Deals of the year 2010: Rabobank €1.25 billion contingent capital notes

Because Rabobank is a member-owned cooperative, the issue couldn’t be converted into conventional equity. Instead, if its tier-1 ratio fell below a 7% trigger, the debt would be written down by 75%, while the bank would pay off the remaining 25% in cash to the investors. Rabo began discussions in late 2009 to develop the structure, and in early 2010 started soft sounding investors. It found a receptive investor base for its structure, although pricing was less certain. After roadshowing the deal to more than 200 investors, the deal priced at a yield of 6.875%, near the top end of the original soft-sounding price of between 6% and 7%, and with an order book totalling 181 investors, predominantly from the UK. "I’m absolutely convinced that contingent capital is an instrument that can be used by all banks, a new suite in the overall capital framework of all banks," says Bert Bruggink, Rabobank’s chief financial officer.