Gaming company Genting Singapore priced a mammoth S$1.8 billion ($1.4 billion) perpetual on Thursday evening, the biggest Singapore dollar-denominated bond to be sold in a single tranche. The deal attracted a S$6 billion order book and offshore investor participation of 42% — said to be the largest for a Singapore dollar bond.
Genting’s deal was also the biggest corporate hybrid in an Asian local currency market. Its heft and high offshore participation indicates that the Singapore bond market — which until recently was viewed as a rather dull market dominated by a handful of big investors — is deepening and maturing. It also augurs well for a number of companies that are said to be planning to launch Sing dollar perpetuals as early as next week.
Genting has said that the proceeds will be used for general corporate purposes, capital expenditure and for the expansion of its business, but analysts speculate that the gaming company is eyeing overseas investments.
Unsurprisingly, private banks took the biggest share (78%) while asset managers and insurance companies took 12%. The rest went to undisclosed investors. The deal paid a 0.25% private banking rebate. Genting is a name that resonates with Singapore and Malaysian investors, which were allocated 58% and 24% of the deal respectively. Hong Kong investors took 12% and European investors 6%. A total of 128 accounts participated.
The deal came out with a “price thought” of 5.5%. The initial guidance was in the area of 5.375% and this was revised to a final guidance of 5.125% to 5.25%, with the bonds pricing at the tight end. The bonds priced at par. DBS and HSBC were global coordinators and joint bookrunners, while CIMB, Deutsche Bank and J.P. Morgan were joint bookrunners.
The perpetual bonds, which are callable after five-and-a-half years, are rated BBB by Fitch and Baa3 by Moody’s, two notches below the issuer rating. There is a 100bp step at the 10th year, which means that the bonds will pay a coupon of 6.125% from the 10th year onwards. If the bonds are not called after five-and-a-half years, they lose all equity credit from Fitch, which incentivises the borrower to call the bonds.
However, unlike most recent perpetuals, Genting’s has no rate reset — so if interest rates are much higher in 10 years, investors will still receive a coupon of 6.125% for the rest of the life of the bond. “I think people are overlooking the fact that it’s fixed for 10-years, and that there is no rate reset. There’s a step-up at year 10, but depending on where rates are, a 100bp step-up may not be enough,” said one rival.
However, the deal had other investor-friendly features, including a dividend stopper and dividend pusher. Judging by the overwhelming response to Genting’s deal, the tremendous name recognition was enough to convince investors to buy the deal.
Genting Singapore is a Singapore-listed casino operator whose flagship property is Resorts World Sentosa. The founding Lim family controls about 55% of Genting Singapore through Genting Bhd.
