* High-yield issuance hit record in 2013
* Southeast Asian companies bet on demand for high coupons
* Private banking fuels search for returns
By Kit Yin Boey
Oct 4 (IFR) - Companies in Southeast Asia are looking atSingapore as a viable alternative for high-yield bond issues inamounts that would be too small for dollar investors.
The push comes as so-called junk bonds became a predominanttheme this year in the Singapore market, with a record number ofsmall-cap and sub-investment grade companies selling debt in theLion City, attracting investor interest by offering juicycoupons.
Data from Thomson Reuters showed that close to S$5bn(US$4.02bn) of high-yield deals were done to date this year,compared with an estimated S$4.4bn and S$3bn in 2012 and 2011.Many of these deals were for amounts smaller than US$100m, toosmall for the dollar market.
This has attracted companies such as unrated Indonesianconglomerate Rajawali Group, which this week started a series ofroadshows in the island republic for a potential Reg S deal.
At the same time, Indofood Agri Resources announced itsplans to diversify into the Singapore market via a new S$500mMTN programme. There were also rumors of Indian and lower-ratedThai companies looking at coming to Singapore with bonds.
The issuers are being attracted by the ability to printbonds at lower coupons than they would get in their homemarkets, which in some cases do not even have investors that buyhigh-yield at all.
Meanwhile, in Singapore, last year, investors becamerenowned for embracing perpetual securities and for chasingyields. And with most of them focused on holding on to thebonds, secondary prices very seldom fall below par.
This has helped Singapore become a consistent source offunds for issuers in the region, being available even at timeswhen the US dollar market was tight.
In 2011, a record US$6.2bn of local currency bonds wereprinted in the city-state just as dollar markets froze amid theEuropean crisis and the downgrade of the United States.
The swelling appetite from private bank is partly to blame.Various research reports estimated that the combined wealth ofhigh-net worth individuals in the country held US$857bn inassets in 2012.
But a recent foray by Perisai Petroleum suggests that evenyield-hungry Singapore investors may draw the line at somepoint.
The Malaysian high-yield company raised only S$23m ofthree-year bonds despite the backing of three joint leads andtwo co-leads, and a generous yield of 6.875%.
The transaction served as notice that even private bankclients, who had thrown money at any high-yielding name lastyear, are now hesitant about taking on unknown foreign issuers.
Rattled by indications from the Federal Reserve in May thatits board could halt monetary easing policies, local investorsstarted pulling back and increased their target yield levels tocushion expected rate increases in the future.
Syndicate desks report that private bank clients are balkingat taking on more risk exposure, and that less leverage is beinggiven to them, although no lines have been pulled.
Institutional investors have also been wary and a number ofSingapore dollar bonds have recently traded below par, albeit toa lesser extent than US dollar ones.
Bankers think that the market, however, remains reliable,noticing that there is still demand for recognizable names.
"Foreign names come to Singapore because they know it is aviable and accessible market," said a syndicate head of aforeign bank. "The Singapore bond market is still substantial,and getting along quite healthily despite the last few months ofvolatility."