Investor appetite for subordinated debt from the region’s financial firms is starting to recover after the Credit Suisse bondholder wipeout shuttered the market.
European banks are getting a warmer welcome in the capital markets.
Photographer: Daniel Acker/Bloomberg
As summer ends and the sun loungers get stacked away so the seasonal demand from European banks to raise capital is reappearing. Financial institutions have issued senior bonds in dribs and drabs in recent months, but this week is seeing new supply in the riskiest form of subordinated debt — evidence that investors are becoming more comfortable in allocating fresh money to the region’s banks.
New subordinated debt deals offer the best gauge of appetite, after the March implosion of Credit Suisse Group AG prompted the Swiss regulator to cancel all of the lender's $17 billion of AT1 debt. Wiping out those bondholders effectively closed that market for several months. Additional Tier 1 capital bonds, also known as contingent convertibles, allow regulators to zero investors in the event of a bank failing. The asset class offers the highest yields for lending to financial firms, but accompanied by the largest risk of losses. A handful of deals has been brought in recent weeks, such as the $1.5 billion 8.5% perpetual issue from BNP Paribas SA in early August, but the sector has yet to fully regain confidence.
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