|
EON Bank Bhd's
decision to tap US dollar funds through a US$150 million (US$1 = RM3.80)
10-year surbodinated bonds rather than domestic funds has been tied to
cost-saving. Sources said the move is due to the bank's plans to use some of
the bonds' proceeds for its offshore operations. This will help save the
bank the cost of converting the ringgit into US dollar if it decides to tap
local funds, said a local treasury head.
Sources said the bank is
currently awaiting for approvals from the relevant authorities for the
bonds.The bank is likely to target the bonds at Asian investors in countries
like Hong Kong and Singapore. EON Bank officials were not available for
comment. The bank is expected to begin its investor presentation as early as
next week. ING is believed to be the lead manager for the bond issue.
Sources said the US dollar-denominated bonds are likely to fetch better
coupon rates compared with local bonds.
This is partly due to the less attractive local bond yields as a result of
last year's bonds selldown. Overseas interest rates are also more attractive
than local rates, said bond traders.Bond traders said local financial
institutions are generally not interested in subordinated bonds which will
limit the demand and cost of bonds.The limited demand for such bonds in the
local market will see investors asking for better prices and coupon rates
which would make such bonds issue quite costly," said a bond trader.
Sources said the decision to tap foreign funds is timely and makes a lot of
sense as local bond yields will make subordinated bonds a costly affair.
Furthermore, they said, EON Bank can benefit in the event of Malaysia
unpegging the ringgit against the US dollar.Global rating agency Moody's
Investors Service has assigned first time ratings of Baa2 to EON Bank, one
notch below Malaysia's sovereign ratings of Baa1.EON Bank's rating, Moody's
second lowest investment grade, reflects the likelihood of the bank
receiving regulatory support from the Government, and that the bank has
relatively sound financial strength, said Moody's.EON Bank has also been
assigned a D financial bank strength ratings by Moody's which reflects its
car retail franchise and its expansion into the competitive corporate
lending segment.
|
