Sanpaolo IMI SpA, one of the top three banking groups in Italy, made its debut in Singapore's bond markets yesterday (Thursday). Sanpaolo IMI announced the launch of a S$100 million five-year bond off its EMTN programme lead-managed and underwritten by Citibank.
The fixed rate bonds pay a coupon of 2.71%, which is much cheaper than the 4.4% coupon on the Eu100 million five-year fixed rate bonds that Sanpaolo issued earlier in the month. At that time Sanpaolo also raised Eu100 million each three- and seven-year fixed rate bonds paying a coupon of 3.85% and 4.7%.
The issue under the EMTN programme, which is rated A+/Aa3, allows Sanpaolo to take advantage of arbitrage opportunities when swapped back from S$ into US$ or Euros. Foreign issuers are known to issue in Hong Kong and Singapore bond markets to take advantage of the arbitrage opportunities available.
Diversifying the funding base is another attraction for issuers in Hong Kong and Singapore. Some observers believe Sanpaolo IMI's bonds in Singapore are likely to be taken up by fund managers, insurance companies and other institutional investors, whereas in Hong Kong a similar issue would mostly be taken up by other banks.
Sanpaolo's bond issue adds to the slew of foreign issuers that have been tapping the Singapore dollar bond markets and have raised S$1.75 billion up to the second quarter of 2002, already surpassing the S$1.693 billion raised in 2001. Total debt issuance denominated in Singapore dollars up to the end of the second quarter this year amounted to S$10.1 billion. GE Capital Australia Funding did the longest tenor Singapore dollar bond from a foreign issuer this year when it raised S$100 million through a 10-year bond.
Corporates dominated the issuance from foreign entities last year accounting for 55% of the foreign issuer profile.