Itau Lands Tier 2 Debt

Itau has emerged to raise $1.25bn in 2022 Tier 2 bonds, drumming up around $3.3bn in orders. The Brazilian bank priced the unsecured subordinated bond at par with a 5.500% coupon, to yield at the tight end of 5.500%-5.625% guidance, revised from mid to high 5%. The bonds traded up 0.375 points in the grey Monday afternoon, according to an investor. Itau offered 25bp concession versus pre-announcement levels on its outstanding 2022 Tier 2 bonds, seen at 5.25% yield. “The deal is fair given that the issuer was pretty conservative from the start,” says a banker away from the sale. The sale follows a similar $1.25bn 2022 Tier 2 sale in March. Beginning January 2013, banks will no longer be allowed to issue under the current Tier 2 format. Itau chose to issue a new 2022 for this reason, according to a source close to the sale, seeing the possibility to issue a larger size via a new bond than through a retap of the 2022s. Monday’s issuance is similar in structure, size and maturity minus a few months. Over 200 accounts participated, with a mix of private banking and institutional investors, according to sources familiar with the deal. The issuer has an option to exercise up to 10% greenshoe during Asian hours. Proceeds will be used to strengthen the bank’s capital structure and for general corporate purposes. Itau, JPMorgan and Standard Chartered managed the sale.