Australia and New Zealand Banking Group (ANZ) on January 21 priced the first ever Basel III-compliant tier 2 bank capital bonds from a non-Chinese issuer in the dim sum bond market amounting to CNH2.5 billion.

The Reg S 10-year non-call five-year deal was priced at par with a similar coupon and re-offer yield of 4.75%. The 4.75% coupon is fixed until January 30 2020 and if the bonds are not called, the coupon will be reset at the one-year CNH Hibor rate plus 82.7bp for the remaining five years.

The deal is the largest CNH tier 2 bank capital offering and the largest ever non-Chinese bank issuance. It is also the first bank capital trade of 2015 in the international debt market from the region.

The notes include a non-viability clause and will qualify as regulatory tier 2 capital for ANZ. Upon a non-viability trigger event, it will convert some or all of the notes into ordinary shares of the bank.

The non-viability trigger event occurs when the Australian Prudential Regulation Authority (APRA) provides a written determination to the ANZ that conversion or write-off of relevant securities is necessary because without it, ANZ would become non-viable or without a public sector injection of capital, or equivalent support, ANZ would become non-viable.

ANZ has an active international funding strategy and this transaction is part of its overall diversification plan. The bonds are issued under ANZ's US$60 billion euro medium-term note programme.

The deal garnered an order book of CNH3.5 billion from 71 accounts, with 49% of the paper sold in Taiwan, 36% in Hong Kong, 14% in Singapore and 1% in other jurisdictions. Insurance companies were the biggest buyers as they accounted for 53%, followed by fund managers with 36%, banks 7%, private banks 3% and hedge funds 1%.

ANZ and HSBC were the joint global coordinators for the transaction as well as joint bookrunners, along with CCB International, ICBC Singapore and Standard Chartered. Bank of China and Bank of Communications acted as joint lead managers.

According to Fitch Ratings, which assigned a rating of A+ to the bonds, the size of the dim sum market continues to expand rapidly, and as it does, it will become more attractive to issuers and investors alike as market depth and liquidity improves. It expects other non-Chinese banks to follow ANZ example and issue into the dim sum market, reflecting international investors' and issuers' growing acceptance of the renminbi as a global currency.