Singtel achieves large price compression in latest bond deal
The issuance generated an order book in excess of US$4.1 billion from 225 accounts
5 Jun 2020 | Chito Santiago

SINGAPORE Telecommunications (Singtel) returned to the US dollar bond market when it priced on June 3 a US$750-million offering, which achieved a large price compression amid robust investor demand.

The Reg S 10-year deal was priced at 99.313% with a coupon of 1.875% to offer a yield of 1.951%. This was equivalent to a spread of 123bp over the US treasuries, or at the tight end of the final price guidance of 125bp area (+/- 2bp) and 47bp inside the initial price range of 170bp area.

Issued through Singtel’s wholly-owned subsidiary Singtel Group Treasury (SGT), the deal is part of the company’s long-term financing strategy and extends the group’s debt maturity profile. Singtel group CFO Lim Cheng Cheng was pleased with the strong demand for the transaction from the investor community, which highlights their confidence in the company.

The issuance generated an order book in excess of US$4.1 billion from 225 accounts, with 83% of the bonds distributed in Asia and 17% in Europe. By type of investors, fund managers were the biggest buyers of the paper as they accounted for 45%, followed by insurance companies with 21%, banks 19%, public sector and pension funds 12%, and private banks 3%.

Drawn under SGT’s S$10 billion (US$7.15 billion) euro medium-term note programme, the net proceeds from this issue will be applied by SGT to fund its ordinary course of business. Citi, DBS and HSBC acted as the joint bookrunners and lead managers for the transaction.

Singtel previously tapped the US dollar bond market in August 2019 when it printed a similar US$750 million offering, also for 10 years. That deal carried a coupon of 2.375% and generated a total demand of US$2.3 billion.

In April, Singtel announced that its wholly-owned subsidiaries have entered into agreements for total credit facilities of S$4.17 billion to be used for general corporate purposes and to refinance existing facilities.

SGT signed an agreement for a three-year S$2.5 billion committed revolving credit facility with 13 banks, comprising of ANZ, Bank of America, Bank of China, Citi, DBS, HSBC, Mizuho Bank, MUFG Bank, OCBC Bank, Societe Generale, Standard Chartered, Sumitomo Mitsui Banking Corporation and United Overseas Bank. This facility is guaranteed by Singtel. In addition, SGT inked agreements with another group of banks to raise one-year committed facilities totalling S$950 million.

In Australia, Optus Finance, a subsidiary of Singtel Optus, entered into 364-day committed facilities to raise a total of A$800 million (US$551.70 million), guaranteed by Singtel Optus and a certain number of its subsidiaries.

Moody’s Investors Service, which assigned an A1 rating to Singtel’s latest bond deal, notes that as at March 31, the company has about S$4 billion in debt, including lease liabilities, maturing over the next 12 months. However, it notes refinancing risk is manageable given the company’s demonstrated strong access to the bank and bond markets.

Moody's expects Singtel’s net adjusted leverage will remain elevated at 2.4x-2.5x over the next 12 months, reflecting operational challenges from the protracted Covid-19 outbreak, increased competition in its core markets of Singapore and Australia, high levels of capital spending and a commitment to shareholder returns.

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