The Singapore dollar bond market was active this week — with Central China Real Estate (CCRE) and real estate developer Ascendas raising a combined S$475 million ($377 million). Though not exactly a huge amount, both deals give bankers a glimmer of hope that the Singapore dollar bond market will stay open even as a heavy pipeline looms.
Earlier this year, the lingering question was whether the Singapore dollar bond market had sufficient liquidity to absorb just a handful of deals or a whole slew of them. So far, the market has got off to a flying start — with Singapore bond issuance chalking up S$7.6 billion year-to-date compared to S$4.4 billion for the same period last year, according to Dealogic data.
In particular, perpetual issuance has spiked this year as investors are hungry for yield. The total amount of Singapore dollar perpetual bond issuance is S$2.6 billion year-to-date, double the S$1.3 billion raised during the whole of 2011, according to Dealogic.
Much of the demand has been driven by private banking money — as reflected by CCRE’s S$175 million four-year high-yield bond that priced Wednesday evening and Ascendas’s S$300 million perpetual non-call five-year bond, which priced a day earlier. One banker said CCRE’s deal was “predominantly” bought by private banks, while 68% of the Ascendas perpetual was allocated to private banking accounts.
“Private banking demand is driving the issuance in the Singapore dollar bond market,” said Owen Gallimore, head of credit strategy Asia at ANZ. “The US dollar market is closed for single-B rated property bonds and we have seen Chinese real estate sell off heavily recently due to disappointing results and wider market weakness.”
Even recent issues from preferred double-B borrowers such as Agile Property and KWG Property have underperformed and are down four points, according to Gallimore.
“For borrowers whose contract sales and earnings have not disappointed, such as Central China Real Estate, the Singapore dollar market offers an alternative funding source to the dollar market,” he said.
CCRE is notable because it offered a yield of 10.75%, making it the first double-digit yield on a Singapore dollar bond and the second high-yield bond to hit the Singapore dollar market after Shui On Land’s deal, which priced earlier this year. The deal raised slightly more than the expected S$150 million. It was estimated to have offered the borrower cost savings of about 2% compared to the US dollar market given that CCRE’s outstanding 2015s were yielding about 13.35% while CCRE was in the market. CCRE’s bond issue was rated B+. Deutsche Bank, Morgan Stanley and OCBC were joint bookrunners.
Ascendas, on the other hand, was the first unlisted company to tap the perpetual market, which it re-opened after Temasek-linked shipping company Neptune Orient Lines pulled its transaction. The Singapore developer attracted a decent S$1.2 billion book for an unrated deal.
“The deal re-opens the market after NOL’s failed transaction. However, it feels like fatigue is setting in and we’re hearing quite a few other companies in the region are looking at the Sing market,” said one banker.
The coupon for Ascendas’s perpetual is fixed at 4.75% for the first five years and resets to the prevailing five-year swap rate plus 351.2bp on April 18, 2017. The swap rate resets every five years thereafter and there is a 100bp step-up at the 10th year. DBS was the global coordinator. DBS, Citi and Credit Suisse were bookrunners.
Elsewhere in Singapore, Hutchison Whampoa is also holding a non-deal roadshow in Singapore. DBS and HSBC are arranging the meetings. The company is said to be updating Singapore-based investors as it has recently released its results.
Having tapped the market with a gigantic S$1.8 billion perpetual in March, Genting Singapore is returning once again, but this time it is tapping retail investors with a perpetual of up to S$700 million — to be distributed through ATMs. DBS is the global coordinator and bookrunner. OCBC is also a bookrunner.
Away from the Singapore dollar bond market, Shenzhen International will conclude roadshows this week and is eyeing a potential deal print this week. UBS and Standard Chartered are global coordinators and bookrunners. DBS, ING, J.P. Morgan and BOCI Asia are bookrunners.
Meanwhile, Mongolian lender Golomt Bank and China Shanshui Cement are also on the roads for potential dollar bonds, but both are expected next week. Credit Suisse, Deutsche Bank, HSBC and J.P. Morgan are the arrangers for China Shanshui while Deutsche Bank, Morgan Stanley, UBS and QNB Capital are the arrangers for Golomt.
