2nd UPDATE: Nationwide Plans 10Y Euro LT2 Bond At Swaps +4.00

13th Jul 2010 13:59

(Adds background) By Mark Brown Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. lender, Nationwide Building Society (NANW.LN), plans to issue a 10-year, euro-denominated, lower tier-2 bond, and has set guidance at 400 basis points over mid-swaps, a bank running the sale said Tuesday. Barclays PLC, Deutsche Bank AG, and JP Morgan Chase & Co. have been hired to act as joint lead-managers. Tier 2 debt is subordinated debt that ranks above tier 1 debt and has fewer equity-like features, while still paying a higher return than senior debt. A spokeswoman for Nationwide said the proceeds from the bond would be used to refinance existing lower tier-2 debt that the lender will call in August. The deal follows lower tier-2 issues from Intesa Sanpaolo SA (ISP.MI) and Barclays last week. Between them, the two banks issued EUR2.75 billion of lower tier-2 debt, as the market for senior unsecured and subordinated bank debt reopened. Sovereign-bond market volatility had kept bank debt issuance relatively low in May and June. No new euro-denominated subordinated bank bonds were sold in May, while the figure for June was just EUR1.4 billion, according to figures from Societe Generale SA. "The issuers tapping the lower tier-2 market are the same ones that can fund in the senior and covered bond markets," said a debt capital markets banker. "Investors are looking for yield, and issuers are looking for funding." Nationwide's most recent senior unsecured benchmark euro-denominated bond, a five-year deal that priced in January, was rated Aa3 by Moody's Investors Service Inc, A+ by Standard & Poor's Corp., and AA- by Fitch Ratings. -By Mark Brown, Dow Jones Newswires; + 44 (0)207 842 9485; [email protected] (END) Dow Jones Newswires July 13, 2010 08:59 ET (12:59 GMT)