UOB diversifies investor base with Australian dollar notes
Bank prints three-year A$500 million floating rate notes, priced at par with a similar coupon and spread of 53bp over three-month bank bill swap reference rate
Singapore lender United Overseas Bank (UOB) spotted a window of opportunity to access the Australian dollar bond market as it diversifies its investor base.
The bank, through its Sydney branch, on July 17 printed a three-year A$500 million (US$354.60 million) floating rate notes, which were priced at par with a similar coupon and spread of 53bp over the three-month bank bill swap reference rate (BBSW).
The final price outcome means UOB achieved the tightest priced Australian dollar three-year financial benchmark for five years. It paid a minimal new issue concession and it was priced inside the Singapore bank curve.For reference, the Singapore banks were trading around mid-50bp over BBSW.
UOB also achieved a favourable funding level compared with other currency markets by capturing tight spreads and favourable swap dynamics.
In executing the trade, Koh Chin Chin, head of central treasury unit at UOB, says they’ve been closely monitoring markets and spotted a window of opportunity with last week’s announcement by the Australian Prudential Regulation Authority on tier 2 securities.
“As part of UOB’s overall funding strategy, we are always looking to diversify our investor base and we are glad to see close to 90% participation by Australian investors, including many of the largest investors,” she says. “The strong performance of the issuance reflects the confidence of international investors in UOB’s strong business fundamentals.”
The transaction attracted a high-quality order book that held through well into the final price guidance with very little attrition. The demand peaked at just over A$800 million with the final order in excess of A$780 million, enabling UOB to upsize the deal amount from A$300 million to A$500 million.
In terms of geographic distribution, 87% of the bonds were distributed in Australia and 13% in Asia. By type of investors, official institutions accounted for 44% of the paper, fund managers and insurance companies 29%, banks 24% and other investors 3%. Such investor response illustrates the strong and continued onshore support for UOB trade following its last fundraising in this market in July 2018 amounting to A$600 million for 3.5 years, as well as the confidence that international investors have in UOB’s balance sheet and business fundamentals.
The Australian dollar offering also demonstrated UOB’s ability to be nimble across markets and capital structures, having tapped the Singapore dollar additional tier 1 perpetual market last week amounting to S$750 million (US$551.50 million) and followed by the Australian dollar senior benchmark this week.
The latest deal was drawn from UOB’s US$15 billion global medium term note programme. HSBC, National Australia Bank, UOB and Westpac Banking Corporation acted as joint bookrunners for the transaction.
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19 Jul 2019