Important to have credit ratings when issuing bonds to retail investors

WITH Singapore grappling with the issues around a rapidly ageing population, it is becoming increasingly apparent that there should be a wide variety of fixed income instruments that can provide investors with a steady stream of funds to help meet their retirement needs.

The authorities have recognised this and now allow corporates to market bonds (or similar debt-like securities) - formerly restricted to sophisticated or institutional investors - to the retail public via the Monetary Authority of Singapore's seasoned or exempt issuers frameworks. Singapore Airlines' 3.03 per cent bond last month was the latest to be exempted, which meant it could be offered for retail investment with only a product highlights sheet and without a prospectus. But there is an equally important incentive known as the Singapore-dollar Credit Rating Grant that was introduced in June 2017 to encourage issuers to have their bonds rated before issue, which appears not to have gained much support.

When the scheme was launched, MAS said it would like to see a higher number of rated issuances in the local bond market as at the time, only half of outstanding Singapore-dollar bonds had a rating. As such, MAS offered a grant of up to S$400,000 to pay for up to 100 per cent of the cost of obtaining a credit rating from an international agency. It also said getting bonds rated would provide greater transparency to investors, broaden the pool of participants and help grow the Singapore-dollar bond market.