Weak dollar attracts Singapore borrowers offshore

Singapore borrowers are gearing up to take advantage of attractive funding levels in the dollar market, and banks are circling to win the mandates. Companies such as SembCorp Marine, Singapore Airlines, Singapore Telecommunications, Wilmar and DBS are all considering dollar bonds.

“Singapore companies are checking out the dollar market and asking for quotes,” said one debt capital markets banker. “It is a good time to lock in rates and term out debt. But the Singapore dollar bond market offers cheap funding, so the pricing in the dollar market would have to be very compelling,” he added.

So far this year, Singapore borrowers have been relatively quiet in the offshore market as they took advantage of the ample liquidity at home. In March, Singapore Telecommunications issued a $600 million 10.5-year bond, while Stats ChipPac issued a $200 million five-year non-call-three in January. Otherwise, there has not been much issuance.

Indeed, borrowers seem to be opting to issue in the local markets and swap to dollars, as seen by shipping company Neptune Orient Lines (NOL), which closed a S$300 million 10-year non-call-five on Wednesday. The bond paid a coupon of 4.4%. NOL will be swapping the proceeds from Singapore dollars into US dollars to partially finance the purchase of new containerships. DBS, HSBC and Standard Chartered Bank were the arrangers. NOL has in the past contemplated issuing a debut offshore bond but this has never materialised.

Singapore’s retail bond market has also been developing and retail investors have been willing to buy bonds at low yields to beat the miserly deposit rates — giving borrowers yet another investor base to tap. In September last year, Singapore Airlines sold a S$300 million five-year retail bond that paid a yield of 2.15% — a very competitive rate for the borrower.

The only compelling reason to go offshore would be to raise funds in large sizes, but there is some reluctance to pay up. “Singapore issuers are a difficult bunch,” said one banker. “They want to issue bonds with long tenors but at the same time, they don’t want to tap the professional US market — where pension funds want long-dated paper.”

Away from Singapore companies, PRC real estate company Shui On Land has mandated Deutsche Bank, Standard Chartered Bank and UBS on a perpetual non-call-five to raise $300 million to $500 million. The company is likely to issue an unrated bond — similar to Sino Ocean Land — offering a big step up. The deal is targeted to launch around July.