Australian lender Westpac Banking Corporation on August 4 priced its first Singapore dollar Basel III-compliant tier 2 securities amounting to S$325 million (US$250 million) – illustrating a continuing trend in the local currency markets offering alternatives to US dollar and the euro for this type of capital raising.

The Reg S 12-year non-call seven year deal, with an expected rating of A3 by Moody’s and BBB+ by Standard Poor’s, was priced at par with a similar coupon and re-offer yield of 4%. The rate is fixed until August 12 2022 and if the bonds are not called, there will be a one-time reset for the remaining five years at the five-year SGD swap offered rate (SOR) on the second reset business day, plus 154bp – the initial credit spread over the seven-year SGD SOR at pricing.

According to one deal arranger, the pricing outcome was competitive relative to other onshore and offshore options available, while offering diversity away from the domestic market.

The transaction is only the third Basel III tier 2 bonds in the Singapore dollar market from any bank this year following the issuances of ANZ in March amounting to S$500 million and BPCE of France in June amounting to S$150 million.

The ANZ deal, rated A3 by Moody’s, BBB+ by Standard & Poor’s and A+ by Fitch Ratings, was also a 12-year, non-call seven year offering with a similar coupon and yield of 3.75%. BPCE is the first French bank to sell Basel III-compliant tier 2 notes in Singapore with the 10.5-year non call 5.5 year issue priced to yield 4.45%.

In the Westpac deal, a non-viability trigger event will occur when the Australian Prudential Regulation Authority (APRA) notifies the issuer in writing that it believes a conversion or write-off of all or some subordinated notes or conversion or write down of all or some of the capital instruments of the Westpac Group is necessary because, without it, the issuer would become non-viable.

The trigger will also occur when a public sector injection of capital, or equivalent support, is necessary because, without it, the issuer would likewise become non-viable.

The deal garnered an order book of S$475 million with 44 orders. In terms of geographic distribution, 86% of the bonds were sold in Singapore and 14% in other jurisdictions. By type of investors, insurance companies accounted for 78%, private banks 15%, and fund managers and others 7%.

HSBC, Standard Chartered and Westpac were the joint bookrunners and lead managers for the transaction, while United Overseas Bank acted at co-manager.