CGD pays interest of near 1.5% to issue 500 million in debt

  • ECO News
  • 18 November 2019

Caixa Geral de Depósitos (CGD) is on the market to finance itself with 500 million euros in five-year non-preferential senior debt securities. It is expected to pay an interest rate of around 1.5%.

Caixa Geral de Depósitos (CGD) has to issue 2,000 million euros in senior debt in the coming years to comply with regulatory requirements. It has already started on this path: it is in the market to finance itself with 500 million euros in non-preferential senior debt securities with maturity of five years. The public bank will have to pay an interest rate of around 1.5%.

This rate of 1.5% results from the sum of a premium of 175 basis points and the market interest rate for five years (mid-swap DP euro rate), which negotiates this Monday at -0.2076%, according to Bloomberg.

The operation marks the start of a series of subordinated debt issues that CGD will have to carry out by the end of 2022 under the MREL (minimum requirement for own funds and eligible credits), which obliges European banks with systemic importance to provide an additional financial cushion to face any difficulties. The aim is to ensure that banks have the capacity to absorb losses and to avoid taxpayers’ help.

In the case of CGD, the bank will have to issue about 2,000 million euros in senior preferential debt and senior non-preferential until the end of 2022.

For this issue, the public bank relies on the help of CaixaBI, HSBC, Morgan Stanley, NatWest Markets and Société Générale. This after a roadshow that took place last week in London and Paris. According to Bloomberg, the debt securities will receive a financial rating of Ba2 from Moody’s, BB+ from Fitch and BBB Low from DBRS.