OCBC Bank plans to sell $1 billion worth of preference shares to major investors in the next few days to shore up liquidity. The last issue was in July 2008 and August 2008, right before global financial crisis.
The bank will be offering a coupon rate at 4% that will be paid twice-yearly.
The payout is non-cumulative, which means that if the bank does not pay dividends this year, it is not obliged to make it up the following year. The shares will be callable after 5 1/2 years in 2018. This placement will be offered only to institutional investors and sophisticated investors, with a minimum tranche of $250,000.
If you think Preference Share price will not drop, take a look at how OCBC 5.1% Preference Share performed since inception. It has dropped as much as 15% during financial crisis.
Below are past preference shares issued by OCBC:
- January 2003 – Amount: $500 million; Dividend: 4.5 per cent
- May 2003 – Amount: $396 million; Dividend: 4.2 per cent
- January 2005 – Amount: $400 million; Dividend: 3.93 per cent
- June 2008 – Amount: $1.5 billion; Dividend: 5.1 per cent
- August 2008 – Amount: $1.5 billion; Dividend: 5.1 per cent