Taiwan Business Bank may sell first perpetual bond

Taiwan Business Bank (台灣企銀), a state-controlled lender, may sell NT$12 billion (US$354 million) of perpetual bonds in the nation's first sale of debt with no fixed maturity date.

The bank plans to use proceeds from the sale to increase the ratio of capital to assets, which is about 10 percent as of July, before it writes off more bad debt, said Lee Chun-sheng (李俊昇), the lender's executive vice president, in a telephone interview. The planned amount has been increased from the NT$6.5 billion sale announced on the Taiwan Stock Exchange on Aug. 26.

"These bonds will probably be Taiwan's first perpetual bonds," Lee said on Friday.

The lender expects to offer annual interest that is "much lower" than 5 percent on the bonds, Lee said. The coupon will change periodically based on market yields. The bank will probably agree to start redeeming the bonds some time after five years, Lee said. The benchmark five-year government bond yield stood at 2.19 percent as of yesterday, according to the GRETAI Securities Market.

Taiwan Business has a long-term credit rating of "tw-A," the sixth-rank on the 19-level scale of Taiwan Ratings Corp (中華信評), a credit rating venture of Standard & Poor's.

"Issuing perpetual bonds is like selling new shares because the capital is kept forever on the issuer's books," said Susan Chu (朱素貞), a director at Taiwan Ratings. "When I rate it, I will consider a part of it as capital" instead of debt, depending on the terms of the issue. Chu declined to comment on Taiwan Business Bank's planned sale.

The bank may seek buyers for the securities on its own without using a sale manager, Lee said. The bank expects to receive regulatory within a week to sell the securities, Lee said.