Santander Buys EU1 Billion of Own Asset-Backed Bonds (Update1)
By Esteban Duarte
By Esteban Duarte
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Sept. 12 (Bloomberg) -- Banco Santander SA, Spain's largest bank, bought 1 billion euros ($1.4 billion) of its own asset- backed bonds, according to a banker familiar with the transaction.
The Madrid-based bank will keep the securities on its balance sheet until market conditions improve, when it may offer the debt to investors, said the banker, who declined to be identified because the deal hasn't been made public.
``Santander might have to pay too much if it insists on selling the notes in the current market,'' said Markus Ernst, a Munich-based credit analyst at UniCredit SpA. ``There simply might not be sufficient demand in the asset-backed securities market.''
Investor concerns that losses linked to U.S. subprime mortgages will spread, pushing up bank borrowing costs. Ahorro Corporacion Financiera SV, the investment group owned by Spanish saving banks, today postponed its first sale of bonds in dollars, citing market conditions.
Santander is buying the asset-backed debt as it starts marketing to depositors 5 billion euros of bonds convertible into shares.
Consumer Loans
Santander hired JPMorgan Chase & Co. and its own investment banking arm to manage the asset-backed debt sale, which is backed by loans made to its consumer finance unit.
The notes were rated from the highest Aaa ranking to Caa2, eight steps below investment grade, Moody's Investors Service said in a note yesterday. The notes pool 120,096 loans to individuals mainly in the Spanish regions of Andalusia, the Canary Islands and Cataluna, Moody's said.
Banks create asset-backed securities by pooling mortgages or consumer loans and selling them to investors as bonds. This allows them to raise capital more cheaply than they could through unsecured debt, or to broaden their sources of funding.
Santander amows SNS Bank, a Dutch lender, that last week bought 2 billion euros of its own mortgage-backed bonds, according to Jean David Cirotteau, a credit analyst at Societe Generale SA in Paris.
A Santander spokeswoman, who declined to be identified, wouldn't comment.
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