Temasek returns with a dual-tranche S$1 billion deal

Only two weeks after Temasek Holdings (Private) Limited issued a S$1 billion 10-year benchmark deal, the Singapore investment house returned to the local bond market with a dual-tranche Reg-S S$1 billion ($708 million) transaction on Wednesday night.

The sale was under Temasek Financial Limited's global medium-term note programme and consisted of two $500 million securities. The first tranche is set to mature on March 5, 2025, paying a coupon of 3.785%. The second note holds a 4.0475% coupon and will mature on March 5, 2035. Both were re-offered at par hence yielding 3.785% for the 15-year and 4.0475% for the 25-year notes.

At final pricing, the spreads were quoted at 50bp over the Singapore dollar swap offer rate (SOR) for the 2025s and 65bp over the SOR for the 2035s.

The two issues resulted from reverse enquiries generated from the February S$1 billion 10-year deal that just closed. Given that the interest from a select few reverse-enquiry investors was enough to absorb the supply, the deal was not offered to a broader investor base.

The deal played out in a very similar manner to the $500 million 30-year tap issued by Temasek in October 2009, which was effectively driven by reverse enquiry from US investors in response to the $1.5 billion 10-year securities that were sold in the same month (October 2009).

This time around, given the nature of the deal, the bonds were mainly placed with onshore Singapore investors. For the 2015s, insurance companies made up the bulk of allocation with 68%, asset managers bought 6%, sovereign and quasi-sovereign investors took 23% and banks were sold the remaining 3%. Distribution for the 25-year bonds had insurance companies take 84% of demand and asset managers 16%.

As one banker explained, "the local dollar market welcomed these issues as they completed the AAA corporate benchmark credit curve in the 10-, 15-, 20-, 25- and 30-year tenors".

The yield curve for this deal and the 2020s should further develop the local currency market by providing such benchmarks for future corporate issuers to price off.

"This has only just been established for the first time in Singapore and it will help develop the Singapore dollar bond market even further," said one source close to the deal.

Moody's rated the issue Aaa and Standard and Poor's gave it a AAA. Both agencies based their investment-grade ratings on the strong financial profile at the holding company level, Temasek's sound corporate governance and its solid investment portfolio.

Elizabeth Allen, senior credit officer with Moody's, wrote in a press release that "Temasek's management's demonstration and commitment to financial discipline is an important driver in its rating, while its objective of maximising long-term shareholder returns allows it to have a very flexible investment strategy and investment horizon".

It is expected that the dual-tranche deal alongside previous notes issued under the global medium-term note programme will strengthen Temasek's liquidity and spread out its debt maturity.

During trading yesterday, the 2025s traded up to a bid/offer price of 100.60/101.00. The 2035s were more tightly held with better bids in the market at 101.00 levels but with no offers. In comparison, the Temasek 2020s closed yesterday's session with spreads of 33.5bp over the SOR with the yield slightly tightening to 3.23%.

The deal was jointly arranged by DBS, Standard Chartered, ANZ and HSBC, with DBS as the billing and delivery agent.

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