UOB launches $500m of perpetual bonds

PHOTO: UOB launches $500m of perpetual bonds

United Overseas Bank has launched $500 million worth of perpetual bonds.

The funds raised will be added to a class of reserves held by banks known as Tier 1 capital.

The perpetual capital securities were 3.7 times subscribed. The orders amounted to $1.85 billion from about 71 high quality fixed- income investors, UOB said Tuesday.

This is the second time that UOB has raised Tier 1 capital under the Basel III banking framework, which took effect at the start of this year. In July, UOB was the first Asian bank to do so, raising $850 million, also by selling perpetual capital securities to major investors.

Under the 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.

The bank's head of global markets and investment management, Mr Terence Ong, said: "Despite the volatile broader market environment I am very pleased with the terms we have been able to achieve on this transaction.

"The strong and well diversified order book is a testament to the strong investor support that UOB is able to rely on."

The securities, being issued in denominations of $250,000, have a fixed distribution rate of 4.75 per cent a year. UOB can redeem them on Nov 19, 2019, also known as the first call date.

The rate is subject to a reset on the first call date and every six years thereafter to a rate equal to the prevailing six-year Singdollar swap offer rate plus 2.92 per cent.

The distributions are payable semi-annually and are non-cumulative. This means that distributions which are not paid will not accumulate.

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