The Bank of Scotland has launched a tender offer to buy back three classes of notes from its Candide Financing 2005 and 2006 Dutch residential mortgage securitizations at par.
The Lloyds Banking Group subsidiary is tendering for the EUR1.39 billion ($1.83 billion) senior class A tranche from Candide Financing 2005 B.V., as well as the EUR395 million ($520.4 million) senior class A2 tranche and the EUR1.12 billion ($1.47 billion) senior A3 notes from Candide Financing 2006.
The firm is offering to pay a purchase price of 100% of the original principal on the bonds to investors in a move described as “liquidity management,” according to tender offer documents issued late on Wednesday. The expiry date for the tender offer is Feb. 16.
The first optional redemption date for the Candide 2005 bonds is in April this year, while the Candide 2006 bonds are callable in November. London-based market officials expect the junior notes to be tendered on the call dates later this year.
There is speculation the issuer may be buying back the bonds to use as repo collateral in the European Central Bank’s long-term refinancing operation (LTRO).
Dipesh Mehta, European ABS research analyst at Barclays Capital in London, noted the LTRO takes place eight days after the tender’s Feb. 20 settlement date. “This though seems uneconomical, as it would be calling bonds issued at pre-crisis levels—at par—to be used in a repo operation with a sizeable haircut for ABS bonds,” Mehta said in client memo Thursday. “Lloyds could in theory be using these ABS bonds as a placeholder in the LTRO to revolve new assets in....