Neptune Orient Lines (NOL) of Singapore, the global transport and logistics group whose core business is shipping, has come to market with the first bond deal from a $1 billion medium-term note (MTN) programme.
MTN arrangers - Overseas Chinese Banking Corporation (OCBC), Overseas Union Bank (OUB), Societe Generale and Standard Chartered - are acting as lead managers of the transaction.
The offering comprises a S$540 million ($297.2 million) seven-year fixed rate, carrying a coupon of 4.09%. NOL has the right of early redemption of the bonds after five years.
The use of an MTN programme, the second to be established in Singapore in a week following Credit Agricole Indosuez and Deutsche Bank's creation of a S$500 million multi-currency facility for the DelGro Corporation, allow firms to tap the markets when conditions are most favourable.
NOL's programme, while not exactly multi-currency, will still allow the company to issue in both Singapore and US dollars over the next ten years.
A banker at one of the leads believes that the use of such programmes will become more widespread in the city state. "The use of MTN programmes is becoming common in Singapore right now," he says. "They allow a company to be more responsive to changing market conditions and to get quick access to funds. We, and the other co-leads, have been pitching this idea to businesses recently."
Lim How Teck, chief financial officer at NOL, agrees that this offers the group more flexibility. "The arrangement not only meets our current requirements, it allows us to access further funds sometime in the future if we so choose," he argues. "It provides us with flexibility to, for example, pursue opportunities for growth as they arise, or to refinance existing borrowing or to finance working capital.
"We consider this good timing because the interests rates are currently very low," he continues. "The interest rate of 4.09% is excellent, especially considering it is over seven years."
The banker also feels that NOL got good pricing for the deal. "I think it is very fair pricing that reflects not only a current scarcity of paper, but also highlights how well the issuer has recovered [from the Asian crisis] in the last few years."
NOL, which has a market capitalization of around S$1.6 billion, says it will use proceeds from the first deal to support expansion of the group's businesses and to refinance existing borrowing.
One of its subsidiary companies, the crude oil tank operator American Eagle Tankers which NOL took over in 1997, is also trying to raise funds and in the last two weeks has filed for an initial public offering with the US Securities and Exchange Commission.
Salomon Smith Barney will act as lead manager on the IPO, with ABN Amro and Morgan Stanley acting as co-leads.
American Eagle is looking to raise in the region of $130 million to expand its fleet of tankers.
