Barclays Markets Risky AT1 Bonds, Following Other European Banks

By Miriam Mukuru

Barclays said it is marketing Additional Tier 1 bonds, a risky form of debt which offer high yields, making it the third major European bank to issue such bonds in the last week.

Initial price talk for the bonds is at 10.5%, with a call period--the time until the bonds can be redeemed--in six years' time, the bank said Wednesday.

AT1 bonds are risky debt created after the global financial crisis which act as safety buffers if a bank's capital levels fall below a certain threshold. They can be converted into equity or written down if the bank runs into trouble.

Last week, UBS and Societe Generale both issued AT1 bonds.

In UBS's case, this was the first AT1 bond since it took over Credit Suisse. Credit Suisse's AT1 bonds were completely written down in March as part of the rescue and acquisition by UBS, scaring investors away from AT1 markets.

Barclays confirmed the bonds are convertible into shares upon any "trigger event."

Barclays' AT1 bonds will be redeemable on the first call period from Dec. 15, 2029 to June 15, 2030, Barclays said.

Interest payments on the bonds will be quarterly in arrears, starting from March 15, 2024, it said.

Interest payments are "fully discretionary, may be cancelled in whole or in part, and are non-cumulative," the bank said.

So far, only one bank has skipped coupon payments in the history of AT1 bonds, CreditSights said in a note.

"In June 2017, [Bremer Landesbank] announced it would not be paying coupons on its two euro AT1s, reflecting insufficent ADI (Available Distributable Items)," CreditSights said.

Bloomberg reported that Barclays has seen more than $5 billion of investor demand for these bonds so far.

Write to Miriam Mukuru at [e-mail]

(END) Dow Jones Newswires

November 15, 2023 12:48 ET (17:48 GMT)

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