From
Business Times,
S$ perpetual bond sales at record high
Mapletree Logistics Trust began marketing a sale of perpetual notes to yield in the mid-5 per cent range, a person familiar with the matter said yesterday, asking not to be identified because the details are private.
Corporates have sold about $2.7 billion of the bonds since December, more than any other year, according to data compiled by Bloomberg which stretches back to 1999.
Falling yields and low benchmark rates are pushing investors seeking higher returns to riskier and longer-maturity assets. Yields on Singapore sovereign debt have dropped 54 basis points since the beginning of July, and the six-month swap offer rate averaged 0.304 per cent over the last 12 months, 20 basis points lower than the previous 12 months.
'We've been in a low interest environment for quite some time, and investors have started to look for higher-yielding alternatives,' Clifford Lee, head of fixed income at DBS Group Holdings Ltd, said yesterday. 'This can be achieved by buying bonds from lower-rated companies or by buying notes with longer tenors.'
DBS is helping to arrange Mapletree's sale, the fifth of such notes denominated in Singapore dollars this year.
Perpetual securities accounted for 34 per cent of all Singapore dollar-denominated bonds sold this year, versus 7.7 per cent in 2011, according to data compiled by Bloomberg. Singapore dollar bond sales more than doubled to $7.8 billion this year compared with $3.7 billion in the same period of 2011.
The notes pay more than securities with a set maturity to compensate investors for the risk that they won't be called. They are generally senior to equity and subordinated to other types of debt, and may contain terms stipulating that coupons must be paid if a dividend has been declared. Issuers typically retain the right to call the bonds after a set period.
Genting Singapore Plc, which operates one of the country's two casino resorts, sold the largest Singapore dollar perpetual bond on record when it issued $1.8 billion of 5.125 per cent notes on March 1.
Singapore Post and Olam International, the commodity supplier partly owned by Temasek Holdings, raised $625 million selling perpetual securities last month while Global Logistics Properties increased its 5.5 per cent of existing notes by $250 million in January.
Hyflux Ltd, the country's biggest provider of water treatment services, became the first company in Singapore to sell perpetual bonds when it issued notes in April last year, bringing the total for 2011 to $1.63 billion.
Singapore Post's $350 million perpetual bond pays 4.25 per cent until its first call date in March 2022, more than a 10-year bond it sold in March 2010 which has a 3.5 per cent coupon.
'With high levels of liquidity among private bank investors across Asia and robust conditions in global credit markets, this is a good time to look at perpetuals,' HSBC Holdings Plc's Singapore-based managing director for Asia-Pacific debt capital markets, Alexi Chan, said.
'For many companies, issuing a hybrid instrument can also bring significant benefits to their capital structure.' - Bloomberg
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