Results of a recently-closed tender offer for structured bonds by Spain’s Catalunya Banc indicate that investors’ attachment to this paper is stronger than anticipated, at least at the prices offered by the issuer, according to a note by Barclays Capital analyst Dipesh Mehta.

The originator was offering to snap up €900 million ($1.18 billion) worth of paper across several programs: 31 RMBS bonds via the Hipocat shelf; three SME-backed bonds; and two covered bonds.

With Monday the deadline, the issuer ended up buying back €213 million of RMBS, €1.5 million of SME paper and €336 million of covered bonds, Mehta said.

Some 22 bonds were tendered from a possible 36.

Only a handful of the bonds were bought for more than the tender levels — and for only marginally more, as shown in the graph below.

Source: Catalunya Banc tender offer announcement

"The overall take-up was far lower than we expected, and we can only assume that investors see more value to these bonds than the tender offer levels suggested,” Dipesh said. This was the case even though the offer levels appeared to higher than secondary pricing, by about five points for senior notes and ten points for subordinate pieces.

That more investors did not give up their subordinate paper in the currently grim economic environment was suprising, Dipesh said. Possible reasons he offered was that banks may be holding them as legacy assets and marking them on their books at over the offering levels, or they may be repo’d with the European Central Bank.

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