BPCE shows market leadership with the issuance of an atypical “RAC Tier 2” benchmark

On Monday 4th of October, BPCE priced a €1.75bn 20.25NC5.25 & 25NC10 dual-tranche RAC Tier 2 benchmark. The final demand from investors stood at €5.1bn. With this transaction, BPCE successfully returns to the Tier 2 market after a 5-year hiatus. Natixis acted as Sole Structuring Advisor & Sole Bookrunner

The transaction will optimize and further strengthen Groupe BPCE’s capital structure and rating metrics. In particular, it will support Groupe BPCE’s ‘Strong’ assessment of Capital & Earnings as the instrument will be eligible to S&P’s Total Adjusted Capital with an intermediate equity content. The new instruments will also strengthen Groupe BPCE’s Tier 2 ratio, in line with the announcement of Groupe BPCE’s 2024 strategic plan (T2 ratio ≥ 2.5 % in 2024).

"We are delighted by the confidence shown by investors in Groupe BPCE for this inaugural RAC T2 issue. This tailor-made Tier 2 instrument perfectly fits the strategy of Groupe BPCE, which is to strengthen its Tier 2 ratio and support its S&P rating."

Roland Charbonnel, BPCE

In this structure, coupons are “must pay”, in line with a plain vanilla Tier 2; there is however a 25% Principal Permanent Write-Down upon breach of a 7% Trigger on Groupe BPCE’s CET1 ratio.

The final spreads stand at MS+175bp and MS+205bp respectively on the 20.25NC5.25 & 25NC10 tranches, reflecting a limited premium of c. 60bp over a plain vanilla Tier 2 structure.

With this inaugural RAC Tier 2 issuance, BPCE also achieves a diversification of its Tier 2 investor base, notably with a strong participation from UK asset managers, which typically tend to be less active in plain vanilla Tier 2 at these low levels of spreads.

"We are very grateful for BPCE’s trust and were delighted to act as sole structuring advisor and sole bookrunner on this strategic transaction for our Groupe."

Gabriel Lévy, Natixis CIB

"This landmark transaction follows a nice series of bank capital mandates since the end of the summer break (KBC T2, Commerzbank T2, La Banque Postale AT1 as Structuring Advisor & Global Coordinator, and Belfius T2). We are thrilled that clients have trusted our strategic move in the FIG DCM segment implemented a few years ago. Our goal was to have a more diversified business mix between funding and regulatory instruments, which fitted to all market environments and all our clients’ needs."

Thibault Archeray, Natixis CIB