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[SINGAPORE] Singapore issuers are turning to private debt placements to seek tighter pricing and new investors amid an uncertain rates outlook.
Showing the way last week were Singapore Telecommunications and Bank of East Asia, Singapore branch, which together raised S$250m from a handful of investors.
OCBC was sole lead manager on both deals, propelling the city state's third-largest bank to the top spot on the bookrunner league tables for Singapore dollar bonds, replacing long-time market leader DBS Bank. "We see more opportunities for such deals as issuers explore private deals in addition to public ones to align their target yields and spreads", said Pee Beng Kiong, head of bond syndicate at OCBC Bank.
Typically, private placements are faster than public deals and can offer greater certainty over funding costs to issuers.
In public deals, there is often no clear sign of what the size will be or how much the guidance can tighten at the end of the day. This may work against the issuer when rates are volatile, as Singapore dollar SOR rates have been in the past few weeks. Bankers believe that the benchmark rates will only settle in April after the Monetary Authority of Singapore holds its next policy meeting.
Institutional investors like a private placement as it is a clean-cut way of securing an allocation in a deal, even if they may get a slightly lower yield. Conversely, the issuer gets a funding advantage.
Normally, pricing of private placements were tighter than public deals, which needed to draw in many accounts, said a Singapore-based debt syndicate banker.
SingTel raised S$150m of 5.5-year bonds last Tuesday at a yield of 2.58 per cent, or a very tight 37.35bp over Singapore dollar SOR, which is even narrower than the 51.75bp spread achieved on an earlier S$150m 2.72 per cent 6.5-year public issue in February. It was also around 25bp inside its own curve.
Usually, such fine spreads are seen only for the likes of Housing and Development Board in public deals.
Despite the tight spreads, the SingTel bonds were firmer in secondary trade Thursday at 100.25/100.40.
Bank of East Asia returned on Tuesday after a two-year absence for a S$100m one-year placement at 1.48 per cent that was drawn off a US$2bn MTN programme. "Singapore institutional investors remain extremely keen on offerings from top-tier issuers and they have the ability to put fairly large chunks of funds to work, meaning, for the right company, they can be very constructive on pricing and tenor,"said Winston Tay, head of South-East Asia debt syndicate at Royal Bank of Scotland.
Private placements will not work well for high-yield names, which often need to target a mass group of investors, typically from private banks.