Monday, 23 July 2018

Credit Suisse launches consent solicitation on covered bonds

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Credit Suisse is asking covered bond investors to change the terms of their holdings and switch from a hard to a soft bullet maturity as it seeks more efficiency in its funding structure.

The Swiss bank, which issued its first soft bullet covered bond in September, launched a consent solicitation on Monday on seven of its outstanding bonds.

Soft bullet maturities are not unusual in covered bonds although they are used more by Australian and Canadian banks.

Bank treasuries can benefit from soft bullet issuance as it offers offer greater efficiency from a liquidity and resources management perspective.

Only last week, Credit Agricole issued a debut soft bullet structure at swaps minus 2bp.

The operation aims to “align the terms and conditions of the older outstanding series with those of the most recently issued series 9 to ensure ongoing cost efficiency of this funding programme.”

Holders of the seven outstanding covered bonds being targeted, the maturities of which range from 2015 to 2039, are invited to vote on whether or not they approve the change in structure. The deadline for voting is 17:00 on December 11.

Bondholders can also continue to submit consent instructions and receive payment until 5pm on 22 December although no vote would be cast at the first meeting as a result of missing the deadline.

Credit Suisse is the soliciting agent.

According to market sources, the switch to a soft format would have little consequence for investors since soft and hard bullets are generally perceived to have a similar credit profile.

The 12 month extension would only be employed if Credit Suisse were to become insolvent, in which case the extra year would help protect investors from a fire sale of assets.

Bondholders who vote in favour of the proposal will be eligible to receive a payment equating to 0.05% of the covered bonds that are part of the consent solicitation.

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