The takeover puts BBVA and Sabadell’s financial plans under control.

debt investors they have no problems withhostile takeover undertaken by BBVA in Sabadell. They like the scenario it presents for both, and that’s how the market has reflected it in bond prices. There were no complaints against them eitherThis only applies to banks, and no analyst sees any risk to these problems, no matter what happens.

The only obstacle is the takeover bid itself, a nearly eight-month process in which the focus of banks and investors has radically changed and in which information and forecasts for the future have been made V roadshow and in debt presentations they jumped into the air.

Sabadell can broadcast whatever he wants. His duty to remain passive ahead of BBVA’s takeover prevents him from distributing extraordinary dividends or radically altering his balance sheet, but he has complete discretion to execute his financing plan by following the offering schedule he has planned, according to financial sources.

More difficult is determining what data it can and cannot provide to investors. because some of them may conflict with the duty of passivity what it means to be the target of a hostile takeover and, above all, what price to put on emissions.

Less rating

Sabadell has a lower rating than BBVA.. This is two or three notches lower, depending on the rating agency. This proposal smoothed out these differences in practice by narrowing the risk premium. which almost equaled its cost of financing to BBVA’s. with the expectation that it will eventually become part of the group and its debt will be protected by the buyer.

But Sabadell is fighting for just the opposite, to remain alone and to have his bonuses not paid by anyone other than the bank, as is the case now. This complicates the situation and makes it difficult to determine the correct starting price for new releases and how much investors will be willing to pay, according to market sources.

The positive part for Sabadell is that it has already received a significant portion of the funding needed for this year and that left his drawer of obligations to the European Central Bank down to zero (ECB).

The company has paid back all the money it borrowed from emergency liquidity auctions during the pandemic and paid off its debt. which reduces your most basic needs. In addition, last year he began accessing the bond market and received 5.6 billion.

In 2024 it has only 1.750 million, but given that the collection will be made in 2023 and without pressure from the ECB, Sabadell told debt investors that its one-year financing plan is almost complete..

Few needs

The bank has ruled out what it will do increasing the issuance of CoCo or subordinated debt and assures that it is enough to carry out one more transaction on the senior debt, which can be either preferred or non-preferred. The bond door will remain open for opportunistic placements in euros and pounds if the conditions are met. If they don’t happen and you don’t access this tool, nothing happens.

This situation reduces Sabadell’s problems when accessing the bond market, but BBVA needs a lot more money.

BBVA’s financing plan calls for 8,000 to 9,000 million euros in debt this year. At the beginning of the year, the bank accelerated and already has 5.340 million. leaves 3660 million pending achievement of the maximum planned range.

BBVA has fewer restrictions than Sabadell when it comes to providing data or making forecasts.. The obligation of passivity does not apply to him. But uncertainty as to whether the debt he issues will be for himself alone or for a wider group doubts about commercial orientation While the takeover bid is ongoing, or the transaction’s rating impact will also affect emissions produced while the takeover bid is open, market sources said.

Warnings

Rating agencies S&P and Fitch have already raised their voices.. “Difficulties can distract the attention of bank management from day-to-day activities,” says the first. “Relatively long period before the possible date of approval (of the takeover offer) adds uncertainty and this could distract both banks,” adds the second.

DBRSfor his part, explains that a possible merger has more advantages than disadvantages, but will reduce BBVA’s geographic diversification and this may affect your rating.

What it doesn’t look like is that if you get a hole in your credit score, there will be problems. Sabadell. “We believe that reputational risk needs to be included in BBVA risk premium if surgery failsIt’s not important“,” notes CreditSights. But to find out whether this is true or not, there are at least eight months left.