Danske achieves over 90% participation in $1bn Tier 2 tender

Oct 3rd, 2013

Danske Bank achieved a participation rate of over 90% on a tender offer it launched on 18 September for a $1bn (Eu748m, Dkr5.58bn) 7.125% 25 year non-call five Tier 2 instrument, it announced yesterday (Wednesday).

The Danish bank launched the tender after it lost favourable equity treatment for the security from Standard & Poor’s in mid-July. Danske offered to buy back the bonds at 101.50, with the change in rating agency treatment meaning that it could call the securities at par in November.

DanskeSome market participants had expressed disappointment that a similar security was not being offered in exchange, but Danske explained that uncertainties over tax treatment prevented it offering a Tier 1 security for now, while a traditional Tier 2 issue would not be a direct comparable.

The bank nevertheless went on to issue Eu1bn of Tier 2 notes on Tuesday of last week (24 September).

Announcing the results of the buy-back, Danske said that $908,465,000 in aggregate nominal amount of the notes had been tendered pursuant to the offer.

Steen Blaafalk, Danske Bank treasurer, told Nordic FIs & Covered that the bank is very pleased with the result.

“It was very nice to see that almost 91% participated in the tender,” he said. “I think that’s predominantly because there was an economic rationale to do so.

“I also see it as a sign that our communication with investors was good, in that they understood the arguments why this had to be done.”

And although the Tier 2 issue last week was not seen as a direct alternative to the Tier 2 securities being brought back, Danske enjoyed participation in the new offering from holders of the old issue.

“Many of the existing investors actually participated in the new Tier 2,” said Blaafalk, “no matter that it was in euros and basically that it was a very different instrument. They actually replaced their tendered securities with purchase of the new one.

“There was a really good uptake, so investors are most likely still very happy with the name and understand the process, so my overall conclusion is that this has been a successful exercise.”

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