CaixaBank announced an exchange taking in some Eu2.11bn of mortgage covered bonds yesterday (Thursday), offering the retail investors that hold them an option of switching out of the illiquid and low yielding issues into fixed term deposits.

CaixaBank headquarters, Barcelona

The Spanish bank is offering to buy back at par four cédulas hipotecarias maturing between June 2016 and September 2017 that were issued in 2006 and 2007 for a combined Eu4.5bn. The bank previously bought back more than half of the outstandings in a previous exercise in 2009 and is now offering to exchange all of the approximately Eu2.11bn balance.

Three of the issues pay three month Euribor plus 10bp and the other three month Euribor flat.

A spokesperson for the CaixaBank told The Covered Bond Report that the cédulas being tendered for now pay very low interest rates and are very illiquid, making them difficult for retail investors to sell at a time when they may be facing financial difficulties. In line with La Caixa’s social responsibilities, he said, the bank is offering holders the offer to switch into the fixed term deposits.

According to the terms of the exchange, the four year fixed rate deposit pays 1% in the first year, 1.25% in the second, 2% in the third, and 3.75% in the fourth. The deposit may not be cancelled in the first year.

Bondholders must exchange all their holdings in any particular cédulas they hold, but if they have holdings in more than one of the issues they can exchange all or none of their holdings in each individual issue.

The buyback will be launched towards the end of October, said the bank, and last approximately four weeks.