Spain’s Catalunya Banc has launched this year’s third tender offer to buy back covered bonds for cash, underscoring the attractiveness of such liability management exercises as issuers seek to boost capital and free up collateral. A new tender offer by Italy’s CDP is linked to the issuer’s voluntary termination of its covered bond programme in November.

CatalunyaCaixa, as the bank is also known, is targeting a Eu1.5bn 4.875% June 2017 cédulas hipotecarias issue and a Eu1.75bn 3.5% March 2016 issue, also mortgage-backed. Together with 34 ABS tranches, the aggregate face value of the debt eligible for its buy-back stands at Eu7.01bn, although the tender offer is capped at Eu900m and therefore subject to pro-ration.

Deutsche Bank, JP Morgan, and Natixis are joint dealer managers alongside Catalunya Banc.

The purchase price has been set at 94% for the June 2017 issue and 93% for the larger, March 2016 bond. This compares with discounted purchase prices of 70% for a cash for covered bonds tender offer carried out by National Bank of Greece in early January, and an 85% purchase price for a tender offer launched last Thursday (26 January) by Portugal’s Banco BPI, which is still underway.

Bankers working on CatalunyaCaixa’s tender offer put the market premium incorporated in the purchase price at between 3% and 4%.

Royal Bank of Scotland analysts pointed out that while Banco BPI has offered to repurchase the entire, single covered bond issue it is targeting, in CatalunyaCaixa’s buy-back covered bonds compete with ABS. They also noted that the maturity of the covered bonds does not fall within the timeframe of the three year long term repo operations being conducted by the European Central Bank.

“Given that Catalunya Banc offers considerable premiums over yesterday’s bid market price for the cédulas hipotecarias, the incentive for mark-to-market investors to participate might be higher than with BPI’s offer,” they said. “However, the satisfaction of potential interest will depend on the result of the ABS auction.”

Other market participants suggested the market premium was less attractive.

Bernd Volk, head of covered bond research at Deutsche Bank, said that a premium of four “big figures” does not appear compelling, but suggested that ongoing uncertainty around Spanish second tier banks, rating downgrade risk and a lack of market access could be important considerations for investors.

Market participants put the market premium in Banco BPI’s tender offer at various levels, ranging from 2.5% to 3.7%, with some suggesting this was somewhat small.

Italy’s Cassa Depositi e Prestiti is offering to buy back for cash its remaining outstanding covered bonds, Eu3bn January 2013 and ¥10bn (Eu99.7m) January 2017 issues, with the re-offer price set at 99.9% plus accrued interest. An additional 0.1% will be paid to investors who tender their bonds by an early deadline of 10 February.

CDP headquarters, Rome

Banca IMI, BNP Paribas, Deutsche Bank, Nomura and UniCredit are joint dealers.

A banker close to the tender offer said that a par repurchase price had been targeted since the discussions about the buy-back began, but noted that bond prices had rallied significantly since then.

“Yields were around 7% on one year T-bills when we started on this,” he said, adding that par value was an attractive level for the Japanese yen denominated covered bonds but arguably less so for the 2013 euro issue.

The 2013s were trading at around 98 cents when preparations for the tender offer were in the early stages, he said.

“It would have been difficult to pay anything but par,” he added.

The tender offer was launched yesterday and is open until 20 February, with CDP aiming to accept for repurchase all validly tendered bonds, without pro rata scaling, if the relevant bondholders pass two extraordinary resolutions.

These give a hint of the rationale for CDP’s tender offer, which is understood to be linked to CDP’s voluntary termination of its programme on 3 November rather than for capital-generating purposes as is the case for other covered bond tender offers underway.

In connection with CDP’s termination of its covered bond programme the issuer desegregated the cover pool backing its covered bonds, with the collateral returned to the issuer in exchange for a full cash collateralisation of the principal and interest due on the covered bonds. Fitch in November placed CDP’s covered bonds on Rating Watch Positive as a result of these changes (click here for more).

The Covered Bond Report understands that CDP, having terminated its covered bond programme, is seeking to make use of the cash in this collection account to buy back its remaining covered bonds, the Eu3bn January 2013s and ¥10bn January 2017s.

The resolutions that CDP is putting to the vote are principally to remove any restriction on the principal amount of covered bonds that CDP may buy back, dubbed the 50 percent resolution, and to remove any restrictions on the funds which CDP may use for the purpose of purchasing covered bonds, allowing CDP to also use also what are called “Covered Bonds Segregated Rights”.

CDP said that if the 50 percent resolution is not passed and the aggregate principal amount of bonds validly tendered is greater than what it refers to as “the acceptance limit”, the issuer will determine the aggregate principal amount of bonds of each series, if any, it will accept for repurchase.

Any investor who does not tender bonds pursuant to the offer may be eligible to receive a consent fee equal to 0.05% of the principal amount of the bonds held in respect of each extraordinary resolution in favour of which the investor voted.