PowerSeraya, one of the three generating companies spun off from Singapore Power, closed its inaugural Singapore dollar bond yesterday. The company raised S$350 million ($195 million) for seven years at 80bp over the swap offered rate (SOR), up from the original targeted size of S$250 million.
Priced at par, the bond carries a coupon of 3.97%. JPMorgan and OCBC led the deal and they had initially gone out with price guidance of 85bp-90bp. This was revised down to 80bp-85bp last Friday before closing right at the bottom on that reduced range on Monday.
In total some S$1.25 billion of orders were generated, an oversubscription of 3.6 times. In the end some 62 separate accounts participated in the deal, 94% of which came from Singapore with 4% from Hong Kong and 2% from Europe.
Of the types of accounts that participated, 30% were insurance companies, 27% were banks, 24% were asset managers, 10% were private banks and 9% were corporates.
Interestingly, this deal was bookbuilt, going against the grain in a city where companies like to see their lead managers undertake bought deals. But according to bankers close to the transaction, if the bookrunners had agreed to buy the deal, the issuer probably could not have got as tight pricing as it did through the bookbuilding process.
Indeed, those bankers say that in initial talks, most investors were talking about requiring levels of 100bp over the SOR to participate, but as the book generated momentum, the bookrunners were able to get them down to the 80bp level, saving PowerSeraya 20bp in the process.
But the deal did have some hurdles. Firstly the deal is not rated and there are few comparables in the market to give an indication of either price. But on the credit side, PowerSeraya is 100% owned by Temasek, so in effect is 100% government owned, which must have given some comfort to investors.
However during the investor meetings, Temasek was apparently quick to point out that it is sticking to its ambitious privatisation drive, which will see PowerSeraya (along with Tuas Power and Senoko Power, the other two gencos) sold off.
But given that this privatization has been in the pipeline for a number of years, with no discernible movement, investors could be forgiven for thinking that for the time being PowerSeraya's credit stood as a Temasek credit. That assumption is frankly reflected in the price of the offering, which at 80bp is the equivalent of a single A rated paper.
This is commensurate with similarly government owned issuers in Singapore where the credit has been affected by government privatisation plans. Indeed in the covenants on the PowerSeraya deal there is specifically no maintenance of ownership clause.
"Investors were buying this as a private sector credit," says one banker. This deal is the latest in a small string of Singapore power deals that are likely to come to market in coming months.
After PowerSeraya, will come SenokoPower, a deal being led by DBS. In October, Morgan Stanley and DBS are likely to bring Singapore Power (which is now a transmission and distribution company) to market with a combined dollar and Singapore dollar deal for up to $2 billion.
