New Maybank Subdebt Offers Alternative to Existing LT2

04 May 2016

Credit and RV Idea

           

New Maybank Subdebt Offers Alternative to Existing LT2

Highlights/Updates:

Maybank priced its USD500m Basel III Subdebt (B3T2) 10.5nc5.5 at 3.905% or T5+255bps from its USD15bn Multicurrency MTN Programme. The issuance is the first USD B3T2 from the Malaysian banks and offers an attractive absolute yield pickup of 151bps over its existing LT2 9/22c17. However, we view that it is fairly priced relative to similarly rated B3T2 instruments in the region such as CCB-Asia 8/24c19 (Z+251bps; T+255bps) and KEBHNB 10/24 (Z+225bps; T+207bps).

Bond Details:

Bond(s)	MAYMK 3.905% 10.5nc5.5 (Price:100.00, YTC: 3.905%; T5+255bps)
Amount Outstanding	USD500m
ISIN	XS1402194952
Rating(s)	Baa2/BBB/NR; Stable
Key Term(s)	·          Subordinated ·          PONV trigger event: Earlier of BNM & PIDM (i) notifying the issuer in writing that a write-off is necessary, without which the Issuer would become non-viable; and (ii) a decision by BNM, PIDM and the Government to make a public sector injection of capital, or equivalent support, without which the Issuer would have become non-viable ·          Write-off of B3T2 will only occur after all Tier 1 with loss absorption features are fully written-off or converted into equity. ·          Write-off is permanent and irrevocable. Partial write-off is allowed. ·          Coupon will reset to 5y USD mid-swap + margin, after the first call date.

Relative Value Commentary:

Maybank’s new B3T2 offers absolute pick-up of 4-28bps over the similarly rated B3T2 CCB-Asia 8/24c19 (YTC: 3.63%; Z+251bps; T+255bps) and KEBHNB 10/24 (YTM: 3.87%; Z+225bps; T+207bps) where it reflects the 2y longer duration over CCB-Asia’s B3T2 and the non-call risk and 2y duration difference over KEBHNB’s B3T2, in our opinion. At 3.905%, the new B3T2 is priced relatively tighter to UOB B3T2 9/26c21 (YTC: 3.49%; Z+210bps; T+205bps), which is rated higher by three-notches. Nonetheless, for investors who are searching for Malaysia’s banking capital instruments, the new B3T2 appears attractive offering 151bps spread on absolute term over the existing LT2 9/22c17 (YTC:2.40%; Z+171bps; T+133bps)  for an additional 4 years tenure.