Barclays impressed on Monday as it pulled in "spectacular" £5bn-plus peak demand for a £1.5bn perpetual non-call six year Additional Tier 1, while in the euro senior space a pragmatic approach to pricing paid off for Intesa Sanpaolo, which landed a two-part €2.25bn green senior non-preferred transaction.
Bankers said the UK lender' deal further underlined the impressive depth of demand for riskier paper in sterling, after Tier 2 trades from Lloyds and ING Groep pulled in strong demand in recent weeks – although the latter subsequently traded poorly in the secondary market. The transaction is the second sterling-denominated AT1 of the year so far, following a £750m 8.5% perpetual non-call September 2028 SEC-registered transaction from Lloyds on January 9.
Barclays' self-led issue, which is expected to be rated Ba2/B+/BBB–, was marketed with initial price thoughts of 9.625% area.
Books were reported above £4bn by midday, UK time, and continued to grow from there. The coupon was ultimately set at 9.25% and the size at £1.5bn on more than £5bn of demand (pre-rec).
"It's an absolute cracker, that trade," said a banker away from the deal. "At £1.5bn, it's the biggest sterling AT1 in the curve now, and a £5bn book is pretty spectacular."
Bankers said the issuer paid a relatively slim concession of around 12.5bp–25bp, extrapolating from its £1.25bn 8.875% perpetual non-call March 2028 AT1 – which was bid at a yield of 8.77% at Monday's open, according to Tradeweb figures – and adjusting for that deal's reset spread of 695.5bp. Bankers calculated that the reset spread of the new issue will be more than 100bp tighter.
That the new issue still attracted such strong demand was attributed partly to the eye-catching outright coupon on offer for a UK national champion.
"It is a monster coupon from a carry perspective," said a second banker away from the trade.
Other bankers noted the deal also offered an attractive pick-up to US dollars. Barclays' last AT1 in that currency was a US$2bn 8% perpetual non-call March 2029 issue, sold in August 2022, which was trading at a yield-to-call of 8.55%.
"There is such a crossover between the two investor bases that anyone who has bought [Barclays'] US dollar AT1 will think this looks pretty attractive," said the first banker.
Barclays had been expected to return to the AT1 market after it recently announced it will call its £1.25bn 7.25% AT1 at its first call date on March 15. It also has another AT1, a US$2.5bn 7.75% transaction, coming up for call in September.
As of the end of 2022, Barclays held AT1 equivalent to 3.9% of its risk-weighted assets, well above its 2.3% minimum regulatory requirement. The bank has said it will continue to run a "conservative" buffer over its regulatory requirement to account for RWA and FX fluctuations.
Intesa "pragmatic"
Meanwhile, in the euro market, Italy's Intesa Sanpaolo was offering a two-part green senior preferred. The deal comprised a five-year non-call four tranche and a 10-year bullet tranche and was run by leads BBVA, BNP Paribas, Bank of America, Citigroup, Commerzbank, IMI-Intesa Sanpaolo, Morgan Stanley and UBS.
The €1.5bn five-year non-call four tranche was launched at 170bp over mid-swaps, 20bp inside initial price thoughts, on the back of around €3.2bn of demand (pre-rec).
The €750m 10-year tranche was launched at 255bp, 15bp inside IPTs, with demand coming in at around €2.1bn (pre-rec).
Bankers said that although spreads have widened in recent weeks, Intesa's trade indicated that some issuers will judge current levels as still well worth locking in.
"We have given up a few basis points in credit, but if you look at where your spreads are now versus where they were in October, the net answer is you're still money good," said the second banker.
"They know they are a well-liked name, so if they pay a sensible premium they will get [the deal] done."
Bankers said Intesa Sanpaolo had taken a pragmatic approach by offering both tranches with initial new issue concessions of around 40bp–45bp, meaning the shorter tranche offered a final 20bp–25bp and the longer one 25bp–30bp.
"It shows premiums are still elevated and you need to be pragmatic ... but if you're willing to pay and motivated to go, you can get a really strong trade away," said a third banker, away from the deal.
The deal is expected to be rated Baa3/BBB–/BBB–/BBB (Moody’s/S&P/Fitch/DBRS).
Elsewhere, Landesbank Berlin priced a debut €250m three-year SNP at 95bp, 5bp inside IPTs, via DZ Bank, Helaba and NordLB.
The book stood slightly below €300m at reoffer, according to a banker close to the deal. Fair value was seen at around 70bp–75bp.