DBS to increase tier 1 capital with hybrid equity issue

In what is being viewed as the precursor to a major acquisition, DBS is planning to launch the first non-cumulative tier 1 perpetual issue by an Asian bank. While Siam Commercial Bank has previously recapitalized itself using tier 1 capital in the form of a preferred shares convertible into common shares and warrants, DBS's prospective transaction will rank as a hybrid of debt and equity.

The Aa2/A+ rated credit has mandated its house banks Goldman Sachs and Morgan Stanley Dean Witter to lead a $500 million perpetual offering which is thought likely to have a 10-year step up structure. It is also believed that the bank might combine the issue with what would be its third $500 million issue of upper tier 2 debt. Roadshows for the deal are rumoured to have been provisionally scheduled for early March, after the announcement of the group's annual results on March 5 and ahead of the next FOMC meeting on March 20.