New Stanchart USD CoCo Issue : Perp NC5 High 6%

Edz is out today so you will have to listen to my rant instead.


Issuer: Standard Chartered PLC (the “Issuer”)
Instrument: US$[●] Fixed Rate Resetting Perpetual Subordinated Contingent Convertible Securities
Tenor: Perpetual-NC5
IPT: High 6s per cent.
Settlement:[●] April 2015 (T+[5])
Ranking: Senior to ordinary shareholders, subordinated to any Senior
Creditors, including Tier 2 creditors, pari passu with  existing preference shares
Exp. Issue Rating: Ba1 / BB / BBB (Moody’s / S&P / Fitch)
Denom/Offering:    US$200k x US$1k / RegS/144A
Size: US$ Benchmark

The recent HSBC USD 2.25 bio CoCo went mad after its issue a few days ago, with its coupon coming in 3/8% lower than first indicated. Current market price 102.125/102.25 with offers coming in now that Stanchart is about to hit the street.

Differences between this perp and HSBC :

  • ratings Ba1/BB/BBB (junk) vs Baa3/BBB (invt grade)
  • 5 years vs 10 years, or until perpetuity
  • coupon high 6 vs 6.375% (current yield ard 6%)
  • listing in HKSE vs Irish Stock Exchange
  • conversion price is 30% discount vs GBP 2.7 for HSBC which is roughly 53% discount (*note that Stanchart share price is up 14.5% ytd)
  • governing law English vs New York (except Subordination and consent to UK statutory “bail in” power governed by English law  – i guess that means English law



Another comparable would be the UBS 7.125% NC 5 AT1 (BB/BB+) issued in Feb which is trading at mid 6.1% or thereabouts.

At high 6%, this bond would be priced to sell and we shall see demand pour forth in the grab-the-safe-high-yields game.

Regardless of analyst estimates that banks like HSBC could need another $190 bio worth of bail-in-able debt, I think this CoCo fad will last for a while.

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