Public Bank returns to international debt market

Malaysian bank launches record sub-debt offering.

Barclays and Citigroup have priced a $400 million 12-year non-call seven-year Lower Tier 2 issues for Public Bank of Malaysia at the aggressive end of the deal's revised indicative range.

Initially marketed to investors at 90bp to 95bp over mid swaps, guidance was cut to 85bp-90bp. With an issue price of 99.383%, the notes carry a coupon of 5% to yield at 85bp over seven-year mid swaps or 132.7bp over five-year US Treasuries.

The notes, rated Baa1 by Moody's and BBB+ by S&P, offered investors an attractive pick-up over its outstanding similarly rated $350 million 10 non-call five Tier 2 issue launched last June. As of late Friday, the outstanding deal was trading at 60bp over Libor.

The order book was said to be strong, with the deal approximately four times oversubscribed with orders amounting to $1.55 billion. The issue attracted a broad range of investors, including insurance companies, pension funds and private banks, however asset managers and banks accounted for the bulk of the deal, making up 34% and 58% respectively.

Distribution was taken up primarily by Asia, which accounted for about 75% of the book. UK investors accounted for 20%, while the remainder went to investors in Europe.

This will be the third overseas deal from Malaysia this year, following Tenaga Nasional and IOI and represents the largest sub-debt deal to come from a Malaysian bank. It was also the first Lower Tier 2 transaction from an Asian bank with a 12 non-call seven structure.

The longer structure gives Public Bank the chance to extend its credit curve in the cross-border debt market.