CORRECT: 3rd UPDATE:Santander Sells 4-Year Euro Bond At Swaps +1.60

29th Jul 2010 18:04

("=3rd UPDATE: Santander Sells 4-Year Euro Bond At Swaps +1.60 Area," at 1647 GMT, misstated the spread over midswaps in the headline.) (Adds pricing details, comment, context.) By Mark Brown Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Spain's Banco Santander SA plans to issue a euro-denominated, benchmark, senior unsecured bond, maturing August 2014, and issued a EUR1.5 billion, four-year senior bond Thursday as the debt capital markets reopen for top-tier Spanish lenders. The bonds pay a coupon of 3.5% and are priced at 99.802, to give a spread of 160 basis points over midswaps. The Santander deal follows a EUR1.25 billion, five-year senior bond issue from Banco Bilbao Vizcaya Argentaria SA (BBVA.MC), which priced at 170 basis points over midswaps Wednesday--the first benchmark senior bond from a Spanish bank since mid-April. Santander, the second-largest bank in Europe by market value, Thursday reported an 8% fall in second-quarter net profit, but said it is on course to make a net profit this year. HSBC Holdings PLC, Natixis, and Santander were joint-lead managers of the new deal. Santander is rated Aa2 by Moody's Investors Service Inc., and AA by Standard & Poor's Corp. and Fitch Ratings. Banks in some peripheral euro-zone countries, especially Spain, have been the focus of market attention over the past few months as the sovereign debt crisis spilled over into the bank debt market. However, confidence has returned over the past week as the sovereign fears have dissipated, and following last week's European bank stress tests, and Spanish bank bond spreads have tightened sharply in recent days. Santander's Chief Financial Officer Jose Antonio Alvarez said Thursday that the publication of the stress test results "has clearly been positive" for funding conditions. "Despite recent valuation volatility... [the] fundamentals of Banco Santander underscore the credit as a durable favourite in the European banking space," Eleonore Lamberty, credit analyst at ING Bank NV, wrote in a note Thursday. "Both [the Santander and BBVA] bonds will provide useful price discovery at the short end of the Spanish banking sector curve." An investor said that the secondary market performance of the new deals will be watched closely for indications on the depth of demand for new Spanish bank debt. The early signs were fairly encouraging, with BBVA's new issue tightening three basis points Thursday. "Spreads widened a little in the dealer market, but buyers have returned, and end investors aren't selling," a trader said. BBVA's senior bond priced with a tighter spread to midswaps than the EUR2 billion, three-year covered bond that it had issued a week earlier, at 190 basis points over midswaps. This fact highlights "the swift change in sentiment towards banks over the past week," credit strategists at Deutsche Bank AG, said in a note Thursday. Year-to-date euro-denominated, senior bank bond issuance now totals more than EUR100 billion, according to figures from Societe Generale SA. Spanish issuers sold 12% of the senior financial bonds issued in the first half of 2010, compared with 15% from the Netherlands, 13% from the U.K., and 12% from France, according to Soc Gen. -By Mark Brown, Dow Jones Newswires; + 44 (0)207 842 9485; [email protected] (END) Dow Jones Newswires July 29, 2010 13:04 ET (17:04 GMT)