With Deutsche Bank and JPMorgan as joint bookrunners, the majority-government owned bank is planning to raise $300 million from a ten non-call five offering. After Singapore, the team moves to Hong Kong on Friday, then Frankfurt the following Monday and London on Tuesday, before pricing of the reg S deal either Wednesday or Thursday.
Pricing has been given a considerable boost by Standard & Poor's decision to lift the bank's senior debt rating by one notch from BBB- to BBB. Previously its subordinated debt had been assigned a non-investment grade rating of BB+, but this will move up one notch to investment grade territory as well.
Moody's and Fitch by contrast, rate Maybank's senior and subordinated debt at the same Baa2 level. The one notch discount has not been applied in either instance, because both agencies consider Maybank's stand-alone rating to be capped by the sovereign ceiling.
The low S&P rating and the subordinated status of Maybank's outstanding bond issue means that the deal has traditionally been the highest yielding instrument in Malaysia's tier 1 credit universe. At Asia's close (Tuesday) the 7.125% September 2005 deal was bid at 105.43% to yield 5.31% or a spread of 203bp over Treasuries. It is now being quoted over a two-year Treasury.
In terms of benchmarks for the new deal, which will be priced at a spread to five-year Treasuries, the most comparable bonds are probably an outstanding four-year deal from Petronas, a five-year deal from Tenaga and a four-year deal from Hong Kong's Bank of East Asia, which has a subordinated debt rating of Baa2/BBB.
The 7.125% October 2006 bond from Baa1/BBB rated Petronas is still being quoted over a five-year Treasury and closed trading in Asia yesterday at a bid price of 106.28% to yield 5.5% or 96bp over Treasuries. Baa3/BBB rated Tenaga has a 7.625% 2007 bond bid at 107.74% to yield 5.8% or 126bp over Treasuries. Slightly wider again is the Bank of East Asia 7.5% February 2006 which is bid at 104.23% to yield 6.2% or 166bp over Treasuries.
Petronas and BoEA provide neat pricing caps at either ends of the spectrum and Maybank is likely to fall somewhere in between. But it is unlikely to price wider than BoEA, even though it is slightly lower rated, because is is considered more of a leveraged play on Malaysia Inc. Key to its success, therefore, will be whether it can come through Tenaga, which has always historically been considered the weakest of the sovereign related troika.
Despite the fact that Petronas sucked $2.7 billion out of the bond markets last week with its multi-tranche issue, Maybank is still likely to be well received because it is relatively small, and a rare issuer. Indeed, its new deal will be the only one to offer pure exposure to the Malaysian banking sector - its outstanding deal is considered illiquid and has already begun to amortise for regulatory capital purposes.
Maybank is Malaysia's second largest company by market capitalisation and because of its 52.2% government-ownership and domestic revenue base (80% of the total), the bank is a pure Malaysian play. Funds are being raised to replenish those that have already begun to amortise and to boost tier 2 capital.
At the end of December, the bank reported a CAR of 13.29% of which tier 1 accounted for 9.49%.
