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Singapore corporates' USD bonds warmly received by international investors

Thursday, November 19, 2015 - 16:59
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Singapore corporates are hot, going by the strong demand from international investors for their US dollar-denominated bond deals.

SINGAPORE corporates are hot, going by the strong demand from international investors for their US dollar-denominated bond deals.

On Tuesday, two benchmark USD issues from - SP Powerassets and Stats ChipPac - sold well; this was followed by Thursday's Citic Envirotech Ltd (CEL) USD perpetual deal which closed early at 12.45 pm after orders hit US$950 million, exceeding the issue size more than five times.

"It's to prevent allocation nightmare," said Clifford Lee, DBS Bank head of fixed income of the 12.45 pm closing.

DBS is involved in all three deals.

CEL is expected to sell US$175 million bonds and orders had exceeded US$250 million shortly after the morning opening.

The final price guidance was 5.5 per cent (+/- 5 basis point), down from the initial price guidance of 5.75 per cent area.

CEL is a "thoroughbred," when you consider its pedigree, said Terence Lin, iFAST regional research manager - bonds & portfolio management.

CEL's two main shareholders are China's state-owned Citic group and global private equity firm KKR with effective ownership of 54.9 per cent and 23.9 per cent, respectively.

The strong reception for CEL follows similar warm responses on Tuesday for the two issues by SP Powerassets and Stats ChipPac.

The orderbook for Singapore Power's SP Powerassets US$700 million 10-year bonds reached US$1.4 billion. US and Asia investors accounted for 43 per cent each of the issue with Europe getting 14 per cent. By investor type, insurance and pension funds accounted for 40 per cent, banks 39 per cent, funds 18 per cent and others 3 per cent.

Stats ChipPac US$425 million 5-year deal had an orderbook of US$800 million. Some 77 per cent of the deal was allocated to Asia, while Europe and US had 12 per cent and 11 per cent, respectively.

Asset managers took the bulk or 86 per cent of the Stats ChipPac bonds.

DBS' Mr Lee said the market for USD issues had opened up in the past few weeks and there has been a backlog of deals waiting for the market to stabilise. Financial markets had been volatile following the yuan devaluation in August.

"You (also) have USD issues coming out of China, Korea," said Mr Lee.

The week ended Nov 13 was a bumper week for new bond announcements - as many as 13 bond issues across both USD and SGD issues, with S$780 million of new issues in the SGD corporate bond space, and S$4.8 billion of new issues in the USD space, said a bondsupermart note on Nov 13.

The largest of the deals were from China, including some from real estate firms.

Mr Lee said one reason for the strong reception for the Singapore deals was that they represent a diversification from the China names which are also predominantly in the real estate space.

SP PowerAssets US$700 million bonds are "rare because these high grade credits are extremely well funded, with big cash balances and strong balance sheet," he said.

As for Stats ChipPac, while it may be held by China investors, the management is pretty unchanged and its receivables are outside China, said Mr Lee.

Formerly owned by Temasek Holdings, Stats ChipPac, South-east Asia's biggest semiconductor assembler was sold to Chinese firm Jiangsu Changjiang Electronics Technology Co, with the takeover completed in October.

CEL, listed on the Singapore Exchange since 2004, has more than 10 years of proven track record in providing membrane bioreactor wastewater treatment solutions in Asia, and owns 42 water plants across different provinces in China.

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