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On 16 July 2025, Access Bank UK issued Additional Tier 1 loan notes to the value of $295 million (N451.9 billion) to Access Holdings Plc.
The issuance of Additional Tier 1 (AT1) loan notes by Access Bank UK to Access Holdings Plc for $295 million (N451.9 billion) means the subsidiary bank raised capital through a specific hybrid financial instrument known as AT1 bonds.
What is an AT1 Bond?
AT1 bonds – a $275 billion global sector also known as “contingent convertibles” or “CoCo” bonds – act as shock absorbers if a bank’s capital levels fall below a certain threshold. They can be converted into equity or written off.
They make up part of the capital cushion that regulators require banks to hold to provide support in times of market turmoil.
They are the riskiest type of bond a bank can issue and so carry a higher coupon.
An analysis from Danmarks Nationalbank (the central bank of the Kingdom of Denmark) suggests that banks with low capital headroom in particular use more AT1 to meet increases in capital requirements.
In finance, AT1 bonds are a type of capital instrument that banks use to strengthen their core equity base while complying with regulatory requirements under Basel III.
These bonds are perpetual (no fixed maturity date) and typically do not guarantee repayment of principal. They carry higher yields compared to traditional debt because they absorb losses during financial distress to protect the bank’s solvency.
Key features of AT1 loan notes include:
- They count as capital but sit below common equity in seniority, meaning in case of financial trouble they can be written down or converted into equity.
- Interest payments on AT1 notes can be skipped or deferred at the bank’s discretion without triggering default.
- They provide a buffer to absorb losses and help banks remain operational during economic stress.
- The issuance of these notes improves regulatory capital ratios, helping the bank meet minimum capital adequacy requirements.
In summary, this transaction represents Access Bank UK raising long-term, loss-absorbing capital from Access Holdings Plc, enhancing its capital structure and regulatory compliance.
For Access Holdings, the purchase of AT1 notes is an investment or asset on its balance sheet. Access Holdings will earn interest from the notes and face the associated risks (such as loss absorption features of AT1).
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