Santander has announced the issuance of $2.5 billion in Additional Tier 1 (AT1) bonds, joining other European banks like UBS Group, Societe Generale, and Barclays who have recently made similar moves.
AT1 bonds are a form of high-risk debt created in the aftermath of the global financial crisis. They serve as safety buffers for banks, activating when capital levels dip below a specified threshold. In times of trouble, these bonds can be converted into equity or written down.
This particular issuance is divided into two parts: $1.15 billion in five-year call bonds and $1.35 billion in 10-year call bonds. Both segments have been priced at 9.625%.
Sources in the market suggest that the total book size for this offering was around $8 billion, with $3.25 billion allocated to the five-year call bonds and $4.75 billion to the 10-year call bonds.
Similar to recently-issued AT1 bonds, Santander’s bonds will be convertible into shares if a trigger event occurs. In this case, the trigger event is the bank’s common equity Tier 1 ratio dropping below 5.125%.