CGD has gone ahead with the debt issuance

  • ECO News
  • 21 March 2017

CGD'S CEO Paulo Macedo is already in the markets issuing subordinated debt. He hired banks for the roadshow beginning on May, 20.

Caixa Geral de Depósitos (CGD) is already in the market for the issuance of subordinated debt within its recapitalization programme. The State-owned bank, headed by Paulo Macedo, has already hired banks for the roadshow to take place next Monday, March 20.

According to Bloomberg, CGD entrusted five investment banks with the first two tranches of the high subordination debt needed to reinforce capital ratios: CaixaBi, Barclays, Citi, Deutsche Bank and JPMorgan will be promoting CGD‘s 500 million euros’ debt issuance.

CGD’s debt must appeal to institutional investors. Paulo Macedo stated he is optimistic about the success of the operation, during the presentation of the 2016 balance in which the bank had its largest losses.

“We will be issuing high subordination debt worth 500 million euros by the end of March and then we will issue an additional 430 million euros in 18 months“, Macedo stated. Now, CGD is already in the market placing those securities that have high rates due to their high risk.

CGD will place perpetual bonds with a 5.125% coupon, according to the information brought forward by Bloomberg, quoting a source close to the operation who did not want to be identified. Regardless of the coupon, the costs for the bank should be close to 10%, since CGD will have to sell those bonds for less than 100.

“Only those who really need to issue subordinated debt will do it, because it is a debt with high remuneration characteristics and which weighs on the banks’ balance“, explained the CEO. Considering the high risk of those bonds, Fitch should give this issuance a “B-” rating — meaning it is “junk“.

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