now loading...
Wealth Asia Connect Middle East Treasury & Capital Markets Europe ESG Forum TechTalk
Treasury & Capital Markets
UOB prices first Sonia-linked sterling covered bond
Transaction achieves negligible new issue concession
Chito Santiago 15 Sep 2021

Singapore lender United Overseas Bank (UOB) on September 14 priced an 850 million pounds sterling (US$1.18 billion) floating rate covered bond, which will use the compounded daily sterling overnight interest rate average (Sonia) as its basis for interest rate. This is the first-ever Sonia-linked covered bond transaction by a Singapore bank and also the first ever from an Asian bank. This is also the largest sterling covered bond offering from an Asian issuer.

The new issuance follows UOB’s consent solicitation for the conversion of the interest basis for its 350 million pound floating rate covered bond due 2023 from the sterling London interbank offered rate (Libor) to compounded daily Sonia in July 2021.

The five-year covered bond was priced with a coupon rate of compounded daily Sonia plus 100bp, with a re-offer yield of 29bp above Sonia. This was 3bp tighter than the initial price guidance of 32bp and represented just 1bp premium to the recent sterling covered bond supply from the Canadian issuers and, therefore, a negligible new issue concession.

The transaction thus outperformed the recent five-year trades, which had generally seen 2bp price progressions. It also represented a tight covered senior ratio of about 40%. Taking advantage of the favourable sterling covered funding environment, the deal also provided a cost saving of about 8bp compared with comparable five-year US dollar senior funding on a three-month US dollar Libor basis and about 2bp inside the comparable five-year euro covered funding on a three-month Libor basis.

The deal attracted a final order book in excess of 975 million pounds – after peaking at over one billion pounds – from 19 accounts, which enabled UOB to tighten pricing. In terms of geographic distribution, 75.8% of the demand came from the United Kingdom, 22.8% from EMEA and 1.4% from Asia. It attracted orders from a diversified investor base comprising of asset managers, which accounted for 48.5%, banks 39.9% and central banks/official institutions 11.6%. BNP Paribas, Credit Suisse and UOB were the joint bookrunners for the offering.

Commenting on the transaction, UOB group chief financial officer Lee Wai Fai notes there is now a greater clarity and established market conventions in the Sonia market since UOB launched the first sterling-denominated covered bond from Singapore in 2018. The latest issuance is a landmark trade in establishing a Sonia-linked pricing reference for issuers in the region. UOB has so far issued 10 benchmark covered bonds, including its inaugural transaction in 2016 across global markets – the most among Asian banks.

The covered bond, issued under UOB’s US$8 billion global covered bond programme, is the bank’s second benchmark transaction in 2021 following the eight-year, €750 million (US$882.35 million) offering executed in May.

Conversation
Cosette Canilao
Cosette Canilao
president and CEO
Aboitiz InfraCapital
- JOINED THE EVENT -
18th Philippine Summit
Bouncing back better
View Highlights
Conversation
Omar Slim
Omar Slim
managing director and portfolio manager, fixed income
PineBridge Investments
- JOINED THE EVENT -
17th Asia Bond Markets Summit
Resilience in an age of uncertainty
View Highlights