Hybrids: Asian retail tier 1 market reopens
Asset managers are part of an unusual issuer mix.
A market that has been devoid of issuance for one and a half years reopened last month when Aberdeen Asset Management successfully launched and priced a 7.9% $400 million perpetual non-call five tier 1 bond via Merrill Lynch. The asset manager was swiftly followed by transactions for BNP Paribas and Lehman Brothers. There are others in the wings, namely an upper tier 2 style deal for International Securities Trading Corporation, via Merrill Lynch and HSBC, and a tier 1 offering for IKB via Deutsche Bank.
"There is lots of money in private banks, and current coupons in the range of 6.5% to 7.5% are attractive," says Martin Egan, head of primary markets at BNP Paribas. "Fortunately the market is reopening in a very controlled fashion so it’s coming back as a potential option for issuers although it does not offer the dramatic cost saving that it did several years ago. It is very much on the radar screen, especially from a diversification of investor base perspective." BNP Paribas managed to raise $600 million with a 6.5% coupon on a perpetual non-call five-year bond.
Over the years Asian dollar retail investors have offered borrowers extremely attractive terms for financing deeply subordinated securities.