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(CORRECTS BOND TENOR IN PARA 14)
By Aimee Donnellan and Danielle Robinson
LONDON/NEW YORK, Sept 10 (IFR) - HSBC helped restoreconfidence in contingent convertible (CoCo) Tier 1 deals fromEuropean banks Wednesday with appropriate pricing on itsUS$5.6bn-equivalent triple-tranche dollars and euros deal.
The deal attracted some US$30bn equivalent in demand, almostUS$22bn of which turned up for the US$3.75bn of dollar tranches,split into US$1.5bn 5.625% perpetual non-call five-year notesand US$2.25bn 6.375% perpetual non-call 10s.
The non-call five and the non-call 10-year CoCos traded upto US$101.00 and US$101.375 respectively by New York'safternoon, while the EUR1.5bn 5.25% perpetual non-calleight-year awaits a full trading day on Thursday.
"That's what you like to see," said a financials coveragebanker at another bank.
"If a bond is trading up 1.00 to 1.5 points in the firsthours after pricing, then you know it's priced attractively forinvestors - but not too cheaply either."
The performance helps undo some of the damage done by poorlyperforming euro CoCo deals from Santander and UniCredit inrecent weeks.
"The AT1 market's performance has not been stellar over thepast six months, so a lot of people wanted to see this deal gowell," said one syndicate manager.
Bankers are hoping the positive tone HSBC has generated will be bolstered by another high-quality AT1 inaugural CoCotrade coming from Sweden's Nordea.
"This is an incredible trade and will hopefully set thescene for Nordea to come to the CoCo market next week," said ahybrid capital expert.
Nordea, Sweden's largest bank, began an investor roadshow onWednesday to prep the market for what will be the first CoCofrom Sweden. The bond is expected to be priced on Monday orTuesday, according to a lead manager.
Credit Agricole is also roadshowing a deal for the dollarmarket.
Demand for the HSBC deal, rated Baa3/BBB, was split intoUS$9.3bn and US$12.5bn respectively between the shorter andlonger pieces, while the euro tranche attracted a 6.5bn book.
The non-call fives were first whispered at 5.75%-6%, and thenon-call 10s at 6.5%-6.75%.
At 6.375% pricing on the non-call 10 (2024 call date), theHSBC deal came through Credit Suisse's 6.25% non-call 2024CoCos, which were quoted at around 6.4%.
Credit Suisse isn't a perfect comparable, however, given itslower trigger of 5.125% of common equity Tier 1, compared withHSBC's 7.00%. The CS deal also has an investor-friendly dividendstopper.
Barclays and Lloyds CoCos have the same structure as HSBC'spending deal, carrying a 7% trigger, but they are significantlylower rated, with the Barclays CoCos at Single B-plus by S&P andLloyds at Double-B minus.
The nearest Barclays comps in CoCos include 6.625% non-call2019s yielding 7.25% and 8.25% non-call 2018s yielding 6.85%.Lloyds has an outstanding 7.5% perpetual non-call 10 with a calldate in 2024, trading with a yield of 7.00%.
To calculate the value of HSBC's higher rating, some marketparticipants looked at how much tighter it trades versusBarclays and Lloyds, while also accounting for the fact thatHSBC has an enormous US$54.2bn buffer before its 7.00% triggercan be hit. (Reporting by Aimee Donnellan and Danielle Robinson; Editing byAlex Chambers)
