BBVA raises fresh capital after prosecutor pushes for spying trial

Spanish bank BBVA is seeking to raise new capital as it pursues a hostile takeover bid for rival Sabadell that has been complicated by the revival of spying allegations against the would-be acquirer.

BBVA announced the sale of €750mn of additional tier 1 (AT1) bonds to reinforce its capital base on Tuesday, just days after it said it would ask shareholders in early July to approve a share issue to fund its €12bn bid for Sabadell.

The bond sale comes after an anti-corruption prosecutor called in a court filing for BBVA to stand trial over allegations it hired a former top police officer to engage in corporate espionage.

An investigating judge must now rule on whether BBVA should face a criminal trial in the case.

The events date back to 2004 and revolve around José Manuel Villarejo, a former police commissioner whose private investigation agency was initially hired by BBVA to help frustrate a takeover bid for the bank by a construction company. BBVA declined to comment on the prosecutor’s move.

The developments raise the stakes for BBVA chair Carlos Torres, who has triggered the first takeover battle in Spanish banking in a quarter of a century and was in Barcelona on Monday and Tuesday to try to persuade sceptics in the business elite.

To succeed in its bid for Sabadell, BBVA needs to win the approval of regulators, more than half of its rival’s shareholders, and the Spanish government, which says it is firmly opposed to the deal.

BBVA’s AT1 issuance is the sixth time it has tapped bond markets in 2024, having raised a total of €5.25bn and $2bn, including a €1bn green bond.

It will help the bank meet its stated goal of raising between €8bn and €9bn in debt funding this year. BBVA is offering a 6.875 per cent coupon on the seven-year AT1 and had received more than €1.15bn of demand for the bonds by Tuesday afternoon.

AT1s are designed to be converted into equity or written down when institutions run into trouble.

Last week BBVA said it would ask its shareholders at an extraordinary general meeting on July 5 to approve the issuance of up to 1.126bn of new shares to fund the Sabadell deal. This would raise more than €10bn from investors at the current share price.

BBVA shares fell 3.8 per cent on Tuesday, primarily in reaction to the landslide victory of Claudia Sheinbaum in the presidential election in Mexico, which is the main driver of the bank’s profits. Mexican officials have discussed increasing bank taxes.