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US IG WRAP-ING CoCo Yankee debut attracts US$20bn of demand

By Danielle Robinson

NEW YORK, April 9 (IFR) - ING Groep (Amsterdam: INGA.AS - news) locked in aggressive pricing on its inaugural US$2.25bn issue of Additional Tier 1 securities in the Yankee dollar market on Thursday, after being inundated with about US$20bn of demand.

Rated Ba3/BB, ING's US$1bn 6.00% perpetual non-call five-year and US$1.25bn 6.5% perp non-call 10-year CoCos were not countable as investment grade volume by IFR Markets.

Alabama Power (Other OTC: ALBPP - news) was the lone issuer in the investment grade market on Thursday, with US$425m of a new 10-year and a tap of its existing 30-year, taking the week's tally so far to US$10.125bn.

The focus was on ING, with investors from Asia, Europe and the US jumping at the chance to reap junk bond-like yields from an investment grade Dutch bank, by purchasing CoCos that convert to equity if ING's common equity Tier 1 ratio to risk weighted assets drops to 7.00%.

The deal follows a rally in AT1 Yankee capital securities in the dollar market this week, as investors seek yield in a world where some European government paper is trading at negative yields and the US 10-year Treasury under 2.00%.

Both CoCos priced 37.5bp tighter than initial price thoughts and at levels that were very competitive versus outstanding CoCos in the Yankee market.

The 6.00% dividend level on its perp non-call fives was 50bp tighter than where better rated Standard Chartered (HKSE: 2888.HK - news) (Ba1/BB/BBB) priced its US$2bn 6.5% Perp non-call fives only a fortnight ago, and 23bp better than the 6.23% yield-to-call on the StanChart (HKSE: 2888-OL.HK - news) trade pre-announcement.

As for the US$1.25bn 6.5% perp non-call 10s, ING locked in a dividend rate that was only 12.5bp wider than where Baa3/BBB rated HSBC priced its 6.375% US$2.25bn perp non-call 10s on March 23.

ING's perp non-call 10, however, did offer a 55bp pickup to the 5.95% yield-to-call at which the HSBC deal was quoted before ING announced its deal. (Reporting By Danielle Robinson; editing by Shankar Ramakrishnan)