of capital loaned by Spanish institutions to constitute these loans amounted to €4,040 million, 12.5% more than in October 2014 and 15.6% less than in September.

More than half of all of the mortgages constituted in October, specifically, 53.1%, involved homes, according to INE’s data, which also revealed that 90.3% of the loans had variable interest rates, versus 9.7% which had fixed interest rates.

Euribor was the preferred reference rate for the constitution of variable rate mortgages, specifically it was used in 92% of all new variable rate contracts. The average interest rate, at the beginning of the mortgage terms, for home loans was 3.30%, which was 8.2% lower than during the same period in 2014.

In total, changes to the conditions of 12,457 mortgages were recorded in the property registers, down by 18% compared with last year. For homes, the number of mortgages whose conditions were modified decreased by 19.4%. (…).

By autonomous region, the areas that recorded the highest number of new mortgage constitutions over homes in October were: Andalucía (3,551); Cataluña (3,138) and the Community of Madrid (3,033).

The autonomous regions that recorded the highest YoY rates of change were the Balearic Islands (61.8%), País Vasco (43.7%) and the Canary Islands (32.8%).

The autonomous regions that loaned the most capital for the constitution of mortgages over homes were the Community of Madrid (€513.0 million); Cataluña (€388.5 million) and Andalucía (€335.0 million).

The autonomous regions with the highest month on month positive rates of change in the number of home loan mortgages were La Rioja (19.1%); Murcia (12.1%) and the Canary Islands (9.7%).

Meanwhile, the autonomous regions that recorded the highest MoM decreases were the Community of Madrid (38.7%); Navarra (36.2%) and Aragón (30.4%).

Original story: Cinco Días

Translation: Carmel Drake

Sabadell Places €750M 5-Yr Debt Issue At 0.475%

1 June 2015 – Expansión

€750 million debt issue / The bank has placed an issue of 5-year mortgage bonds with a record low yield of 0.475%.

For many financial institutions, the excess liquidity in the market is offsetting the recent increase in volatility that has resulted from the lack of agreement between Brussels and Greece. As a result, debt issues are proving successful.

Friday’s operation by Sabadell is a good example. Just 24 hours after the bank held its AGM, it went to the market in search of financing through the issue of 5-year mortgage bonds, arranged by Barclays, Deutsche Bank, HSBC and Lloyds. It paid a yield of 0.475%, which represents the lowest ever interest rate on a bond issue. Moreover, spreads, or differentials, are returning to pre-crisis levels, given that this yield sits just 12 basis points above the mid-swap rate (the reference rate for fixed rate issues).

“The primary international investors have all taken part in this operation and the participation rate in Germany has been particularly noteworthy. The main investors participating in the issue have been financial institutions, central banks, investment fund managers, insurance companies and pension funds”, said the entity in a statement on Friday.

Balance sheet

Sabadell has been particularly active in the market for this type of issue. Since November last year, it has completed four such transactions, raising €3,100 million in total. “The solvency of Banco Sabadell and its reputation on the international financial markets have undoubtedly been the factors that have contributed to the success of this placement”, it added. The bank wants to take advantage of the decreasing financing costs caused by the recent stimulus measures put in place by the European Central Bank (ECB). “The release of this issue will take place on 10 June and its launch forms part of Banco Sabadell’s non-equity security program, filed with the CNMV”, explain sources at the bank.

In September last year, the financial institution launched a covered bond (the term used for bonds in Europe) purchase program. In total, it has acquired €82,805 million. Moreover, it put in place a securitisation purchase program at the end of last year, and as a result it will close the first transaction involving Spanish mortgages since 2007, with UCI, which is owned by Santander and BNP Paribas. And in March this year, it started to purchase government debt, which has significantly reduced its financing costs.

Improved credit

As a result, credit is being revived once more, which is the main objective of the ECB. In this regard, Josep Oliu, Chairman of Sabadell (pictured above), said at the entity’s AGM last Thursday, that the strong level of competition in the financial markets to secure credit in the context of excess liquidity, represents a threat to the recovery of the banks’ financial results.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake