The Bank of Cyprus (BoC) has successfully launched a €300 million unsecured and subordinated Tier 2 bond, generating significant interest from investors. On September 10, 2025, the bank priced the issue under its €4 billion Euro Medium Term Note Programme, highlighting robust demand across the investment landscape.
Investor Confidence Drives Oversubscription
The bond issuance attracted over 100 institutional investors, with the final order book exceeding €3 billion, resulting in an oversubscription of more than ten times. This overwhelming interest reflects both local and foreign investors’ confidence in the Bank of Cyprus.
Strong Demand Influences Pricing
Due to the high demand, the final pricing of the bond was set at a spread of 195 basis points, which is 35 basis points tighter than the initial price indication. This adjustment resulted in a yield of 4.321 per cent, lower than the initial indication of 4.67 per cent. The bank noted that the pricing margin is significantly better than the bond being refinanced and is competitive compared to recent Senior Preferred bond issuances.
Key Features of the Tier 2 Bond
The New Notes were priced at 99.632 per cent with a fixed coupon of 4.25 per cent per annum, payable annually in arrears. The bond will reset on September 18, 2031, with a maturity date set for September 18, 2036. The bank retains the option to redeem the New Notes early, within a six-month window from March 18, 2031, to September 18, 2031, subject to regulatory approvals.
Impact on Capital Structure
The issuance of these bonds will be instrumental in maintaining the group’s optimised capital structure, contributing approximately 300 basis points to the group’s Total Capital Ratio. The proceeds from the bond issue will be on-lent by Bank of Cyprus Holdings to its subsidiary, the Bank of Cyprus Public Company Limited, for general funding purposes, with the aim of qualifying as Tier 2 capital.
Future Plans for Existing Bonds
In a related move, the Bank of Cyprus has invited holders of its outstanding €300 million Fixed Rate Reset Tier 2 Capital Notes, callable between April 23, 2026, and October 23, 2026, to tender their notes at a purchase price of 102.3 per cent of the principal amount. Additionally, the bank has announced its intention to buy back the existing subordinated bond maturing in 2031 at the same price of 102.3 per cent.
Role of Financial Advisors
Bank of America Securities Europe SA and Goldman Sachs Bank Europe SE acted as Global Coordinators and Structural Advisers for the bond issuance. They were joined by Barclays Bank Ireland PLC, Citigroup Global Markets Limited, and Morgan Stanley Europe SE as Joint Lead Managers. The Cyprus Investment and Securities Corporation Limited (CISCO) served as Co-Manager for the transaction.
Market Reception and Future Outlook
The Bank of Cyprus’s successful Tier 2 bond issuance not only reflects strong investor confidence but also positions the bank favourably within the competitive financial landscape. The significant oversubscription indicates a robust appetite for financial products from the bank, enhancing its capital position and facilitating future growth.
This bond issuance is a clear signal of the bank’s strategic direction, focusing on strengthening its capital base while providing investors with an attractive investment opportunity. With plans to refinance existing bonds and maintain a solid capital structure, the Bank of Cyprus is setting a positive trajectory for its future financial endeavours.
