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Bond Market News
HSBC Prices Largest SGD AT1 Deal, Raising S$1.5bn at 5.25%
June 7, 2024
HSBC raised S$1.5bn via a PerpNC5.5 AT1 bond at a yield of 5.25%, 37.5bp inside the initial guidance of 5.625% area. The subordinated notes have expected ratings of Baa3/BBB (Moody’s/Fitch), and received orders over S$1.85bn, 1.2x issue size. The notes are callable on 14 June 2029 to 14 December 2029. If not called by 14 December 2029, the coupon will reset to the 5Y SGD Overnight Indexed Swap (OIS) plus 223.7bps then, and each fifth anniversary date thereafter. A trigger event will occur if the CET1 ratio falls below 7%, wherein the notes will be fully convertible into equity. Proceeds will be used for general corporate purposes, and to further strengthen the issuer’s capital base pursuant to requirements under UK CRR. 71% of the new notes were allocated to private banks, 20% to asset and fund managers, 6% to banks, and 3% to insurance companies. By region, Singapore took 80%, rest of Asia 18%, and EMEA 2%.
This is the largest deal done by a bank in the SGD market, tied with the likes of DBS’s 5.75% Perp and OCBC’s 5.1% Perp, both of which were issued in 2008 and have since been redeemed by the issuers. Deals of such size were otherwise seen from sovereign and state-backed issuers such as the Land Transport Authority, Housing & Development Board, and Temasek. The second largest SGD AT1 deal seen was from DBS, which issued a 3.98% Perp in 2018. The new HSBC bonds are priced at a premium of 15bp to UBS’s 5.75% SGD Perps, callable on 21st August 2029, that yield 5.1%.
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