August 5, 2013 / 6:19 AM / 4 years ago

IFR-Swiber's debut sukuk brings Brunei buyers to Singapore

SINGAPORE, Aug 5 (IFR) - A debut Singapore dollar sukuk from offshore marine services company Swiber has introduced a new group of Islamic investors to the city's capital markets.

Almost half of the 150 million Singapore dollar ($118 million) deal went to investors from the small oil-rich state of Brunei, helping Swiber clinch pricing that was more competitive than conventional debt.

Brunei buyers have participated in Singapore's nascent Islamic bond market before, but their dominance of Swiber's order book will be welcome news for Singaporean companies that are looking to sell Islamic debt in the local market, such as Mustafa Group and Sabana REIT.

"The latest deal is another piece of clear evidence that Islamic sukuk generates more competitive yields than conventional debt," said one debt syndicate banker.

Swiber's five-year deal priced last week to yield 6.5 percent and was backed by strong anchor demand from high-quality institutional investors before books opened.

About half of the bonds were allocated to Islamic institutions. The biggest chunk, 46.3 percent, went to Brunei, while Malaysia took 10.0 percent and Singapore 43.7 percent.

Institutional buyers, including takaful funds, pension funds and banks, accounted for a huge 96.5 percent share of the deal. Fund managers took a meagre 0.7 percent while private banks took 2.8 percent.

The small share of fund managers and PBs reflected the tight pricing on the new issue. Given the already strong anchor interest from the start, Swiber was in a position to withstand any pushback from other investors.

At a yield of 6.5 percent, pricing was in line with guidance and inside Swiber's outstanding conventional paper, with its 7.125 percent 2017s quoted at 6.58 percent.

That suggests Singapore dollar sukuk can now command more competitive pricing than conventional bonds.

"Sukuk deals are gaining traction in Singapore," the banker added. "Swiber is only the second Singapore corporate to sell Islamic bonds in this market but it benefited from City Development's regular sukuk issuance, and Khazanah Nasional's S$1.5 billion sukuk issue in 2010. There were also Singapore companies crossing into Malaysia to sell Islamic bonds, all of which have built up demand for sukuk from Singapore companies."

Bankers had also indicated peer Ezra's 4.875 percent 2018 conventional bonds at 5.24 percent, showing the new sukuk yielded a concession of about 125 basis points.

Rival bankers credited the borrower with achieving a good result and garnering an impressive benchmark issue size for the local market.

The deal also got a boost from a positive announcement by Swiber that it had clinched new contracts worth about $435 million, boosting a strong order backlog that stood at about $1.1 billion as of May 2013.

DBS and Maybank Kim Eng were joint leads in the deal, issued via Swiber Capital with Swiber Holdings acting as obligor. The notes were to be issued on Aug. 2 at par off a newly established $500 million multicurrency Islamic trust certificates issuance programme, which was announced on the Singapore Stock Exchange.

Maybank Kim Eng was sole lead arranger and global coordinator for the programme. Maybank Kim Eng and its parent company Maybank were joint programme dealers with Maybank Islamic as the sharia adviser for the programme. The sukuk is based on the wakalah bi al-istithmar principle.

Proceeds from the issue will be used to refinance debt and support capital expenditure, for working capital and general corporate purposes which are sharia-compliant.

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