Banco Santander 5yr Samurai raises ¥50bn; size smaller than debut deal

Banco Santander, rated A2/A/A, has raised ¥50bn (US$456m) from a five-year senior preferred Samurai bond.

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TOKYO, Nov 29 (IFR) - Banco Santander, rated A2/A/A, has raised ¥50bn (US$456m) from a five-year senior preferred Samurai bond.

This is the Spanish bank's first such offering since December 2017, when it made its Samurai debut with ¥95.9bn of five and 10-year senior non-preferred bonds.

In the latest offering, the five-year bond priced at 45bp over yen offer-side swaps with a 0.463% coupon, landing in the middle of the 43bp–47bp initial price guidance range issued on Tuesday.

Lead managers expected investors to find the bond attractive as the guidance range was equivalent to about 20bp over the issuer's euro curve and about 10bp–15bp over its US dollar curve. Indeed, trust banks saw the relative value and were the main buyers. The bond also drew demand from city banks, asset managers, specialised banks, shinkin banks, life insurers and other accounts including foreign investors.

The smaller size of the deal compared with its debut two years ago shows that some Japanese investors are still hesitant to broaden their horizons and add southern European credits.

"Japanese investors do buy Spanish sovereign bonds, but when it comes to a Spanish credit there is an extra hurdle to overcome," said a banker on the deal.

According to monthly data from the Ministry of Finance, Japanese investors bought a net ¥900bn of Spanish bonds from January to September, but the net purchases are believed to have been mainly sovereign bonds.

Another drawback was the complexity of calculating the risk weighting of a European senior preferred note, which deterred some investors. European lenders are allowed to partly count senior preferred debt towards total loss-absorbing capital requirements, so Japanese investors need to adjust risk weightings on their TLAC bond investments accordingly.

Mitsubishi UFJ Morgan Stanley, Mizuho and Nomura are the lead managers on the deal.

(Reporting by Takahiro Okamoto; Editing by David Holland)


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