Temasek announced the bond offering this morning and is looking to price US$1bn of 10.5-year notes and at least US$500m of 30-year notes later today, according to people familiar with the company’s plans. Each tranche will yield around 105bp over US Treasuries, based on initial price guidance.
Citigroup, Deutsche Bank, Goldman Sachs and UBS are leads on the deal.
Temasek hired Citigroup and UBS to arrange a series of investor meetings on July 9–10, IFR reported earlier this month. The meetings were officially billed as “investor updates”, but the news prompted talk that the state fund was planning to return to the bond markets.
At a yield of 105bp over Treasuries, Temasek is looking to price the new offering 5bp–20bp inside its existing curve – an unusual feat in volatile markets. The outstanding 10-year was bid this morning at a G-spread of approximately 124bp, while the illiquid 2039 was at 110bp over the old 30-year US Treasury, according to three traders. Comparisons are difficult because the 30-year bonds are seldom traded.
However, given the high quality Aaa/AAA ratings of the borrower and its scarcity value, the aggressive valuation is not expected to reduce demand for the bonds.
Temasek last visited the US dollar markets with a public deal in November 2009, when it launched a 5.375% US$500m bond due 2039. Portfolio company PSA International followed with a long 10-year dollar bond in August 2010, but Temasek has since preferred to fund in its local Singapore dollar market. The fund’s last international benchmark came in July 2010, when it launched a £700m deal in the sterling market.
Temasek said in its annual review earlier this month that weak Asian markets had dragged its total shareholder return down more than three percentage points to 1.5% in the fiscal year ending March 31.
Temasek said its net profit fell to S$10.7bn (US$8.4bn) in 2012 from S$12.7bn the previous year. Net portfolio value rose 2.6% to S$198bn from S$193bn, lagging the 3.8% gain in 2011. Total shareholder return, at just 1.5% in 2012, fell far short of the 4.6% in 2011.
The share of North America and Europe in the company’s portfolio rose to 11% from 8%, thanks largely to investments in energy companies. The share of the Asia ex-Singapore investments, however, fell to 42% from 45%. Singapore’s share fell to 30% from 32%.
