HONG KONG, Sept 13 (Reuters) - The world’s biggest sale this year of bonds for meeting Basel capital requirements - $3 billion worth by Bank of China’s Hong Kong unit - will encourage other Asian banks, particularly Chinese ones, to tap the market, bankers said.
State-backed Bank of China Hong Kong (BoCHK) sold the so-called additional tier 1 (AT1) bonds late on Tuesday, in a deal exceeding both price and size expectations.
The AT1 bonds are a key part of regulators’ post-financial crisis armoury because they allow for debt to be converted into equity when a bank’s capital falls below a certain level - imposing the loss on investors instead of taxpayers.
Bank of China Hong Kong’s sale drew over $5.4 billion in final orders, according to IFR, a Thomson Reuters publication,
The strong investor interest led to the deal size being raised to $3 billion from the original $1.5 billion-$2 billion, IFR said.
BoCHK’s deal was the largest dollar-denominated AT1 bond in Asia, and the largest such bond globally so far this year.
The bonds were priced to yield 5.90 percent, less than the initial expectation of 6.30 percent.
“This really reopened the market,” said a senior debt capital markets banker.
Market jitters over Sino-U.S. trade tensions, which have hit emerging markets hard, meant that banks looking to sell AT1 bonds a few months ago would have had to pay a much higher coupon on the debt.
“Issuers were electing to stay on the sidelines until market conditions improved”, said one senior debt capital markets banker not involved in BoCHK’s deal.
One banker involved in this week’s transaction predicted other potential issuers will see the BoCHK bond as a “pricing benchmark”.
The bankers spoke on condition of anonymity as they were not authorised to talk to the media.
Beijing-based Bank of China, Cinda International, Citigroup and Goldman Sachs were joint global coordinators on the deal. (Reporting by Julia Fioretti; Editing by Richard Borsuk)