Record Sing-dollar bond sales in August

Banyan Tree's $50m three-year, Sing-dollar bond sale adds to a flurry of debt sales in recent weeks


By CONRAD TAN

AUGUST is turning out to be the month for record Singapore-dollar bond issuance, with some $4.6 billion in bonds sold so far this month - more than a quarter of the total this year.

Companies have sold Sing-dollar bonds on 13 of the 19 business days so far this month, according to data compiled by Bloomberg.

Yesterday, luxury resort developer Banyan Tree Holdings said it had sold $50 million in three-year, Sing-dollar bonds, adding to a flurry of debt sales in recent weeks that have been snapped up by investors.

Companies have sold Sing-dollar bonds on 13 of the 19 business days so far this month, according to data compiled by Bloomberg.

'We expect the market to continue to be active in the second half of the year, and that borrowers will continue to opportunistically tap the market to take advantage of the historically attractive interest rate environment,' said Jason Khoo, head of debt capital markets for South-east Asia at HSBC, which managed Banyan Tree's bond sale.

On Thursday, shipping group Neptune Orient Lines (NOL) sold $280 million worth of 10-year, Singapore-dollar bonds, paying interest of 4.65 per cent a year.

Banyan Tree increased its bond issue size to $50 million from a planned $30 million, after receiving orders worth $118 million - or nearly four times the original offer. It will pay interest of 6.25 per cent a year on the bonds.

The firm will use the funds raised as general working capital, for capital spending and investment, and to refinance existing debt, it said.

Insurers bought 40 per cent of the bonds, while rich individuals and private banks bought 35 per cent, and other banks bought the rest.

Most of the bonds were initially allocated to investors here, but some were quickly sold on in the secondary market to offshore investors, particularly offshore private banks, Mr Khoo said.

Private banks have become big buyers of Sing-dollar corporate bonds, bankers say. The relatively high yield on corporate bonds such as Banyan Tree's is attractive to private banks' rich clients, at a time when Sing-dollar fixed deposits here are paying interest of less than one per cent a year - though bank deposits carry almost no risk.

The annual yield on Singapore government securities ranges from 0.33 per cent for one-year treasury bills, to 2.92 per cent for 20-year bonds.

Big companies such as NOL, property developer CapitaLand or state-owned Temasek Holdings - seen as less likely to default on their debt - can afford to pay lower interest on their bonds than small companies, and still attract investors.

The search for extra returns by investors has allowed more companies to sell long-dated bonds to lock in relatively cheap borrowing costs for long periods of time.

Of the $17.3 billion in Sing-dollar bonds sold this year so far - the most ever - $9.6 billion, or more than half, had maturity lengths of seven years or more. That compares with just 14 per cent of Sing-dollar bond issuances last year, when investors were jittery, and 43 per cent in 2008.

Previously, fewer investors were willing to buy such long-dated Sing-dollar bonds for fear that the bonds would be difficult to re-sell without incurring a substantial loss, if investors needed to cash them in before maturity.

But as more such bonds are issued, and then actively traded after the initial sale, potential investors have become more confident that a liquid secondary market exists for bond investors, allowing them to re-sell the bonds easily if needed, Clifford Lee, head of fixed income at DBS Group, said earlier this week.

Similarly, the success of recent bond sales has spurred interest from other companies, who can see that investors' appetite for such bonds is strong, Mr Lee said.