Chinatrust breaks new ground

The Taiwanese bank becomes the first to attempt on offshore bond with a complex cumulative perpetual subordinated issue.

Chinatrust Commercial Bank of Taiwan yesterday announced that it is to go to the international capital markets for the first time and launch its inaugural dollar bond. The bank is seeking a minimum of $300 million of upper tier two capital.

The bonds will have a perpetual maturity with a call at year ten. If the bonds aren't called there will be a 100bp step up and the interest will switch from fixed rate to floating. The bonds will be 144A. Fitch has assigned the bonds a long term rating of A-.

Other features include an interest rate deferral option. This will be triggered if the banks capital adequacy falls below 8% or if its cumulative loss exceeds its profits and capital reserves, for a period of six months or more. However, the bank is in good shape at the present. Its capital adequacy ratios are 10.7% and 8% for its tier one capital.

The bank is starting road shows with its sole bookrunner, JPMorgan, next week, going to Hong Kong, Singapore, London and New York next Monday through to Thursday.

The issue is the first Taiwanese bank capital deal in the international markets. After years of lobbying by international investment banks, the regulator in Taiwan has relented and now allows banks to go to the international markets as long as they meet a certain long list of requirements. So while the potential for lots more deals exist, they will be approved on a case-by-case basis. It is not clear at this stage whether or not the Taiwanese authorities have actually approved this deal.