Lessons from the SGD Sembcorp Perpetual Bond

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My impression is that the issue went badly.

For a household name to fail to garner more than 400 mio in orders and names like Goodpack and Banyan Tree getting more orders than them. Even SGX traded retail Hyflux perpetual is going at 5%.

And more importantly, the PB rebate they paid is the same as the others (except Banyan which was more).

** SCI PerpNC5 – Stats ***
Books at S$320mm, over 50 accounts
By Investor Type:
PBs 53%
FMs/Ins/Bks 37%
Others 10%
By Geography
SG 89%
HK 10%
Others 1%

What does it show and what have we learnt.

  1. Sembcorp would ideally prefer a long dated senior issue at low 4% like the last one they did in 2010.
  2. This perpetual serves just as well because they pay a slight premium for the free 5 year call option at 100.
  3. Institutional investors cannot hold too much of the perpetuals even though they are good with the name and the yield especially now with Basel 3.
  4. Bond leverage is important for private banking clients – to have the comfort of knowing that the bond has lending value.
  5. Private banking RMs are getting defensive on perpetuals even though some of them do not fully comprehend the terms.
  6. The in-transparency of the market allows selective dissemination of information – I did not receive any notification of this deal from my RM because the bank was not awarding leverage to clients and also because they are winding down the SGD business which is a worry for the future.

Just some random thoughts for posterity.

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