HSBC SFH is seeking bondholder approval for the transfer of the issuer and two of its euro benchmark covered bonds to the My Money Group, offering investors consent fees for voting on the move, which analysts expect to be accompanied by a widening of the paper.

In June, HSBC Continental Europe (HBCE) and signed a memorandum of understanding with Promontoria MMB SAS (My Money Group) members for the sale of HSBC’s French retail banking activities, including HBCE subsidiary HSBC SFH (France), to My Money Group subsidiary Banque des Caraïbes SA. The My Money Group members are controlled by private equity firm Cerberus Capital Management.

HBCE, My Money Group and Banque des Caraïbes yesterday (Thursday) entered into a framework agreement for the transfer of HSBC SFH to Banque des Caraïbes or any other member of the My Money Group.

Such a transfer is contrary to undertakings in the issuer’s programme documentation, so it yesterday launched a consent solicitation in respect of its €1.25bn 2% October 2023 (ISIN FR0011470764) and €1bn 0.5% April 2025 (FR0013329638) covered bonds, asking bondholders to waive the relevant undertakings and thereby allow the transfer. Bondholders are also being asked to approve more technical resolutions in respect of issues such as a new representative and document filings.

Holders who participate in the process by voting – whether for, against, or abstention – are being offered a consent fee, 10 cents for the 2023 issue and 20 cents for the 2025 issue, payable if all resolutions are approved at the meetings of each series. A further five cents will be paid upon completion of the transfer of HSBC SFH, although for the 2023 issue this is only payable if the transfer is completed before it matures on 16 October 2023. The transfer is expected to be completed by 31 December 2023.

HSBC SFH has one other euro benchmark outstanding – the €1bn deal matures in March 2022.

A bondholder meeting is scheduled for 10 December, and a second for 21 December should either series vote be inquorate at the first meeting. Crédit Agricole and HSBC Continental Europe are solicitation agents and CACEIS Corporate Trust is centralisation agent.

Rabobank analysts noted that My Money Group has said the issuer will become “a strategic tool for the funding of residential real estate business acquired from HBCE” and “is expected to be a recurring issuer in the covered bonds market”, taking this to mean that the transferred issuer could operate in parallel to MMB SCF, the group’s current issuer with €2bn of euro benchmarks outstanding.

MMB SCF’s covered bonds have hitherto traded at a premium to other French covered bonds, including HSBC SFH’s, and some analysts have suggested the latter could widen, with some evidence of this already having occurred since the planned transfer was announced in June.

“The pick-up is, in our view, more likely related to the My Money Bank brand itself given the private equity ownership and lesser known name in general,” said Rabobank’s analysts. “Whether that will then result in spread convergence, i.e. widening, for the HSBC SFH bonds in the event of the transfer taking place remains to be seen but is probably limited.”

They added that there is a lack of clarity over what will happen to HSBC SFH’s covered bonds if the transfer is not approved, but said it would most likely become inactive.