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DBS transaction a first for Singapore

DBS transaction a first for Singapore

(3 August 2015 – Singapore) DBS Bank successfully priced the issue of US$1 billion ($1.37 billion) fixed rate covered bonds due 2018.

It will be DBS’s first issue under its US$10 billion Global Covered Bond Programme established on 16 June 2015.

The competitive pricing of this issue follows the announcement of the group’s strong first half 2015 financial results and a successful roadshow in Asia, Europe and the United States.

DBS was also granted the ECBC Covered Bond Label on 29 June 2015.

This quality label was the first granted by The Covered Bond Label Foundation to an issuer outside the European Economic Area, and further enhanced visibility of DBS’s covered bond initiative to global investors.

The issue attracted orders of approximately US$1.37 billion from over 40 investors, with banks anchoring the order book and accounting for 62 percent of orders.

Orders were received across 16 countries with a high level of representation from Asia at 51 percent.

DBS chief financial officer Chng Sok Hui said, “We are very pleased with the strong interest received from global investors in our first covered bond issuance, which allowed us to price at tight spreads even under current difficult bond market conditions.

“With the issue, we have been able to engage a fresh group of investors, and access liquidity with greater cost efficiency, lowering our overall funding cost.”

“This inaugural issuance is a milestone for the Singapore covered bond market and it paves the way for greater participation in the future by investors and issuers in this new asset class.

“As the largest bank in Singapore and a leading bank in Asia, we are proud to have taken the lead in opening up this market.”

DBS, Deutsche Bank, J.P. Morgan and Société Générale were mandated as Joint Global Coordinators, Joint Lead Managers and Joint Bookrunners, and Barclays and Citibank as Joint Lead Managers and Joint Bookrunners for the issue.

The issue is expected to be rated Aaa/AAA by Moody's and Fitch.

Covered bonds are rated higher than senior unsecured debt as investors have recourse to both the issuer and a portfolio of mortgage loans and other assets.

The expected Aaa/AAA ratings would allow banks to hold DBS’s covered bonds as high quality liquid assets and count towards Basel’s liquidity coverage ratio requirement.

The covered bonds will bear a fixed coupon of 1.625 percent per annum payable semi-annually in arrear, equal to a spread of 37 basis points over mid-swaps, well below the level for new senior unsecured USD debt issues by bank issuers of similar rating to DBS.

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