DBS prices S$20m SORA-referenced notes

DBS announced after trading hours on Wednesday that it has successfully priced floating-rate notes with the Singapore Overnight Rate Average (SORA) as the reference rate for the calculation of interest - which the bank said is the industry's first note to be priced this way.  

The issue of S$20 million floating-rate notes, due 2021 with a one-year tenor, comes under its US$30 billion global medium-term note programme.

The notes will bear a coupon rate of compounded daily SORA + 0.65 per cent per annum, payable quarterly in arrear, with compounded daily SORA calculated using a five-business day look-back observation period.

The notes are expected to be issued on May 14, 2020, and the net proceeds from the issue of the notes will be used for DBS' general business purposes.

DBS Bank was mandated as structuring advisor and sole lead manager for the offering of the notes.

The issue of the SORA-referenced notes is in line with the roadmap of the Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee (ABS-SFEMC) for the development of new SORA-based markets.

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Last August, it was announced that Singapore would move from the SGD Swap Offer Rate (SOR) to SORA over the next two years. This comes on the back of the discontinuation of the London Interbank Offered Rate (Libor) at end-2021, which would affect SOR as it uses the US-dollar Libor in its computation.

SORA, the average rate of unsecured overnight interbank SGD transactions brokered in Singapore, was selected as the new interest rate benchmark as it was found to be the "most robust and suitable alternative", underpinned by a deep and liquid overnight funding market.

Philip Fernandez, DBS Group Corporate Treasurer, said: "DBS Bank is pleased to have completed the pilot issuance of a SORA-referenced floating rate note. This is an important step in the industry's plan to develop an active market for financial instruments linked to SORA. We will continue to work together with ABS-SFEMC to encourage adoption of SORA-based products."

While DBS has issued the first SORA-referenced floating rate notes, several banks in Singapore have already undertaken SORA-derivative transactions; these include DBS, Deutsche Bank, OCBC, Standard Chartered and United Overseas Bank.

Last November, OCBC Bank and Standard Chartered completed Singapore's first overnight indexed swap derivatives transaction using SORA as the interest rate benchmark.

DBS' counter went up four cents to close at S$19.74 at the end of trading on Wednesday.