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Standard Chartered priced a $1 billion subordinated bond on Wednesday night that was heavily bought by Asian investors. Despite its London listing, the bank enjoys name recognition among Asian investors thanks to its broad footprint in the region.
Asian investors were by far the biggest buyers, accounting for 62% of the allocation. This was followed by Swiss investors (17%) and UK investors (10%). The rest went to Germany, Benelux and the US. Private banks were allocated 54% of the deal and the two other major buyers were banks (19%) and insurers (13%).
“We’ve seen a lot of European bank capital getting placed in Asia,” said one person familiar with the deal. “Deals such as Rabobank and Zurich Insurance were well bought by Asia, so this is a continuation of that theme. There is demand for selective names.”
The leads — Barclays Capital, BNP Paribas, Credit Suisse and Standard Chartered — released initial guidance at Treasuries plus 400bp and revised it to Treasuries plus 390bp, where the bonds priced.
The closest comparable was Standard Chartered’s January 2020s, issued through its Hong Kong branch, which were at Treasuries plus 325bp. Taking into account the tenor extension, this put fair value of the new Standard Chartered January 2022s at about Treasuries plus 350bp, which meant that the new issue premium was about 35bp. Bucking the recent underperformance from new issues, the Standard Chartered 2022s tightened by 5bp in secondary trading.
Standard Chartered’s sub-debt was the so-called old-style tier-2 and is not Basel III compliant. So far, no Asian banks have issued dollar bonds that comply with the latest Basel standards — though debt bankers expect that they will do so, especially after 2013.
So far, ICBC Asia’s dim sum bond is the only Basel III compliant bond from an Asian borrower in the market, and there have been no compliant dollar bonds issued by Asian banks.
“It is hard to issue ascertain how much a loss-absorption premium is worth,” said another banker familiar with the deal. “We have ICBC Asia’s dim sum but it’s not a good reference point as the dim sum market is not very efficient,” said a second person familiar with the deal.
Shinhan Bank beats the crowd
Elsewhere, South Korean lender Shinhan Bank’s $700 million five-and-a-half-year bond, which priced early Thursday morning, also enjoyed support from Asian investors, which were allocated 55% of the deal. US investors were allocated 30% and European 15%. In contrast, Asian investors were allocated 38% of Shinhan’s $500 million bond in March 2011, while US investors were allocated the lion’s share (54%).
The total book was $5.15 billion from 305 accounts. The bonds priced at Treasuries plus 365bp and tightened to Treasuries plus 353bp/352bp in secondary trading. Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank, HSBC and Standard Chartered were the arrangers.
Shinhan is getting its bond away ahead of a big pipeline of Korean banks. Nomura reports that there is about $8.1 billion of maturities from Korean banks that fall due in 2012, and candidates for new bond issues include Kookmin, Woori and NACF in the senior bond space and Hana Bank and Busan Bank in the lower tier-2 space.
“Korean banks are under regulatory pressure to pre-fund for their offshore maturities this year, and European banks could potentially stop rolling over their bilateral loans to Korean banks as part of their deleveraging process,” said Nomura analyst William Mak in a report.
As such, there was an advantage for Shinhan Bank to get its deal done early. “There’s a big pipeline of banks out there, so I suppose if I were an issuer I would like to get out first and pay a new issue premium rather than wait,” said one investor.
Shinhan’s bonds offered a coupon of 4.375% and the notes were reoffered at 99.681 to yield 4.441%.
