United World Chinese Commercial Bank has become the first Taiwanese issuer of Hong Kong dollar debt, raising HK$300 million ($38.5 million) via a three-year, floating rate certificate of deposit (FRCD). The issue will be priced at par with a coupon of 3-month HIBOR plus 30 basis points. UWCCB is rated A3 by Moody's and demand for the relatively small issue should be robust given that no other Taiwanese credits are available.
UWCCB is 30% owned by the Taiwan government and is the island's eighth biggest bank in terms of assets. "We are planning to increase our presence in Hong Kong by upgrading our representative office into a full branch in the near future," says Andrew Tsai, senior vice president and general manger of UWCCB's international banking division. The fund-raising is UWCCB's first ever debt issue and some of the funds raised will be used to finance the bank's Hong Kong expansion.
Deutsche Bank is lead manager and sole bookrunner for UWCCB's issue. The syndicate for the issue is still being formed. FRCDs are widely viewed as a form of low disclosure bond, which, though targeted at banks, can wind up in the hands of other investors. This low level of disclosure has long made FRCDs a favourite fund-raising instrument for mainland China banks to raise money through their Hong Kong branches.
For similar reasons, Taiwanese banks will no doubt like them, though political considerations have so far kept them at bay. UWCCB's issue might prove a trigger for the seven Taiwanese banks that already have Hong Kong banking licences to start raising money locally.
No doubt HSBC, which sells the bulk of Hong Kong dollar debt issues, will be hoping to get a sniff of the action as and when the next Taiwanese bank steps forward.
