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Executive Summary

Banco Santander filed a 6-K attaching the final executed indenture, underwriting agreement, and first supplemental indenture for its $1.5 billion 7.250% perpetual AT1 contingent convertible preferred securities (CoCos) issued on June 3, 2026. The net proceeds of ~$1.49 billion will be used to refinance outstanding AT1 securities and for general corporate purposes. This is a routine capital management transaction for a well-capitalized global bank, following the preliminary prospectus filed on May 27 and the final pricing on May 28.

Key Facts

• Issued $1,500,000,000 of 7.250% Non-Step-Up Non-Cumulative Contingent Convertible Perpetual Preferred Tier 1 Securities (AT1 CoCos).
• Net proceeds to issuer: $1,491,000,000 (after 0.600% underwriting commission) plus $180,000 in reimbursable expenses.
• Securities are perpetual, non-cumulative, and mandatorily convertible into common shares if CET1 ratio falls below 5.125%.
• Proceeds used to refinance outstanding AT1 securities and for general corporate purposes.
• Securities listed on NYSE; settlement date June 3, 2026 (T+5).
• Floor price set at $8.199 per common share (approx. 66% of May 26 closing price).
• First optional redemption date: any day during six-month period from Dec 3, 2035 to June 3, 2036 (First Reset Date).
• Distribution rate: 7.250% per annum until First Reset Date, then resets every 5 years at 5-year UST + 283.7 bps.
• Distributions are discretionary and cancellable at any time; non-payment is not an event of default.
• Securities are subordinated (créditos subordinados) ranking junior to Tier 2 instruments and senior to common shares.
• Subject to Spanish bail-in powers (write-down, conversion, cancellation).

Financial Impact

$1.5 billion AT1 issuance with net proceeds of ~$1.49 billion; 7.250% coupon; 0.600% underwriting commission.

Risk Factors

• Coupon cancellation risk: distributions are discretionary and non-cumulative; cancellation does not constitute default.
• Mandatory conversion risk: if CET1 ratio falls below 5.125%, securities convert to common shares at a potentially dilutive price.
• Bail-in risk: securities may be written down, converted, or cancelled by Spanish resolution authorities.
• Refinancing risk: proceeds used to refinance existing AT1s; if market conditions worsen, future refinancings may be more costly.

Market Snapshot

Investment Themes

Documents Analyzed

This report is based on 3 SEC documents filed with EDGAR.

US Market Status

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