OCBC issues $1 billion short-dated notes

Close on the heels of its rival Singapore lenders, OCBC raised $1 billion of unsubordinated debt late on Tuesday. The sale of three-year notes was only the second time the bank has issued bonds in the US under the SEC’s Rule 144a.

The short-dated tenor was chosen to fit OCBC’s asset-liability management strategy — although the market for five-year paper had become a little crowded following other primary issues by similar credits during the past couple of weeks.

The issue’s 1.625% coupon was the lowest ever by a bank in Asia ex-Japan. The notes were re-offered at 99.799 to yield 1.694% to a maturity date of March 13, 2015. The spread of 130bp over the three-year US Treasury note yield was tighter than where comparable Singapore bank issues with five-year tenors were trading at the announcement of the deal.

The recent $1 billion DBS 2.35% 2017s was bid at Treasuries plus 145bp, and the $500 million UOB 2.25% 2017s, launched last week, was quoted at Treasuries plus 143bp. OCBC’s new bonds traded steadily yesterday.

The senior unsecured notes are rated Aa1 by Moody’s and a couple of notches lower at AA- by both Standard & Poor’s and Fitch. The proceeds will be used for general corporate purposes.

Demand for the issue was anchored by a few large orders of more than $100 million from key Asian investors, which generated early deal momentum, according to a person familiar with the transaction.

The total order book was $1.4 billion, made up from 69 accounts. More than half the issue was distributed in Asia (57%), and 33% and 10% was sold to investors in the US and Europe, respectively. Fund managers bought 34% of the notes, commercial banks took 32%, government agencies 21%, private banks 6% and others 7%.

The joint bookrunners were Citi, Credit Suisse, Morgan Stanley and OCBC. CIMB and Daiwa acted as co-managers.

Established in 1932, OCBC — Overseas-Chinese Banking Corporation — is a Singapore-listed bank and one of Southeast Asia’s biggest lenders. It has been growing its presence within the region in recent years, but at the end of 2011, Singapore and Malaysia still accounted for around 80% of its asset base.

OCBC posted an 18% increase in 2011 fourth-quarter profit as personal and commercial loan demand rose. Net income in the three months ended December 31 grew to S$594 million ($475 million) from S$505 million a year earlier. And for the whole of 2011, OCBC’s net income increased 3% to S$2.3 billion.