Royal flush
Everyone battled volatility in 2015. ABN AMRO also faced a looming IPO. For running one of the year’s deepest and most diverse funding programmes in tandem with that process, ABN AMRO is IFR’s Issuer and Financial Issuer of the Year.
It was always set to be a transformational year for ABN AMRO, once a symbol of market failure. The Dutch bank’s float turned out to be a sure-fire winner for investors, but for the investor relations and treasury teams it provided yet another set of challenges in a year that came to be characterised by stop-start issuance windows.
ABN became one of the year’s most prolific financial issuers, pricing deals across more than 10 currencies – and that included a “royal flush” in euros (Additional Tier 1, Tier 2, senior, covered and Green) – despite the extremely tricky period for execution.
The Tier 2 bond issue in June stood out for many as one of the year’s strongest deals. Announced and executed within one day, the deal locked in €1.5bn of capital – and just before the markets took a turn for the worse as fears over Greece escalated.
“There was a one-day window, and we picked it,” said Danielle Boerendans, head of long-term funding and capital issuance.
The fact that ABN could bypass a roadshow bears testament to its ongoing investor work, a programme that saw the issuer meet about 500 investors in almost 30 cities during 2015. The deal raked in some €8bn in orders, one of the largest books for a European subordinated bank deal all year.
That deal helped lay the foundations for ABN’s inaugural €1bn Additional Tier 1 bond offering in September, the riskiest form of bank debt. The capital ABN raised over the year totalled almost €4bn-equivalent.
The success of the AT1 bond, even in volatile conditions, boosted the bank’s Tier 1 ratio and effectively set the stage for the IPO. The bank launched the flotation on October 27.
Quality
Confidence around the IPO was partly a combination of the quality of the underlying asset and the size of the deal. Despite ABN being a fraction of its former self, that was all the better for equity investors who had repeatedly had to prop up larger European banks since the financial crisis.
ABN had a fully loaded CET1 ratio of 14.8% as of September 30 and the bank will pay out 50% of annual net profit as a dividend for the full year 2017 onwards.
At more than €3.8bn, the IPO was the second largest of the year in Europe, once the 15% secondary greenshoe was fully exercised in early December. That was assured, with the shares closing up 4.85% on their debut, around the perfect start for a deal that needed to provide new investors with a return while protecting taxpayers by not leaving too much on the table. The stock has risen steadily since, up more than 11% over pricing by early December.
ABN also proved its mettle in the funding markets, where execution for much of the year proved as difficult, if not more so, than for capital.
The Dutch bank had a quiet start to the year as it focused on private placements, taking what it could from that market at attractive levels in bespoke maturities. While euros and US dollar funding remained important for private placements, ABN also diversified into currencies such as Swedish kronor and Australian dollars.
In the senior market, it printed a chunky €1.25bn 10-year fixed-rate senior note issue in response to the QE-driven “duration bid” from investors.
It also issued the first Green senior bond from a European commercial bank, the culmination of seven to eight months of preparation. The proceeds will be used to fund loans for solar panels and mortgages for energy-efficient homes.
Beyond euros, ABN also landed successful senior trades in US, Australian and Canadian dollars, Swiss francs and yen, among others.
In the covered bond market, the bank extended its funding profile with a €1.5bn 15-year in September, the largest covered bond in the tenor since 2009 and ABN’s longest ever covered issuance. The deal was well-timed – the 15-year swaps rate dropped just days later, which would have made achieving the bank’s desired 1.5% coupon considerably more difficult.
It was also the second bank to shift its outstanding covered bond programme from hard to soft-bullet format via a consent solicitation, a key trend in 2015 as issuers sought to make their outstanding debt more efficient.
To see the digital version of the IFR Review of the Year, please click here .
To purchase printed copies or a PDF of this report, please email gloria.balbastro@tr.com .
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