UOB prices US$600m subordinated notes due 2031 at 1.75%

UOB saw strong investor interest for its new US$600 million subordinated notes due 2031, which were priced at 1.75 per cent until the first call date.

In response to The Business Times (BT) queries, the bank on Wednesday said there was "robust demand from the outset", with the deal reaching a peak orderbook of US$4.25 billion.

The notes, to be issued below par at 99.739 per cent on Sept 16, 2020, are expected to qualify as Tier 2 regulatory capital of the bank, UOB said on Wednesday in a regulatory update.

If they are not redeemed or purchased and cancelled, the interest rate from the first call date on March 16, 2026 to the maturity date on March 16, 2031 will be reset to a fixed rate equal to the then-prevailing five-year US Treasury Rate, plus 1.52 per cent.

Asian investors continue to anchor the trade like in previous issuances, with 74 per cent of the orders coming from Asia, and 26 per cent coming from Europe, according to deal statistics UOB provided BT.

More than half, or 54 per cent of the notes, were allocated to fund managers; insurers or pension funds took 35 per cent, while banks, private banks and others took 11 per cent.

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UOB chief financial officer Lee Wai Fai told BT: "We moved quickly to seize a window of opportunity on Tuesday and as a result, achieved the tightest possible spread for the transaction."

He added that the transaction was sized to meet UOB's modest capital requirements, given the bank's already-strong capital base.

Credit Suisse (Singapore), HSBC Singapore Branch, Societe Generale, Standard Chartered Bank (Singapore) and UOB are the joint lead managers for the notes.

Strong and diverse investor reception enabled UOB to reprice its own Tier 2 curve, which was "a significant achievement especially given the persistent low rate environment", said Ashish Malhotra, Standard Chartered Bank head of Asia-Pacific debt capital markets, in response to BT's queries.

To be issued under UOB's US$15 billion global medium-term note programme, the notes are expected to be rated A2 by Moody's Investors Service, BBB+ by S&P Global Ratings and A by Fitch Ratings.

UOB is the second bank in Singapore to issue notes at a time when Asian banks are looking to bolster their capital. Just last week, OCBC priced US$1 billion in subordinated notes due 2030, with the offering almost six times subscribed. Those notes are expected to qualify as Tier 2 capital of OCBC.

Over the next few months, banks in Asia are expected to continue issuing Tier 2 and additional Tier 1 instruments to refinance maturing or called instruments, and to improve their overall capital adequacy, said Moody's.

Shares of UOB closed down 0.9 per cent or S$0.17 to S$19.28 on Wednesday.

READ MORE: Asian banks have ample room to beef up capital: analysts