Temasek proposes 5-year, 10-year and 30-year tranches of offshore Chinese yuan bonds

[SINGAPORE] Temasek announced on Tuesday (Jul 22) a proposed notes issuance in a five-year tranche. This is in addition to the 10 and 30-year tranches.

These will be issued under its wholly owned subsidiary, Temasek Financial (I)‘s US$25 billion guaranteed global medium-term note programme.

The Singapore investment firm has mandated Credit Agricole CIB, DBS, HSBC and Standard Chartered as joint lead managers and joint book runners for the proposed notes issuance.

The notes are unconditionally and irrevocably guaranteed by Temasek. If issued, they are expected to be rated “Aaa” by Moody’s and “AAA” by Standard and Poor’s (S&P).

“The ratings on Temasek reflect the company’s large, well-diversified, and high-quality portfolio assets; above-average investment capabilities; and minimal leverage. In addition, we see an extremely high likelihood of extraordinary support from the government of Singapore, if needed,” said S&P Global Ratings in a media release on Wednesday.

Its stable outlook on the bonds also stems from “Temasek’s unique credit characteristics” which “temper asset liquidity risk”, despite its increasing portion of unlisted assets over the years. As such, the likelihood that the company would have to rely on liquidating its unlisted assets for debt repayment is “very remote”.

“We rate the proposed senior notes the same as our long-term issuer credit rating on Temasek because we do not view the company’s capital structure as having any material subordination risks, primarily given its very low leverage,” the credit ratings agency added.

Moody’s assessment

As for Moody’s, it acknowledged Temasek’s “excellent liquidity” anchoring its ratings, but also clarified in a Wednesday note that it only assessed the parent, its investment holding companies and special purpose funding vehicles in assigning them.

“As a government-related issuer, Temasek’s ratings benefit from its 100 per cent ownership by the government of Singapore through the minister for finance, although currently its baseline credit assessment (the measure of its standalone credit quality) – is also positioned at ‘Aaa’,” the statement said.

“We expect Temasek to maintain a conservative financial profile over the next 12 to 18 months, with the net debt to market value of its portfolio assets (excluding cash) remaining below 5 per cent and funds from operations interest coverage above 15 times.”

Moody’s noted that the ratings would only be downgraded in the event Temasek undertakes aggressive investments which significantly worsen its investment portfolio’s credit quality; the amount and quality of the company’s cash and near-cash resources deteriorate significantly; or there are indications of moral hazard behaviour which could impact Temasek’s financial position adversely.

The bonds have yet to be priced.

Temasek will apply for the listing and quotation of the bonds on the official list of the Singapore Exchange.

As at Mar 31, the firm’s net portfolio amounted to S$434 billion, with about 51 per cent in liquid and listed assets. Temasek also had cash and cash equivalents, and short-term investments of S$57.8 billion, as well as gross debt totalling S$20.7 billion.

Earlier on Aug 21, 2024, Temasek Financial (I) announced that it will launch a dual tranche offer of 10-year and 30-year offshore Chinese yuan bonds.

It said at the time that net proceeds from the issuance will be given to Temasek and its investment holding companies to fund their businesses.