ABN Amro has come a long way since RBS and Fortis, two of the Dutch bank's three owners, faced collapse in 2008. So when the senior unsecured debt market reopened in late September, the bank stepped forward to issue a €500m, two-year floating rate note, securing a good price, as it attempts to re-establish itself on the international market.

If everything had gone according to plan, ABN Amro would not officially exist. Back in 2007, when RBS, Fortis and Santander undertook an audacious €70bn acquisition of the bank, their intention was to dismantle it for ever, bolstering their respective positions in the process. That was before the financial crisis intervened, sending RBS and Fortis to the point of collapse and exposing the hubris of their Dutch acquisition.

In October 2008, the Dutch government was driven to intervene, acquiring all of Fortis’s Dutch operations, including the ABN Amro assets the group had bought only a year previously. In July 2010, the banking businesses of Fortis and ABN Amro were merged and ABN Amro Bank was reborn – smaller, under state ownership, but a recognised entity nonetheless.

Since those inauspicious beginnings, the bank has made considerable progress, operationally and financially. Informing the market in a timely fashion of its forthcoming needs, the group stated late in 2010 that it intended to raise between €17bn and €19bn in 2011.
“We split this between €9bn for 2011 itself and the rest as pre-funding for 2012. By [late April], we had raised close to €9bn and we told the market subsequent funding would be via a series of smaller deals in which the focus will continue to shift from a volume to a more price-based strategy,” says Erik Bosmans, ABN Amro group treasurer.

A window of opportunity

The fund-raising climate has been exceptionally difficult for financial institutions this year so, in common with its peers, ABN Amro has adopted a somewhat opportunistic approach.

“Since the financial crisis, there have been far fewer opportunities to access the market. And when a window of opportunity arises, it rarely lasts very long – sometimes just a few hours. So we are always on the look-out and always ready to tap the market if the right opportunity arises,” says Mr Bosmans.

“We have a group of about 10 banks we can call on when we think we can issue and we retain close links with them. We deliberately focus on a small group because we think this delivers better, more consistent results. We also talk frequently to investors; we update them whenever the bank issues trading updates or results and we go on regular roadshows throughout the year,” he adds.

Worth the wait

At the tail end of the third quarter, this diligence paid off. Financial institutions had been unable to access senior unsecured debt since mid-2011, yet ABN Amro was able to issue a €500m, two-year floating rate note just 24 hours after Deutsche reopened the market.

“As soon as Deutsche launched its deal on September 29, we called the banks we wanted to deal with – Deutsche, Barclays Capital, Citi and ABN Amro itself. They are all part of our top 10 and we chose them because of their particular distribution capabilities. We started to prepare in earnest at about 2pm on September 29, as soon as Deutsche had completed its transaction. At 9am the following morning, we launched our deal,” says Mr Bosmans.

Since the financial crisis, there have been far fewer opportunities to access the market. And when a window of opportunity arises, it rarely lasts very long – sometimes just a few hours. So we are always on the look-out and always ready to tap the market if the right opportunity arises

Erik Bosmans

The transaction had an issue price of 99.9 and a coupon of Euribor plus 125 basis points. ABN has been criticised in some quarters for the size and the terms of the issue but Mr Bosmans refutes both criticisms.

“The market for senior, unsecured paper had been closed for months and we wanted to test it. We wanted to show that there was demand for the Netherlands and ABN Amro in particular. But we deliberately kept our issue small because we wanted to show market access capability and secure a good price,” he says.

Breadth of demand

Ahead of launch, the bank and its book-runners spoke extensively with investors. “Investors had two main questions: do you need the money and why are you accessing the market now? We explained that we did not need the money but we wanted to tap the market while we felt we could,” says Mr Bosmans.

These answers proved satisfactory and more than 80 investors participated in the deal, 95% of whom came from outside the Netherlands. Highlighting investor caution, order sizes were considerably smaller than usual – €5m to €15m rather than €30m to €50m in good times. Nonetheless, the breadth of demand encouraged ABN and its advisors, particularly as the bank has existed in its current form for less than 18 months.

This would present book-runners with a challenge even in benign conditions but, given market volatility over recent months, nothing could be taken for granted. Deutsche had proved there was a market for FRN paper but there was no guaranteeing appetite would extend to ABN Amro. Not surprisingly, therefore, Mr Bosmans and his team were a little nervous before the deal was launched.

“We were anxious but luckily the books were filled quite quickly. Within two hours, it was all over. The deal was over-subscribed and we were very pleased. We had shown we were capable of accessing the market in difficult conditions, investor participation was widespread and the pricing was slightly better than we expected,” says Mr Bosmans.


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