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UOB to issue one billion euros of 0.01% covered bonds
INVESTORS brought a hearty appetite to UOB's offering of one billion euros (S$1.6 billion) in seven-year covered bonds, with the deal about two times subscribed.
The transaction size is the largest for euro-denominated covered bonds from Singapore, UOB said in a press statement on Wednesday.
The bank has priced the deal at 0.01 per cent. It noted that the pricing was revised from a guidance of 22 basis points above mid-swap to 17 basis points above mid-swap, "with minimal drops in the orderbook". "The final pricing achieved was inside fair value," UOB added.
The final orderbook stood in excess of 2.1 billion euros from 85 investors.
The reoffer spread of 17 basis points above the mid-swap equates to a reoffer yield of -0.21 per cent.
This makes it the deepest negative-yielding covered bond ever achieved in the Asia-Pacific, and the first negative-yielding bond from Singapore, according to the bank.
It is also the tightest seven-year covered bond issuance spread in the Asia-Pacific since October 2018, UOB said.
The new bonds will be issued above par, at 101.553 per cent, on Dec 1, 2020 and mature on Dec 1, 2027.
They will be guaranteed by Glacier Eighty. This guarantee is secured by a portfolio of loans purchased by Glacier Eighty from UOB, as well as other assets of Glacier Eighty.
Covered bonds are a type of financial product issued by banks and are based on a pool of assets, typically mortgages.
Lee Wai Fai, UOB's group chief financial officer, said: "We were the first Singapore bank to bring euro-denominated Singapore covered bonds to investors in 2016 and now, we are proud to bring them back to the market."
With the new funding, the bank will be able to achieve cost savings of 27 basis points, when compared with seven-year US dollar senior funding on a three-month US dollar London interbank offered rate basis.
Moreover, the euro covered-bond market has enabled UOB to lengthen its debt's tenor in a cost-efficient manner, as other covered-bond markets, such as those denominated in the US dollar, tend to favour shorter tenors, UOB added.
UOB, HSBC France, Société Générale and UBS's London branch were lead managers for the deal, while Norddeutsche Landesbank Girozentrale was co-manager.
The covered bonds are expected to be rated Aaa by Moody's Investors Service and AAA by Standard & Poor's Rating Services.
The latest offering is the eighth series under UOB's US$8 billion global covered-bond programme.
UOB shares rose S$0.33 or 1.4 per cent to trade at S$23.93 as at 9.20am on Wednesday, after the announcement.