SINGAPORE - United Overseas Bank (UOB) is raising $850 million by selling perpetual capital securities to major investors.
The securities are expected to be issued on July 23 and the funds raised will be added to a class of reserves held by banks known as Tier 1 capital.
The proceeds will also allow UOB to redeem its outstanding additional Tier 1 Class E preference shares, callable on Sept 16.
This is the first time that an Asian bank is raising Tier 1 capital under the Basel III banking framework, which took effect at the start of this year.
Under the new rules, capital securities used to raise Tier 1 capital must have a loss absorption clause so that holders of these securities will have to take a "writedown" on their investment if the bank is regarded as non-viable by regulators.
This means that if UOB were to find itself in such a position, holders of these capital securities may have to accept lower payouts or forgo them altogether.
Under these new rules, the strong credit profile of the issuer was a critical factor for investors, said Mr Alexi Chan, HSBC's Asia head of debt capital markets origination. HSBC was one of the joint bookrunners of the deal.