Martin Lee @ Sg
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OCBC to Issue Preference Shares Again

Soon after the recent OCBC preference shares issuance, OCBC has decided to issue more preference shares to further balance its capital base.

This time round, they will be issuing 10,000,000 preferences share at a price of $100 each. If demand is good, this might be increased to 15,000,000 shares.

Out of these 10,000,000 OCBC preference shares, 2,500,000 will be offered to retail investors while the rest will be offered to institutions.

The retail application will be available via ATM application of Singapore’s three local banks starting from 9am today, until 12 noon on 26th August. The ATM subscription will be subjected to balloting if demand exceeds supply. Since the minimum subsciption this time round is 100 shares (compared to 200 shares previously), more people might be able to apply for it.

The preference shares will provided a dividend of 5.1% per annum which will be paid semi-annually in March and September till 20th September 2018. They are perpertual securities with no fixed maturity dates. They may however, be redeemed by OCBC on 20th September 2018 and each dividend date thereafter (subject to MAS’s approval).

After 20th September 2018, the dividend rate will no longer be fixed at 5.1% p.a. Instead, the rate will be tied to the 3-month Singapore dollar swap offer rate plus 2.5%. Dividends from that point onwards will be payable every 3 months.

The 3-month swap offer rate is a rate that is slightly higher than the 3-month SIBOR. You can find out the historical SIBOR rates from MAS’s financial database. Refer to “interbank 3-month”. For current rates, you can refer to a copy of The Business Times.

The OCBC preference shares are expected to list on SGX from 28th August 2008. More details on the OCBC preference shares offering can be downloaded here:

OCBC preference shares

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6 comments
lioninvestor says 10 years ago

Hi John,

Sorry, I just saw your comment.

I will try to write something on the Citrine Notes.

Reply
lioninvestor says 10 years ago

Hi Lim,

Yes. Very sorry, there was a small typo. Thanks for pointing it out.

Reply
LIM K K says 10 years ago

Hi,

You have mentioned in your article “They may however, be redeemed by OCBC on 20th September 2008 and each dividend date thereafter (subject to MAS’s approval).”

Do you actually mean 20th September 2018?

LIM KK

Reply
John says 11 years ago

Hi, recently there is this launch of Citrine All Weather Booster notes but i cant find the prospectus. It gives

o 100% Principal Protection at Maturity

o Fixed Quarterly Coupon 3% p.a. (SGD) and 4% p.a. (USD)

o Maximum potential total coupon of up to 7% p.a. (SGD) and 8% p.a. (USD)

Linked to shares of 5 Singapore based Companies

· City Developments Limited

· Keppel Corporation Limited

· Singapore Telecommunications Limited

· DBS Group Holdings Limited

· Oversea-Chinese Banking Corporation Limited

o Short Investment Tenure of 3 years

I was thinking about buying such notes compared to ocbc preference shares … Can you give me some advice on such notes? How do they function? Are they safe since they are principle protected? 3% is quite a lot and it could reach up to 7%. Does such notes equal to structured products?

Reply
lioninvestor says 11 years ago

Hi Cecilia,

We are all here to learn. I appreciate your questions.

1) The terms of the new offering is different (div rate after 2018), thus they can’t just give it to those who have applied earlier. In any case, the monies have already been returned to them.

2) Yes, the supply will increase. But a preference share is quite different from an ordinary share. You might want to read my earlier article on preference shares here:

http://www.martinlee.sg/preference-shares/

3) To answer that question, you will have to look at the dividend payout policy of OCBC. The board will have to decide how much dividends to pay out to ordinary shareholders while at the same time ensuring they have sufficient capital to run the business.

Don’t forget also that the money raised from the preference shares can be used to grow the business (and earnings).

4) It should be 20th Sep 2018. I left out the year earlier. Here are the 3-month SIBOR rates.

1989 Jan 5.38
Feb 5.44
Mar 5.25
Apr 5.31
May 5.31
Jun 5.31
Jul 5.25
Aug 5.19
Sep 5.31
Oct 5.38
Nov 5.56
Dec 5.63
1990 Jan 6.50
Feb 6.13
Mar 6.44
Apr 6.81
May 8.00
Jun 7.31
Jul 7.25
Aug 6.81
Sep 6.69
Oct 6.69
Nov 5.88
Dec 4.81
1991 Jan 4.81
Feb 4.81
Mar 4.63
Apr 5.19
May 5.75
Jun 6.13
Jul 5.75
Aug 5.31
Sep 4.88
Oct 3.88
Nov 3.50
Dec 3.00
1992 Jan 3.63
Feb 3.50
Mar 3.44
Apr 3.38
May 3.25
Jun 3.00
Jul 2.50
Aug 2.38
Sep 1.63
Oct 2.06
Nov 2.44
Dec 2.31
1993 Jan 2.31
Feb 2.00
Mar 1.69
Apr 2.88
May 2.88
Jun 2.81
Jul 2.81
Aug 2.75
Sep 2.81
Oct 2.00
Nov 2.63
Dec 3.31
1994 Jan 3.31
Feb 3.13
Mar 3.50
Apr 4.00
May 3.69
Jun 3.94
Jul 3.56
Aug 4.13
Sep 3.81
Oct 3.44
Nov 4.63
Dec 4.38
1995 Jan 3.13
Feb 3.25
Mar 2.88
Apr 2.06
May 1.31
Jun 2.44
Jul 3.31
Aug 2.81
Sep 2.75
Oct 2.94
Nov 2.63
Dec 2.56
1996 Jan 2.75
Feb 2.13
Mar 2.31
Apr 2.44
May 2.50
Jun 2.94
Jul 3.50
Aug 3.44
Sep 3.25
Oct 3.44
Nov 3.56
Dec 3.13
1997 Jan 2.75
Feb 3.06
Mar 3.50
Apr 3.50
May 3.88
Jun 3.63
Jul 3.94
Aug 4.38
Sep 3.94
Oct 5.25
Nov 6.00
Dec 6.75
1998 Jan 7.75
Feb 5.38
Mar 5.00
Apr 5.13
May 6.63
Jun 6.25
Jul 5.50
Aug 5.13
Sep 4.13
Oct 2.63
Nov 2.25
Dec 1.88
1999 Jan 1.88
Feb 2.25
Mar 1.75
Apr 1.25
May 1.63
Jun 1.88
Jul 2.25
Aug 2.25
Sep 2.50
Oct 2.69
Nov 2.50
Dec 2.75
2000 Jan 2.50
Feb 2.44
Mar 2.38
Apr 2.50
May 2.75
Jun 2.50
Jul 2.56
Aug 2.56
Sep 2.56
Oct 2.69
Nov 2.81
Dec 2.81
2001 Jan 2.50
Feb 1.88
Mar 2.38
Apr 2.25
May 2.25
Jun 2.25
Jul 2.38
Aug 2.25
Sep 1.81
Oct 0.88
Nov 1.13
Dec 1.25
2002 Jan 1.00
Feb 0.94
Mar 1.06
Apr 0.88
May 0.88
Jun 0.88
Jul 0.75
Aug 0.88
Sep 1.38
Oct 1.06
Nov 0.81
Dec 0.81
2003 Jan 0.75
Feb 0.69
Mar 0.75
Apr 0.69
May 0.69
Jun 0.63
Jul 0.69
Aug 0.88
Sep 0.81
Oct 0.88
Nov 0.69
Dec 0.75
2004 Jan 0.75
Feb 0.75
Mar 0.75
Apr 0.75
May 0.75
Jun 0.81
Jul 1.06
Aug 1.31
Sep 1.44
Oct 1.38
Nov 1.38
Dec 1.44
2005 Jan 1.75
Feb 1.94
Mar 2.13
Apr 2.13
May 2.06
Jun 2.06
Jul 2.00
Aug 2.06
Sep 2.38
Oct 2.63
Nov 3.19
Dec 3.25
2006 Jan 3.38
Feb 3.38
Mar 3.44
Apr 3.44
May 3.44
Jun 3.56
Jul 3.56
Aug 3.50
Sep 3.44
Oct 3.50
Nov 3.44
Dec 3.44
2007 Jan 3.44
Feb 3.38
Mar 2.94
Apr 2.63
May 2.38
Jun 2.50
Jul 2.56
Aug 2.75
Sep 2.63
Oct 2.50
Nov 2.56
Dec 2.38
2008 Jan 1.69
Feb 1.56
Mar 1.31
Apr 1.44
May 1.25
Jun 1.19
Jul 1.00

Reply
Cecilia Ching says 11 years ago

Hi Martin

I accidentally found your interesting website when I was searching for info on the OCBC preference shares. Thank you for the articles. It is very informative especially for me as I am a novice when it comes to financial investments.

It puzzled me why OCBC wants to issue more preference shares when the recent offer was oversubscribed. Hope you can enlighten me on the following queries:

1) Why can’t OCBC just accept those applications for pref shares submitted earlier instead of offering another round, apart from the fact that you can buy in minimum of 100 shares instead of 200?
2) By increasing the pref shares base, would it means in future it is harder to sell it at the open market since they are in abundant.
3) Pref shares holder are given dividends before the ordinary share holders. Would that translate that lesser amount of dividend will be given to ord share holders?
4) After 20th September, the dividend rate will no longer be fixed at 5.1% p.a. Instead, the rate will be tied to the 3-month Singapore dollar swap offer rate plus 2.5%. Dividends from that point onwards will be payable every 3 months. Would you be able to give me a rough idea what is the approx rate like. (I know you have given the way to calculate but I just couldn’t figure it out)

Looking forward to receive your reply.

With regards
Cecilia

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