Lead managers Morgan Stanley and CIMB priced a $300 million debut subordinated debt issue for Bumiputra-Commerce Bank Berhad (BCB) yesterday (Wednesday). The lower tier 2 deal has the standard 10 non-call five maturity and was priced on a coupon of 5.125% to yield 5.182%, equating to 205bp over five-year treasuries or 160bp over Libor.
This was the tightest end of a revised price range of 165bp to 170bp over Libor. At this level, the Baa2/BBB- (Fitch) rated deal priced about 2bp to 3bp tighter than RHB Bank on a like-for-like basis.
RHB has a January 2008 lower tier 2 deal outstanding that was trading at about 170bp over Libor at the time of pricing. There is said to be about 8bp to 9bp on the swap curve.
Both RHB and BCB have the same senior and subordinated debt ratings from Moody's. BCB is, however, rated one notch higher by Standard & Poor's on a senior basis, with a BBB- rating compared to BB+ for RHB. As such, some might expect pricing to have been tighter.
But two things stood in its way. Firstly, RHB has never performed well since its launch in January and bankers say it only really started to really settle during August. Since then it has tightened over 40bp.
Bankers say one of the main reasons for the tightening is a lack of Maybank paper in the secondary market. Malaysia's largest bank by assets has a one notch higher sub debt rating from Moody's and a June 2007 issue yielding 85bp over Libor.
Secondly, Korean paper is trading much wider than Malaysia and this makes BCB look expensive on a relative value basis. Korea First Bank, for example, has the same mix of investment and non-investment grade ratings as BCB.
In late September it issued a $200 million lower tier 2 deal with a Ba1/BBB-/BBB (Fitch) rating. It is currently trading just over 100bp wider than BCB at 318bp over Treasuries, or 271bp over Libor.
What helped BCB comfortably over the finishing line was the strong market tone following Standard & Poor's sovereign rating upgrades of Thailand, Malaysia and Indonesia. Malaysia was upgraded from BBB+ to A- and paper traded about 5bp tighter across the board during Asian hours yesterday.
As such, accounts that had been wavering about the indicative pricing, decided to come into a book, which gained enough momentum to be tightened a fraction further. The final order book is said to have closed at the $700 million, with participation by about 48 accounts.
Those accounts which liked the credit came in with sizeable orders. About 40% put in orders for more than $20 million.
By geography, the book split 70% Asia, 20% Europe and 10% US. By account type, it split 41% asset managers, 34% banks, 12% private banks, 6% insurance companies and 7% other. Only about 20% of the book are said to hve participated in previous Malaysian subordinated debt offerings.
Fees total 45bp.
