Banco Santander launches two issues of ‘CoCos’ in dollars

2023-11-16 18:35:25

Banco Santander, chaired by Ana Botín, has launched two issues of contingent convertible bonds (‘CoCos’) in dollars. The first optional amortization windows for these issues are 5.5 and 10 years, and their interest will be paid quarterly starting February 21, 2024.

Both emissions of Santander Bank They have started with a 10% coupon. One of its objectives will be the refinancing of existing capital instruments.

‘CoCos’ are contingent convertible bonds issued by banking entities, on a perpetual basis, and which count as additional level 1 capital, which is why they are also known as AT1 issues.

These bonds include an optional first window of liquidity to which banks usually resort, although they can postpone its settlement. In this case, once the first window is rejected, others are opened every three months.

These bonds are placed with institutional investors, and can be converted into the entity’s common shares under certain circumstances, such as a bank’s CET1 capital ratio falling below a preset level.

At the end of last August, Santander Bank decided to postpone the repurchase of one of its contingent convertible bonds of 1,000 million euros, whose first optional amortization window was on September 29.

The entity chaired by Ana Botín made this decision due to the current high cost of issuing ‘CoCos’, whose yields are around 10%. This situation is the result of the sale of Credit Suisse to UBS, an operation that changed the order of priority in the absorption of losses between AT1 bondholders and shareholders.