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LTA sells S$1.4b bond, its second mega deal in 2019

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The Land Transport Authority of Singapore has sold a S$1.4 billion 35-year bond, its second massive deal this year.

THE Land Transport Authority of Singapore has sold a S$1.4 billion 35-year bond, its second massive deal this year.

The latest issue carries a 3.30 per cent coupon, said DBS Bank, one of the joint bookrunners for the deal on Wednesday. The other bookrunners were HSBC, OCBC Bank and United Overseas Bank.

In January, LTA printed a S$1.5 billion 40-year bond at 3.380 per cent, making a total of S$2.9 billion raised by LTA so far in 2019.   

Last year the LTA issued four deals worth a total of S$4 billion with tenures ranging from 10 to 40 years.

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LTA established a S$12 billion multicurrency medium term note programme in 2015.

The latest LTA issue was well received, with broad based participation and a growing number of investors, said Clifford Lee, DBS Bank head of fixed income.

DBS is the only bank which has been involved in all six LTA transactions, said Mr Lee.

"It has been exciting for us because the LTA is very progressive in approaching both book building and distribution," said Mr Lee.

It is critical to have broad based participation as this will ensure secondary trading, which is important for creating a benchmark for subsequent issuances, he said.

The LTA bonds have all traded up. The January 2019 S$1.5 billion bonds are quoted at 100.75 while the October 2018 S$1 billion issue is quoted at 102.75, according to Bloomberg. Bonds are sold at 100 par.

Still Mr Lee said while the LTA issues are traded, the "fact remains they are a highly sought after issuer and much is bought by long term hold investors."

Typical investors of long term bonds include insurers and various types of asset or fund managers.

Geographically, Singapore-based investors have dominated the deal, he said.

"We priced the S$1.4 billion reluctantly," said Mr Lee, meaning the demand was for a much bigger deal to fulfil investors' requests.

In the past, government-linked entities focused on the price so the deals would be done on a bidding basis with the bonds ending up in the hands of just a handful of banks.

"But LTA is more progressive, it wants to broaden the investor base, attract new investors and deepen the Singapore dollar market further so that it can accommodate longer term financing for infrastructure investments," said Mr Lee.

"This bodes well for Singapore's ambition to become an infrastructure financing hub," he said.

The Singapore dollar bond market is zipping along. Year-to-date volume has jumped almost 50 per cent to S$11.38 billion from 45 deals. The same period last year saw 41 deals worth S$7.66 billion.

Other large issues this year include HDB's S$600 million 10-year 2.675 per cent bond and Societe Generale’s S$750 million perpetual issue.  

Market volatility has meant that investors are turning back to bonds as a defensive strategy, said Mr Lee.