Bankia launched a tender to buy back up to Eu750m of nine cédulas hipotecarias with a face value of Eu16.5bn today (Friday).

The tender offer is believed to be the first of the year. Bankia announced its annual results yesterday (Thursday) and had been in black-out in the run-up to these.

Bankia is targeting nine cédulas hipotecarias issued by Caja Madrid, with maturities ranging from December 2015 to March 2036. According to Florian Eichert, senior covered bond analyst at Crédit Agricole, these are all Caja Madrid single-issuer cédulas hipotecarias with maturities beyond 2014.

The tender is in the form of an unmodified Dutch auction. The bank has not specified a minimum purchase price, leaving it to investors to bid the level they consider appropriate.

Although the target amount of the tender is Eu750m, the Spanish bank can buy back more or less than this. Eichert noted that the Eu750m represents 4.5% of the overall bonds included in the offer.

“The way this reads is that they can do less but certainly also more,” he said. “It all depends on the demand from investors.”

Bankia said in a statement that the offer is part of its active management of its outstanding liabilities.

“The Offeror aims to manage its wholesale funding level, duration, future interest expense, and strengthen its balance sheet, while maintaining a prudent approach to its liquidity,” it said.

Some market participants have suggested that Spanish issuers could buy back cédulas or cancel retained issues to boost overcollateralisation levels, which in some cases have fallen close to legal minimums. However, Eichert said that, with Bankia having already cancelled retained cédulas late last year to heal an OC breach resulting from the transfer of assets to Sareb, OC had improved from 25% to 30%.

He suggested that the tender should perhaps be seen in light of the overall downsizing of the financial institution. He noted that the longer dated cédulas in the tender have been trading well below par and that Bankia could realise some capital gains by focusing on these.

The buy-back ends on 12 March, with results announced the following day and settlement on 15 March. Bankia, Deutsche Bank and JP Morgan are deal managers.