NLB to Place EUR 300m Tier 2 Notes 10Y Maturity with 5Y Recall Option

In recent days, it has been announced that NLB is to place EUR 300m Tier 2 notes with a maturity of 10 years and a 5-year recall option. The order book for the issuance of NLB’s newest tier 2 notes was opened yesterday while the settlement is expected to be on 24 Jan 2024. The transaction also offers the possibility of repurchasing two Tier 2 notes before their call dates and applying for priority in the allocation of the new notes. The interest rate is set at 6.875% per annum.

This issuance refers to the launch of NLB’s newest bond, in the amount of app. EUR 300m. The bond, in the form of a tier 2 subordinated bond, is set to have a 10-year maturity, and after 5 years a recall option (10NC5), which is of course dependent on market conditions.

The interest rate is set at 6.875% per annum, with the issue price set at 100% of their nominal amount. reflecting current market conditions. Settlement is expected on 24 January 2024, maturity on 24 January 2034, and the reset date on 24 January 2029. The bookrunners for the issuance, except NLB are BNP Paribas, BofA Securities, Morgan Stanley, and Unicredit. NLB also made a special offer to the previous Tier 2 bondholders, specifically of the two EUR 120m bonds, with 3.65% and 3.40% interest rates, respectively, which are callable on 19 November 2024 and 5 February 2025, respectively. This offer gives the Noteholders of these two notes the opportunity to sell their current holdings in these notes and to apply for priority allocation of the new notes. As such, if this offer is accepted in its totality, EUR 240m of the new bond issuance would be “refreshing” the old two bonds, thus leaving only app. EUR 60m only as the remainder of the new bond issuance.

As a reminder, NLB has already issued several bonds in the last couple of years in a couple of forms, including Tier 2, Senior Preferred, and AT1 bonds. In total, the Bank issued EUR 510m of Tier 2 notes, EUR 800m of Senior Preferred notes, and EUR 82m of AT1 bonds, which together amount to EUR 1,392m of outstanding bonds.

Below you can see all the currently issued bonds.

NLB outstanding bonds’ details

wdt_ID Type ISIN Issue Date Maturity Date First Call Date Interest Rate Nominal Value (EURm)
1 Tier 2 SI0022103855 6.5.2019 6.5.2029 6.5.2024 4,20% 45
2 Tier 2 XS2080776607 19.11.2019 19.11.2029 19.11.2024 3,65% 120
3 Tier 2 XS2113139195 5.2.2020 5.2.2030 5.2.2025 3,40% 120
4 Senior Preferred XS2498964209 19.7.2022 19.7.2025 19.7.2024 6% 300
5 AT1 SI0022104275 23.9.2022 Perpetual 23.9.2027 - 23.3.2028 9,721% 82
6 Tier 2 XS2413677464 28.11.2022 28.11.2032 28.11.2027 10,75% 225
7 Senior Preferred SX2641055012 27.6.2023 27.6.2027 27.6.2026 7,125% 500

Source: NLB, InterCapital Research

There are several reasons for the issuance of this new bond, including strengthening and optimization of the capital structure, meeting future MREL requirements, and general corporate purposes. Regarding MREL requirements, NLB already met its current requirement when it issued its newest bond in 2023. However, requirements change, and if this bond replaces the two smaller EUR 120m ones, then it would effectively also act as a “buffer” for the MREL requirements instead of them. Secondly, NLB recently announced its acquisition of Summit Leasing (more on which you can read here), which will add EUR 700m of risk-weighted assets, or RWAs. In total, by 2025 NLB plans on having an M&A capacity of EUR 4bn of RWAs, meaning that the extra capital acquired from the issuance of this new bond also supports this.

Category : Flash News

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