Bank Hapoalim (TASE: POLI) has completed the institutional stage of an offering of two series of contingent convertible bonds (CoCo). One of the bonds matures after 25 years, the longest tenor so far for debt issued by the bank.
The amount raised at the institutional stage is NIS 640 million in total. The bank is raising two series of CoCo bonds (12 and 13), the first being repayable in 2049, with the possibility of early repayment in after twenty years. Demand for this bond at the institutional stage was NIS 557 million, of which the bank filled NIS 310 million.
The second bond is for thirteen years, with early repayment possible after eight years. Demand for this bond amounted to NIS 850 million, of which the bank filled NIS 330 million. The issue will be completed with the offering to the public tomorrow (Thursday).
Both bonds are index-linked. Under the terms of the offering, the maximum interest rate on the first, series 12, bond is 3.45%, and that on the second, series 13, bond is 3.88%. It is likely that in fact a lower interest rate will be set, given the demand. Bank Hapoalim said, "The size of the demand and the long tenor of the series express the great confidence that the bank enjoys among investors, as well as the opportunities in the local market in the coming decades."
Banks began to issue contingent convertible bonds in 2008, when those in the West (although not in Israel) found themselves in an acute liquidity crisis, and it was decided to build mechanism for raising debt that, in moments of crisis, could be converted to part of the bank’s capital, and thus strengthen its liquidity. If the debt is not converted, these instruments behave like regular bonds.
In the case of the current offering, the CoCo bonds become part of Bank Hapoalim’s tier 2 capital. The aim of the offering is to enable the bank to grow its activity.
The offering was led by Leader Capital Markets.