Debt financing of PZU, Pekao and Alior Bank

PZU

PZU bonds: PLPZU0000037 for a total of PLN 2.25 billion

On 30 June 2017, PZU effected the largest issue of subordinated bonds (in Polish zloty) in the history of the Polish financial sector, which at the same time was the first issue in Poland complying with Solvency II requirements. 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 issue with an early redemption option 5 years after the issue date.

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

The issue was effected with a view to 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 not lower than 200%, as defined in the PZU Group’s Capital and Dividend Policy.

PZU bonds: XS1082661551 for EUR 850 million (redeemed on 3 July 2019)

The PZU Group (through its wholly-owned subsidiary, PZU Finance AB) issued Eurobonds totaling 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) consisted 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 were secured by a guarantee extended by PZU. The bonds bore interest at a fixed interest rate of 1.375% per annum. The coupon was paid once a year. The bonds were redeemed on 3 July 2019.

Alior Bank

Opening of Alior Bank S.A.’s new Long-Term Bond Issue Program

Pursuant to the resolution adopted by the Bank’s Supervisory Board on 5 August 2019 the Bank opened a Long-term Bond Issue Program (Long-term Program) making it possible to hold multiple issues of unsecured bonds. The total nominal value of the bonds issued under the Long-term Program will not exceed PLN 5 billion.

A bond offering program for issues of unsecured, unsubordinated or subordinated, bearer bonds for up to PLN 1.5 billion was set up under this Long-term Program on the basis of the Bank’s Management Board decision of 10 September 2019. The Offering Program will be covered by a basic prospectus prepared by the Bank according to Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC.

The application to approve the prospectus was submitted to the Polish FSA on 4 October 2019. As of the date of the publication of this report, the prospectus has not been approved by the Polish FSA.

Closure of Alior Bank S.A.’s current Bond Issue Program
On 5 August 2019 the Bank wrapped up its own bond issue program established under the Bank’s Management Board Resolution No. 253/2015 of 29 July 2015, which was approved by the Bank’s Supervisory Board under resolution no. 54/2015 of 10 August 2015.

Bond issues and redemptions conducted by Alior Bank in 2019
The Bank did not conduct any bond issues in 2019. On 4 October 2019 the Bank’s Management Board adopted a resolution on the early redemption on 21 October 2019 of series C own bonds with a total nominal value of PLN 80 million issued on 21 October 2014 by Meritum Bank ICB SA (presently Alior Bank S.A.) whose final redemption date was 21 October 2022. These bonds were redeemed and retired.

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 A- with a stable outlook (1 notch above the rating for Pekao Bank Hipoteczny whose risk Fitch assesses at BBB+).

The total value of the company’s liabilities due to covered bonds amounted to PLN 1.3 billion (principal value) as at the end of December 2019. The liabilities under covered bonds with maturity date up to 1 year account 6.8%, from 1 year up to 3 years account for 47.6% with maturity date from 3 up to 5 years account for 21.2% and with maturity date from 5 years up to 10 years account for 24.4% 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 reference 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 from this issue were earmarked to raise the Bank’s Tier II capital.

On 15 October 2018 Pekao issued subordinated bonds in subsequent B and C series worth PLN 550 million and PLN 200 million, respectively. The series B bonds have a 10-year maturity while the series C bonds have a 15-year maturity. Both series bear interest at a floating interest rate equal to the sum of the underlying WIBOR6M rate and a 1.55 p.p. margin (for series B bonds) and a 1.80 p.p. margin (for series C bonds), respectively. These bonds offer an early redemption option of five years before maturity. As a result of classifying the series B and C bonds as instruments in Tier II capital, after obtaining the consent of the Polish FSA on 18 October 2019 (for the series C bonds) and 16 November 2019 (for the series B bonds), the total capital ratio (TCR) for the bank and the bank’s group increased.

On 4 June 2019, Pekao issued series D subordinated bonds worth PLN 350 million. The D series bonds have a 12-year maturity with an early redemption option seven years after the date of issue. The bonds bear interest at a reference rate based on WIBOR6M plus a margin of 1.70%. After receiving on 3 July 2019 the Polish Financial Supervision Authority’s consent, the funds from this issue were earmarked to raise the Bank’s Tier II capital. Additionally, on 4 December 2019 the Bank issued D1 series subordinated bonds with a nominal value of PLN 400 million and parameters identical to the D series. On 11 December 2019 the Bank received the Polish FSA’s decision expressing its consent for the Bank to treat the D1 series bonds as instruments in the Bank’s Tier II capital.

On 30 December 2019 both series of the bonds were assimilated and designated by the National Securities Depository (KDPW) with a single ISIN code.

All the series of the subordinated bonds issued by Pekao are listed on Catalyst’s alternative trading system.

Other unsecured bonds
The Pekao Group’s various entities have programs to issue unsecured bonds backed by Bank Pekao. These instruments are used to diversify funding sources; in particular, they elevate the percentage of the Bank’s subsidiaries’ assets funded directly from the wholesale market.

In 2019 Pekao Bank Hipoteczny held 2 bond issues under the issuer’s bond issue program for up to PLN 1.0 billion:
PLN 150 million with a maturity of 6 months and
PLN 150 million with a maturity of 1 year.

Regularly renewed securities with maturities ranging from 3 months to 1 year are the most prevalent among the issues conducted by Pekao Leasing (issue program of PLN 3.0 billion) and Pekao Faktoring (issue program of PLN 5.0 billion). The total liabilities under these two entities’ issues as at 31 December 2019 were PLN 3.077 billion.