The last twelve months has provided a few examples of large corporates buying back bonds prior to maturity. Rio Tinto and Fortescue have both bought back bonds worth billions of dollars and, in Rio’s case, only just recently. The individual reasons vary but with yields at historic lows the actions suggest that companies believe this is the best use of their excess funds. It says a lot about the opportunities for business to grow.
Barclays Bank plc has now joined the growing list of issuers reducing their outstanding bonds. Through its Australian branch, Barclays has just announced the repurchase of $261.88 million 4.50% April 2019s and $235.15 million April 2019 FRNs. The buy-back leaves $338.12 million worth of fixed rate notes and $464.85 million worth of FRNS outstanding.
First flagged at the start of June, Barclays said the transaction was made as part of the “group’s ongoing transition to a holding company capital and term funding model in line with regulatory requirements”. Barclays announced in April it would be converting to a two division structure, with one division to house the UK bank and the other left with everything else. The notes not repurchased will be transferred from the Australian branch which issued the notes in April 2014, to Barclays Bank plc.
Barclays Bank was rated A by S&P and A2 by Moody’s at the time of the 2014 issue. It has since suffered a one notch downgrade but its Moody’s credit rating of A2 remains intact.