Temasek issuing new bonds with record 50-year tenor

Singapore

A 50-YEAR bond - the longest tenor by Temasek Holdings - is being marketed by the state investment firm's wholly owned subsidiary, Temasek Financial (I) Limited (TFin-I).

It is part of a three-tranche offering of senior unsecured US dollar (USD) bonds, which also includes a 10-year tenor and a 30.5-year tenor, launched on Tuesday.

The deal will be unconditionally and irrevocably guaranteed by the investment firm, it said in a statement on Tuesday.

A Temasek spokesperson said in response to The Business Times' queries on the longer debt: "Temasek plans proactively for a long dated and well distributed debt maturity profile and avoids large debt repayment obligations in any one year.

"We assess market conditions and take into account investor feedback along with our own requirements when looking at potential issuances."

The new bonds will be issued under TFin-I's US$25 billion guaranteed global medium-term note programme.

Temasek and its investment holding companies will use the net proceeds from the issuance to fund their ordinary course of business.

Citing sources with knowledge of the deal, Reuters reported that the size and pricing would be finalised later on Tuesday or by Wednesday morning. One source said the issue will be of a benchmark size and raise at least US$500 million.

Initial price guidance on the 50-year bond is about 135 basis points above the benchmark rate, a source told Bloomberg.

Spreads on corporate bonds around the world have increased in recent days, although the premium on Asia's top-rated bonds is still lower than the highs in March, according to Bloomberg. Issuers in Asia ex-Japan have sold a record US$254 billion in the year to date.

Temasek has been assigned an overall corporate credit rating of Aaa by Moody's Investors Service and AAA by S&P Global Ratings.

Moody's said on Tuesday that Temasek's Aaa rating reflects the investment company's strong fundamental credit quality supported by steady and recurring dividend income, as well as its large, high-quality investment portfolio.

"In addition, Temasek's largest investee companies and major dividend contributors have strong investment-grade credit profiles," says Jacintha Poh, a vice-president and senior credit officer at the credit rating agency.

"We expect the company to maintain a conservative financial profile, with the net debt to market value of its portfolio assets (excluding cash) staying below 5 per cent and FFO (funds from operations) interest coverage above 15 times," she added.

Moody's on Tuesday assigned Aaa ratings to the proposed notes with a stable outlook.

S&P gave them an AAA long-term issue rating. Temasek's increasing proportion of unlisted assets weigh on the company's net portfolio characteristics and temper its strengths, which include minimal leverage and above-average investment capabilities, said S&P.

Temasek said an application will be made to list and quote the three new bonds on the Singapore bourse.

The joint bookrunners are Barclays, Citigroup, DBS, HSBC and Morgan Stanley, according to Reuters.

Temasek last sold bonds in November 2019, when TFin-I's 12-year and 30-year notes, each sized at 500 million euros, drew strong demand from investors.

Another long-tenor note launched recently by a Singapore issuer was NTUC Income Insurance Co-operative's S$800 million, 30-year deal, which was heavily subscribed as final orders exceeded S$2.4 billion.