Singapore scoops up high-yield bond trade

Companies in Southeast Asia are looking at Singapore as a viable alternative for high-yield bond issues in amounts that would be too small for US dollar investors.

The push comes as so-called junk bonds became a predominant theme this year in the Singapore market, with a record number of small-cap and sub-investment grade firms selling debt in the city, attracting investor interest by offering juicy coupons.

Data from Thomson Reuters showed that close to S$5 billion (HK$31.1 billion) of high-yield deals were done to date this year, compared with an estimated S$4.4 billion last year and S$3 billion in 2011.

Many of these deals were for amounts smaller than US$100 million, too small for the US dollar market.

This has attracted companies such as unrated Indonesian conglomerate Rajawali Group. At the same time, Indofood Agri Resources announced its plans to diversify into the Singapore market via a new S$500 million debt programme.

The issuers are being attracted by the ability to print bonds at lower coupons than they would get in their home markets, which in some cases do not even have investors that buy high-yield.