Singapore lender United Overseas Bank (UOB) on May 18 priced a 750 million euro (US$914.60 million) covered bond, representing the first covered bond transaction out of Singapore in 2021.

The eight-year offering is priced at 99.809% with a coupon of 0.10%, breaking new ground in the market with the longest-dated covered bond by a Singapore bank. With the efficient use of covered bond collateral, the deal achieved tight pricing. The issue was priced 7bp cheaper than UOB’s seven-year euro covered bond transaction in November 2020 amounting to one billion euro despite the longer maturity. The latest deal represents a new eight-year fair value at 8-9bp. This implies about 1bp in new issue concession, which is in line with or outperformed recent non-European Union issuances.

Compared with core issuers in the European Union, UOB’s euro covered bond offering’s differential is at its tights. The deal also provided UOB with cost savings of about 36bp, against a comparable eight-year US dollar senior funding on a three-month US dollar Libor basis. This is better than the 27bp cost savings achieved in last year’s transaction.

The covered bonds will be guaranteed as to payments of interest and principal by Glacier Eighty (CBG). The guarantee is secured by a portfolio of loans purchased by CBG from UOB and other assets of CBG. 

UOB’s latest transaction demonstrates its continued commitment to maintaining a presence in the euro bond market. It has been the most active Singaporean bank in the euro covered bond market and it was the first in Singapore to issue euro covered bond in March 2016 

Commenting on the deal, UOB head of group central treasury unit Koh Chin Chin notes the participation of high-quality investors who have supported UOB through the years, having achieved a large issuance at attractive pricing despite the challenging market backdrop.

Drawn under UOB’s US$8 billion global covered bond programme, the deal attracted a final order book just approaching 800 million euros at reoffer from 40 accounts, In terms of geographic distribution, 51% of the bonds were allocated in Germany and Austria, 16% in Benelux countries, 13% in Scandinavia, 11% in the United Kingdom and Ireland, 3% in Switzerland and 6% in other jurisdictions.

By type of investors, banks were the biggest buyers as they accounted for 37% of the paper, followed by central banks and official institutions with 33%, fund managers 27%, and insurance companies, pension funds and other investors 3%.

UOB, BNP Paribas, HSBC Continental Europe and Norddeutsche Landesbank Girozentrale were the lead managers for the transaction.