The deal is expected to be a mid-sized benchmark offering. This will be the first dollar-denominated deal for Hang Seng.
Roadshows will kick-off in Hong Kong later today (June 15) before moving onto Singapore on Monday (June 19).
Like most deals that have been mandated in recent weeks, the timing of the Aa3/A+ rated deal will depend on how the market acts over the next few weeks.
As of December 31, Hang Seng had a total capital ratio of 12.8%, an 0.8% increase from its 2004 level. The capital base increased by HK$4.1 billion ($528 million) to HK$37.4 billion ($4.8 billion). The bank had consolidated total assets of HK$581 billion ($75 billion).
Over the course of 2005, Hang Seng issued HK$2.5 billion in subordinated notes and obtained a subordinated loan of $260 million, both qualifying as tier 2 capital.
Hang SengÆs risk-weighted assets adjusted for market risk grew by 5.2% from 2004, due primarily to the increase in advances to customers and financial investments.
The bank is looking to issue lower-tier 2 debt in order utilise its balance sheet for forward organic growth and future loan growth.
In its report, MoodyÆs noted that ôThe issuance of the notes will boost Hang SengÆs already solid capital baseö. Adding that it ôbelieves that Hang SengÆs strong financial condition mitigates the risk associated with the issueÆs subordination".
Hang Seng will be hoping it is entering a market that will be less volatile than in recent weeks. Comments from Fed Chairman Ben Bernanke regarding his fear that inflationary pressures are the greater concern facing the US economy have fuelled a sell-off in both global equity and global bond markets. On Wednesday, almost every market watcher was waiting on the release of the US consumer price index (CPI) figures in order to gauge whether or not the fed would halt or raise rates at its next meeting on June 29.
When the CPI data was just released it came in stronger than expected, which has convinced many economists and investors that a 17th consecutive rate hike is all but a certainty. That certainty may help to alleviate volatility from the marketplace and allow Hang Seng to price its deal in a relatively stable environment.
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