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Temasek launches first 5-year bond for retail investors with fixed rate of 2.7%
TEMASEK Holdings has launched its first public bond offer to retail investors, with a five-year maturity and a fixed interest rate of 2.7 per cent.
Up to S$200 million is offered to retail investors. There is another S$200 million placement for institutional, accredited and other specified investors.
The T2023-S$ bond is issued through Temasek's wholly-owned subsidiary Temasek Financial (IV) Private Limited, under its S$5 billion Guaranteed Medium Term Note Programme. The total offering is subject to an option to upsize the issuance to S$500 million, in the event that the public and/or placement offer is oversubscribed.
Temasek chief financial officer Leong Wai Leng said: "We are pleased to offer Temasek bonds to retail investors for the first time. This helps Temasek to broaden its stakeholder base and provide Singapore retail investors the opportunity to participate in another retail product ... We issue Temasek Bonds as public markers of our credit quality - this is very much a part of our financial discipline as a long-term investor. They also increase our funding flexibility."
Temasek has an overall corporate credit rating of Aaa by Moody's and AAA by S&P. The bonds have been rated Aaa by Moody's and AAA by S&P.
The net proceeds from the total offering will be used by the group's investment holding companies to fund their ordinary course of business.
Sources expect the offer to be strongly subscribed. At 2.7 per cent, the bond offers a pick-up of about 38 basis points over the five-year Singapore government bond, which is trading at about 2.32 per cent. The latest Singapore Savings Bond has an interest rate at the five-year mark of 2.54 per cent. Its average annualised return at the end of the fifth year is 2.22 per cent.
Santosh Bukitgar, Credit Suisse's emerging market fixed income analyst (private banking research), said: "The extra yield (over SGS) is not bad considering Temasek's status as a quasi-sovereign, AAA-rated credit with a track record of debt market participation." He added that credit risk is minimal: "Temasek being one of the few non-sovereign AAA-rated credits."
But he also said that investors will still be exposed to mark-to-market or interest rate risk. "An exit before maturity could incur capital losses if rates trend higher as expected."
The fixed interest rate of 2.7 per cent is payable every six months. For retail investors, the T2023-S$ Temasek Bond will be issued in denominations of S$1,000. The issue price is S$1,000. Individuals can apply via the ATMs of DBS Bank, POSB, OCBC or UOB. They may also apply via Internet banking or the mobile banking apps of DBS or POSB.
The bond is eligible for inclusion under the CPF Investment Scheme - Ordinary Account. CPF members may use up to 35 per cent of their investible CPF savings to apply for the bonds under the public offer, or to purchase subsequently from the market.
CPF savings cannot be used to apply for bonds under the placement. SRS (Supplementary Retirement Scheme) funds cannot be used to apply for the bond in the total offering.
Retail investors will need a CDP account to apply for the bond. Subscriptions under the public offer will be subject to balloting and allocation if the total subscriptions exceed the amount available under the public offer.
Bonds under the public offer are open for application on Oct 17. The public offer will close at noon on Oct 23. The bonds are expected to trade on the Mainboard of SGX-ST on Oct 26.