SingTel – BT

SingTel’s US$700m, 5.5-year notes over 4 times subscribed

Three traded perpetual securities see varied performances

SINGTEL’s sale of US$700 million, 5.5-year notes yesterday met with strong demand as the debt market continued to sizzle. The order book for the bonds, which pay a coupon of 2.375 per cent, came to about US$3.25 billion and was more than four times subscribed by investors, said SingTel in a statement.

But those looking for a quick buck trading some of the highly popular perpetual securities are finding that not all perps are the same.

Genting’s 5.125 per cent was selling at $100.65 but SingPost’s 4.25 per cent was trading higher at $101.5/102.5. Olam which has a coupon of 7 per cent was struggling to stay above water at $100.2/100.8.

All the three perps, which were sold within the past 10 days, were priced at $100 plus a typical commission of 0.25 per cent, so the effective cost would be $100.25.

‘One customer complained that Genting is so huge compared to SingPost, so how come Genting is not performing compared to SingPost,’ said a broker.

Genting issued $1.8 billion perps after receiving $6 billion orders. SingPost had orders of $2.5 billion or seven times more than the $350 million issuance.

‘SingPost is exceptional, like it’s small size and it’s got everything,’ the broker added. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Ltd.

Olam’s issuance was $275 million after the order book came to $350 million. One relationship manager said he took orders only from customers who asked for Olam rather than actively market the issue, given its higher risk profile.

Among the three names, SingPost is considered the least risky with an A+ credit rating, said Todd Schubert, Bank of Singapore head of credit research.

Genting has a Baa3/BBB- credit rating while Olam has no credit rating.

‘Given that the entire SGD corporate bond market is less than US$100 billion, Genting represented a significant increment to the current outstanding stock of SGD dollar bond,’ said Mr Schubert. ‘The large size of Genting vis-a-vis Olam and SingPost and relative to the size of the market limits Genting’s uniqueness factor,’ he said.

Said Hartmut Issel, head of UBS Wealth Management Research Singapore: ‘We had very low issuance activity in the second half of last year, accompanied by high accumulation of cash during that time. The real attraction in these perpetual securities lies in the lucrative yield they provide.’

Added Wilson Aw, head of UOB Private Banking: ‘Being Singapore dollar denominated, besides appealing to local investors, they also offer an avenue for non-Singapore investors.

‘However, investors should bear in mind, for instance, the subordination of the structure and the higher interest rate risk compared to straight bonds.’

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