Singapore Telecommunications (SingTel) tapped the US dollar bond markets early yesterday morning with an opportunistic $600 million 10.5-year bond.
SingTel is a relatively rare borrower and its new bonds initially tightened on the break to Treasuries plus 113bp/110bp, slightly inside the Treasuries plus 113bp issue spread. However, they widened to Treasuries plus 115bp/113bp yesterday morning amid weaker credit markets. At the time, the iTraxx Asia Investment Grade Index stood at 109bp/110bp, about 2bp wider from the previous day.
BNP Paribas, HSBC and Morgan Stanley were joint bookrunners. ANZ was a co-manager. Interestingly, the deal had a slightly different line-up of banks from the original group that took SingTel on the road last year. BNP Paribas has replaced Barclays Capital, which worked alongside HSBC and Morgan Stanley last year.
As a cash-rich company, it was not clear what SingTel would use the funds for and the $600 million does not appear big enough for an acquisition. “It looks to be quite opportunistic. We’re not sure what the use of proceeds will be for,” said one investor during marketing on Tuesday.
A banker on the deal said the proceeds will be used for general corporate purposes and noted that SingTel has debt maturing in 2011, including a $1.35 billion bond that matures in December 2011 and a euro-denominated bond that matures in November 2011.
Pricing on the deal was aggressive. The new bonds priced at the tight end of the final guidance, which was Treasuries plus 115bp, plus or minus 2bp. The price whisper on the deal was in the area of Treasuries plus 120bp and the initial guidance was Treasuries plus 115bp to 120bp.
The notes were reoffered at 99.298 to yield 4.585% and the coupon was fixed at 4.5%.
The Reg-S only deal gathered an order book of $1.8 billion from 130 accounts. The books were evenly split, with Asia taking up 37%, Europe 36% and US offshore investors taking up a large 27% chunk of the deal. Funds took up 49%, banks 31%, central banks 12%, insurance 5% and others 3%.
“SingTel is a strong utility and a rare issuer,” said one banker on the transaction. “There aren’t many strong single-A/double-A rated telco companies in the US with long duration bonds. If you look at Verizon and AT&T, these are all weak single-A credits, which was why there was such strong demand from offshore US accounts.”
SingTel’s issue is rated Aa2 by Moody’s and two notches lower at A+ by Standard & Poor’s and Fitch. It is 55% owned by Singapore’s investment agency Temasek Holdings.
The comps for the deal included the PSA bonds maturing February 2021, which were bid at Treasuries plus 104bp. However, PSA is wholly owned by the Singapore government and its bonds issued last year are rated Aaa by Moody’s and AA by Standard & Poor’s.
The new SingTel bonds, which mature on September 8, 2021, priced 9bp back from the PSA February 2021s for a seven-month extension, which meant there was no new issue premium, according to a banker. Investors also looked at the Optus 2019s, which were issued in October 2009. However, Optus is a SingTel subsidiary and its operations are in Australia.
SingTel issued its bonds off an existing MTN programme.
Elsewhere, the new Shimao Property bonds maturing in 2018 softened in secondary trading yesterday morning. They were initially quoted at 99.25/99.5, below the par issue price, and slipped to 99.25 before stabilising around the 99.5/99.625 level.
Adding to the potential pipeline of new issues, there are also rumours that KWG Property and Yanlord Land are looking to tap the US dollar bond market.