Offers for CGD’s issuance place the rate between 11% and 11.5%

Caixa Geral de Depósitos (CGD) is in the market to obtain 500 million euros through subordinated debt securities. There are also proposals being received for those titles — and interests are high. Bloomberg discloses that the interest rate to be paid by the state owned bank should surpass 11%.

Bloomberg discloses that the offers for the subordinated debt securities of the bank headed by Paulo Macedo place the annual interest rate between 11% and 11.5%. However, since the operation is still taking place, some adjustments may be made to the final rate.

The bank intends to place 500 million euros in the first tranche of the debt for private investors — only institutional — which is a part of CGD‘s recapitalization plan. Without obtaining these funds, the State will not inject 2,500 million euros.

CGD revealed that during the roadshow in the main European markets there were 120 institutional investors who showed a “strong interest” in CGD. Those investors show “deep knowledge about CGD and the Portuguese financial sector”. Yet, that should not stop the operation from having a high cost.

CGD‘s issuance is subject to several factors, some external, other internal, states a source from the market. “Investors are highly aware of what happened to Novo Banco‘s senior bond holders in December 2015″, and the latest press release from Pimco and BlackRock saying they will not participate in the issuance “only made things worse”.

Aside from this, “investors also question the bank’s ability to comply with the strategic plan, considering the State is the shareholder”. ECO is also aware that the worries the Portuguese have concerning CGD‘s cost reduction played an important role in the process: investors do not look favorably on the national resistance to the closure of branches.