BBVA Launches $750 Million Contingent Convertible Bond in U.S. Markets

BBVA Launches $750 Million Contingent Convertible Bond in U.S. Markets

(IN BRIEF) On Monday, BBVA initiated the issuance of a $750 million contingent convertible (CoCo) bond in dollars, registered under the U.S. Securities and Exchange Commission (SEC). This CoCo bond, with a six-year amortization option, carries an initial price of 9.625 percent (equivalent to 8 percent in euros). The bond issue, in SEC format, broadens BBVA’s investor base, mainly targeting the U.S., Europe, and Asia. BBVA’s issuance demonstrates its commitment to this market segment, and it aligns with its financing needs in dollars. This issuance is part of BBVA’s annual wholesale financing plan and aims to provide flexibility for refinancing future amortization options while reinforcing the bank’s hybrid capital. It is the second AT1 (Additional Tier 1) issue by BBVA this year, following its €1 billion CoCo bond placement in July.

(PRESS RELEASE) BILBAO, 12-Sep-2023 — /EuropaWire/ — This bond issue is in SEC format (U.S. SEC prospectus), which allows BBVA to offer the securities to a broader investor base that mainly includes the U.S., Europe and Asia. BBVA is therefore demonstrating its willingness to be present in this market at least once a year, while at the same time covering the financing needs of BBVA holding in dollars. In September 2022,  BBVA placed a $1.75 billion senior non-preferred debt issue in the U.S. market.

Today’s bond issue is part of BBVA’s annual wholesale financing plan and has a dual aim. On the one hand, it gives the bank flexibility to be able to refinance subsequent amortization options of this kind of debt. The next one is September 24th, an issue that the bank has decided to amortize, as it announced to the bondholders last July.

On the other hand, it reinforces BBVA’s hybrid capital, following the announcement last July of its intention to carry out an extraordinary share buyback in the amount of €1 billion once the corresponding regulatory authorizations have been obtained.¹

This is the second AT1 issue so far this year.  In July, BBVA placed a €1 billion CoCo bond with an 8.375 percent coupon. It was the bank’s first issue with these characteristics since 2020, and the first issue by a European bank since the Credit Suisse crisis in March 2023, which rattled the markets.

In August 2023, BBVA placed 300 million pounds of Tier 2 subordinated debt with a 2033 maturity, and in June 2023 and additional €750 million of Tier 2 subordinated debt. Furthermore, the Group has launched four other issues :€1 billion of senior non-preferred debt, with an eight year term; €1.5 billion of mortgage covered bonds with a 4.5 year term; €1 billion of senior preferred debt with a three year term and the previously mentioned  €1 billion CoCo bond in June 2023.

¹Subject to prior authorization by the supervisor and final internal approval. The execution of the €1 billion share buyback program would be considered an extraordinary shareholder distribution and would therefore not be included in the scope of the ordinary distribution policy. The specific terms and conditions will be communicated when relevant prior to the execution.

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