Property developer Hongkong Land broke new ground last year in one of 2005’s outstanding bond issues in an Asian currency: a S$700 million ($416 million) five- and 10-year bond deal – the largest ever Singapore dollar deal for a foreign rated issuer, and the largest overall for 2005.
The deal, led by HSBC and DBS, marked Hongkong Land’s first foray into the debt capital markets, in line with a growing trend among regional corporate borrowers; the company’s previous projects have all been financed with loans. It has also boosted international interest in Singapore dollar funding.
“We looked at all financing solutions and, taking a holistic view, the bond markets were the way to go,” says Anasuya Dhoraisingam, head of debt finance at HSBC Singapore.
The A2/BBB+ rated property developer increased the launch amount of S$500 million ($297 million) to S$700 million ($416 million) after the deal was 1.8 times oversubscribed. The financing was for general funding and new investment in Singapore.
The transaction was split between a S$325 million, five-year bond and a S$375 million, 10-year note. Both tranches were priced competitively, inside Hongkong Land’s existing US dollar bond issues, reflecting how strong liquidity in the Singapore market has helped reduce the cost of even very big issues.
HSBC was able to craft the deal over four to six weeks. The bank saved time on drafting documentation thanks to its old relationship with Hongkong Land and the firm’s US dollar issuance, said Dhoraisingam. Twelve people worked on the deal.
According to Dhoraisingam, Hongkong Land is a “brand name” for Singaporean investors through its investments in commercial properties in the city state, such as One Raffles Link, the new Business & Financial Centre and One Raffles Quay, which it is developing as part of a consortium.
Insurance companies bought three-quarters of the 10-year bonds, while the five-year bonds were snapped up by fund managers, insurers, banks, private banks and government agencies.
From the start of 2005 to April 20, 2005, seven foreign issuers raised S$465 million in the market. Over the same period for this year, 16 issuers have raised over S$1.34 billion.
Dhoraisingam said this trend is due to tax breaks offered by the government to make Singapore’s capital markets a competitive issuance environment, and the relatively flat basis-swap spreads between the Singapore dollar and US dollar.