Martin Lee @ Sg
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Temasek Holdings to Raise Money From Bond Issue

It was reported that Temasek Holdings will be issuing 10-year USD bonds to generate cash to fund it’s own business as well as it’s subsidiary companies.

The offer is expected to be at least US$500 million with the coupon rate yet unknown. For the previous 10-year bond issuance in 2005, the coupon rate was 4.5%. Temasek is looking to pay a spread of 1% over the equivalent US treasury bills, so the coupon rate could be close to 4%.

Temasek-HoldingsThe bonds have been rated AAA by S&P and Aaa by Moody.

This brings us back to the commonly asked question: Should we be paid a higher interest for the monies in our CPF Ordinary Account?

Granted the bonds will be issued in USD, but could Temesek have issued bonds in SGD, and pay a coupon higher than 2.5% to the CPF board? Even the 10-year Singapore government bond is giving a yield of close to 2.85% currently.

A higher interest paid on our long term Ordinary Account funds (which are locked in) will go a long way towards helping people with their retirement funding.

100k earning 2.5% over 20 years will become 163k.
100k earning 3% over 20 years will become 180k.
100k earning 3.5% over 20 years will become 199k.
100k earning 4% over 20 years will become 219k.

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16 comments
Intheknow says 10 years ago

pref shares may not ever be redeemed. so you are still subject to principal risk since pref share prices can move up and down.

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Jasmin says 10 years ago

Such bonds are meant for big fish or those with deep pockets.
This world is cold and cruel; no money no talk.

Compared such bonds (with min 250k etc), I would go for pref shares.

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VSL says 10 years ago

Yes, there is a HDB 3-yr note just launched. Details at http://www.hdb.gov.sg/fi10/fi10296p.nsf/PressReleases/0938879B58BA978A482576560020264E?OpenDocument.

Though the yield is not that great, I am prepared to go in as I trust HDB. Now, if only I can find $250k loose change.

Why doesn’t HDB issue notes in smaller bundles eg $10k for small retail investors? All these big govt organisations are after big fish. First Temasek, now HDB. No one cares a damn for the ikan bilis.

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    lioninvestor says 10 years ago

    Hi VSL,

    There are some stat board loans denominated in 10k that are sold on the SGX. LTA, HDB, JTC are some of them. Though the HDB bond I last saw has matured already.

    Reply
Jasmin says 10 years ago

Yes, my concern is the US currency too. But why these bonds are not issued in SGD?

I saw from papers; HDB issued a 3 years notes with coupon at 1.55%pa (pse verify). This yield is so lousy!

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DanielP says 10 years ago

I am abit unsure why retail investors would want to buy this bond. The minimum is US$250K, which is not a little sum of money. It is quoted in US$, a sophisticated investor would know how to hedge the US$/S$ exchange rate exposure,
a retail investor may not know. He could very well get less if the US$ depreciates, or vice versa.

If this was quoted in S$, then I agree the govt should allow us a bite, but I doubt it.

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Jasmin says 10 years ago

Hi Lion Investor,
Isn’t it better to buy such bonds in the primary than secondary markets?

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    lioninvestor says 10 years ago

    Hi Jasmin,

    No chance at all. Taken up within a few hours.

    Reply
Jasmin says 10 years ago

http://news.asiaone.com/News/the%2BStraits%2BTimes/Story/A1Story20091021-174760.html

These bonds were sold out within hours!

Why Temasek does not offer retail investors a chance to buy its bonds?

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    lioninvestor says 10 years ago

    Hi Jasmin,

    7% was actually sold to retail investors.

    You can also buy it from the secondary market but need a minimum of $250k to transact, as with most other bonds traded on the secondary market.

    Reply
DanielP says 10 years ago

That is good to know, that they are not gambling away our reserves.

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DanielP says 10 years ago

I wonder if the borrowings mean Temasek is using leverage in its investments.

Leveraging will juice up returns when times are good, and magnify losses when things turn bad.

One of the issues which caused the financial crisis, was the over use of leverage to juice up returns which helped the fund managers get much bigger bonuses, at least when things when swimmingly well.

I wonder if the govt imposes any limits on Temasek with regards to leverage or it will just leave it to “market forces”.

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    lioninvestor says 10 years ago

    Hi Daniel,

    Temasek had to pump in a fair amount of cash to support all the Rights issue over the past year. eg DBS, Keppel Land, NOL, Capitaland.

    I am not surprised it needs to raise cash at some point in time.

    Reply
VSL says 10 years ago

Hi LI,

Do you think this bond issue will be open to the retail public? No mention about it in the press. Tks.

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    lioninvestor says 10 years ago

    Hi VSL,

    The offer has been fully placed already. Retail investors can now buy on the secondary market, indicative yield is around 4.2% but the minimum transaction size is $250k. So retail yes, but need deep pockets.

    Reply
Intheknow says 10 years ago

threading on dangerous waters!

big brother watches!

Reply
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