Singapore's Oversea-Chinese Banking begins exchange offer for 5% notes

By Angela McDaniels

Tacoma, Wash., March 5 - Oversea-Chinese Banking Corp. Ltd. is offering to exchange its outstanding 5% bullet subordinated notes due 2011 for new 5.6% subordinated notes due 2019, according to a company announcement.

The new notes will be non-callable for five years and will rank senior to the existing notes.

The interest rate on the new notes will step up to 7.35% after five years. Unlike the existing notes, the new notes will not have an interest deferral option.

The bank said Standard & Poor's rates the new notes A and the old notes A-. Both the existing and new notes are rated Aa2 by Moody's Investors Service and A+ by Fitch Ratings.

Holders who exchange will receive a principal amount of new notes equal to the principal amount of existing notes accepted.

Holders who elect to exchange all of their notes can apply for additional new notes such that the total principal amount of new notes to be held is rounded up to the nearest multiple of S$250,000. The bank said it plans, as far as practicable, to allocate additional new notes for rounding-up purposes only.

The exchange offer will close at midnight ET on March 23, and the settlement date is expected to be March 27.

In-principle approval has been received to list the new notes on the Singapore Exchange Securities Trading Ltd., according to the announcement.

Existing notes accepted for exchange will be cancelled.

The purpose of the exchange offer is to substitute the existing notes with the new notes that are expected to qualify for full regulatory capital treatment as tier II capital for the first six years.

The bank explained that under the capital adequacy guidelines applicable in 2001 when the existing notes were issued, the existing notes that can qualify as tier II capital for the bank and its subsidiaries have been subjected to progressive reductions of 20% per year from September 2006. Currently, only 40% of the existing notes remain qualified as tier II capital.

Oversea-Chinese Banking is a Singapore-based retail and commercial bank.

© 2015 Prospect News.
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