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Debt financing of PZU, Bank Pekao and Alior Bank

PZU AR 2021 > Capitals (IIRC) > Financial capital > Debt financing of PZU, Bank Pekao and Alior Bank
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Subordinated bonds – PLPZU0000037 bonds for a total of PLN 2.25 billion

On 30 June 2017, PZU effected the largest issue of subordinated bonds (in Polish zloty) in the history of the Polish financial sector. At the same time, it was the first issue in Poland complying with Solvency II requirements. The bonds with a nominal value of PLN 2.25 billion bear interest at WIBOR6M GLOSSARY + 180 bps. The maturity date is 29 July 2027, or 10 years after issue with an early redemption option 5 years after the issue date.

The bonds are listed on the Catalyst ASO WSE/Bondspot.

The issue was effected with a view to supplementing PZU’s equity following the acquisition of a 20% stake in Bank Pekao, in order to maintain the Solvency II ratio at a level not lower than 200% as defined in the PZU Group’s Capital and Dividend Policy.

On 15 February 2022, PZU's Management Board adopted a resolution to apply to PZU's General Shareholders Meeting for an issue of subordinated bonds on the domestic market. The contemplated issue is closely related to the Company's planned early redemption of the subordinated bonds described above. The new issue would be for subordinated bonds on the domestic market with parameters similar to those of the previously issued and redeemed bonds and with a total nominal value of no more than PLN 3 bn (say: three billion zloty) (“Bonds”) whose proceeds would be treated as tier 2 own funds according to the Act on Insurance Activity and the requirements of Solvency II regulations.

Bank Pekao

Covered bonds

Pekao, acting through its subsidiary Pekao Bank Hipoteczny, issues long-term debt securities secured on its loan portfolio. The issue is uncapped in value. Pekao Bank Hipoteczny’s covered bonds have been rated by Fitch at A- with a stable outlook (1 notch above the rating for Pekao Bank Hipoteczny whose risk Fitch assesses at BBB+).

At the end of December 2021, the carrying amount of the covered bonds issued by the Bank was PLN 2.3 billion (including EUR 49.9 million in the original currency), which represents roughly a 9.5% market share in the market for covered bonds issued by mortgage banks operating in Poland.

The liabilities by virtue of covered bonds (mortgage and public bonds) with a maturity of up to 1 year accounted for 8.1%, from 1 to 3 years for 31.8%, from 3 to 5 years 27.7% and above 5 years 32.5% of the total carrying amount.

Unsecured bonds

The Pekao Group’s various entities conduct programs to issue unsecured bonds backed by Bank Pekao. These instruments are used to diversify funding sources; in particular, they elevate the percentage of the Bank’s subsidiaries’ assets funded directly from the wholesale market.

As at 31 December 2021, the carrying amount of the bonds issued by Pekao Bank Hipoteczny was PLN 300.3 million. In 2021, the Bank did not issue any new bond series and at the same time it redeemed three bond series with a total nominal value of PLN 340 million.

Regularly renewed securities with maturities of up to 1 year are the most prevalent among the issues conducted by Pekao Leasing (issue program of PLN 3 billion) and Pekao Faktoring (issue program of PLN 5 billion). The total liabilities under these two entities’ issues as at 31 December 2021 were PLN 3.9 billion.

Alior Bank

In 2021, in respect of its own bonds, Alior Bank did not conduct any issue or early redemption operations. On 31 March 2021, Alior Bank redeemed on time G series bonds with a nominal value of PLN 192.9 million. On 29 April 2021, Alior Bank redeemed on time B series bonds (of the former Meritum Bank ICB S.A.) with a nominal value of PLN 67.2 million. On 6 December 2021, Alior Bank redeemed on time I and I1 series bonds with a total nominal value of PLN 183.3 million.

Bank Securities

In 2021, Alior Bank carried out a subscription of 13 series of Bank Securities (BPWs) with a total nominal value of PLN 341 million and USD 1.5 million, including:

  • 6 series of Bank Securities under the 1st Issue Program with the nominal value of PLN 137.7 million and USD 1.5 million.
  • 7 series of Bank Securities under the 2nd Issue Program based on the base prospectus with a total nominal value of PLN 203.6 million.

February 2021 was the first time when Alior Bank offered Bank Securities based on a base prospectus approved by the Polish Financial Supervision Authority on 31 December 2020. The Bank Securities were offered in a public offering to individual (including Private Banking) customers with an eligible investment profile and to corporate clients. The issues of Bank Securities offered 100% protection of capital on maturity. The value of potential interest to be paid out depends mainly on the levels of share baskets, which are the underlying instrument for the individual series of Bank Securities. In 2021, 45 Bank Securities issues were completed, with the best closing at 12%.