Crédit Agricole launched a cash tender offer for up to Eu2bn of euro-denominated hard bullet covered bonds today (Monday), and will embark upon a consent solicitation after the completion of the tender offer to seek approval to convert any remaining bonds to soft bullets.

Under the tender offer, Crédit Agricole is seeking to buy back seven series of hard bullet covered bonds issued between 2010 and 2013 by Crédit Agricole Home Loan SFH, while also targeting four series of Tier 2 bonds. Crédit Agricole Home Loan SFH began issuing soft bullet covered bonds in November 2014.

The seven covered bonds included in the tender offer are:

Eu1.675bn 3.25% March 2017 FR0010875880

Eu1.5bn 2.125% July 2017 FR0011230598

Eu1.85bn 3.50% June 2018 FR0011060367

Eu1.25bn 1.625% March 2020 FR0011440528

Eu2bn 3.875% January 2021 FR0010989087

Eu1.5bn 4.00% January 2022 FR0011179852

Eu2.4bn 4.00% July 2025 FR0010920900

The tender offer opens today and will expire next Monday (21 March). The maximum aggregate amount of the covered bonds that Crédit Agricole may purchase is Eu2bn.

The French issuer said the tender offer is part of a plan to optimise its balance sheet through the partial reinvestment of capital gains expected from a simplification of Crédit Agricole group’s corporate structure.

It added that the tender offer also provides a liquidity opportunity for holders of the bonds.

“For holders of covered bonds, the tender offer is being made for outstanding bonds whose coupon payments are high relative to current market conditions for new issuances,” it said. “The reduction of such debt through the tender offer will reduce Crédit Agricole S.A.’s financing costs in the years to come, after taking into account adjustments to interest rate hedging transactions and the cost of new issuances and will thus increase interest margins.”

Crédit Agricole Home Loan SFH will on 21 April, following the completion of the tender offer, call meetings of the bondholders of the relevant covered bonds that have not been purchased and cancelled to seek approval to switch the issues to soft bullet structures. The issuer will pay a consent fee of 0.05%.

“Consistent with an increasingly widespread market practice and with Crédit Agricole Home Loan SFH soft bullet covered bonds issuances dating back to 2014, these amendments would improve Crédit Agricole Home Loan SFH efficiency as a financing vehicle,” the issuer said.

Crédit Agricole is global coordinator and joint dealer manager with Citi, Credit Suisse and Morgan Stanley.