Alliance Bank Malaysia, formed as one of the country's ten anchor banks following restructuring in the banking system, has launched a subordinated fixed rate bond offering via Deutsche Bank.
The M$535 million ($140.8 million) issue has a maturity of ten years, with a step up after the fifth year, and was rated A3 by Rating Agency of Malaysia, one notch below the bank's long term-rating. It priced at par and carries a 7.75% coupon, 250 basis points over swaps, says an official at Deutsche.
According to the lead manager, the deal was the largest ever sub-debt bond issued into the single-A market. It was oversubscribed by 1.25 times, with considerable pick-up from pension funds, mutual funds and insurance companies.
Alliance Bank was formed in January this year as part of Bank Negara's plan to scale-down Malaysia's banking system from 21 commercial banks, 25 finance companies and 12 merchant banks into the 10 anchor banks.
Seven institutions — Multi-Purpose Bank, Sabah Bank, Sabah Finance, International Bank Malaysia, Bolton Finance, Amanah Merchant Bank and Bumiputra Merchant Bankers — with assets of around M$18 billion, were brought together to establish the Alliance Banking Group.
Proceeds from the bond sale will be used to partially finance the bank's acquisition of the seven entities. The bank's capital ratio is expected to increase to 10.6% as a result of the deal, much higher than the 8% minimum level stipulated by Bank Negara in its guidelines on risk-weighted capital ratios.
