Temasek US$20b bonds: Some questions?

temasek

Will you buy the newly launched Temasek bonds?

I refer to the article “Temasek to launch 10-year US dollar bond offering” (Straits Times, Jul 26).

It states that “Initial price talk on Temasek Holdings’ offering of 10-year US dollar-denominated bonds is for a yield spread of 90 to 95 basis points over US Treasuries, market sources told the Business Times.

Temasek, a Singapore government-owned investment firm, said on Wednesday (July 25) that the offering is part of a US$20 billion guaranteed global medium term note programme. The size of the deal was not disclosed.

Net proceeds will be used by Temasek and its investment holding companies to fund their ordinary course of business.

90 to 95 basis points above US treasuries is arguably, not very high, considering that effectively the proceeds can be used by any of its investment holding companies to do anything.

Also, do other sovereign wealth funds borrow by listing on their own local stock exchange?

So, in a sense, they take our money – now ask us to give even more money and they will keep the difference in the returns that they get?

Moreover, if you look at Temasek”s contribution to the NIRC vis-a-vis the Budget surpluses almost every year – the people’s money is being effectively accumulated like forever, and has and may never comes back to Singaporeans.

As to “The notes will be issued by Temasek Financial (I), a wholly owned subsidiary of Temasek. Temasek, which has a triple-A credit rating, will guarantee the notes” – does this mean that the “guarantee” may implicitly be Temasek Holdings and flow through to the Government and the citizens of Singapore?

In this perspective – shouldn’t Parliamentary approval or at least a mention be done, given that the size may be as much as US$20 billion (S$27.2 billion)?

With regard to “The bonds will be listed on the Singapore Exchange. They are being offered in the United States under Rule 144A, and elsewhere in the world under Regulation S” – according to Investopedia – “What is ‘Rule 144A’

Rule 144A is a Securities and Exchange Commission (SEC) rule modifying a two-year holding period requirement on privately placed securities to permit qualified institutional buyers to trade these positions among themselves. This has substantially increased the liquidity of the securities affected because institutions can trade these securities among themselves, sidestepping limitations imposed to protect the public” – does this mean that it is a “higher risk” instrument?

If so, is it appropriate for it to be listed in the Singapore stock exchange?

(Read more: Rule 144A https://www.investopedia.com/terms/r/rule144a.asp#ixzz5MLp75IY1 )

It may also be interesting to note that “A restricted offering into the States is often combined with an unrestricted placement of securities offshore (i.e. outside of the US) under the provisions of Regulation S.

Leong Sze Hian

About the Author

Leong
Leong Sze Hian has served as president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), invited to speak more than 200 times in over 30 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of Indonesia and Brunei. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.