Singtel unit prices S$1b subordinated perps at 3.3%

SINGAPORE Telecommunications (Singtel) on Thursday announced that its wholly-owned subsidiary Singtel Group Treasury (SGT) had priced S$1 billion of subordinated perpetual securities on April 7.

Net proceeds from the issue will be applied by SGT to fund its ordinary course of business.

In a pre-market bourse filing, Singtel said its issuance "attracted strong demand from a wide range of high-quality investors". Its order book closed after receiving interest of about S$2.1 billion, resulting in an oversubscription.

"We are pleased with the strong demand for our inaugural perpetual securities from the investor community and their continued confidence in the Singtel group. The issuance is aligned with our capital-management strategy of achieving the optimal capital structure for the group," commented the telco's group chief financial officer, Arthur Lang.

DBS, HSBC, OCBC and Standard Chartered (Singapore) acted as joint lead managers and bookrunners for the deal.

Guaranteed by Singtel, the perpetual securities will have an initial rate of 3.3 per cent per annum, and will be drawn down under SGT's existing S$10 billion euro medium-term note programme.

The first distribution rate reset will fall on Oct 14, 2031, with subsequent resets occurring every 10 years thereafter. The distribution rate will be subject to a step-up of 25 basis points (bps) per annum on Oct 14, 2031, and an additional step-up of 75 bps per annum on Oct 14, 2051. The distributions will be payable semi-annually in arrear on a discretionary basis and in accordance with the terms and conditions of the perpetual securities.

This represents the first time such a structure has been used in the SGD bond market, said DBS global head of fixed income Clifford Lee, who considers the deal a "test" that proved well received by the market.

Deal statistics provided to The Business Times (BT) by DBS showed that Singtel's order book of over S$2.1 billion, including S$85 million of joint lead manager (JLM) interest, comprised a total of 123 offers.

"Forty seven per cent of demand for Singtel's perpetual securities came from institutional investors, while the remaining 53 per cent came from private banks. This is quite unusual as most perp issuances would see a larger proportion of bonds going to the private banks. About 15 per cent of demand came from overseas, whereas almost 100 per cent of perpetual bonds in the SGD market would have typically been taken up in Singapore alone," Mr Lee told BT in a telephone interview Thursday.

According to Mr Lee, Singtel's latest deal offers one of the longest periods to the first call date at 10.5 years - compared to most perp deals, where investment horizons range from five to 10 years. It is also the largest Sing-dollar perpetual bond issuance in almost a decade since Genting Singapore priced S$1.8 billion of subordinated capital securities in Jan 3, 2012. They carried a 5.125 per cent coupon and were called on Dec 9, 2017.

Phillip Securities analyst Timothy Ang separately told BT in an e-mail on Thursday: "Given the Singtel 3.3 per cent perp call date has the longest tenor, and yet its yield difference from the stock dividend yield is one of the narrowest among other related Temasek-linked listcos, we can ascertain that the bond to dividend yield spread is quite narrow on a company relative basis."

"Given the search for yield by fund managers, insurance sector and private banks, investors are willing to consider subordinated bonds by high-quality issuers such as Singtel for additional returns," added Ashish Malhotra, Standard Chartered's head of capital markets for Asia Pacific, in another e-mailed statement.

Singtel ended Thursday S$0.02 or 0.8 per cent lower at S$2.44, after the announcement.