The United Overseas Bank (UOB) opened the Singapore dollar bank capital market in 2023 when it priced on January 12 an S$850 million (US$644 million) additional tier 1 (AT1) offering. The perpetual non-call five-year deal was priced at par with a coupon of 5.25%.
The issuance was the first benchmark transaction in the Singapore dollar bond market and the first bank capital deal in this market since August 2022.
Taking advantage of a favourable issuance window, UOB announced the deal on the morning of January 12. The offering quickly gained traction among investors with the demand amounting to S$1 billion after three hours of opening the order book, anchored by private wealth channels. It was eventually 2.5x oversubscribed with total orders of S$2.1 billion from over 62 accounts.
Private banks and securities houses accounted for 85% of the bond allocation, with fund managers and insurance companies taking 13% and banks, hedge funds and corporates buying the remaining 2%.
The coupon is subject to a reset on January 19 2028 – the first reset date – and every five years thereafter to a rate equal to the then-prevailing five-year Singapore overnight rate average-overnight indexed swap (Sora-OIS) plus the initial spread of 2.393%.
The perpetual capital securities are intended to qualify as the bank’s AT1 regulatory capital. The securities may be written down permanently (in whole or in part) and any accrued and unpaid distribution may be cancelled by the bank upon the occurrence of a loss-absorption event.
The loss-absorption event is the earlier of the Monetary Authority of Singapore (MAS) notifying the bank in writing that it is of the opinion that a write-down is necessary or of its decision to make a public sector injection of capital, or equivalent support – in each case without which the bank would become non-viable as determined by MAS.
The capital securities were drawn from the bank’s US$30 billion global medium-term note programme, with UOB acting as the sole global coordinator and bookrunner for the deal.
