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Subordinated debt issuers get mixed reception

If much-needed domestic bank consolidation ever gets off the ground in Taiwan, those banks that have brought successful subordinated debt issues to the market might be the most likely consolidators. Successful issues are a sign of confidence on the part of the market in a specific bank, and last year Taiwanese banks emerged to test their popularity.

They tapped the international capital markets for the first time since 1998, with three banks attempting subordinated debt issues that had markedly different receptions.

This perhaps suggests that a vibrant flow of deals from Taiwan will not emerge in the immediate future. In the longer term, however, with the expected consolidation in the sector, the bigger banks are likely to require substantial offshore long-term capital to fund acquisitions.

Chinatrust Commercial Bank, via lead manager JPMorgan, made the initial breakthrough in March 2005 with a US$500 million upper tier 2 perpetual deal, callable after 10 years.

The Reg S/144A bond attracted 155 investors in an order book totalling nearly US$4 billion. “It was the first of anything out of Taiwan for a very long time and if you wanted access to Taiwan per se you simply had to be in that deal,” says Fergus Edwards, head of syndicate for Asia at JPMorgan in Hong Kong.

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