Singapore Telecommunications (SingTel) early this morning priced a $700 million five-and-a-half-year bond, attracting strong demand from high-quality accounts. The bonds priced at Treasuries plus 150bp, about 12.5bp inside the initial guidance, which was around Treasuries plus 162.5bp. The expected issue size was $500 million, but the deal ended up raising more thanks to a robust order book north of $3 billion.
Bank of America Merrill Lynch, Citi, Deutsche Bank and Morgan Stanley were joint bookrunners.
SingTel is the third Singapore borrower to tap the dollar bond market this year — following DBS Bank and United Overseas Bank — and it joins a crowd of high-grade Asian borrowers to take advantage of low rates. SingTel is rated Aa2 by Moody’s and A+ by Standard & Poor’s.
The Temasek-linked firm is the incumbent telco in Singapore and, thanks to its parentage and high rating, investors expected the deal to sail through. “The SingTel deal will do well. It’s a quasi sovereign name and there is a lack of paper so there will be a lot of demand from long-only accounts,” said one Hong Kong-based fund manager on Thursday afternoon.
SingTel bonds mature on September 8, 2017 and offer a half-year extension over UOB’s five-year bonds, which mature March 7, 2017. According to one source, the new SingTel bonds priced through UOB — which printed a $500 million five-year bond at Treasuries plus 144bp on Wednesday night.
“The new SingTel bonds offer a half-year extension over UOB’s bonds and this is worth about 12bp. This puts a new SingTel five-year bond at Treasuries plus 138bp, which means that SingTel priced 6bp through UOB,” said the source.
UOB was seen as the closet comparable as it is the most recent bond issue and it tapped Asian and European investors only — similar to SingTel — whereas DBS tapped US investors. It is rated Aa1 by Moody’s and AA- by S&P and Fitch, a notch above SingTel.
Other comparables were the SingTel and PSA 2021s, which were both quoted at Treasuries plus 150bp on Thursday, and the Temasek 19s which were at Treasuries plus 112bp. However, those bonds trade over the 10-year Treasuries whereas the new SingTel bonds priced over the five-year Treasuries, so they were not necessarily the best comparables.
The coupon was fixed at 2.375% and the notes reoffered at 99.795 to yield 2.415%.
SingTel last tapped the dollar market a year ago in March 2011 with a $600 million 10-and-a-half-year bond that priced at Treasuries plus 113bp. BNP Paribas, HSBC and Morgan Stanley were the arrangers.
SingTel owns Australian mobile and fixed-line operator Optus and has stakes in a number of Asian telcos, including Telkomsel, Bharti and Globe from the Philippines.