Debt financing

PZU bonds: PLPZU0000037 for a total of PLN 2.25 billion

On 30 June 2017, PZU effected the largest issue of subordinated bonds (denominated in Polish zloty) in the history of the Polish financial sector, while at the same time being the first issue in Poland complying 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.

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 a total of EUR 850 million

The PZU Group (through its wholly-owned subsidiary, PZU Finance AB) issued Eurobonds totaling EUR 850 million (download the prospectus here), listed on the Official List, Main Securities Market of the Irish Stock Exchange and on the Catalyst ASO WSE/Bondspot market. The listed bond series (PZU0719) is composed of two assimilated series (under a single ISIN code XS1082661551) with a nominal value of EUR 500 million and EUR 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 date of maturity is 3 July 2019.

The Eurobond issue implemented PZU Group’s investment strategy to manage the matching of assets and liabilities in EUR. The funds obtained from the bond issue were to increase the exposure in the investment portfolio to investments denominated in Euro, manage the FX position and harness debt financing that is less expensive than equity.

The PZU Group’s debt ratio was 27.6%¹ as at 31 December 2017.

1 PZU Group’s leverage ratio – quotient of debt on long-term financial liabilities (excl. banking deposits) to the sum of the following: debt on long-term financial liabilities and the PZU Group’s equity minus intangible assets, deferred acquisition expenses and deferred taxation assets carried in the PZU Group’s consolidated financial statements.

Alior Bank

In order to secure a safe level of capital adequacy ratios, Alior Bank regularly issues debt instruments. In 2017, the following debt issue programs were in place in Alior Bank:

• Own bond issue program capped at PLN 2 billion;
• Public Subordinated Bond Issue Program capped at PLN 800 million.

In 2017, under these programs, Alior Bank effected the following issues:

• On 11 August 2017, Alior Bank issued bonds with a nominal value of PLN 250 million in a private issue of ordinary bonds. The bonds are unsecured and bear interest at a floating interest rate based on WIBOR 6M plus a margin of 1.19%. The final maturity of the bonds will be 11 August 2020.
• On 20 October 2017, Alior Bank issued series K and K1 bonds with a nominal value of PLN 400 million and PLN 200 million in a private issue of subordinated bonds. The bonds are unsecured and bear interest at a floating interest rate based on WIBOR 6M plus a margin of 2.7% with a maturity of eight years. However, the Bank may exercise an early repayment option five years after the date of issue.

All the subordinated bond series issued by Alior Bank under these programs are classified as Tier II capital instruments referred to in Article 63 CRR.

On 23 August 2017, the Supervisory Board of Alior Bank, in accordance with a motion submitted by the Bank’s Management Board, gave its consent for the launch of Alior Bank’s Second Public Bond Issue Program and authorized the Management Board to repeatedly contract financial liabilities by issuing unsecured, ordinary or subordinated bonds. The total nominal value of the bonds issued under the Second Public Bond Issue Program may not exceed PLN 1.2 billion.

Under the Second Public Bond Issue Program, Alior Bank issued series P2A bonds with a nominal value of PLN 150 million in a public issue of subordinated bonds. The bonds are unsecured and bear interest at a fixed rate of 4.55% in the first interest period, to be followed by a floating rate in the subsequent interest periods, calculated as the WIBOR 6M rate plus a fixed margin of 2.7%. The final maturity of the bonds will be 29 December 2025.

Pekao

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 negative outlook. As at the end of 2017, 14 series of Pekao Bank Hipoteczny’s securities were listed on Catalyst, including six series denominated in EUR. In addition, the Pekao Group has subordinated liabilities resulting from Pekao Leasing bonds in the amount of PLN 99 million.

In 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 WIBOR 6M plus a margin of 1.52%.