Keppel bond

Keppel sets corporate benchmark with S$300 million long bond

Keppel Corporation attracts strong domestic demand for the 30-year issue and prices inside the curve.
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Keppel’s interests span marine services, property, infrastructure and investment services (AFP) </div>
<div style="text-align: left;"> Keppel’s interests span marine services, property, infrastructure and investment services (AFP) </div>

Singapore’s local bond market continues to develop, creating opportunities for its domestic investor base. In recent years, the government and state investment agency Temasek have extended the yield curve, providing long duration alternatives for insurance companies and pension funds, and setting benchmarks for corporate issuance.

Late on Wednesday, Keppel Corporation, a conglomerate with interests that range across marine services, property, infrastructure and investment services, broke new ground by launching a S$300 million ($240 million) 30-year bond.

The senior unsecured notes pay a 4% semi-annual coupon and were re-offered at par. The final redemption date is September 7, 2042, but Keppel has the option to call the issue at par on any coupon payment date after 20 years.

Despite the call provision, the duration was sufficient to appeal to funds with long-term liabilities. Insurance companies and pension funds bought 38% and 7% respectively, while private banks took 34%, institutional fund managers 18% and commercial banks 3%.

Around 85% of the bonds were placed in Singapore, with the balance sold to Hong Kong-based funds, according to a person familiar with the deal.

The sole bookrunner, Credit Suisse, approached investors early on Wednesday morning and quickly attracted anchor support for about 30% of the issue at an initial yield level of 4.25%. That was the equivalent of 145 basis points above the Singapore swap offered rate (SOR), which was well inside the Keppel curve. The company’s existing 2027 bond, launched in April, was trading at the equivalent of SOR plus 170bp.

Demand for the issue soon gathered momentum, allowing the issuer and Credit Suisse to tighten the yield to 4%. The total order book amounted to S$1.25 billion, with orders from more than 50 investors.

Keppel, already a well-established name with strong roots in Singapore history, has become increasingly familiar to local bond investors, despite lacking a rating from leading credit agencies.

In addition to the S$300 million 3.8% 15-year bond it issued in April, it raised S$500 million from a 10-year deal in February. Like its issue this week, both were launched from Keppel’s S$3 billion multi-currency medium-term note programme.

The proceeds from the 30-year bonds will be used for unspecified spending and working capital purposes.

The transaction comes a few months after the Singapore government launched its first 30-year issue, which raised more than S$2 billion through an auction in March. Those bonds were trading at a yield of 2.45% on Wednesday.

During the past three years, Temasek has set benchmarks across the yield curve, launching its first 30-year bonds in 2009 and issuing paper with 10-, 15- and 25-year tenors in early 2010, before raising S$1 billion with a 40-year maturity in July that year.

However, long-dated bonds tend to be tightly held and there is little secondary market liquidity, so further issues are expected to be launched, according to a local Singapore banker.

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