DBS Bank announced that it has successfully priced the industry’s first Singapore Overnight Rate Average (SORA)-referenced floating rate notes under its $30 billion Global Medium Term Note programme. The issue of the notes supports the Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee (ABS-SFEMC)’s roadmap for the development of new SORA-based markets.
ABS-SFEMC announced on 30 August 2019 that the discontinuation of the London Interbank Offered Rate would affect the sustainability of the Singapore Dollar (SGD) Swap Offer Rate (SOR) and held a public consultation on the use of SORA as the new interest rate benchmark to replace SOR.
More recently, the Steering Committee for SOR Transition to SORA (SC-STS) published the response to feedback on 19 March 2020, together with a roadmap for the transition. SORA is a transaction-based interest rate benchmark underpinned by the SGD overnight interbank funding market and has been published by the Monetary Authority of Singapore since July 2005.
As the first financial institution in Singapore to successfully price the issue of a SORA-referenced floating rate note, DBS Bank has taken the first step to pave the way for further SORA adoption. The notes have a notional amount of $14 million (SGD 20 million) and a tenor of one year. The notes will bear a coupon rate of compounded daily SORA + 0.65% per annum, payable quarterly in arrear with compounded daily SORA calculated using a five business day lookback observation period.
DBS Group’s corporate treasurer Philip Fernandez said, “DBS Bank is pleased to have completed the pilot issuance of a SORA-referenced floating rate note. This is an important step in the industry’s plan to develop an active market for financial instruments linked to SORA. We will continue to work together with ABS-SFEMC to encourage adoption of SORA-based products.”
The notes are expected to be issued on 14 May 2020 and the net proceeds from the issue of the notes will be used for the general business purposes of the DBS Group.
DBS Bank was mandated as structuring advisor and sole lead manager for the offering of the notes. The notes have been offered to certain non-US investors outside the United States in reliance on Regulation S under the Securities Act. The notes are expected to be rated Aa1 by Moody's Investors Services Inc and AA- by Fitch Ratings Ltd.
Application will be made to the Singapore Exchange Securities Trading Limited (SGX-ST) for the listing and quotation of the notes on the SGX-ST. There is no guarantee that an application to the SGX-ST will be approved. Admission of the notes to the official list of the SGX-ST is not to be taken as an indication of the merits of DBS Bank, the programme or the notes. The SGX-ST assumes no responsibility for the correctness of any statement made, opinions expressed or reports contained herein.
Re-disseminated by The Asian Banker