NSB defends charges against international bond issue
7 January 2015 04:06 am
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State-owned National Savings Bank (NSB) yesterday said no individual investors were among the subscribers to its bond issue in 2013 and the proceeds were never deployed below the cost, contrary to certain news items and statements made at various forums recently.
NSB raised US $ 750 million via a 5-year international bond issue which was priced at a coupon rate of 8.875 percent.According to the bank, the bond issuance was carried out complying with US, European andAsian regulations.“In terms of the relevant regulations, only institutional investors are allowed to participate in subscribing for the issue with a minimum subscription value of US $ 200,000,” the bank said.
“The issue was oversubscribed 2.5 ti mes approximately, and 172 subscribers committed for US $ 2.3 billion. The allocation was made among 141 applicants with a good spread among investors,” the bank added.The spread of the investor community to the bond issue ranged from the US to Asia that covers all three time zones. Geographically US contributed 39 percent, Europe with 38 percent andAsia with the remaining 23 percent.
The categorization of investors ranged from fund/asset managers with 88 percent, banks with 10 percent and insurance companies., and other institutions with 2 percent of the issue.“Therefore, we wish to emphasize to the general public that no individual investors were among the subscribers to NSB international bond,” the bank said.NSB was rated on par with the sovereign by two rating agents, and the bond carried international rating of BB-.
“In the first week of September, none of the bonds in the secondary market of Singapore Debt Exchange traded at par except the Vietnamian’16 and Vietnamian’20. All others were trading at a discount. The average US $100 bond was trading between prices of US $ 78 – 99.
In the global market, certain bonds that carry identical issuer/issue ratings to that of NSB was trading at levels of 8.3 percent p.a., to 8.5 percent p.a. with comparable maturities.”The bank also said when an issuer who is not known to investors enters the international market for the first time, a debut issue is priced higher than that of a seasoned issuer.
“NSB bond being a non-sovereign issue would have had to pay a margin of 100 bp to 150 bp over a sovereign issue. Nevertheless, in reality, the initial book building started at rates above 9.25 percent and NSB was able to drive the price down due to the strong demand shown by over 170 investors with a commitment of over US $ 2.3 billion,” the bank said.
“The issue price was finally set at 8.875 percent and not at 9 percent or above as has been stated at various forums. NSB wishes to highlight that the proceeds were never deployed at 7 percent or below the cost but always at a margin.”“The NSB bond was trading near par immediately after the issue. If the pricing was way beyond the market rates, the post issue should have been traded at high premiums,” the bank added.