DBS Bank outshone the competition in a challenging year, with new securitisation structures and a bold liability-management exercise for its own bank capital securities.
Singapore’s bond market was not a one-way street in 2013, with issuance down 50% year on year and investors worried about global interest rates. However, amid less-than-ideal market conditions, DBS devised smarter structures to meet its clients’ needs.
“This is not a balance-sheet game, otherwise it’d be the other local banks sniping at our heels,” said Clifford Lee, managing director and head of fixed income, treasury and markets. “Instead, it is the international banks we are competing against and shows how much the bank has developed.”
A securitisation of progress payments for property developer TG Master, sold through Orchis Capital, revived a format that had died out with the 2008 crisis, and introduced a number of structural innovations and a top credit rating.
DBS also caught the market’s attention with an audacious tender-and-exchange offer, which allowed it to replace old-style preference shares with Basel III-compliant Tier 1 notes. The bank had done exhaustive research on investor needs before embarking on the exercise in November.
The new-style bonds, marketed at a yield of 4.7%-4.9%, drew mixed comments. Investors thought them too expensive and rival bankers argued it was too cheap, but the bank ultimately met its goal of running an investor-friendly exercise that protected bondholders from unnecessary mark-to-market losses.
The exchange was a first in Asia and provided a template for banks wanting to transition to the new-style bonds without the cost of carrying unnecessary capital.
It also showcased DBS’s growing skill at structuring and executing bonds. As the leading Singapore bank, the expertise should support the government’s goal to make the city state a regional bond hub.
DBS also set itself apart by underwriting bonds for a new group of small and medium-sized issuers. The SMEs found the debt market to be a good source of financing as there was little competing supply from large, high-grade corporate issuers, which had pre-funded their financing needs the year before.
DBS had supported several of these SMEs in the secondary, as well as the primary markets. Courts Asia’s debut 4.75% three-year bond of S$125m in April traded at 103 in early December. Lesser-known Hiap Hoe tapped its maiden 4.75% bond due 2016 for S$75 in November – almost double the S$40m size of the original issue in August.
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