At the end of April, Banca Transilvania sold EUR 500 million of bonds. The issue was oversubscribed within just a few hours, and more than 80% was taken up by international investors from almost 20 countries. In this context, Ӧmer Tetik, CEO of Banca Transilvania, gave this exclusive interview to Ziarul Financiar.

Why did you choose EUR 500 million?

We initially planned a EUR 300 million transaction, but as we progressed through the discussions and the offering, we saw significant demand at a satisfactory yield, so we took the opportunity to upsize the tranche, which also allowed us to make a better allocation to investors in the deal. EUR 500 million is also a standard size for the international markets in terms of an issue’s liquidity, which matters both during the offering and later, once the bonds are trading. In short, it gives us meaningful funding at a good cost compared with similar issues. At this size we were at an optimal point, a standard size that let us optimise all the parameters of the offering.

What was total investor interest, and why did you choose EUR 500 million?

Investor interest was high; the issue was oversubscribed in just a few hours. Total orders at that yield level were close to EUR 900 million, and had we looked at a slightly higher yield, investor interest would have been significantly larger.

We chose this size because it is standard and gives us a competitive cost and good allocation for the investors who expressed interest.

What are market conditions like right now? What do they tell us?

Investors are selective at the moment and prefer to invest in companies/banks with very strong prospects, but there is clearly appetite for these investments. We believe the success of the issue shows foreign investors’ confidence in BT’s position and strategy, as well as the bank’s strong appeal. We hope our issue will be a door-opener and that we’ll see more international funding for our banking system, especially now that we have set a benchmark.

What is the investor breakdown by country, as a share of the funding?

Over 80% of the issue was subscribed by international investors from almost 20 countries. A total of 80 investors took part — investment funds, financial institutions, pension funds, commercial and central banks, and insurance companies — with the EBRD as anchor investor at EUR 90 million. Investors came from countries such as the United Kingdom — over 30%, the Netherlands — approx. 15%, Switzerland — approx. 12% and the USA — 10%.

How much did you raise from investors in Romania?

20% of the placement came from Romania.

Where are most of the investors who subscribed from?

The United Kingdom.

Who is the anchor investor in this issue? How much did the EBRD subscribe?

The EBRD, which is also one of Banca Transilvania’s shareholders, was the anchor investor, with EUR 90 million.

How was the 9% yield set and based on which parameters?

As with any offering of this type, the yield is set based on discussions between the intermediaries and the issuer, as well as investor feedback (which in BT’s case was evident in the high level of oversubscription and the speed at which the book was covered). Initial talks started around a higher yield of 9.5%, but given the very strong investor interest we were able to bring the yield down while still ensuring a good allocation for interested entities. The yield is good relative to comparable issues, even in calmer markets, but it also illustrates the elevated funding costs banks face globally at the moment.

What will you do with the funds raised?

The proceeds will count toward own funds and MREL-eligible liabilities. EU MREL standards (Minimum Requirement for own funds and Eligible Liabilities) require banks to maintain at all times an optimal level of MREL-eligible funds, distinct from customer deposits, which are guaranteed by the Bank Deposit Guarantee Fund.

The issue is part of BT’s growth plan by maintaining the accelerated pace of financing the Romanian economy. The proceeds are treated as capital and have a strong multiplier effect on our lending capacity. Every euro raised through the issue allows us to grant loans at least five times larger, which matters given that Romania needs substantial public and private investment to close the gap with Western Europe.

Why the Dublin exchange and not the Bucharest Stock Exchange? Why Dublin?

The issue was subscribed by a large number of international investors who are used to trading on certain markets and would have to go through additional formalities to access new ones.

In addition, we believe that for Romania, for the Romanian capital market and for the Bucharest Stock Exchange (BVB), this transaction means greater visibility — as a country and as a market we get onto new entities’ radar, which will bring in new investors.

Obviously, for future issues, depending on the target investor base and other specifics of the offer, we are also considering a listing on the Bucharest Stock Exchange, not least because, as a financial group, developing the BVB and the domestic capital market is an immediate priority for us.