Temasek subsidiary sold its first
US dollar bond last month, a
US$300m 10-year issue priced at
49bp over US Treasuries.
LTA’s bonds, the proceeds of
which will fund land transport
infrastructure projects, were
issued on a standalone basis.
The 30-year piece paid a higher
spread for the long duration at
around 37bp over Singapore
dollar SOR, or around 39bp over
Singapore government securities,
while the 10-year piece priced
at 15bp over SOR. Housing and
Development Board, a frequent
issuer with a Aaa rating from
Moody’s, paid about 16bp over
SOR on its recent S$600m 2.303%
five-year bond and only 13bp
on its S$515m 10-year note in
January.
One banker expressed concern
that a rush of infrastructure-
related issues from statutory
boards could weigh on investor
appetite, noting that liquidity
in the Singapore dollar bond
market is not as deep as last year,
with more investors holding out
for higher yields. Demand for
longer-dated assets is typically
limited to insurance companies
and pension funds, effectively
determining how much supply
the market can bear, and at what
price.
Debt bankers are hoping
for some structured deals in
which the government can
tailor its guarantee as a credit
enhancement to mitigate
risks inherent in a greenfield
infrastructure project, instead of
giving a direct guarantee to the
issuer. That way, they argue, the
deal can provide better yields to
widen the investor base.
Increased issuance of longer-
duration corporate bonds may
also dent demand for lower-
yielding government debt and
impact Singapore’s government
yield curve. Although the
primary bond market typically
uses the SOR as a reference
rate, the lack of liquidity at 30
years means the government
security is seen as a more reliable
benchmark at that tenor.
“Longer-tenor SGS are likely to
face headwinds from increased
issuance as the government
looks to the capital markets to
fund infrastructure projects,”
said Eugene Seow, rates strategist
at DBS.
“If there are implicit or
explicit government guarantees,
these bonds – if issued over the
coming couple of years – will be
in direct competition for longer-
term SGS.”
DBS and UOB were joint lead
managers and bookrunners for
the LTA issue, which settled on
March 10 off a S$12bn multi-
currency MTN programme. Foreign banks step
up in Taiwan
Loans Mizuho expands footprint with acquisition loan for
shoemaker Pou ChenBY EVELYNN LINTaiwan’s ultra-competitive
loan market, dominated by
highly-liquid domestic lenders,
is turning out to be an unlikely
source of opportunities for
international banks.
Mizuho Bank is the coordinator
on a NT$28.5bn (US$977m)
acquisition loan for POU CHEN
CORP, the world’s biggest
footwear maker, in a rare
instance of a Japanese bank
leading a high-profile domestic
currency loan in Taiwan.
The five-year loan, which
will fund Pou Chen’s buyout of
Chinese sportswear retailer Pou
Sheng International Holdings,
follows a NT$90bn acquisition
financing for ADVANCED
SEMICONDUCTOR ENGINEERING also
with a foreign bank as lead – in
this case Citigroup.
“We are seeing more
competition from our overseas
counterparts in cross-border
acquisition deals as they have
branches in Taiwan and they
are more experienced in this
field, and sentiment is quite
positive,” said a senior loan
manager at a top-tier Taiwanese
state-owned bank.
On Pou Chen’s loan, two
other Japanese mega banks- MUFG and Sumitomo Mitsui
Banking Corp – are also joint
mandated lead arrangers and
bookrunners along with Mizuho
and Taiwanese lenders Bank of
Taiwan, Bank Sinopac, CTBC Bank
and Taipei Fubon Commercial Bank.
Mizuho has been a
coordinator previously on
domestic currency loans in
Taiwan, but has not led an
acquisition financing since
- Japanese banks are
expanding overseas in search
of higher yields than the ultra-
thin returns on offer in Japan.
Pou Chen’s five-year loan
offers an interest margin of
50bp over Taibor and a top-level
upfront fee of 12.5bp. MUFG
and SMBC have also committed
to ASE’s loan, which offers an
interest margin of 55bp over
Taibor and a top-level fee of
30bp.
Both loans for Pou Chen and
ASE come with pre-tax interest
rate floors of 1.7%, which is a far
more lucrative proposition than
most domestic loans in Japan.
“It makes sense that Japanese
banks are eyeing offshore deals
for better returns,” said the
senior loan manager.
It is not just the Japanese
lenders increasing their
presence in Taiwan. Around
a dozen of the 35 banks
committing to ASE’s giant
financing are foreign lenders.
NT dollar loans are not
known for paying juicy returns,
given the flush liquidity in the
banking system in Taiwan.
Still, the blowout response to
Pou Chen, with commitments
totalling around NT$200bn,
shows the appeal of the
borrower’s strong credit profile
and the loan’s rarity value.
Pou Chen makes shoes for
international sports brands
including Nike, Adidas, New
Balance and Puma.
Taiwanese lenders also
welcome borrowers from the
traditional manufacturing
sector as an opportunity
to diversify beyond the
semiconductor industry.
“We see traditional
manufacturing business
as more stable than the
semiconductor industry,” said a
second loan manager at a state-
owned bank looking to take
part in Pou Chen’s financing.
The loans for Pou Chen and
ASE total about US$4.1bn –
nearly half of the US$8.7bn
raised from M&A loans in
Taiwan in the last four years.
M&A lending peaked at
US$5.4bn in 2016. For daily news stories
visit http://www.ifrasia.com37bp over yen offer-side swaps
for the five-year, 55bp–57bp for
the seven-year, and 90bp for
the 20-year. The 20-year was
marketed at a fixed spread from
the beginning as demand had
already been confirmed.
Guidance for the five-year
and seven-year pieces swiftly
narrowed to a single number
on Tuesday. The tranches priced
at 35bp and 55bp over swaps,
respectively.
The coupons for the three
tranches are 0.509%, 0.764% and
1.595%, respectively.
Bankers hope that KKR will
now issue yen bonds frequently.
“We hear it wants to be a
frequent issuer [in yen],” said
the first banker. “I don’t know
how frequently it will issue, but I
think it will continue to issue in
yen, and this debut deal is a good
starting point.”
KKR has been an active player
in Japan, as local conglomerates
restructure and spin off
non-core assets. It recently
acquired the semiconductor
manufacturing equipment
activity of Hitachi Kokusai
Electric and a 60% interest in
its video and communications
business. Earlier last year,
it sealed a ¥147.1bn LBO of
Hitachi’s power tools unit
Hitachi Koki and a ¥498.3bn
buyout of auto parts maker
Calsonic Kansei.
Mizuho and SMBC Nikko were
leads on the 144A/Reg S issue,
which domestic agencies R&I
and JCR see as A+, while S&P
and Fitch both have expected A
ratings.