Banco Santander’s New Senior Notes Exclude Retail Investors Amid Benchmark Changes

Banco Santander’s New Debt Issuance

Banco Santander, S.A., one of Europe’s largest banking groups, has announced the issuance of A$450 million in floating rate ordinary senior notes due 20 January 2031. This issuance forms part of its broader A$5 billion Debt Issuance Programme and marks a significant capital market transaction targeting professional investors.

The notes carry a floating interest rate based on the 3-month Bank Bill Swap Rate (BBSW) plus a margin of 0.97% per annum, with interest paid quarterly. This structure aligns with current market conventions for senior unsecured debt, offering investors a yield linked to prevailing short-term Australian dollar interest rates.

Target Market and Regulatory Compliance

In line with MiFID II regulations, the notes are strictly targeted at eligible counterparties and professional clients, explicitly excluding retail investors in both the European Economic Area and the United Kingdom. This restriction is reinforced by the absence of a key information document required under the EU and UK PRIIPs Regulations, making any offer or sale to retail investors potentially unlawful.

Further, the issuer clarifies that it is not an authorised deposit-taking institution under Australian law, and the notes are not government guaranteed. This highlights the risk profile for investors, who should consider the notes as unsecured debt obligations of Banco Santander.

Syndication and Market Distribution

The issuance is syndicated with a consortium of prominent financial institutions including Commonwealth Bank of Australia, Mizuho Securities Asia Limited, National Australia Bank, and Nomura Financial Products Europe GmbH acting as joint lead managers and dealers. The notes will be listed on the Australian Securities Exchange, providing liquidity and transparency for investors.

Credit ratings assigned to the notes are robust, with Fitch and S&P Global Ratings assigning an A+ rating, and Moody’s Investors Service assigning an A1 rating. These ratings reflect Banco Santander’s creditworthiness and the senior unsecured nature of the notes.

Benchmark Transition and Interest Rate Determination

The documentation includes detailed provisions for fallback mechanisms in the event of discontinuation or non-representativeness of the BBSW benchmark. These fallback arrangements ensure continuity in interest rate determination by referencing alternative rates such as the Australian Overnight Index Average (AONIA) or a Reserve Bank of Australia recommended rate, with clearly defined triggers and adjustment spreads.

This level of detail reflects the ongoing global transition away from traditional interbank offered rates towards more robust benchmark rates, mitigating risks associated with benchmark discontinuation.

Selling Restrictions and Geographic Scope

Strict selling restrictions apply, including prohibitions on offering or selling the notes to retail investors in the EEA, UK, and Singapore, with sales in Singapore limited to institutional and accredited investors under local securities laws. These restrictions underscore the notes’ positioning as a sophisticated investment product suitable for professional market participants.