Temasek launches first retail bonds

The institutional placement was received well by investors mainly because of the scarcity value of AAA-rated Singapore dollar bonds by a high-quality issuer

Singapore global investment company Temasek Holdings has launched its first public bond offering for retail investors with a five-year maturity, paying a fixed interest rate of 2.70% per annum.

Up to S$200 million (US$145 million) was allocated to retail investors and another S$200 million was placed with institutional and other investors for a total of S$400 million. There is an option to upsize the issuance to S$500 million in the event of oversubscription in the public offer and/or the placement offer.

For retail investors, applications must be made in multiples of S$1,000 subject to a minimum of S$1,000. Individuals can apply via the ATMs of DBS, POSB, Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB). They may also apply via internet banking or the mobile banking apps of DBS or POSB.

Bonds under the public offer opened for application on October 17 and will close at noon on October 23.

The offering was the second Singapore dollar retail bond issuance this year, after the S$121 million retail offering of Class A-1 private equity bonds by Astrea IV in June this year.

The bonds, which are priced at par, are issued through Temasek's wholly-owned subsidiary Temasek Financial (IV) Private Limited under its S$5 billion guaranteed medium term note programme. The net proceeds will be used by the group's investment holding companies to fund their ordinary course of business.

The institutional placement attracted a strong investor reception, attributed mainly to the scarcity value of a AAA-rated Singapore dollar bond issuance by a high-quality issuer. The last time Temasek accessed the Singapore dollar bond market was in 2010.

The initial institutional tranche garnered an order book of S$1.438 billion from a total of 76 accounts. In terms of geographic distribution, 92% of the bonds were sold in Singapore and 8% in the rest of Asia.

By type of investors, insurance companies accounted for 54%, central banks, sovereign wealth funds and agency 24%, fund managers 12%, banks 8%, corporates 1%, and private banks and securities firms 1%.

The coupon/yield of 2.70% was established by institutional investors through a bookbuilding and price discovery process. At that level, the bonds offer a yield pick-up over the five-year Singapore government bonds, which were trading at a yield of between 2.32% and 2.34%.

The Temasek bonds also offer a slightly higher yield than the most recent bonds by the Housing Development Board, which were trading at 2.64%. Also, from the retail investors' perspective, the Singapore savings bonds for the November issue offer an average return per year of just 2.22% per annum if the investor holds the paper for five years.

DBS acted as the sole global coordinator for the transaction as well as a joint bookrunner and a lead manager, along with HSBC, OCBC, Standard Chartered and UOB.