Bank of Ceylon on Monday night priced a $500 million five-year bond that was arranged by UBS, a rare sole led trade out of Asia.
The deal is expected to propel UBS up the league tables. At the end of last week, the Swiss bank was placed fourth in the G3 league tables for Asia behind Citi, Standard Chartered and HSBC, according to Dealogic. Meanwhile, it is placed second in the G3 high-yield league tables, just slightly behind HSBC, which has a market share of 16.3%, having raised $2.69 billion. UBS is just slightly shy of that, having raised $2.65 billion with a 16% market share.
Bank of Ceylon is rated BB- by Fitch and B1 by Moody’s. However, as it is wholly owned by the Sri Lankan government and considered a quasi sovereign, some may not consider it a true high-yield credit. UBS has been active on the high-yield side, and has placed much of the bonds with its private banking clients.
However, according to one source, this was not a private banking play and the majority of the deal was placed to fund managers, with strong interest from emerging-market investors. There was no private banking rebate offered.
The deal attracted an order book of more than $2 billion. The initial guidance was 5.5% and the bonds eventually priced at 5.325%, in line with the final guidance, and at par.
The Bank of Ceylon 2017s traded at a yield of 4.92% before the deal was announced. Based on the swap curve and the Sri Lankan outstanding bonds, the one-year extension was worth about 25bp to 30bp, so the new bonds priced roughly flat to the bank’s outstanding curve.
When Bank of Ceylon issued its $500 million debut bond in April last year, it paid a yield of 6.875%, so its pricing has tightened considerably since then. Bank of America Merrill Lynch, Citi and HSBC were the arrangers.
There is a change-of-control put at 101 if the government of Sri Lanka ceases to own at least 51% of the bank. Other covenants include a negative pledge.
Bank of Ceylon, which was founded in 1939, accounts for 22.8% of the total assets of the entire Sri Lankan banking system and plays a key role in the country’s economy. It funds most of the state’s dollar needs and is also well positioned to tap the dollar market as it is hedged by the inflow of remittances. More than 40% of worker remittances are routed through the Bank of Ceylon.