Bloomberg News

Banks Issue Longest-Dated Bonds in Europe for Four Months

October 13, 2011

(Updates with bank bond yields in ninth paragraph.)

Oct. 13 (Bloomberg) -- Svenska Handelsbanken AB, Sweden’s second-biggest lender, and Standard Chartered Plc of the U.K. are raising 2.5 billion euros ($3.4 billion) from sales of the longest-dated senior unsecured bank bonds since June as plans to re-capitalize the industry spur sales.

Europe’s credit markets rallied this week, helping bond issuance, after German Chancellor Angela Merkel said governments will do “everything necessary” to ensure banks have enough capital. Europe’s crisis is hurting bank balance sheets because they’re the biggest holders of bonds sold by the region’s most indebted countries.

“We’ve had headlines on bank recapitalizations over recent days which the market has taken positively, which at least provide a degree of certainty for a bank treasurer to consider accessing the market again,” said Oliver Judd, a credit analyst at Aviva Investors in London, which manages $150 billion in fixed-income assets.

Svenska Handelsbanken is selling 1.25 billion euros of 10- year benchmark-sized bonds, while Standard Chartered is raising the same amount from five-year notes, according to bankers involved in the sales. They’re the longest deals since JPMorgan Chase & Co. sold 1 billion euros of five-year bonds on June 8. Deutsche Bank AG’s two-year floating-rate offering in September re-opened the market after a two-month sales drought.

Svenska Bonds

Stockholm-based Svenska Handelsbanken’s bonds will be priced to yield 170 basis points more than the benchmark mid- swap rate in a deal managed by the borrower together with BNP Paribas SA, Goldman Sachs Group Inc., HSBC Holdings Plc and UBS AG, said the banker.

Standard Chartered’s issue will have a 188 basis-point spread over swaps, the banker with knowledge of that transaction said. Deutsche Bank, Goldman Sachs and JPMorgan are arranging that deal along with the London-based issuer.

ABN Amro Bank NV and SEB AB, which both followed Deutsche Bank in raising money from sales of senior unsecured securities, also sold two-year floating-rate notes. Credit Agricole SA sold 10-year bonds through bank branches to individual investors last month.

Handelsbanken and Standard Chartered are tapping bond investors as yields on European bank debt drop from their highest in more than two years.

Absolute yields on bank debt in Europe have slipped to 5.42 percent from 5.51 percent on Oct. 6, which was the highest since July 2009, according to Bank of America Merrill Lynch index data.

Iberdrola SA, Spain’s biggest power utility, and Milan- based Telecom Italia SpA are also taking advantage of renewed optimism about a solution to the Europe’s debt woes, raising 1.35 billion euros from bond sales today.

--Editors: Paul Armstrong, Andrew Reierson

To contact the reporter on this story: Ben Martin in London at bmartin38@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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