For one, KangaNews data reveal BPCE is the first Kangaroo issuer in the financial institution sector to print a dual-tranche tier-two and senior-preferred deal since the financial crisis.

Cédric Perrier, head of group funding at BPCE, in Paris, explains that the decision to press ahead in this format was a strategic move that challenged local norms but aligned with global issuance practices. He tells KangaNews: “We received feedback that it might be better to do two different deals, to have full attention on both and not jeopardise one over the other. However, the dual-tranche tier-two and senior-preferred format can be issued very easily in Europe, the US and Japan – and it is very common to do so. It is unconventional in Australia, but just because it is unconventional does not mean it is not doable.”

The issuer had a natural need to return to the Australian market, as it had two Australian dollar senior-preferred redemptions totalling A$650 million falling due on 5 June as well as €250 million (US$285.8 million) of its €2 billion tier-two task for this funding year left to complete. As its core markets - euros and US dollars – would have required a larger minimum benchmark size, BPCE weighed up its other options.

Perrier explains that BPCE could have issued in sterling or yen, for example, because these markets welcome the format and volume. However, after witnessing the demand for Australian dollar tier-two paper during a recent roadshow in Australia, BPCE decided to proceed with an Australian dollar deal.

The roadshow took place in Sydney and Melbourne, in April. Perrier says there was clearly a lot of appetite from domestic accounts, specifically for Kangaroo tier-two notes. “Investors were experiencing a lot of domestic supply from the big banks in tier-two format, but not enough from non-domestic names,” he tells KangaNews.

BPCE last issued a Kangaroo tier-two deal in October 2015. Since then, Australian dollar issuance has been entirely in senior format. Perrier continues: “After 10 years of absence in tier-two format in the Australian dollar market, we thought it would be good to come back and meet this huge appetite we noticed.”

BPCE’s transaction is the fourth Kangaroo tier-two to price so far in 2025, but it is the first to test the market further out the curve (see table). In fact, it is the longest tenor in a tier-two tranche for a nondomestic issuer, according to KangaNews data.

Source: KangaNews 6 June 2025

Perrier suggests that witnessing the appetite for Australian major-bank 15-year non-call 10-year tier-two deals supported BPCE’s decision to test this part of the curve. He points out the importance of distinguishing the maturities of the tranches, and the five-year tenor for the senior-preferred notes fit its asset and liability management requirements well, with a good mix of demand and pricing.

While it was a challenge to test the unknown territory of a longer-tenor Kangaroo tier-two tranche, Perrier believes this was compensated for by capping the volume at A$500 million and adding the social label.

According to Perrier, the social label also made sense for BPCE because it serves toward BPCE’s commitment to issuing at least five environmental, social and governance-related transactions per year, while also potentially boosting demand for the deal. He adds that the local economic development social format is something BPCE is very familiar with, and says BPCE issues via this label on a regular basis.

The social label on the tier-two tranche adds another layer of uniqueness to BPCE’s deal in the Australian market as it marks the first time a green, social or sustainability (GSS) label has been applied to a Kangaroo tier-two deal. According to KangaNews data, the only other issuer to print a tier-two deal with a GSS label in the domestic market is ANZ Banking Group.

Determining price for the senior-preferred tranche was relatively straightforward, the issuer explains, as BPCE has some outstanding Australian dollar senior-preferred lines. On the other hand, without any local pricing markers, the tier-two tranche involved an element of price discovery.

Perrier explains that the deal group looked at similar transactions issued by BPCE’s French peers, such as the most recent Kangaroo tier-two deals from BNP Paribas and Credit Agricole.

The group also referenced recent Australian major bank 15NC10 deals. “We tried to extrapolate fair value for a 10-year deal based on the steepness of the Australian domestic major bank curve from five years,” Perrier explains. “We also looked at our US dollar non-call 10-year tier-two bonds and tried to draw the curve to 10 from five years and applied this to the Australian dollar market.”

Given the need for price discovery, the issuer announced indications of interest at 270 basis points over swap for the tier-two tranche. “This was a bit prudent for some, but for others it was necessary, and it proved to be efficient in the end,” Perrier comments.

According to Perrier, as the spread was revised and the volume cap announced, this attracted more orders - allowing for further price tightening. The final pricing of 250 basis points over semi-quarterly swap exceeded BPCE’s expectations.

Overall, the result provided BPCE with more cost-effective funding than it could have achieved in euros. Perrier tells KangaNews that the tier-two notes priced at roughly flat to euros while the senior-preferred notes were 5 basis points inside euros.

Perrier also says the deal diversified the bank’s investor base, and he confirms BPCE aims to roadshow in Australia, and to access the Australian dollar market, at least once a year.