Wednesday, 28 September 2022

UOB prices $1.6 billion in covered bond

5 min read

UOB has priced a EUR1.5 billion ($1.6 billion) covered bond.

Koh Chin Chin, head of group central treasury unit of UOB said, “UOB has always been committed to maintaining a presence in the euro covered bond market. We capitalised on the anticipated strong demand for euro covered bonds, which are seen as a safe haven instrument, to print the largest transaction to-date from Singapore despite the challenging market backdrop. The strong support from our investors is testament to their confidence in the credit quality of UOB and enables the Bank to maintain access to capital markets liquidity”.

We also wish to share the transaction highlights for your reference:
Opportune issuance by UOB, the most active Singapore bank in the covered bond market

  • This is the first Singapore covered bond issuance in 2022.
  • UOB took advantage of the strong demand for front-end covered bonds, which has been driven by:

i.  favourable relative value proposition for EUR covered bonds versus government bond yields;
ii.  flight to quality/safe haven;
iii. strong front-end defensive bid to access the covered bond market ahead of the European Central Bank meeting.

  • UOB sees the euro market as one of our core markets for covered bond issuances and is committed to maintaining a presence in the market.

Strong outcome with a rare 3-year tenor and achieved large size of EUR1.5 billion ($1.6 billion), despite challenging markets and competing primary supply

  • UOB managed to print a large EUR1.5 billion ($1.6 billion) transaction, the largest Singapore EUR covered bond ever, with an oversubscribed book despite challenging geopolitical market conditions and competing primary supply.
  • Defensive and rare three-year tenor appealed to investors in the current climate and received very robust investor support across central banks/official institutions, real money fund managers and bank treasuries.
  • UOB now has five outstanding benchmark EUR covered bond transactions with a total of EUR 4.25 billion ($4.69 billion) outstanding.

Very high quality investor base; one of the largest orderbooks from Singapore

  • Very high quality orders from central banks / official institutions and real money fund managers, taking up 55 per cent of the final allocation; the remaining went to banks, insurance and pension funds, demonstrating the confidence in the credit quality of UOB.
  • The final orderbook was approaching EUR1.9 billion ($2 billion) from 56 investors.

Achieved tight pricing; efficient use of covered bond collateral

  • UOB’s EUR covered bond offering priced at EUR Mid Swaps (MS)+7bps, which represented a new issue premium of zero basis points, outperforming recent non-European transactions.
  • Starting initial price guidance was around EUR MS+11bps and this drove momentum in the orderbook, with books reported at more than EUR1.5 billion ($1.6 billion) at 11am CET.
  • Pricing was revised in one swift move with minimal drops in the orderbook, demonstrating appetite for UOB’s offering. Achieved savings of ~30 basis points versus senior unsecured USD funding levels.

Re-disseminated by The Asian Banker

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