What started as a trickle of Singapore dollar bonds from small- and medium-sized issuers turned into a flood in 2014, throwing open the local debt market to several companies for the first time. DBS was at the forefront of this trend, correctly calculating that private bank clients would embrace the new high-yield offerings.
The arrival of the new asset class helped DBS cement its position as the top arranger of Singapore dollar bonds, with 70 new issues during the review period for a 37% market share.
Reading the investor mood correctly may be one thing, but the bank also exercises a strong sense of discipline in bringing the right issuers to the market to protect investors’ interests. Rivals were quick to carp that DBS was introducing additional risk to the local market, only to copy the idea themselves as the year drew on.
The bank’s diverse tally of deals also pointed to the growing maturity of the Singapore market. This year brought to the Singapore dollar market many new PRC issuers, including Hainan Airlines, China Coal Solution and Central China Real Estate, all of which had DBS as a lead manager.
“Our objective has been to grow and develop the Singapore dollar market to the standards of the US dollar market,” said Clifford Lee, head of fixed income, treasury and markets at DBS Bank. “Singapore has now become relevant to both onshore and offshore issuers such that they are able to fund in size and in tenor.”
DBS also continued to bag major deals for large local borrowers, underscoring their confidence in the bank. It won the sole mandate for Singapore Airlines’ long-awaited return to the bond market in March, as well as the sole role in a very keenly fought contest for Jurong Shipyard.
Its structuring prowess was most clearly demonstrated in a transaction for its own parent, DBS Group, completed at the start of IFR’s review period in December 2013. The tender offer for S$1.7bn (US$1.4bn) of 4.70% preference shares for an exchange into S$805m of Basel III-compliant perpetual capital securities struck a neat balance between investors’ wishes and the bank’s own requirements.
The group did not need additional funding, but the legacy capital instrument was losing its capital treatment as part of the transition to the new Basel regime. It was also trading well above par, even though DBS had the right to call the notes at face value due to the regulatory changes.
The solution, the first of its kind in Asian bank capital, offered investors an above-market coupon at a shorter call period, but introduced price tension through a Dutch auction with a limited amount of new notes on offer.
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