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Bond Market News
UBS Prices S$500mn PerpNC5.5 AT1 at 5.6%
June 19, 2024
UBS raised S$500mn via a PerpNC5.5 AT1 bond at a yield of 5.60%, 25bp inside initial price guidance of 5.85% area. The bonds have expected ratings of Baa3/BBB- (Moody’s/Fitch). If not called by 21 December 2029, the coupon will reset to the 5Y SGD OIS rate plus 264.3bp. As compared to HSBC’s recently issued SGD 5.25% Perp (callable by December 2029), the new UBS bonds offer a yield pick-up of 33bp.
Below are some of the summarized terms set out in the newly issued perp.
Dividend Stopper:
UBS cannot, directly or indirectly:
– recommend shareholder dividends
– other cash/kind distributions
– redeem, purchase or buyback shares unless coupons on the Perps have been paid in full OR an equal amount of coupon has been paid in full to a designated third party trust account for the benefit of noteholders.
Discretionary Coupon:
UBS may, in its sole discretion, choose to cancel all/part of any coupons. Besides, UBS will also be prohibited from making coupon payments if Distributable Items (Net profits carried forward plus freely distributable reserves) are less than the sum of coupon payment, all other payments (except redemption payment) by UBS Group AG in respect of any Parity Obligations or Junior Obligations.
Trigger Event:
A trigger Event would occur if the CET1 Ratio as of the relevant publication date is less than the Threshold Ratio of 7%.
Viability Event:
A Viability Event would occur if FINMA has notified the Issuer in writing that it has determined:
– UBS would need a necessary conversion or write-down to prevent it from becoming insolvent, bankrupt, unable to pay a material part of its debts or be a going concern
– UBS’s measures to improve capital adequacy are inadequate/infeasible without public sector support to prevent it from becoming insolvent, bankrupt, unable to pay a material part of its debts or be a going concern.
Following a trigger or viability event, a conversion will occur wherein, each note will be redeemed by delivery of new fully paid ordinary shares.
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