2nd UPDATE: Temasek's First Sterling Bond Climbs In Initial Trade

20th Jul 2010 10:52

(Adds initial trading) By P.R. Venkat and Sam Holmes Of DOW JONES NEWSWIRES SINGAPORE (Dow Jones)--Singapore state investment company Temasek Holdings Pte. Ltd.'s first pound-denominated bonds rose in initial trading, carrying over from a strong launch as U.K. investors grabbed a rare sterling issue from a top-rated name. Demand for both the GBP500 million tranche of 30-year bonds and the GBP200 million tranche of 12-year bonds appeared strong in initial London trade Tuesday, with spreads narrowing from Monday's pricing levels, traders said. There appears to be "strong 'real money' demand" for the bonds, "particularly in the recent wake of investment-grade underperformance," a trader said. Temasek priced the 30-year tranche to yield 90 basis points over comparable U.K. government bonds, tighter than the 92-95 basis-point guidance. In early London trade, it was quoted tighter at 80/85 basis points, a trader said. The 12-year chunk, priced at 95 basis points over gilts, in from guidance of 97-100 basis points, was at 87/90 basis points. Temasek sold the GBP700 million two-tranche bond "in response to enquiries from U.K.-based institutional investors about long-dated, high-grade sterling bonds," Temasek's head of treasury, Alyssa Ong, said in a statement Tuesday. The deal was well over three times subscribed, with bids totaling some GBP2.35 billion, said a banker involved in the deal. The GBP500 million 30-year tranche was three times subscribed, while the GBP200 million 12-year chunk was 3.5 times subscribed, the banker said. The bonds "add new stakeholders for Temasek, enhance our capital efficiency and increase our funding flexibility," Ong said. More than 80% of the 30-year issue and 65% of the 12-year were bought by U.K. investors, said a banker involved in the deal, with more than 40% of the total bought by fund managers, more than 30% by insurers and the rest purchased by pension funds with a small portion going to banks. The move into pounds is part of a US$10 billion medium-term note program by Temasek, which is rated AAA by Standard & Poor's Corp. and Aaa by Moody's Investors Service Inc. It had already about US$6 billion worth of bonds denominated in U.S. and Singapore dollars. The new bonds "will further strengthen Temasek's liquidity and help maintain a staggered debt-maturity profile," Moody's senior credit officer Elizabeth Allen said in a statement. The sterling "issuance will match its underlying asset profile." The idea to issue in pounds came up in a global series of investor meetings last week on Temasek's recent fiscal-year performance, said bankers familiar with Temasek deals. Temasek said the parent company and its affiliates would use the proceeds "to fund their ordinary course of business." A person familiar with the matter said the firm doesn't plan to swap the money back into Singapore dollars but wouldn't comment on whether Temasek was planning to use the cash for U.K. acquisitions. The fund's biggest U.K. holding is an 18% stake in Standard Chartered PLC. -By P.R. Venkat and Sam Holmes, Dow Jones Newswires; +65 64154 152; [email protected] (END) Dow Jones Newswires July 20, 2010 05:52 ET (09:52 GMT)