Barclays has announced that it is marketing Additional Tier 1 (AT1) bonds, joining other major European banks in issuing such bonds. AT1 bonds are a form of risky debt that offer high yields. They were created after the global financial crisis as a safety buffer for banks. These bonds can be converted into equity or written down if a bank’s capital levels drop below a certain threshold.
Barclays’ initial price talk for the bonds is set at 10.5%, with a call period of six years. The bonds will be redeemable from December 15, 2029, to June 15, 2030. Interest payments on the bonds will be quarterly in arrears, starting from March 15, 2024. Barclays confirmed that the interest payments are fully discretionary and may be cancelled in whole or in part.
UBS and Societe Generale have also recently issued AT1 bonds. UBS’s issuance marked its first since taking over Credit Suisse, whose AT1 bonds were entirely written down in March. However, Barclays’ AT1 bonds are said to be convertible into shares upon any “trigger event.”
Barclays has already received more than $5 billion in investor demand for these bonds, according to Bloomberg. While the history of AT1 bonds shows that only one bank has skipped coupon payments so far, it is important to note the risks associated with these types of debt instruments.