Credit Agricole tenders for €4 billion of covered bonds, tier 2 bonds

By Susanna Moon

Chicago, March 14 – Credit Agricole SA said it began a tender offer for €2 billion maximum principal amount of covered bonds and €2 billion maximum principal amount of tier 2 bonds.

The tender covers four series of outstanding tier 2 bonds issued between 2008 and 2010 under the company’s euro medium-term note program, denominated in euros and pounds sterling, as well as seven series of outstanding covered bonds issued between 2010 and 2013 by Credit Agricole Home Loan SFH, denominated in euros, according to a company notice.

The tender offer will run for one week until March 21, with settlement following on March 24.

After the tender, Credit Agricole Home Loan SFH will seek bondholder consent to modify the covered bonds to soft bullet from hard bullet, the release noted.

The tier 2 bonds purchased in the tender will be canceled immediately after settlement. The covered bonds purchased in the offer will be transferred to Credit Agricole Home Loan SFH immediately after settlement.

The tier 2 bonds covered by the offer are as follows:

• €2,375,000,000 (€2,364,000,000 outstanding) 5.971% dated subordinated fixed-rate notes due Feb. 1, 2018 issued in three tranches on Feb. 1, 2008, March 18, 2008 and Sept. 9, 2008;

• €1.25 billion (€1,192,000,000 outstanding) 5.875% dated subordinated fixed-rate lower tier 2 notes due June 11, 2019 issued in two tranches on June 11, 2009 and Dec. 22, 2009;

• €1.25 billion (€1,122,000,000 outstanding) 3.9% dated subordinated fixed-rate lower tier 2 notes due April 19, 2021 issued on Oct. 19, 2010; and

• £450 million 7.375% dated subordinated fixed-rate notes due Dec. 18, 2023 issued in two tranches on Dec. 18, 2008 and Jan. 21, 2009.

The covered bonds included in the tender are as follows:

• €1,675,000,000 of 3.25% covered bonds due March 23, 2017 issued in three tranches on March 23, 2010, Dec. 23, 2011 and Feb. 20, 2012;

• €1.5 billion 2.125% covered bonds due July 10, 2017 issued on April 10, 2012;

• €1.85 billion 3.5% covered bonds due June 14, 2018 issued in two tranches on June 14, 2011 and Feb. 20, 2012;

• €1.25 billion 1.625% covered bonds due March 11, 2020 issued on March 11, 2013;

• €2 billion 3.875% covered bonds due Jan. 12, 2021 issued in three tranches on Jan. 12, 2011, April 28, 2011 and Oct. 19, 2011;

• €1.5 billion 4% covered bonds due Jan. 17, 2022 issued on Jan. 17, 2012; and

• €2.4 billion 4% covered bonds due July 16, 2025 issued in five tranches on July 16, 2010, Nov. 9, 2010, May 11, 2011, July 18, 2011 and March 28, 2013.

The tender offer is “part of Credit Agricole SA’s plan to optimize its balance sheet through the partial reinvestment of capital gains expected from the simplification of the Credit Agricole Group’s corporate structure announced for 2016,” according to a company notice.

The offer also provides a liquidity opportunity for holders.

For holders of tier 2 bonds, the tender covers outstanding high coupon tier 2 bonds, some of which are inefficient for “prudential requirements,” the company said. The reorganization of the group allows for the purchase of the tier 2 bonds without the need for new issues to replace them. This will reduce Credit Agricole SA’s subordinated debt, while preserving the group’s favorable position with respect to TLAC requirements, the release added.

For holders of covered bonds, the tender is being made for outstanding bonds whose coupon payments are high relative to current market conditions for new issues, the company noted. Cutting the debt will reduce the company’s financing costs in the years to come, after adjustments to interest rate hedging transactions and the cost of new issues and increased interest margins, the release said.

The tender offer is not being made to any U.S. holders or to those in the United States. The offer is only available to holders outside of the United States.

Credit Agricole is a Montrouge, France-based bank.

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