SINGAPORE/HONG KONG, March 5 (Reuters) - Singapore's Oversea-Chinese Banking Corp on Thursday offered to exchange existing S$1 billion ($643.9 million) of local currency bonds due in 2011 for new callable notes with longer maturities and higher yields.
The new notes would qualify under Tier 2 capital for the lender for the first six years of their lifespan, providing Singapore's third-biggest lender with a better mix between its Tier 1 and Tier 2 capital, OCBC <OCBC.SI> said in a regulatory filing.
OCBC is offering to exchange the 5.00 percent bonds due in 2011 <SG013227977=> for a new 10-year note that will be callable in March 2014 and will offer a coupon of 5.60 percent.
The lender said it would raise the coupon yield for the new bonds to 7.35 percent should it not redeem the bonds in 2014.
Fitch estimated that the move, if fully realized by bondholders, would allow OCBC to improve its capital adequacy ratio by about 0.6 percentage point.
Banks worldwide are raising money to improve their capital cushions. OCBC's core tier 1 capital adequacy ratio (CAR) was 11 percent as of the end of 2008, leaving it in a good position, according to Fitch.
"OCBC is entering an extremely difficult operating environment with a strong capital cushion," Fitch said in its statement.
OCBC's new notes will be rated A-plus by Fitch, A-minus by Standard & Poor's and Aa2 by Moody's, the same as the existing notes.
