Keppel Land, the property subsidiary of Singaporean conglomerate Keppel Corporation, has launched its first issue from an $800 million multi-currency medium term note (MTN) programme. Standard Chartered was selected as the sole arranger for the MTN facility.
The multi-currency nature of the programme gives the issuer greater flexibility because it can tap investors in different currencies depending on market conditions. Unsurprisingly, given the low absolute interest rates available and continued strong support from local institutional investors for Singaporean corporates, Keppel Land has decided to tap the domestic market first.
The company's debut offering is for S$100 million ($54.2 million), split into two S$50 million tranches with maturities of five years. Both pieces will pay variable coupons, to be reset either semi-annually or quarterly.
For the first tranche, on which interest will be paid semi-annually, the bonds were issued at par and the first coupon was set at 1.7625%. The second tranche, which will pay investors on a quarterly basis, also priced at par and carries a first coupon of 1.5625%.
Keppel Land says that proceeds from the MTN facility will be used to refinance existing borrowings and to finance working capital needs. The company, which has operations in 11 countries and assets - ranging from office blocks to resorts - of S$6 billion, has estimated borrowings of S$2.4 billion.
Meanwhile, CapitaLand Commercial, the commercial property arm of Keppel rival CapitaLand, is also tapping local bond investors with a new offering from an existing MTN programme, also arranged by Standard Chartered.
The latest issue comprises S$50 million of one-year paper that will carry a fixed coupon of 2%, to be paid semi-annually. CapitaLand, like Keppel Land, says that proceeds will go towards refinancings and for working capital requirements.
It goes without saying that CapitaLand and Keppel Land will be looking for a positive response from local investors for their latest deals, but especially so given what happened to planned real estate investment trust (REIT) IPOs by both parties.
In November, CapitaLand had to pull an S$740 million IPO via DBS and UBS Warburg because of poor demand for what would have been the first REIT out of Singapore.
Keppel Land then decided to pull the plug on its own REIT - scheduled for the first half of this year - which would have given investors the chance to buy into three prime office buildings in Singapore.
However, it should be noted that CapitaLand was involved in a successful first securitization in 2001. That is an avenue that Keppel Land may also consider this year as it seeks to divest some of its investment properties, and with the REIT route seemingly closed for the time being.
With its S$200 million deal in June, CapitaLand set a precedent for the market, as it was the first securitization by a Singaporean company to be rated by one of the three international credit rating agencies.
Fitch rated the S$160 million senior tranche triple-A, which had an expected life of six years and carries a fixed rate coupon of 3.71%, 32 over swaps.