Bank of East Asia confirms renewed Asian AT1 strength

Bank of East Asia (BEA) issued an almost five times subscribed $650m perpetual non-call five AT1 yesterday (Wednesday), in the latest sign the Asian market is again proving conducive to bank capital after a bout of volatility.

Bank of East Asia web

The mandate for the Hong Kong bank was announced on Tuesday and yesterday launched with initial price guidance of the 6.25% area for a perpetual non-call five trade, rated Ba2/BB. Later in the day, final price guidance was set at the 5.875% area, plus or minus 5bp, will price in range, on the back of orders above $3.8bn, including $350m joint lead manager interest. The deal was then sized at $650m and priced at 5.825%, with the final order book above $3.1bn, comprising 189 accounts.

Asia took 82% and EMEA 18%. Asset managers and fund managers bought 67%, private banks 27%, insurers 3%, and banks and corporates 3%.

According to Francis Woo, director, Asia debt syndicate, at passive lead manager Crédit Agricole CIB in Hong Kong, after the tightening of 42.5bp during execution, the ultimate pricing was roughly flat to fair value. The deal then traded up to 100.75/100.85.

Woo noted that the issuer had managed to attract the strong investor interest on a busy but stable day in Asian markets.

“They were a healthy five times oversubscribed,” he said. “For Bank of East Asia to come flat to the curve really just shows the strength of the market.”

Like other regions, in preceding weeks Asian markets had been hit by an increase in volatility on the back of Covid-19 and related US political developments.

“Obviously Trump, Covid, and the stimulus talks didn’t help,” said Woo, “and of course we had Chinese Golden Week just last week. A lot of market participants were sidelined and we didn’t see much activity.

“But as we’ve seen the tone improve in terms of risk appetite and found some stable ground, we are seeing AT1 transactions being mandated and executed, showing the resilience of the market here in Asia.”

Bank of East Asia’s trade came after Kasikornbank sold a $500m perpetual non-call five AT1 last Thursday (8 October), which was only the third AT1 from Thailand.

The oversubscription and absolute level of demand, at $2bn, for Kasikornbank’s Reg S deal compare with a $1.75bn book for a $750m perpetual non-call five 144A/Reg S transaction for compatriot Bangkok Bank on 15 September. Woo noted that Kasikornbank was able to generate such demand in spite of coming to market during Chinese Golden Week.

“They started with wider initial price guidance than Bangkok Bank,” he added, “but given the better tone in the market, they were able to achieve stronger oversubscription.”

Kasikornbank tightened pricing from initial price guidance of the 5.7% area to 5.28%, while Bangkok Bank moved from the 5.4% area to 5%. Both trades are rated Ba1.

The day after Bangkok Bank’s deal, China’s ICBC on 16 September hit the market with a $2.9bn perpetual non-call five Reg S AT1. Following IPTs of the 3.95% area, the new issue was priced at 3.58%, driven by onshore Chinese demand.