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Treasury & Capital Markets
Private banks drive OCBC AT1 capital securities
Monetary Authority of Singapore still has ultimate option to redeem capital. The capital securities are drawn under OCBC's US$30 billion global medium-term note programme
Chito Santiago 17 Aug 2018

Singapore lender Oversea-Chinese Banking Corporation (OCBC) on August 16 priced Basel III-compliant additional tier 1 capital securities amounting to US$724.64 million, underpinned by the strong demand from private banks. The capital securities are intended to qualify as additional tier 1 capital of the bank under the requirements of the Monetary Authority of Singapore (MAS)

The Reg S perpetual non-call five offering was priced at par with a similar coupon and re-offer yield of 4%. This was 37.5bp tighter than the initial price guidance of 4.375% area.

Under the terms and conditions, the principal of the capital securities can be written off, partially or in full, upon notification by the MAS that it is of the opinion that a write off is necessary, without which OCBC would become non-viable.

Another trigger is a decision by MAS to make a public sector injection of capital, or equivalent support, without which OCBC would have become non-viable as determined by MAS.

OCBC has the option to redeem the capital securities on any distribution payment date on or after the first call date, subject to MAS approval.

If the securities are not redeemed on the first reset date on August 24 2023, the distribution rate will be reset on the first reset date and every five years thereafter to a fixed rate per annum equal to the aggregate of the then prevailing five-year Singapore dollar swap offer rate, plus the initial spread of 181.1bp.

Distribution may be cancelled by OCBC at its sole discretion, subject to the provisions of the capital securities. The bank is also not obliged to pay distributions to holders under certain circumstances.

The capital securities are drawn under OCBC's US$30 billion global medium-term note programme and the proceeds will be used for general corporate purposes.

The transaction generated an order book of over S$3 billion, of which 93% of the bonds were allocated in Singapore and 7% in other markets. By type of investors, private banks drove the deal as they accounted for 60% of the paper. The remaining 35% was taken by insurance companies and fund managers and 5% by agency, banks, hedge funds and corporates.

Credit Suisse, OCBC and Standard Chartered were the joint bookrunners and lead managers for the transaction.

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