A 500 million euro bond issue from Greece's Alpha Bank was met with strong demand, with investors offering ten times more the money than the lender asked for, at an interest rate well below expectations.
Greece's recent sale of a 15-year government bond helped boost the appetite of global investors for Alpha Bank's tier 2 bond, as did Fitch's upgrade of Greece by a notch. The results also represent a vote of confidence in Alpha Bank's plans to reduce bad loans at a faster pace, led by its 12 billion euro Galaxy loan securitization project.
Total offers from investors reached 5.1 billion euros in the best performing bond sale held by a Greek bank as demand also outpaced that seen for the recent state 15-year state bond sale.
The large participation rate on the bank bond helped push down the interest rate to a lower-than-expected 4.25 percent, versus initial expectations for a rate of between 5 to 5.25 percent. Even though previous bond sales by Greek banks had taken place under different conditions in 2019, it is also noteworthy that the interest rate on Alpha Bank's bond was impressively lower.
"Strong demand for Alpha Bank's bonds allowed the lender to price it at half the price shown by National Bank's (NBG) respective issue that took place just seven months ago," said Bloomberg.
NBG's bond sale was priced at 8.25 percent in July, while Piraeus Bank's had a 9.75 percent interest rate, just one month earlier.
"The sharp drop in cost reflects the hunger among investors for returns on bonds in the eurozone and increasing interest in Greek bank bonds amidst plans to improve their balance sheets," added Bloomberg.
The profile of the investors that snapped up the bond is also important. Alpha Bank managed to draw a difficult group of investors, long term players, who are particularly careful and conservative with their choices. More than 60 percent of the bond went to long term investors, such as fund managers and insurance funds. More than 340 investors expressed interest in the bond, with 92 percent of it going to international portfolios from Europe (43 percent), UK (39 percent) and Asia (10 percent).
The transaction is an integral part of Alpha Bank’s strategy, as presented to the investor community in November 2019, the bank said in a statement. The issuance optimizes the bank’s capital structure and diversifies its capital sources while further strengthens its total capital ratio by about 105 basis points.
“Our inaugural Tier II capital transaction is a key milestone in the implementation of our recently communicated strategic plan. The strong demand by a well-diversified international investor base led to this successful outcome, which represents a strong testament to the future of Alpha Bank and the prospects of the Greek economy,” said Alpha Bank chief executive Vassilios Psaltis.
Meanwhile, Alpha Bank has been ranked positively by Goldman Sachs, which slapped a buy rating on the Greek lender's shares. In a report published on Thursday, the US investment bank highlighted that the current share price is not demanding and the bank has a low price to book value when compared with other Greek lenders. Alpha Bank is the only Greek lender with a buy rating from Goldman Sachs.
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