Singapore Airlines’ (SIA), whose business was greatly affected by the global pandemic, is issuing its first US dollar bond today.
SIA, whose biggest investor is Temasek, had in the past only carried out debt deals in Singapore dollars rather than US dollars. They have issued US$2.77 billion (S$3.7 billion) in five bond issuances in the past seven years. The most recent was a US$372 million 10-year private placement deal last November.
Is SIA bond safe?
To most people, investing in SIA bonds is perceived as relatively low risk, given the “Temasek backing”. In 2019, SIA issued an SGD retail bond with only 3.03% interest but gathered strong interest.
However, bond investing is not without volatility. Singapore Airlines flew 81% fewer passengers last year as the pandemic devastated the global travel industry, forcing it to suspend flights and let go of employees. While vaccines have provided some optimism, the outlook for any sustained rebound in travel demand remains uncertain.
When the global lockdown kicked in around 2020 March, SIA’s bond took a dip but quickly recovered. To give you an idea of how it worked out, below is the price chart of the 5 years bond (maturity date: 28 Mar 2024).
What is the SIA USD Bond Offer?
Below are the indicative terms which are subject to changes. Note this is a wholesale bond, generally, you need to be an Accredited Investor to subscribe to the bond. Leave your comment below if you have any questions about buying bonds.
|Bond Issuer||Singapore Airlines Limited|
|Initial Price Guidance||T+300bps area (Subject to change based on market conditions and demand)|
Update: Final Price Guidance (T+260bps) – 3% coupon
|Tenure||5.5 Year (Maturity: July 20, 2026)|
|Expected Issue Rating||Unrated|
|Denomination||USD 200,000 / USD 1,000|
|Features||Callable (Par call 1 month prior to maturity in respect of all or some of the Notes)|
Below is the peer comparison with other bonds.
Who should consider SIA USD Bond?
Whether you buy or not depends on your desired return and your risk profile.
- If you are preserving your wealth and prefer peace of mind, the bond yield is attractive at the current interest rate environment.
- But if 3% is below your expected or required return, then you should look somewhere else. You don’t have to buy something just because it is popular.
- It also depends if you already have USD and if you are OK with currency fluctuations as a Singapore investor.
I would say if you already have USD and looking for a safe investment to generate above interest income, this SIA USD bond is worth considering.
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Pardon my ignorance, but how would I buy from the secondary market? Through a platform such as Vickers? Is the minimum purchase 200k on the secondary market?
Yes, the minimum trade is USD200K. You need to buy through a bond broker as bonds are traded OTC (over the counter). As a licensed adviser, I can facilitate the transaction for my clients. Contact me if you need assistance.
What is the min amount to buy this bond? Considering the current market conditions do you think is it safe to put money in the bond. I
The minimum is US200K. The IPO has closed, you need to buy from the secondary market now. Personally, I think the chance for SIA to default their bond is low.