Singapore port operator PSA prices 10-year benchmark dollar bond

PSA International, a Singapore-based port operator, priced a new 10-year $500 million benchmark bond on Thursday night. The company has not issued new dollar-denominated debt since 2006 and investors responded warmly to the opportunity to buy such a strong credit, reportedly placing orders worth $2.5 billion in just a few hours.

The company reacted quickly to take advantage of investors' improving mid-week mood and the joint lead managers -- DBS, J.P. Morgan and Nomura -- started taking orders on Thursday morning. By 4.30pm Singapore time the bankers had closed the books and later priced the deal at 140bp over US Treasuries after tightening the price guidance to 140bp to 145bp.

Investors were looking to ST Engineering's 10-year bond sold in July for a pricing comparison and, despite the reported level of demand, were happy with the final pricing. ST's bonds were trading at a bid/offer spread of 128bp/120bp on Friday, which reflects the fact that ST is slightly higher rated, according to sources close to the deal. ST is rated triple-A by all the rating agencies, while PSA has a split rating of triple-A from Moody's and double-A from S&P. ST is also publicly traded, whereas PSA is wholly-owned by Temasek, one of the investment companies operated by the Singapore government.

Even so, investors continued to show good interest in the bonds in secondary market trading, bringing the bid/offer down to 134bp/132bp by Friday afternoon.

The deal was mostly a benchmarking exercise for PSA, which has "ample access to other sources of funding", according to one bond specialist, who added that the city's other blue-chip borrowers were keeping a close eye on the deal. "It's rare to see such high-quality issuance out of Singapore so it does help to set a 10-year pricing benchmark for the other corporates too," he said.

In total, 128 accounts placed orders for the bonds, which are expected to be issued on September 11 under PSA's new $3.5 billion medium-term note programme. They carry a fixed rate of 4.625% and will be quoted on the Singapore exchange.

Most of the buyers were Asian money managers. Overall, the demand was split 74% from Asia, 15% from Europe, with the remainder coming from investors in the rest of the world. Fund managers placed 51% of the orders, followed by 23% from banks, 16% from retail investors and 10% from insurers and other investors.