ABN Amro finds liquidity in Singapore dollar bond market

With Basel III around the corner, banks worldwide are looking to shore up their capital. Last night, ABN Amro closed a S$1 billion ($822 million) tier-2 issue, and proved that there is ample demand for European hybrid paper in the Singapore dollar bond market. The deal attracted a whopping S$17 billion of orders from 170 accounts.

“It was the first public bond deal for ABN Amro in the Sing dollar market, and they achieved cost savings of about 30bp compared to the dollar market for the same structure,” said a source. “There is clearly unfulfilled demand for European bank paper in Singapore dollars.”

The Dutch bank does not do much business in Singapore — not enough to justify raising S$1 billion anyway — and the bank is expected to swap the proceeds.

The tier-2 paper has a loss-absorption feature, so it was also a test of investor appetite for such bonds. They will have statutory loss absorption only if ABN’s regulatory regime in the Netherlands calls for it.

The 10-year non-call five-year bond priced at a yield of 4.7%, at the tight end of the 4.7% to 4.8% final guidance. The hybrid priced at a spread of 379bp over the five-year swap offer rate (SOR). There is a single reset at the fifth year at a spread of 379bp over the prevailing five-year SOR if the bonds are not called, and no step up.

Singapore investors were allocated 65%, other Asian investors 31% and European investors 4%. Private banks were allocated 58%, fund managers 31%, banks 5%, insurers 3% and other investors 3%.

ABN Amro is rated A2 by Moody’s and A+ by Standard & Poor’s and Fitch, but the subordinated bond was a few notches lower and is expected to be rated BBB+ by S&P and BBB by Fitch.

DBS, Standard Chartered and UBS were joint bookrunners.