Bank Leumi (TASE: LUMI), managed by CEO Hanan Friedman, yesterday successfully closed its pricing proceeding for raising $750 million (NIS 2.6 billion) in an issue of CoCo deferred notes (tier-2 capital for foreign institutions, net of the issuance costs. The proceeds will be used to refinance existing deferred debt and manage exposure to foreign currency.
The bank carried out the pricing stage, with completion of the offering scheduled for next week. The deferred notes bear 3.275% annual fixed interest. Bank Leumi says that the issue of the paper was oversubscribed, with demand totaling NIS 4 billion.
The issue involves a bond series with special characteristics, including potential for the debt being lost and turned into capital in the event of a crisis at the bank. The series is index-linked. CoCo bonds are a contingent capital instrument that is converted to share capital if a stability event occurs.
Referring to the overseas issue, Bank Leumi said, "The deferred notes will be redeemed in a single payment 11 years after their issue, with the bank having the option of early repayment six years after the issue, subject to certain conditions. The deferred notes also include a loss absorption mechanism through conversion to the bank's ordinary shares under certain circumstances that the bank is not necessarily able to foresee and/or which are not necessarily subject to its control, according to a predetermined conversion formula that includes a floor price."
Bank Leumi is the first Israeli bank to issue debt to investors outside of Israel, after "becoming the first bank to issue CoCo bonds in Israel five years ago," Friedman said. Bank Leumi said that the deferred bonds "will be listed for trading in the Tel Aviv Stock Exchange Continuous Trading (TACT) system." As far as is known, few Israeli institutions take part in overseas issues; they account for only 3% of the issue.
Published by Globes, Israel business news - en.globes.co.il - on January 23, 2020
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