Braddell launches innovative Singapore bond

Braddell, a subsidiary of DelGro, sets a first for Singapore with the initial bond from a multi-issuer program.

Braddell, the internationally-based, wholly-owned subsidiary of DelGro Corporation, SingaporeÆs largest transportation company, has launched its first ever bond deal with a S$100 million ($55.04 million) offering.

Credit Agricole Indosuez and Deutsche were brought into to co-lead manage the transaction.

The deal establishes a few precedents for the Singapore debt market. To start with, it is the first time a Singapore-dollar bond has been issued by a Singapore corporation through one of its non-resident subsidiaries.

More interestingly, the deal will be launched through a S$500 million multi-currency, medium-term note (MTN) program that will allow DelGro, Braddell and Singapore Bus Services ù of which DelGro owns a 75% share ù to issue bonds through it, making it Singapore's first ever multi-issuer bond facility.

This program has very obvious benefits to an entity like DelGro, a holding company with a majority share in different firms, according to Sim Buck Khim, head of Deutsche's debt capital markets team in Singapore.

"The multi-issuer and multi-currency format gives DelGro tremendous flexibility in tapping the capital markets as and when opportunities arise," says Khim. "This was clearly demonstrated through the inaugural note issue by Braddell, where DelGro took advantage of the current low interest environment in Singapore."

That current interest rate environment meant Braddell was able to sell the five-year bonds at a coupon of 3.80%, or 52 basis points over five-year swaps. Interest will be paid on a semi-annual basis and the re-offer price was set at par.

An official at one of the leads said that pricing was within DelGro's targets, even though it was difficult to measure against a similar deal. "There have not been any bonds issued by transport companies recently so it is hard to offer a valid comparison, plus this is also the company's first issue," he explains. "As far as the next deal from the program, I would not like to say when that would be. It was logical to register Singapore Bus Services in the program so that they can also tap the markets in the future if they need funds."

Proceeds from the current deal will be used to refinance Braddell's purchase of Metroline, one of London's five biggest bus operators, in March 2000. Evelyn Tan, vice-president of corporate finance at DelGro, says the bond markets presented the group with a good opportunity to support its investments.

"We are pleased with the developments in the local capital markets over recent years which have significantly enhanced its viability as a funding alternative for foreign and local issuers," she says. "This has given us an opportunity to capitalize on our local credit standing to secure competitive funding for our foreign subsidiary."

As well as its taxi and bus operations in Singapore and the UK, DelGro runs similar services in Shanghai and Guangzhou in mainland China.