Bank,Popular, Inc.,Subordinated debt,Bond (finance)

Banco Popular at pains to protect AT1 coupons

January 26, 2017

* Bank confident will pay coupons * Erosion of ADIs * Bonds hold steady in secondary By Alice Gledhill LONDON, Jan 25 (IFR) - Spain's Banco Popular is being forced dip into reserves to ensure it can pay coupons on its Additional Tier 1 bonds in 2017 as the threat of significant losses looms large. Banks pay coupons on their AT1 bonds, the most subordinated debt they can sell, out of a pool known as Available Distributable Items (ADIs). In Banco Popular's case, that stood around 3.5bn at the end of 2015 (the most recently reported). However, the Spanish lender told IFR that its ADIs would be reduced on the back of expected losses in Q4 2016, but remains confident that it will able pay the coupons. "As discussed with a number of market participants in the past, we can and will transfer share-premium to reinforce the level of ADIs so that the overall volume remains unchanged versus September's level even after the extraordinary losses of the quarter," a spokesman said. "Thus, it won't be an issue." The share premium is the difference between the nominal value of a share and the price paid for it. Moving equity between reserves in this way is unusual, and rules vary by country, but there is precedent from the likes of Santander. Spanish press reports...

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