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CREDIT SUPPLY: Aareal Tier 2 Issue: We See FV Around MS+310-330bp Area

CREDIT SUPPLY
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Aareal Bank (AARB: Baa3/BBB) is issuing Tier 2 debt today, we see fair value at MS+310-330bp area, with a wide confidence interval reflective of the CRE risk in the issuer alongside its trading wide of much-lower rated peers in, for example, SNP ranks.

  • Aareal is issuing EUR400m WNG 10.25NC5.25 Tier 2 fixed sub debt with IPT at MS+375bp area. Expected rating is BB+.
  • Aareal has no meaningful Tier 2 lines outstanding, and few recent issues of size across other ranks. If we look at senior non-preferred, AARB has a 5.875% ’26 which trades around 30-40bp (30-40% relative) wide of the big three Greek banks (all lower rated, however) – this is the first chart.
  • In Tier 2 world, the intercept at 5.25yrs for the Greeks, would be around MS+260-280bp area. If we add that nominal, we’d get MS+300-320bp area but we’d want a relative add-on, which likely brings fair value to around MS+310-330bp area, obviously with a wide confidence interval, however. 
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Aareal Bank (AARB: Baa3/BBB) is issuing Tier 2 debt today, we see fair value at MS+310-330bp area, with a wide confidence interval reflective of the CRE risk in the issuer alongside its trading wide of much-lower rated peers in, for example, SNP ranks.

  • Aareal is issuing EUR400m WNG 10.25NC5.25 Tier 2 fixed sub debt with IPT at MS+375bp area. Expected rating is BB+.
  • Aareal has no meaningful Tier 2 lines outstanding, and few recent issues of size across other ranks. If we look at senior non-preferred, AARB has a 5.875% ’26 which trades around 30-40bp (30-40% relative) wide of the big three Greek banks (all lower rated, however) – this is the first chart.
  • In Tier 2 world, the intercept at 5.25yrs for the Greeks, would be around MS+260-280bp area. If we add that nominal, we’d get MS+300-320bp area but we’d want a relative add-on, which likely brings fair value to around MS+310-330bp area, obviously with a wide confidence interval, however.