#Singapore #Covered Bonds #Euro Bonds #UOB

UOB Successfully Launches a 1 Billion Euro Dual-Tranche Covered Bond Offering

In a notable transaction for the financial sector, UOB has announced the successful pricing of a dual-tranche covered bond offering amounting to 1 billion euros. This significant issuance, which features two different maturities of bonds, showcases UOB's strong market presence and innovative financing strategies aimed at attracting a diverse pool of investors.

The dual-tranche offering consists of 500 million euros in 2-year fixed-rate covered bonds, priced at Eur mid-swap (MS) plus 7 basis points (bps), and another 500 million euros in 5-year fixed-rate covered bonds, priced at MS plus 24 bps. These figures reflect UOB's initiative and adaptability in the current financial environment, appealing to varying investor preferences in terms of maturity.

This transaction marks UOB's first euro-denominated covered bond issuance in 2026, and it also represents a significant milestone as the first dual-tranche covered bond offering by an Asian issuer in euros. Notably, this is also the first time since 2023 that an issuer from the Asia-Pacific region has launched a 2-year covered bond in euros.

Investor response has been exceptional, with the total demand peaking at 4.25 billion euros shortly after launch. This overwhelming interest led to the transaction being oversubscribed approximately fourfold, ultimately closing at around 3.9 billion euros. Such robust demand illustrates the high regard institutional investors have for UOB as a quality issuer.

To meet varying investor needs, the inclusion of both 2-year and 5-year bonds allowed UOB to cater to a broad spectrum of buyers, including bank treasury departments, central banks, and asset managers. This strategy not only helped in achieving cost-effective financing but also ensured optimal maturity management for UOB.

Given the strong demand, UOB was able to tighten pricing significantly from initial guidance, sharpening the 2-year tranche by 8 basis points and the 5-year tranche by 6 basis points. The pricing of the 2-year tranche stands approximately 5 basis points below similar levels in Singapore's secondary market, indicating the favorable positioning of the offering amidst competitive rates.

Mevrouw Koh Chin Chin, Head of Group Treasury, Research and Customer Advocacy at UOB, stated, "The robust demand for our Singapore Covered Bonds reinforces Singapore’s position in the global capital markets. Following the success of our recent GBP issuance, our latest euro-denominated covered bond offering has also attracted strong interest from investors, reflecting confidence in UOB’s stability and creditworthiness.

The two-tranche structure allowed us to cater to the diverse preferences of investors while achieving an efficient financing outcome."

Key Highlights of the Offering

• - UOB is the first Asian issuer to carry out a dual-tranche covered bond transaction in euros.
• - The 2-year tranche was strategically positioned to capture investors’ preferences for shorter durations in the current market, attracting interests from bank treasuries, central banks, and official institutions. The 5-year tranche appealed to traditional real-money investors.
• - The peak demand reached over 4.25 billion euros, showcasing strong support from high-quality institutional investors.
• - This issuance further strengthens UOB's position in the European covered bond market while enhancing its diversified funding platform.
• - Based on comparable recent issues, the issuance premium was estimated at -1 to -2 basis points for the 2-year tranche and 0 basis points for the 5-year tranche, with the 2-year tranche pricing 5 basis points lower than similar Singapore bonds in the secondary market.

Distribution Figures

The final order book totaled approximately 3.9 billion euros, with the following breakdown:

• - 2-Year Bonds: 2 billion euros
• - 5-Year Bonds: 1.9 billion euros
• - Distribution: 56% bank treasuries, 20% asset managers, 12% central banks/official institutions, and 12% other.

This robust response undoubtedly underscores the confidence investors have in UOB while solidifying its reputation in the global capital markets.