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Wed, Nov 25, 2020-9: 24 am
INVESTORS aroused huge appetite for UOB’s offering of € 1 billion (S $ 1.6 billion) in seven-year covered bonds, with the deal signed roughly twice.
The size of the transaction is the largest for Singapore’s euro-denominated covered bonds, UOB said in a press release on Wednesday.
The bank has set the price of the deal at 0.01 percent. He noted that the price was revised from a guidance of 22 basis points above mid-swap to 17 basis points above mid-swap, “with minimal declines in the order book.” “The final price reached was within fair value,” UOB added.
The final order book exceeded 2.1 billion euros from 85 investors.
The spread of the new offer of 17 basis points above the mid-swap equates to a return on the new offer of -0.21%.
This makes it the deepest negative-yielding guaranteed bond ever to be achieved in Asia-Pacific, and Singapore’s first negative-yielding bond, according to the bank.
It is also the tightest seven-year covered bond issue spread in Asia-Pacific since October 2018, UOB said.
The new bonds will be issued above par, at 101.553 percent, on December 1, 2020, and will mature on December 1, 2027.
They will be guaranteed by Glacier Eighty. This collateral is secured by a portfolio of loans purchased by Glacier Eighty from UOB, as well as other Glacier Eighty assets.
Covered bonds are a type of financial product issued by banks and are based on a pool of assets, usually mortgages.
Lee Wai Fai, CFO of UOB Group, said: “We were the first Singapore bank to offer Singapore Euro-denominated covered bonds to investors in 2016 and now we are proud to bring them back to market.”
With the new financing, the bank will be able to achieve cost savings of 27 basis points, compared to seven-year senior financing in US dollars based on the three-month London interbank interest rate in US dollars.
In addition, the market for covered bonds in euros has allowed UOB to extend the term of its debt profitably, as other markets for covered bonds, such as those denominated in US dollars, tend to favor shorter terms, UOB added.
UOB, HSBC France, Société Générale and the UBS London branch were the main directors of the operation, while Norddeutsche Landesbank Girozentrale was the co-director.
The covered bonds are expected to be rated Aaa by Moody’s Investors Service and AAA by Standard & Poor’s Rating Services.
The latest offering is the eighth installment of UOB’s $ 8 billion global covered bond program.
Shares of UOB rose 0.33 Singapore dollars or 1.4 percent to trade at 23.93 Singapore dollars as of 9:20 am on Wednesday after the announcement.
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