Montepio pays 10% for 2 years on €200M securities

Portugal’s mutual bank Banco Montepio has finalised conditions to issue preferential senior debt bonds worth €200 million with a 3-year maturity and a 10% coupon in the first two years — one of the highest in the Portuguese market.

The bond issue is on the back of its Euro Medium Term Note programme eligible to meet the Minimum Requirement for Own Funds and Eligible Liabilities (MREL).
MREL serves to prevent a bank’s resolution from depending on the provision of public financial support, and so helps to ensure that shareholders and creditors contribute to loss absorption and recapitalisation.
The interest rate on the third year will be Euribor-indexed at three months with a spread of 6.234%.
The bond issue has been offered to 44 institutional investors following a roadshow with the final allocation per country being: France (28%), Portugal (25%), UK (21%), Spain (13%) and Italy (8%), among others according to data from the Portuguese stock market commission CMVM.
Banco Santander, Crédit Agricole Corporate and Investment Bank, J.P. Morgan SE, and NatWest Markets N.V. were Joint Lead Managers and Joint Book-runners for the transaction.
The capital raise is one of the measures foreseen in the bank’s strategic plan to meet the regulatory requirements on the back of the MREL programme, to beef up its capital ratios, improve the quality of its assets and to ensure an adequate financing plan to meet these requirements.
In July Fitch Ratings upgraded Caixa Económica Montepio Geral, Caixa Económica Bancaria, S.A.’s (Banco Montepio) Long-Term Issuer Default Rating (IDR) to ‘B+’ from ‘B’ and Viability Rating (VR) to ‘b+’ from ‘b’. The Outlook on the Long-Term IDR is Positive.
The upgrade primarily reflected Banco Montepio’s successful reduction of problem assets (impaired loans, net foreclosed assets and investment properties) and its improved capitalisation. Together this resulted in a significant decline in the level of capital encumbered with problem assets. The upgrade was also supported by an improvement in the resilience of the Portuguese economy and banking sector and the bank’s improving core profitability.
In July Fitch Ratings upgraded Caixa Económica Montepio Geral, Caixa Económica Bancaria, S.A.’s (Banco Montepio) Long-Term Issuer Default Rating (IDR) to ‘B+’ from ‘B’ and Viability Rating (VR) to ‘b+’ from ‘b’. The Outlook on the Long-Term IDR is Positive.