The Bank of Cyprus issued a new bond, amounting to 300 million euros and with an interest rate of 2.5%. The new bond is eligible for the formation of Minimum Equity and Eligible Liabilities (MREL). This is a new requirement under the Credit Institutions and Investment Undertakings (BRRD) Recovery and Consolidation Directive, which is handled by the Single Resolution Council. MREL bonds, which all banks in the European Union are required to issue, will be “cut” if a bank is put into a liquidation process.
It is the first issue of its kind by a Cypriot bank in Cyprus in general.
The interest rate is significantly reduced compared to the issue, in April, of a Secondary Bond with reduced collateral amounting to € 300 million, which has a fixed annual interest rate of 6.625%.
“In the first issue of this kind, the success of overcrowding and low performance is indicative of the attitude that analysts now have towards us,” commented the CEO of Bank of Cyprus, Panikos Nikolaou.
“Any vote of confidence in the Bank, however, is also a vote for the Cypriot economy in general. The management of the crisis, but also the reaction of the business world of all sizes, also receive praise from the markets through the attitude they have taken towards us today “, added Mr. Nikolaou.
The bank placed the issue in September, but current market conditions were favorable.
The bank estimates that the high interest, with the offer exceeding twice the requested funds and the low interest rate, are a vote of confidence of investors for the course of Bank of Cyprus and our country in general.
A senior executive of the Bank commented that “analysts have closely monitored the management of the Pandemic, but also our general course. “The current attitude of investors is a result of the assessments made in relation to this very course but also for the future as it is estimated by the markets.”
It is worth noting that the amount of the issue, 300 million euros, fully covers the obligations of the Bank of Cyprus towards the Unified Resolution Council.
The announcement
The Bank of Cyprus Holdings Public Limited Company (the “Company” or “BOC Holdings” and, together with its subsidiary, Bank of Cyprus Public Company Limited (the “Bank”), and together with the Bank's subsidiaries, the “Group “) Announces that the Bank has successfully completed the issuance and pricing of a € 300 million high-priority priority bond (the” Bond “), through its European Medium-Term Bond Loan Program (EMTN Program).
The Bond was issued at face value and has an annual interest rate of 2.50%. The interest on the Bond will be paid annually retroactively and will be redefined on June 24, 2026. The Bond expires on June 24, 2027. The Bank has, at its discretion, the right to early repayment on June 24, 2026, subject to certain conditions such as set out in the Terms and Conditions, including obtaining the necessary supervisory approvals.
The issue was in high demand, attracting interest from about 65 institutional investors, and the final bid book was more than doubled, with the final pricing being 25 basis points lower than the original pricing indication. The transaction follows the successful issuance of a subordinated bond with reduced collateral in April 2021 by BOC Holdings.
The settlement is expected to take place on June 24, 2021. The Bond will be listed on the Euro MTF market of the Luxembourg Stock Exchange.
The Bond is expected to meet the criteria for the Minimum Equity and Eligible Liabilities (MREL). The transaction improves the Bank's Minimum Equity and Eligible Liabilities (MREL ratio) to 18.37% 1 of weighted assets and to 10.62% 1 of the Leverage Ratio Exposure (LRE), significantly above interim requirement of 14.94% of the weighted assets and 5.91% of the Leverage Ratio Exposure (LRE), with which the Bank must comply by January 1, 2022.
The success of the transaction, in terms of investor participation and final pricing, demonstrates the recognition by the markets of the significant progress that the Group has achieved in improving its financial profile, as well as the confidence of institutional investors in the Cypriot economy. The transaction is the first issue of the Group in terms of high repayment bonds eligible for the Minimum Equity and Eligible Liabilities (MREL), laying the foundations for similar future issues.
BofA Securities, Citigroup, HSBC and Nomura and co-organized the Joint Lead Managers. Stifel Nicolaus Europe Limited and the Bank acted as Co-Managers.
Sidley Austin LLP acted as the Bank's legal advisor under English law and Chrysafinis and Polyviou DEPE as the Bank's legal advisors under Cypriot law in this transaction.
