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CREDIT SUPPLY: KBC AT1; We See FV Around 6.1% Yield Area

CREDIT SUPPLY
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KBC (KBCBB: A3/A-/A) is using AT1 today, we see fair value around 6.1% yield area.

  • KBC is issuing EUR benchmark PerpNC7 variable AT1 with IPT at 6.75% area. Expected ratings are Baa3/BB+/BBB-.
  • Using a swap rate of 2.36%, this equates to MS+439bp. KBC only has one meaningful AT1 out at 2.5yrs shorter and at MS+358bp. There are few good comparators in the same ratings area but ISPIM’s curve at least shows there’s <10bp p.a. of term premium in this world. Therefore, we see fair value around MS+380bp (or 6.1% yield) area.
  • We do note the lower rated ISPIM 5.875% Perp at a similar workout but that appears unusually tight relative to its own curve, as is the 5.5% Perp trading adjacent to KBC’s single AT1.
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KBC (KBCBB: A3/A-/A) is using AT1 today, we see fair value around 6.1% yield area.

  • KBC is issuing EUR benchmark PerpNC7 variable AT1 with IPT at 6.75% area. Expected ratings are Baa3/BB+/BBB-.
  • Using a swap rate of 2.36%, this equates to MS+439bp. KBC only has one meaningful AT1 out at 2.5yrs shorter and at MS+358bp. There are few good comparators in the same ratings area but ISPIM’s curve at least shows there’s <10bp p.a. of term premium in this world. Therefore, we see fair value around MS+380bp (or 6.1% yield) area.
  • We do note the lower rated ISPIM 5.875% Perp at a similar workout but that appears unusually tight relative to its own curve, as is the 5.5% Perp trading adjacent to KBC’s single AT1.