DBS bags $18b of foreign currency bond deals in '13

PHOTO: DBS bags $18b of foreign currency bond deals in '13

SINGAPORE- The Singapore-dollar (SGD) debt market may have slowed down this year but DBS Bank has powered ahead with foreign-currency bond deals, raking in over S$18 billion worth of issues.

Bolstered by a strong balance sheet and a track record in structuring deals, DBS has arranged bond deals for clients beyond the region such as Turkey's Mersin.

DBS' S$18 billion worth of foreign-currency bond deals so far this year - made up of US dollar (USD) denominated and yuan bonds - is three times more than its SGD-denominated bond sales of S$6.1 billion.

"Activity in non-SGD has grown, it's more than it has ever been," said Clifford Lee, DBS Bank head of fixed income.

Year to date, in the USD space, DBS handled 24 deals worth US$11.6 billion. Last year it was 16 deals worth US$8.1 billion. Total value from 22 yuan deals for 2013 is CNH18.1 billion. In 2012, it was six issues worth CNH1.4 billion. CNH refers to offshore renminbi or yuan.

DBS has been building up its fixed income capability since 2005, beginning with SGD and extending it to relevant regional and also G-3 currencies, said Mr Lee.

The USD bond market, the biggest in the world, is dominated by much bigger players, but DBS has managed to clinch deals by tapping existing clients and showing it has the distribution reach, he said.

"We support clients by extending their debt raising capability beyond the traditional banking market to the bond market," he said. "We have the execution experience and track record to show."

That means not just introducing new investors to the issuers, but also backing up solutions with funding when required, he said.

Some Western banks have the investment bank ability but no balance sheet because their head offices are not prepared to take on credit risk in Asia, he said.

For instance, Miclyn, a Singapore-based Australian-listed company, wanted to raise US$450 million to take the company private.

In the end, DBS offered a bank loan and helped it sell S$200 million three- year bonds, he said.

"It was at lower cost and lower execution risk, leaving the company to concentrate on closing their deal of delisting," he said of the solution offered to Miclyn. The bank loan was a bridging loan in case the bond markets were less than receptive.

The debt market has been choppy this year and it was practically closed for four months from end-May to October on fears of a less accommodative monetary policy from the US Federal Reserve.

Some of the biggest USD deals that DBS handled this year were inaugural issues. They included San Miguel Corp's landmark US$800 million issue, the largest corporate bond out of the Philippines. The inaugural transaction took in US$4.5 billion of orders with investors coming from Asia (69 per cent), Europe (28 per cent) and the US (3 per cent).

Another major deal was Dutch-based Trafigura Beheer BV, which successfully sold an inaugural US$500 million perpetual bond in Singapore. The bond, which was priced at a fixed rate of 7.625 per cent, met with strong demand, with orders of more than US$2.7 billion. It was more than five times subscribed.

"We were the only Asian bookrunner; they included us because they wanted Asia (investors) in the drawer," said Mr Lee. The unrated and unlisted Trafigura had hired Credit Suisse, DBS Bank and The Royal Bank of Scotland as joint lead managers for the bond sale.

Asian investors made up 45 per cent of the bond investors, followed by Switzerland (22 per cent) and the rest of Europe (33 per cent).

Another debut was the US$450 million, seven-year deal for Mersin International Port. Orders for the issue exceeded US$1.1 billion. Mersin is a 50-50 joint venture between Akfen Holding, a leading infrastructure investor in Turkey, and Singapore's PSA, a global port operator. The deal was the first Turkish bond arranged by a local bank and roadshowed to investors in Asia.

The participation of Asian investors was significant. They put in 40 per cent of orders and were allocated 30 per cent of the issue.

Another growing segment of the non-SGD market is yuan bonds. "From a global standpoint, the renminbi is the most exciting bond market in Asia," said Mr Lee.

The offshore renminbi is growing rapidly as China steps up its currency internationalisation policy as part of economic reforms.

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