Asian bond issuers to get grant to help offset credit rating fees: MAS

ASIAN and Singapore bond issuers will get help to offset credit rating fees, said the Monetary Authority of Singapore (MAS) in a bid to raise the quality of bonds sold here.

Qualifying Asian issuances will be able to offset up to 50 per cent of one-time issuance costs such as credit rating fees, said Jacqueline Loh, MAS's deputy managing director, on Thursday.

For Singapore dollar bonds, only rated issuances would be eligible under the Asian Bond Grant scheme, she said.

The local bond market has been hit by defaults and restructuring exercises with investors up in arms.

"About 40 per cent of outstanding Singapore dollar bonds are rated, and we would like to see this share go up," said Ms Loh. She was speaking at the Asia Securities Industry & Financial Markets Association's annual conference.

Singapore already offers an excellent ecosystem of financial institutions, professional services such as legal and accounting, credit rating agencies and market infrastructure for Asian companies to issue, market, list and trade their bonds, said Ms Loh.

"To make it more attractive for Asian issuers to raise international capital in Singapore and benefit from the ecosystem here, we will introduce an Asian Bond Grant scheme next year," she said.

The scheme aims to broaden the base of issuers in our bond market, which will add to the breadth and diversity of debt instruments for the investing community.

"Qualifying Asian issuances will be able to offset up to 50 per cent of one-time issuance costs such as international legal fees, arranger fees and credit rating fees.

"Even as we draw Asian issuers to Singapore, we want to encourage these issuers to be rated," she said.

"Credit ratings improve general market transparency by providing independent and comparable assessments of the credit worthiness of issuers," said Ms Loh.

Together with business and financial information provided in the offering documents or company announcements, credit ratings can assist investors to better understand the issuer's business and financial health.

"Issuers that are rated, in comparison, also gain access to a broader investor base, as many institutional mandates invest only in rated bonds.

"To encourage rated issuances, rated issuers will be eligible for a larger grant quantum under the Asian Bond Grant," she said.

Ms Loh also touched on the defaults in the SGD bond market, which have been mostly from the oil and gas (O&G) sector.

These have so far mostly been from the O&G sector, and reflect the protracted weakness in the sector arising from a slump in energy prices, she said.

"Rising defaults over the late part of the credit cycle and difficulties in particular sectors are to be expected, but MAS's stress test suggests that most corporates in Singapore remain fairly resilient, and banks' exposures to weaker issuers are likely to be manageable," said Ms Loh.