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Debt financing of PZU, Pekao and Alior Bank

Annual Report 2018 > SHARES AND BONDS > Debt financing of PZU, Pekao and Alior Bank
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The debt issued by PZU Group consists of subordinated with a nominal value of worth PLN 2.25 billion and Eurobonds with a nominal value of EUR 850 million.

PZU bonds: PLPZU0000037 for a total of PLN 2.25 billion

On 30 June 2017, PZU carried out the largest issue of subordinated bonds (denominated in Polish zloty) in the history of the Polish financial sector, while the issue was the first one in Poland to comply with Solvency II requirements (download the information note here). The bonds with a nominal value of PLN 2.25 billion bear interest at WIBOR6M + 180 bps. The maturity date is 29 July 2027, or 10 years after the issue, with an option of early redemption 5 years after the issue date at the earliest.

The bonds are listed on the Catalyst ASO WSE/Bondspot.

The issue was aimed at supplementing PZU’s equity, following the acquisition of a 20% stake in Bank Pekao, in order to maintain the Solvency II ratio at a level no lower than 200%, as defined in the PZU Group’s Capital and Dividend Policy. SECTION 8.7 PZU GROUP’S CAPITAL AND DIVIDEND POLICY.

PZU bonds: XS1082661551 for a total of EUR 850 million

The PZU Group (through its wholly-owned subsidiary, PZU Finance AB) issued Eurobonds with a nominal value of EUR 850 million, listed on the Official List, Main Securities Market of the Irish Stock Exchange and on the Catalyst ASO WSE/Bondspot market. The listed series of the bonds (PZU0719) consists of two assimilated series (under a single ISIN code: XS1082661551) with a nominal value of EUR 500 and 350 million issued on 3 July 2014 and 16 October 2015, respectively.

The liabilities arising from the bonds are secured by a guarantee extended by PZU. The bonds bear interest at a fixed rate of 1.375% per annum. The coupon is paid once a year. The maturity date is 3 July 2019.

The Eurobond issue implemented PZU Group’s investment strategy to manage the matching of EUR assets and liabilities. The proceeds from the bond issue were aimed to increase the exposure to investments denominated in EUR, manage the FX position and optimize the cost of financing. 

Alior Bank

Public offerings of own bonds

Pursuant to the resolution adopted by the Bank’s Supervisory Board on 23 August 2017, Alior Bank, up to 12 October 2018, held a second open bond issuance program worth a maximum of PLN 1.2 billion issued in series under the procedure anticipated in article 33 item 1 of the Bond Act according to the basic prospectus. According to the basic prospectus drafted in connection with the Second Public Issue Program, Alior Bank could issue in Poland up to 12 million unsecured bearer bonds, unsubordinated or subordinated, with a nominal value equal to PLN 100 or a multiple of that amount, with a maturity of up to 10 years from the date of issuing a given bond series, while the Bank’s Management Board was authorized to determine the terms and conditions for issuing the various series of the subordinated bonds in such a way so as to accomplish the following:

  • the total nominal value of all the subordinated bonds issued on the basis of the Prospectus does not surpass the amount of PLN 600 million;
  • the unit par value of the subordinated bonds is PLN 400 thousand. 

The Bank did not hold any bond issues under the Second Public Issuance Program in 2018. On 12 October 2018 the Second Public Issuance Program and the basic prospectus expired.

Non-public offerings of own bonds

The Bank has a program to issue own bonds worth a maximum of PLN 2 billion established by the power of the Bank’s Supervisory Board resolution of 10 August 2015. The type of bonds, the offering procedure and the specific terms and conditions for issuing the various series of the bonds issued under the Issuance Program are determined by the Bank’s Management Board in the form of resolutions. The Bank did not hold any subordinated bond issues under the Issuance Program in 2018, but it conducted one private, series L short-term ordinary bond issue.

Alior Bank’s series L bonds: PLALIOR00243 for PLN 15.2 million

On 30 November 2018 the Bank issued 1,520 short-term ordinary bearer series L bonds with a nominal value of PLN 10 thousand, each and a total value of PLN 15.2 million under the procedure anticipated by Article 33 item 2 of the Bond Act. The bonds bear interest at a fixed interest rate of 2.15% per annum. The bonds are for 7 months with their redemption falling on 1 July 2019. These bonds are not listed.

Bank Pekao

Covered bonds

Under the covered bonds program established in 2010, Pekao, acting through its subsidiary Pekao Bank Hipoteczny, issues long-term debt securities secured on its loan portfolio. The issue program is limited to PLN 2 billion. Pekao Bank Hipoteczny’s covered bonds have been rated by Fitch at BBB+ with a stable outlook.

The Company’s total liabilities by virtue of covered bonds as at 31 December 2018 was PLN 1.53 billion. The liabilities by virtue of covered bonds with a maturity of up to 1 year account for 14.7%, from 1 to 3 years for 42.7%, from 3 to 5 years 13.1%) and from 5 to 10 years 29.5% of the total nominal value.

Bonds issued by Pekao Bank Hipoteczny

For the purpose of diversification of financing sources, in 2018 Pekao Bank Hipoteczny issued bonds with the value of PLN 300.0 million. The bonds were issued in the issuer’s bond issue program up to PLN 1 billion. In 2018 Pekao Bank Hipoteczny S.A. obtained the Covered Bond Label quality certificate, which attests to security and quality of the issued covered bonds and the highest transparency standards for investors in place.

Bonds issued by Pekao Leasing sp. z o.o.

In addition, the Pekao Group held as at 31 December 2018 liabilities for the issuance of own bonds by Pekao Leasing Sp. z o.o. totaling PLN 1.68 billion. The bonds with a maturity of up to 1 month account for 18.0%, up to 3 months for 34.6%, up to 6 months for 28.1%, up to 1 year for 8.2% and up to 3 years for 11.1% of the total nominal value.

Subordinated bonds

On 30 October 2017, Pekao placed its first issue of subordinated bonds with a value of PLN 1.25 billion in order to improve its capital ratios. The bonds have a 10-year maturity with an early redemption option five years after the date of issue. The bonds bear interest at a floating rate based on WIBOR6M plus a margin of 1.52%. After receiving on 21 December 2017 the Polish Financial Supervision Authority’s consent, the funds were earmarked to raise the Bank’s supplementary funds (Tier II capital).

In October 2018 Pekao issued subordinated bonds in subsequent B and C series worth PLN 550 and 200 million, respectively. These bonds have a 10-year tenor and bear interest at a floating rate equal to the sum of the underlying WIBOR rate for six-month deposits and a 1.55 p.p. margin (for series B bonds) and a 1.80 p.p. margin (for series C bonds), respectively.

As a result of classifying the series B and C bonds as instruments in Tier II capital, there will be an increase in the total capital ratio (TCR) for the bank and the bank’s group by roughly 0.6 p.p.

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