SGD New Deals : UOB Tier 1 and Aspial AGAIN (I did warn you before)
NEW ISSUE: UNITED OVERSEAS BANK SGD ADDITIONAL TIER 1 PERPETUAL NC5 ***
ISSUER: United Overseas Bank Limited
DESCRIPTION: Subordinated, unsecured, non-cumulative, non-convertible perpetual capital securities
REGULATORY TREATMENT: Intended to qualify as Additional Tier 1 capital of the Issuer
ISSUER RATINGS: Aa1 (Moody’s) / AA- (S&P) / AA- (Fitch) (All Stable)
EXPECTED ISSUE RATINGS: Baa1 (Moody’s) / BBB (Fitch)
ISSUE SIZE: SGD Benchmark
TENOR: PERPETUAL NC5
INITIAL GUIDANCE: [●]% area (5% area indicative)
DISTRIBUTION PAYMENT: Fixed rate, payable semi-annual in arrear, fully discretionary, on a non-cumulative basis
RESET MECHANISM: If not called by the Issuer, the Fixed Distribution resets at the first call date and every 5-years thereafter at the prevailing 5-year SGD SOR plus the initial margin with no step-up
DIVIDEND STOPPER : Permitted
LOSS ABSORPTION EVENT: Earlier of the regulator notifying the Issuer in writing (i) that a write-off is necessary or (ii) of its decision to make a public injection of capital or equivalent support, (in each case) without which the Issuer would become non-viable
WRITE DOWN (PARTIAL ALLOWED):
(i) Upon occurrence of a Loss Absorption Event, cancellation of the accrued distributions and if insufficient, permanent writedown (partial or in full) of the prevailing principal amount
(ii) Write-down amount is ascertained by Issuer (and the Regulator is satisfied) such that the amount written-off will be sufficient to ensure that the Issuer ceases to be non-viable
(iii) Write-down pro rata with Parity Tier 1 instruments that include loss absorption features
ISSUER REDEMPTION: At first call date, [●] 2018, and any distribution payment date thereafter, subject to regulatory approval
EARLY REDEMPTION: Upon occurrence of Change of Qualification or Taxation Events, subject to regulatory approval
USE OF PROCEEDS: Intended to allow redemption of the existing Class E Preference Shares, subject to regulatory approval
Key takeaway are the following.
1. Loss absorbing
2. Reset every 5 years
This issue is intended to redeem the UOB 5.05% retail bond in Sep this year when its call date falls due which means this bond better have a coupon rate lower than 5.05% or there is no incentive for the bank to call. That is because the existing Class E preference shares are 1. Not loss absorbing and 2. does not have a coupon refix in Sep this year.
The loss absorption clause is something the world has to learn to live with. Note the following risks.
1. each coupon is 100% discretionary
2. regarding the write down – can the bonds be written back up in the future ?The risks of a write down is slimmer for Singapore banks as we note from history. In 2008, the 3 local banks did not even need to do equity rights issues to bolster their capital.
This deal is priced to sell. UOB 5.05% has an issue size of SGD 1.32 billion.
But more importantly, it makes the OCBC 4% non cumulative perpetual callable in 01/2018 look real bad and that issue does not have a coupon refix as well. Then again, since when have we ever seen an OCBC bond issue that works in our favour ?
ASPIAL AGAIN ???
Aspial Corp Markets Singapore Dollar Bonds to Yield Low 5% Area (Bloomberg)
July 15 (Bloomberg) — According to a person familiar with
the matter.
• Rating: Unrated
• Tenor: 3y
• Initial Price Guidance: low 5% area
• Timing: As early as this week
• Sale Manager: DBS
• Information from a person familiar, who asked not to be identified because the terms aren’t set
Why do they need so much money when they do not have loans or bonds due ?
Expansion ? With their financial leverage making Olam look good, I am worried and so soon after their consent solicitation. It is like they are in a huge hurry to make themselves look bad or, desperate.
Related articles
- Presenting Singapore’s Potentially Over Leveraged Corp Bonds (tradehaven.me)
- Aspial Bond Follow Up (tradehaven.me)
Just great at noon time !!
*SINGAPORE BANKING SYSTEM OUTLOOK REVISED TO NEGATIVE BY MOODY’S
July 15 (Bloomberg) — Changed outlook from stable owing to recent period of rapid loan growth and rising real estate prices in Singapore and in regional markets where Singapore banks are active, according to statement.
These have increased the probability of deterioration in credit quality under potential adverse conditions for the banks in future: Statement
Hi tradehaven, you haven any idea how is the response so far for this UOB new issue? Oversubscribed?
May I also ask, the clause: Dividend Stopper – Permitted, does it mean even if they dont pay dividend for the preference share they can still pay dividend for the normal share?
Mind I also ask, what is the expected issue size? 1.32 billion?
Many thanks.
Hi
Hearing its >1 bio.
Probably will not be much more oversubscribed given the Moody’s announcement on a negative outlook for Singapore banks.
Dividend stopper means they cannot pay dividend on the stock if they do not pay for the perp.
Not sure about the final issue size.
Hi tradehaven, thanks for all the information and thoughts. Can I ask one really silly question: Dividend Stopper Permitted would mean:
a) they are permitted to give dividend to shareholders even if they are not paying the perpetual holders? Or
b) they are not Permitted to pay dividend to shareholders if they don’t pay the perpetual holders?
May I also ask, do you think it is likely that there will be a retail tranche where public can apply thru ATM as well?
Thank you so much.
Read comments.
I replied to the same question just now.
Many thanks and sorry for the confusion. My sincere apologies. Thanks again.
Hi tradehaven,
Could you please explain how does loss absorption work?
“Loss Absorption Event” means the earlier of:
(i) the MAS notifying the Issuer in writing that it is of the
opinion that a write-off is necessary, without which the
Issuer would become non-viable; and
(ii) the MAS notifying the Issuer in writing of its decision
to make a public sector injection of capital, or
equivalent support, without which the Issuer would
have become non-viable, as determined by the MAS.
In other words, it is a bail-in, like Cyprus style. The write off can be some or all of the entire instrument ie. the bond.
Good = MAS decide
Bad = Bond can be written off before equity
Hi sir you have any updates on coupon and subscription? Thank you
Books 1.5 bio. Coupon looking like 4.9-4.95%.
Issue size indic 750 mio but I think could be larger.
So the loss absorption event actually favours the shareholders over bondholders?!
No, it doesn’t.
We would tend to assume that shareholders will bear the brunt of it since MAS is deciding.
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