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
IPT: High 6s per cent.
Settlement:[●] April 2015 (T+)
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
- both banks are in the GSIB (Global Systemically Important Banks list i.e. Too Big To Fail)
- HSBC has a min CET1 ratio of 9.5% vs SCB at 8%
- Conversion Trigger Event for both is at CET1 Ratio of less than 7%
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.
Read more about Cocos : https://tradehaven.net/market/bond-focus-one-mans-coco-is-another-mans-junk/
When I hear that people are wondering whether to put a 5 mio or 10 mio order just to secure 0.5 mio in allocation, I start to think how much above par clients are willing to bid to get their allocations. Hearing price war over the commissions too ! Clients tripping over to pay more !
Some banks only offer at 101.00. Allocation is not even firm.
Standard Chartered first coco AT1 $1.5bio – books north of 15bn before US open.
US 2 bio priced at 6.5% coupon.
Priced at 6.5%, IPT high 6%.
>$22b orders from 550 investors
To all the lucky sods who got an allocation at 100.
Market price 101.50/101.60
PRICE IS 100.75/101.00
The consensus is that this bond will catch up with the recent HSBC CoCo. Catch up or HSBC to catch down ?