The attractive yield meant the UK-domiciled bank was swamped with US$21bn of orders, as investors in Asia, Europe and the US scrambled for allocations on the perpetual non-call five-year deal.
"It looks very cheap versus the recent HSBC trade," said one debt banker, referring to the rival bank's US$2.25bn 6.375% perpetual non-call 10-year AT1.
He added that since it priced on Monday the bond has traded strongly so Standard Chartered's appears to offer an excessive premium.
"However, they are probably being cautious and keen to get this executed today ahead of the Easter close."
Standard Chartered's deal is rated Ba1/BB/BBB versus the Baa3/NR/BBB rating on HSBC's, which is now bid at 102 on Eikon.
Standard Chartered began testing investor interest for its bond during Asian hours at initial price thoughts of high 6%, which was subsequently revised to 6.75%.
The bank reported a 25% slide in annual pre-tax profits earlier this month and has been under pressure to raise equity to address deteriorating asset quality on its balance sheet.
Once regarded as the darling of the market, Standard Chartered's performance
has been hit by a slowdown in some
emerging markets.But the bank's share price has jumped by almost 16% since it announced that Bill Winters would replace outgoing CEO Peter Sands at the end of February.
"They are one of the more difficult names, but they seem to be capitalising on the positive momentum following the improvement in credit spreads and share price uplift," said a syndicate banker.
The name may also appeal to investors on the grounds of diversification.
"Technically, it's a new CoCo name. Not a lot of European investors would hold Asian bank CoCos, so this provides you with exposure to the Asia/China story - the marketing doesn't really classify it as a UK or European-focused bank," said Chris Telfer, portfolio manager at ECM Asset Management.
The bank began marketing the deal, offered under 144A/Reg S format, to investors on Tuesday.
CAPITAL STRENGTH
Coupons are discretionary and will not be paid if the group has insufficient distributable items, according to rating agency Fitch. The notes convert into equity if the bank's Common Equity Tier 1 ratio falls below 7%.
December 2014 it had an end point CET1 ratio of 10.7%, putting the distance to the trigger at 368bp, according to CreditSights analysts. " is relatively low among AT1 issuers to date, but since this equates to USD$12bn it looks comfortable," they wrote.
But the gap looks much narrower after applying its "combined buffer requirement", to be phased in from 2016, which puts its CET1 ratio at 8.65% (including a G-SIB buffer of 1% and a Pillar 2A buffer of 0.65%). That would leave a distance of just over 200bp, the analysts added.
Barclays and Standard Chartered are structuring advisers, together with Bank of America Merrill Lynch, Goldman Sachs, JP Morgan and UBS as joint lead managers.
Blogger Comment
Facebook Comment