RHB Bank, Malaysia’s fourth-largest commercial bank, plans to launch a $300 million to $500 million senior bond next month, according to sources. Bank of America Merrill Lynch and Goldman Sachs are the arrangers.
Market participants say the Malaysian bank is eyeing tenors of three or five years, or a combination of both, that it will issue from its medium term note (MTN) programme. If the deal goes ahead, RHB will be the second Malaysian bank to issue a US dollar senior bond, following hot on the heels of Hong Leong Bank, which last week became the first Malaysian bank to raise senior debt in the dollar bond market.
The bank already has a dollar deposit base, but the bond market offers RHB the opportunity to raise funds with a longer maturity, which is the most likely motivation for the deal. It is also expected to tap the ringgit bond market through its MTN programme at some point.
RHB has timed the deal to take advantage of a recent upgrade by Standard & Poor’s. In December last year, the ratings agency upgraded the bank to BBB+ from BBB, recognising its improved financial profile. The outlook is stable.
Malaysian banks have long been regular visitors to the ringgit bond market, thanks to the abundance of cheap financing available there. With a liquid swap market, most Malaysian issuers have been able to tap the ringgit market and swap the proceeds into dollars, which is why so few Malaysian borrowers have tapped the dollar bond market directly. There are just a handful of previous issuers, including Petronas, the Malaysian sovereign and the Axiata Group.
However, with US Treasury yields hovering near all-time lows, funding has become sufficiently cheap to attract more issuers to tap the dollar market opportunistically.
Hong Leong Bank’s $300 million five-year bond last week was a case in point. The bank’s notes priced at a coupon of 3.75%, which was the lowest coupon achieved for a dollar-denominated five-year bond from a Malaysian issuer. It was also the lowest coupon for a fixed-rate dollar bond from a Malaysian issuer.
Elsewhere, other Malaysian banks might soon jump on the bandwagon. CIMB Bank has in the past contemplated issuing a dollar bond and is said to be looking at it. However, the bank is rated A3 by Moody’s and one notch lower at BBB+ by Standard & Poor’s and Fitch. According to one source, the bank might wait for an upgrade before issuing.
Maybank sent out an RFP a few months ago, seeking advice from banks on its capital structure. But, according to a banker, it has not announced anything definitive yet. The bank might instead choose to raise funds through the ringgit or Singapore dollar bond market — as it bought Singapore-based broker Kim Eng for $1.4 billion in January this year.
