SGD NEW ISSUE REVIEW : ANZ TIER 2 12NC7
ANZ BASEL 3 TIER II 12NC7 SGD
– NEW 12nc7 SGD BASEL 3 TIER II ANNOUNCED
– ISSUE RATINGS: A3/BBB+/A+
– INITIAL PRICE GUIDANCE: HIGH 3%
– ISSUE SIZE: BENCHMARK
– TIMING: AS EARLY AS TODAY
COMPARABLES
UOB (A2/BBB/A+) SGD 500 mio 3.50% May 26nc20 – 103.0 / 2.87% (to call 05/2020 )
STANCHART (A3/BBB/A+) SGD 700 mio 4.40% Jan 26nc21 – 102.8 / 3.86% (to call 01/2021)
My personal pick for a comparable would be ANZ 4.5% USD SUB 03/2024 is trading at 103.73/104.35 (4/3.92%) which is giving a pick up of 1.8% over interest rates and would work out to be SGD 4.2% when swapped over.
So the mental figure should be 4.2% for 9 years which means 7 years should be somewhere between 3.8-4% ?
7 year swaps are at 2.385% today which means we are only getting a pick up of at most 1%.
GRAPH OF 7Y INTEREST RATE SWAPS
Graph of ANZ 5 year sub debt credit default swaps is 1.15% which means 7 years should be slightly north of that.
Profits have been tumbling and default risks rising.
14 Jan 2015
(Bloomberg) — Default risk for Australia’s biggest banks has risen to a nine-month high as the economy struggles amid tumbling commodity prices and wilting business confidence.
The average cost to insure debt issued by Commonwealth Bank of Australia, Westpac Banking Corp., Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. climbed as high as 71.1 basis points on Jan. 6, a level unseen since April 2014, credit-default swap prices compiled by CMA show. That’s up from a six-year low of 43.8 basis points in September.
The RBA has estimated a shortfall of A$ 30 bio in capital for the 4 major banks in Australia after an inquiry in December last year and so here they come…..
“Dec. 8 (Bloomberg) — Commonwealth Bank of Australia and its three main competitors may need as much as A$30 billion ($25 billion) after a government-commissioned inquiry called for “unquestionably strong” capital levels, analysts said.”
After their 4.75% CNH issue done in Jan this year for CNH 2.5 bio which is trading at 98/99 (5.22/4.99%) cents now, I would expect this SGD bond to do better for the lack of supply onshore and lack of choice for investors as far as bank sub debts are concerned.
And this is a Basel III paper too and they do come cheaper as more will hit the street. The CBA CNH sub debt was launched at 5.15% following ANZ’s.
Alongside UOB, it looks presentable and its credit is a pick up on Stanchart, so there is nothing much for retail investors to complain about if you ask me.
Not my cup of tea but I am sure many would be happy with this fare.
Good luck !
Can teach me something? RM’s circular mentioned builds in excess of 600mio but I don’t understand the remarks for issue size.
ISSUE SIZE: BENCHMARK
– Is it an industry term to hint a specific amount, eg. 100mio or 1bn?
– Is it correct that new bond issues will usually not explicitly indicate issue size in such circulars?
Thank you and have a good week ahead.
Benchmark usually means $250 mio and above and indicative issue size is because there is no target (just in case there is no interest) but some issuers eg. HDB, will have a target size in mind.
Hint at book size because some orders are “upsized” to get full allocation.
Thank you for your guidance, TH
*** ANZ BASEL 3 TIER II 12nc7 SGD – UPDATE 2 ***
– BOOKS OVER S$750M
– FINAL PRICE GUIDANCE: 3.75% THE NUMBER
– ISSUE SIZE CAPPED AT S$500M
– TIMING: BOOKS SUBJECT ALREADY. TODAY’S BUSINESS
ANZ GETS OVER SGD700M ORDERS FOR SGD500M BOND, INSURERS BUY 68%
Opening price 99.95/100.05
+++ANZ BASEL 3 TIER 2 SGD – STATS+++
Books over S$700mm:
By Investor Type:
Insurance 68%
Fund Manager 16%
Private Bank 11%
Bank 5%
By Geography:
Singapore 89%
Taiwan 6%
Australia 2%
Hong Kong 2%
Malaysia 1%
Takeaway: This deal should be well supported in secondary by institutional investors, particularly the insurance companies given the dearth of IG-rated solid names in the SGD space. I’m a little surprised at the lack of foreign participation in the deal given the name. Maybe it’s a case of SGD bonds losing their appeal against a backdrop of continued currency weakness?