Cathay Financial Holding Co (國泰金控) intends to raise NT$20 billion (US$608.7 million) via the issuance of subordinate corporate debt, the company said in a stock exchange filing yesterday.
With a face value of NT$1 million each, the debt will have a seven-year maturity, the filing said.
The recapitalization plan, pending regulatory approval in about a week, aims to boost the financial service provider’s capital adequacy and fund its future mergers-and-acquisition activities “including expansion in China,” Cathay Financial president Chen Tsu-pei (陳祖培) said by telephone yesterday.
Once the refinance plan is completed, Cathay Financial’s capital adequacy ratio is expected to increase by 12 percent to 142 percent, he said, adding that the company had yet to come up with a final timetable on the completion of the fundraising plan.
The current low interest rate environment, however, provides an incentive for financial institutions to raise capital, Chen said, estimating that the company’s to-be-released debts would return about 2 percent interest, which will be subject to market conditions once the issuance materializes.
On Monday, Fubon Financial Holding Co (富邦金控) said in an exchange filing it intended to raise as much as US$900 million from the sale of global depositary receipts (GDR) — the largest fund-raising plan in the nation’s history.
Fubon Financial will find “the best timing” to complete the issuance of the GDRs, which will also be used to boost its capital adequacy and fund its future operations, local media quoted company president Victor Kung (龔天行) as saying yesterday.
“In addition to propping up our capital position, we believe that fundraising will give management more flexibility in evaluating expansion opportunities domestically and in China,” Bradford Ti (鄭溫煌), an analyst at Citigroup Global Markets, said in a research note.
Ti said Fubon would probably use the capital to fund its plan to acquire Nan Shan Life Insurance Co (南山人壽) or buy small rivals in China once a cross-strait memorandum of understanding on financial supervision is signed and details on market access are resolved, he said.
Chen yesterday did not provide information on Cathay’s progress on the Nan Shan Life deal, citing confidentiality.
Shares of Cathay Financial and Fubon Financial yesterday dropped 1.7 percent and 3 percent respectively to close at NT$48.10 and NT$32.50.
Meanwhile, Cathay United Bank (國泰世華銀行), the banking subsidiary of Cathay Financial, teamed up with EasyCard Corp (悠遊卡公司) yesterday to launch a new all-purpose co-branded credit card, targeting young cardholders.
The updated credit card allows cardholders to pay for mass rapid transit fairs and small-amount purchases at the transportation card company’s 10,000-odd outlets while working as an ATM card for cash withdrawals.
An estimate by MasterCard Worldwide says the nation’s youth is expected to have a consumption power of NT$864 billion by 2016, its newly appointed head in Taiwan, Hong Kong and Macau, Danny Cheung (張懷堅), told a launch ceremony.
ADDITIONAL REPORTING BY KEVIN CHEN
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