Banco BPI launched a fixed price tender offer for ten bonds across three Portuguese RMBS transactions.

The tender offer announcement stated that "the offers are being made as part of BPI's management of its balance sheet and capital structure. The offers will also provide liquidity to successful participants in the offers".

The tender is for all rated notes in DOURM 1 and DOURM 2 and for the class A notes of DOURM 3, according to a Bloomberg report.

"Given the current economic backdrop in the Eurozone, specifically in Portugal, and further that no Portuguese transaction has been called on its first optional redemption date, the launch of a tender offer is surprising," said Dipesh Mehta research analyst at Barclays Capital in a report today.

According to Mehta, the offer by BPI might stem from a simple investment strategy to purchase bonds that it is most familiar and more comfortable with and for a price that represents good value.

The repurchase of the bonds would also allow BPI to book accounting profits in its consolidated accounts as well as improve its regulatory capital position, Mehta explained in the report. BPI might also be looking to use the European Central Bank repo facility and repo any eligible bonds to the ECB.

Mehta expects investors will be interested in the tender offer because it provides a useful exit strategy from Portuguese exposure.

"The Portuguese economy faces many risks, of which the most extreme is the risk of redenomination," he explained. "So even if an investor's probability of redenomination is low, due to the potential consequences of such an event, the risks are too large to ignore.

"This may prompt many investors to part with this risk and take up the tender offer," Mehta stated.

He thinks that many other issuers will be interested in the outcome of this tender offer. If viewed as a success, these firms might also use a similar strategy to help improve their regulatory capital positions.

The tender offer will expire on  Jan 13 while the settlement date is  Jan. 18.


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