Wing Hang Bank, a family-owned mid-tier lender, plans to raise as much as US$300 million from a bond sale early next month, market sources said.
One possible structure is a perpetual bond, although five, seven and 10-year maturities will also be considered. Should the bank go ahead with a five or seven-year bond, a tentative yield of 7.5 to 8 per cent would be floated. A yield of at least 10 per cent would accompany a longer-dated bond, the sources said.
Perpetual bonds have no maturity but sellers can usually buy them back from investors using a call option, which typically begins after five years. Such bonds are popular with banks which use them to boost their capital bases.
Wing Hang sold a US$400 million perpetual bond in April last year.
Should it opt for a bond with a term, the deal would probably be subordinated. Subordinated bond holders stand behind traditional bond holders but ahead of equity holders in the event of default. That requires sellers to offer a higher yield to attract investors.
Standard & Poor's rates Wing Hang BBB-plus, three steps above non-investment grade. Moody's Investors Service rates the bank higher at A2, five notches above non-investment grade.