SGD New Issue : Suntec Reit 6Y 3.35%


Issuer:    Suntec REIT MTN Pte. Ltd.
Guarantor:  Unconditionally and irrevocably guaranteed by HSBC Institutional Trust Services (Singapore) Limited (in its capacity as trustee of Suntec REIT)
Issuer Rating: Baa2 Stable (Moody’s)
Expected Issue Rating: Baa2 (Moody’s)
Status: Senior Unsecured
Format: Registered form, Reg S off US$1.5bn EMTN Programme
Tenor:  6 Year
Size:  SGD Benchmark
Price Guidance: 3.35% (the number)
Coupon: Fixed Rate, semi-annual
Details: SGD250k x SGD250k, English Law, SGX Listing, CDP
UOP: General corporate purposes of Suntec REIT and refinancing of existing borrowing, including                                  facility in which ANZ, DBS and Standard Chartered Bank is one of the lenders

An issuer usually chooses the cheaper option and in today’s case, it would appear that bonds are cheaper to issue than continue borrowing from the banks.

Dividend yield indication 6.47%. The term loan outstanding due in 2014 is SGD 773 million so after today’s 200 million there is half a billion more to borrow. There is another loan of SGD 682 million due next year so we shall be seeing them around.

6 year interest rates are 1.95%, thus we are getting a premium of 1.4% for its Baa2 rating. UOB 4.75% perpetual (6 year callable) is Baa1 rated and giving us 4.5%, CDL Reit is about 3.75% for 4.5 years.

I expect decent leverage to be awarded for this name but expect PB demand to be lukewarm. Yet books are covered for 200 million already as we speak as I struggle to see much value.